Exhibit No. 4.1
Form 10-Q
Headway Corporate Resources, Inc.
File No. 1-16025
HEADWAY CORPORATE RESOURCES, INC.
THIRD AMENDMENT AND LIMITED WAIVER
TO AMENDED AND RESTATED CREDIT AGREEMENT
This THIRD AMENDMENT AND LIMITED WAIVER TO AMENDED AND RESTATED CREDIT
AGREEMENT (this "Amendment") is dated as of May 7, 2003 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 Amended and Restated Credit
Agreement dated as of April 17, 2002 (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 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 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 the extent
applicable) to valid, enforceable and duly perfected Liens permitted under
Section 9.3(b)-(h) of the Credit Agreement; and
WHEREAS, Borrowers and the undersigned Lenders desire to waive certain
existing Events of Default solely for the period from the Third Amendment
Effective Date through and until (but not beyond) the Waiver Termination Date
(as such terms are defined below), and to make certain other amendments to the
Credit Agreement, subject in each case to the terms and conditions set forth
below.
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 Third Amendment
Effective Date through and until (but not beyond) the Waiver Termination
Date, the Agent and the Lenders hereby waive compliance with:
(i) the mandatory payment of $1,093,000 due as of September 10,
2002 pursuant to Section 2.3(a)(iii) of the Credit Agreement;
(ii) Section 9.1(a) of the Credit Agreement for the periods
ending November 30, 2002, December 31, 2002, January 31, 2003,
February 28, 2003, March 31, 2003 and April 30, 2003;
(iii) Section 9.1(b) of the Credit Agreement for (x) the six
months ended September 30, 2002, (y) the nine months ending December
31, 2002 and (z) the twelve months ending March 31, 2003;
(iv) Section 9.6(g)(ii) of the Credit Agreement with respect to
loans and advances made to The Whitney Group (Asia) Limited (HK) after
January 2, 2003 through February 20, 2003; and
(v) Section 10.1(e) of the Credit Agreement with respect to
defaults as set forth on Schedule 1 attached hereto.
The "Waiver Termination Date" shall be the earlier of (i) May 30, 2003,
(ii) the occurrence of any other Event of Default or at any time the Agent
or the Lenders may hereafter become aware of any other Event of Default
(whether heretofore or hereafter arising) and (iii) the exercise of any
rights, remedies or privileges under any document relating to the
Subordinated Debt or the Series G Convertible Preferred Stock or under
applicable law by the holders of the Series G Convertible Preferred Stock
or the holders of, or the trustee for the holders of, the Subordinated
Debt. On and after the Waiver Termination Date (x) the limited waiver set
forth in this Section 1(a) shall automatically 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, (y) the mandatory payment
described in Section 1(a)(i), together with accrued interest thereon since
September 10, 2002, shall be immediately due and payable in cash, and (z)
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 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
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referred to therein, under applicable law or otherwise, with respect to any
Events of Defaults described in this Section 1 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)
hereof 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) through (v) 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 Sections 2.3(a)(iii), 9.1(a), 9.1(b), 9.6(g)(ii) and 10.1(e) 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; 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.
Except as expressly set forth herein, the terms, provisions and
conditions of the Credit Agreement and the other Loan Documents shall
remain in full force and effect and in all other respects are hereby
ratified and confirmed.
Section 2. AMENDMENTS TO CREDIT AGREEMENT
(a) Amendments to Section 1: Definitions. Section 1.1 of the Credit
Agreement is hereby amended by adding thereto the following definitions,
which shall be inserted in proper alphabetical order:
"BofA Collateral Account" means the segregated cash collateral account
maintained by the Borrower at Bank of America, N.A. pursuant to
Section 4.9 hereof, account number 3751926087.
"Budget" means the cash budget delivered by the Borrower to the Agent
pursuant to Section 3(b) of the Third Amendment, as the same may be
amended, supplemented or otherwise modified from time to time with the
written consent of the Required Lenders, not to be unreasonably
withheld.
"CMCG" means Carl Marks Consulting Group LLC.
"CMCG Engagement Letter" means that certain Consulting Agreement dated
as of February 28, 2003 between Borrower and Carl Marks Consulting
Group LLC.
"Third Amendment" means that certain Third Amendment to Amended and
Restated Credit Agreement dated as of May 7, 2003 by and among the
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Borrower, the other Credit Parties listed on the signature pages
thereof, the financial institutions listed on the signature pages
thereof and Bank of America, N.A., as agent for itself and for the
other Lenders.
"Third Amendment Effective Date" has the meaning assigned to such term
in Section 3 of the Third Amendment.
(b) Amendment to Section 2.2(c): Payment of Interest. Section 2.2(c)
of the Credit Agreement is hereby amended by deleting it in its entirety
and substituting therefor the following:
"So long as no Event of Default shall have occurred and be continuing,
Borrower may pay in kind a portion of the accrued interest equal to
the PIK Amount, on or before the date such interest is due, in a
principal amount equal to the PIK Amount. "PIK Amount" means an amount
equal to the interest which would have accrued on the Loans at a per
annum rate of 1.50% for the applicable interest period; provided, that
solely for the period commencing November 1, 2002 through the Maturity
Date, "PIK Amount" shall mean an amount equal to the interest which
would have accrued on the Loans at a per annum rate of 4.50%;
provided, further, that upon the occurrence of any Event of Default,
the PIK Amount accrued during the period commencing November 1, 2002
through the Maturity Date shall be immediately due and payable in
cash. Subject to the preceding sentence, the aggregate principal PIK
Amount shall be deemed added to the outstanding principal balances of
the Loans held by the Lenders, on a pro rata basis, and shall
thereafter accrue interest in the same manner as all other outstanding
principal. Agent's acceptance of, or failure to reject, payment in
kind of such accrued interest shall not constitute a waiver of any
Event of Default."
(c) Amendments to Section 2.3: Payment of Principal.
(1) Section 2.3(a)(iii) of the Credit Agreement is hereby amended
by deleting it in its entirety and substituting therefor the
following:
"(iii) Minimum Receivables. Borrower shall, within ten (10) days
after the end of each calendar month, prepay the Loans in an
aggregate principal amount equal to the excess of the Minimum
Receivables (defined below) over the Eligible Receivables of
Borrower and its Subsidiaries as of the end of such preceding
calendar month. The "Minimum Receivables" shall equal, at any
time, Twenty-Four Million Dollars ($24,000,000) less the
aggregate sum prepaid pursuant to this Section 2.3(a)(iii) to
date."
(2) Section 2.3(a) of the Credit Agreement is hereby further
amended by deleting subsection (iv) thereof in its entirety and
inserting the following new subsections:
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"(iv) Whitney Proceeds. Borrower shall, within two (2) Business
Days of receipt, prepay the Loans with any cash proceeds the
Borrower or any of its Subsidiaries receives from time to time
under that certain Purchase Agreement dated as of February 28,
2003 (the "Purchase Agreement") between the Borrower and Whitney
Group, LLC and the documents executed and delivered in connection
therewith, including, without limitation, cash proceeds received
pursuant to the Earnout and the Note (as such terms are defined
in the Purchase Agreement).
(v) Repayment on Maturity Date. The entire outstanding principal
amount of the Loans, together with all accrued and unpaid
interest thereon, all PIK Amounts and any and all other
Obligations shall be due and payable in full, in cash on the
Maturity Date or at such earlier time as provided herein."
(d) Amendment to Section 4.9: Tax Refund. Section 4.9 of the Credit
Agreement is hereby amended by deleting it in its entirety and substituting
therefor the following:
"4.9 Tax Refund. As of the Third Amendment Effective Date the Borrower
has deposited $4,846,873.54 into the BofA Collateral Account, which
account is subject to the first priority liens of the Agent (for the
benefit of the Lenders). The Credit Parties shall not be permitted to
withdraw any amounts deposited from time to time in the BofA
Collateral Account without the prior written consent of the Required
Lenders and the Agent if the aggregate balance in the Accounts (as
defined in Section 4(i) of the Third Amendment) is at any time above
$4,000,000. "Deficiency Amount" shall mean, at any time of
determination, the difference between $4,000,000 and (if less) the
aggregate balance in the Accounts on such date of determination. If
the aggregate balance in the Accounts is at any time below $4,000,000,
then the Credit Parties may withdraw from the BofA Collateral Account
an amount equal to the lesser of (x) the Deficiency Amount and (y) the
actual amount deposited and maintained in the BofA Collateral Account
at such time; provided, that the chief financial officer of the
Borrower shall have delivered a certificate to the Agent not later
than 12:00 noon (New York City time) on the day preceding the proposed
withdrawal date, which certificate shall be in form and substance
satisfactory to the Agent, certifying (x) that no Default or Event of
Default has occurred or is continuing or would result from the
proposed withdrawal and (y) the balance of the Accounts as of the date
of such certification. If the aggregate balance in the Accounts is at
any time above $4,000,000, and the Borrower has prior thereto
withdrawn amounts from the BofA Collateral Account in accordance with
the preceding sentence, the Borrower shall, within two (2) Business
Days, redeposit into the BofA Collateral Account an amount equal to
the lesser of (x) the amount in the Accounts then in excess of
$4,000,000, and (y) the aggregate amount of all prior withdrawals."
(e) Amendments to Article 8: Affirmative Covenants.
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(1) Section 8.1(l) of the Credit Agreement is hereby amended by
deleting it in its entirety and inserting the following new clause:
"(l) within ten (10) days after the last Business Day of each week
(the "Applicable Week"), deliver to the Agent a report, certified as
being true and correct by the chief financial officer of the Borrower,
which report reflects: (x) the actual cash disbursements made by the
Borrower and its Subsidiaries in the Applicable Week and shows on a
line item basis the percentage and dollar variance from the Budget for
the Applicable Week, (y) the aggregate cash balance maintained in the
Accounts and the BofA Collateral Account as of the last Business Day
of the Applicable Week and (z) the number of temporary staffing
payroll employees or consultants employed by the Borrower and its
Subsidiaries as of the last Business Day of the Applicable Week. The
Borrower shall promptly deliver to the Agent such other information
regarding the Borrower's and any Subsidiary's operations, business
affairs and financial condition as the Agent may reasonably request."
(2) Section 8.20 of the Credit Agreement is hereby amended by
deleting it in its entirety and inserting the following new
subsections:
"8.20. Chief Restructuring Advisor. Borrower shall maintain the CMCG
Engagement Letter in full force and effect unless terminated by
Borrower for cause and upon prior written notice to the Agent or
unless terminated by CMCG. If the CMCG Engagement Letter is terminated
for cause in accordance with the previous sentence or if CMCG
terminates the CMCG Engagement Letter, then the Borrower shall
promptly (and in no event later than fifteen (15) Business Days after
the effective date of such termination) appoint a new chief
restructuring advisor to replace CMCG, on terms approved by Required
Lenders. The Borrower shall not amend, supplement or otherwise modify
the CMCG Engagement Letter without the prior written approval of the
Required Lenders and the Agent.
8.21. Cooperation Covenant. Borrower has advised the Lenders that it
has engaged CMCG as its chief restructuring advisor to assist in,
among other things, exploring its strategic alternatives. Without
limiting the generality of Section 8.7, the Credit Parties shall
cooperate with and give full and complete access and make CMCG
available to the Agent, the Lenders and their representatives. The
Credit Parties shall cause CMCG to contemporaneously provide to the
Agent and its representatives (for distribution to the Lenders) any
and all written reports, correspondences and other written
communications that CMCG receives, provides, delivers or otherwise
discloses (in each case, directly or indirectly) from time to time to
or from one or more of the Borrower's customers, vendors, suppliers or
other actual or potential creditors or investors of any Credit Party."
(f) Amendment to Section 9.18: Cash Usage: Section 9.18 of the Credit
Agreement is hereby amended by deleting it in its entirety and substituting
therefor the following:
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"9.18. Cash Usage; Payroll-Temps. On and after the Third Amendment
Effective Date:
(a) all cash expenditures shall be made in accordance with and
for the purposes set forth in the Budget;
(b) the Borrower shall not permit the aggregate cash balance in
(x) the Accounts, plus (y) the BofA Collateral Account to be less than
$3,500,000 at any time; and
(c) the Borrower and its Subsidiaries shall not at any time have
less than an aggregate of 5,500 temporary staffing payroll employees
or consultants placed on its and its Subsidiaries' payroll.
Nothing in the Budget and in this Section 9.18 shall be deemed to
limit or otherwise modify the Credit Parties' obligation to repay when
payable any and all Obligations under the Loan Documents."
(g) Amendment to Section 10.1(o): Events of Default. Section 10.1(o)
of the Credit Agreement is hereby amended by deleting the reference to
"$24,600,000" therein and substituting therefor "$24,000,000", and further
amended by deleting the period at the end of such subsection and inserting
"; or" thereafter.
(h) Amendment to Section 10.1: Events of Default. Section 10.1 of the
Credit Agreement is hereby further amended by deleting the word "or" as the
last word of Section 10.1(n), and by inserting the following new Section
10.1(p):
"(p) if the Borrower and its Subsidiaries lose one or more customer
accounts as a result of such accounts being terminated in accordance
with their terms or otherwise, or such accounts are not renewed or
otherwise extended and such customer accounts comprise in the
aggregate 10% or more of the Borrower's consolidated revenue over the
preceding twelve (12) month period as of any date of determination."
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
"Third Amendment Effective Date"):
(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) Copies of executed counterparts of this Amendment by Borrower
and Guarantors and by each of the Lenders;
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(ii) 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; and
(iii) A certificate of each Credit Party, in form and substance
satisfactory to Agent, 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, (E) 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 herewith and (F) 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 those waived pursuant hereto).
(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, not to be unreasonably withheld, the "Budget"), together with a
duly executed 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 in any material respect or of
any omission of information which causes the Budget to be false or
misleading in any material respect.
(c) 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 Consulting,
Inc.).
(d) The Agent and each Lender shall have received a revised 2003
operating plan (the "Revised Plan") in form and substance satisfactory to
the Agent and the Lenders, together with a duly executed certificate of the
chief financial officer of the Borrower certifying to the Agent that the
Revised Plan was prepared based upon good faith estimates and assumptions
that are reasonable as of the date hereof, when taken as a whole, and does
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not omit any information which causes the Revised Plan to be false or
misleading in any material respect, when taken as a whole.
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.
(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.
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(f) Incorporation of Representations and Warranties. After giving
effect to this Amendment and except as set forth on Schedule 2 annexed
hereto, 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 as of the Third Amendment Effective
Date.
(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 3 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 (all such accounts, other
than the BofA Collateral Account, being referred to herein as 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.
(j) Capitalization. The authorized capital stock of the Borrower
consists of 80,000,000 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 G
Convertible Preferred Stock, $0.0001 par value per share (the "Preferred
Stock"). The outstanding capital stock of the Borrower consists solely of
13,914,627 shares of Common Stock and 1,000 shares of Preferred Stock.
Except for the Preferred Stock, options to purchase 1,145,550 shares of
Common Stock issuable under the Company's employee stock option plan and
the warrants previously delivered by the Borrower to the Lenders, there are
no options, warrants, phantom stock, stock appreciation rights or other
securities that are convertible into capital stock of the Company.
(k) Other Defaults. Schedule 1 attached hereto sets forth defaults
existing as of the Third Amendment Effective Date with respect to the
Subordinated Debt and the Series G Convertible Preferred Stock.
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
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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
April 30, 2003 and after giving effect to this Amendment and the
transactions contemplated hereby, the aggregate principal amount of the
Obligations owed to the Lenders is $74,241,785.09, plus accruing interest,
fees, costs and expenses due under the Loan Documents after April 30, 2003,
and the Letter of Credit Outstandings is $1,600,000. 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
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) 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 the extent
applicable) 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
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deposited in or otherwise maintained in the Accounts are not and shall not
be commingled with any other money, checks or other funds that are not
proceeds of Collateral or otherwise subject to the Agent's first priority
Liens.
(d) 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.
(e) 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.
(f) The Credit Parties and the Lenders acknowledge and agree that the
Credit Parties did not timely meet the requirements of the Credit Agreement
more particularly described on Schedule 4 annexed hereto. Each such
requirement, however, has been satisfied after the expiration of the
respective time periods set forth in the Credit Agreement and, in
consideration of the terms and conditions set forth herein and solely in
this instance, the Lenders acknowledge and agree that as of the Third
Amendment Effective Date the Credit Parties failure to timely satisfy the
requirements of the Credit Agreement more particularly described on
Schedule 4 annexed hereto shall not be deemed an Event of Default under the
Credit Agreement.
Section 6. 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 6 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 Amendment of any right of setoff or recoupment,
counterclaim or defense of any nature whatsoever which arose prior to the Third
Amendment Effective Date to payment or performance of the Obligations. Each
12
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 7. 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 herein, the execution, delivery and performance of this Amendment
shall not constitute an amendment or waiver of any provision of, or operate
as an amendment or 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
13
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 OR ANY OF THE OTHER LOAN DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED THEREUNDER OR HEREUNDER. The scope of this
Amendment 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 Amendment is a material inducement to enter into a
business relationship, that each has already relied on this Amendment in
entering into this Amendment, and that each will continue to rely on this
Amendment in their related future dealings. Each party hereto further
warrants and represents that it has reviewed this Amendment with its legal
counsel and that it knowingly and voluntarily waives its jury trial rights
following consultation with legal counsel. THIS AMENDMENT IS IRREVOCABLE,
MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN
BY A MUTUAL WRITTEN AMENDMENT SPECIFICALLY REFERRING TO THIS SECTION 7(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 6 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 Amendments; Legal Advice. Each
Credit Party acknowledges and affirms that, except as expressly set forth
herein, the Agent and Lenders are not committing or offering any amendment,
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 Amendment 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
14
more strictly against the party who itself or through its agent prepared
the same.
(h) Pending Discussions. The Credit Parties, the Agent and the Lenders
may, from time to time, engage in negotiations concerning the Obligations,
which may be lengthy and complex. The Agent and the Lenders shall not have
any obligation to modify, amend and/or restructure the Obligations or any
of the Loan Documents in connection with the negotiations or otherwise.
Each of the Agent and the Lenders may terminate the negotiations at any
time, in their sole and absolute discretion, with or without notice, and
without liability of any kind. Unless a final, definitive written agreement
(which shall be subject to the Lenders having obtained all necessary
internal approvals) is executed and delivered by all of the parties, none
of the Lenders, the Agent and the Credit Parties shall have any obligation
or liability by virtue of the commencement, prosecution or termination of
negotiations concerning the Obligations and/or the Loan Documents. None of
the Agent and the Lenders shall be deemed to have waived any rights or
shall incur any liability by negotiation or the passage of time associated
therewith unless and until a written agreement as described in the
preceding sentence is executed and delivered by the Credit Parties, the
Lenders and the Agent.
The Credit Parties hereby consent to the Agent and the Lenders (and
their affiliates, corporate parents and related corporate divisions)
meeting directly with any third party, including potential lenders or
investors, regarding a refinancing of the Borrower's Indebtedness or a sale
or assignment of the Loans and entering into negotiations with any such
third party concerning the Loan Documents and the Obligations.
The Credit Parties, the Lenders or the Agent may prepare or cause to
be prepared term sheets or memoranda outlining or describing their
discussions and/or proposals made in connection with any such discussions.
None of the preparation, distribution, response to or failure to respond to
any such document shall constitute an agreement or the basis on which any
party may claim reliance on any agreement unless and until such agreement
is executed and delivered (subject to the Lenders having obtained all
necessary internal approvals) by the parties hereto.
(i) 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 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.
(j) Survival. Without limiting the generality of Section 12.4 of the
Credit Agreement, all representations, warranties, covenants, agreements,
15
undertakings and Amendments 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.
(k) 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]
16
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/
Name:
Title:
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 CORPORATE STAFFING SERVICES
OF FLORIDA, L.L.C.
HEADWAY TECHNOLOGY RESOURCES, L.L.C.
HEADWAY TECHNOLOGY RESOURCES
OF TEXAS, L.L.C.
HEADWAY TECHNOLOGY RESOURCES
INTERNATIONAL, 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/
Name:
Title:
S-1
BANK OF AMERICA, N.A.,
as Agent for the Lenders and as Lender
By: /s/
Name:
Title:
FLEET NATIONAL BANK
By: /s/
Name:
Title:
TRANSAMERICA BUSINESS CAPITAL
CORPORATION
By: /s/
Name:
Title:
CITIZENS BANK OF MASSACHUSETTS
By: /s/
Name:
Title:
WACHOVIA NATIONAL BANK
By: /s/
Name:
Title:
S-2
Schedule 1
The Borrower failed to comply with the covenants contained in Sections 6(a)(i)
and 6(a)(ii) of the Second Limited Waiver dated April 17, 2002 among the
Borrower, The State Street Bank and Trust Company, as Trustee, and certain
holders of notes and preferred stock issued by the Borrower, and Section
4.15(ix)(y) of the Indenture.
Sch. - 1
Schedule 2
As of the Third amendment Effective Date the representations and warranties
contained in the following sections of the Credit Agreement are not true and
correct:
(i) Section 7.3;
(ii) Section 7.6(b): there has been no Material Adverse Effect nor
have the businesses or properties of any Credit Party been
materially adversely affected except as disclosed in the
Borrower's Annual Report on Form 10-K for the Fiscal Year ended
December 31, 2002;
(iii)Section 7.9(b): with respect to defaults identified on Schedule
1 annexed to the Third Amendment; and
(iv) Section 7.10 - General Electric Mortgage Insurance Corporation
(GE) has notified the Company that they plan to demand
indemnification for losses suffered by GE related to the actions
of a Headway employee. GE is claiming that its losses in this
matter are in excess of $5 million. This demand would likely be
in the form of a claim against Headway's general liability/errors
& omissions insurance policy.
Sch. - 2
Schedule 3
List of Domestic Bank Accounts
[Excluded]
Schedule 4
1. The requirement of Section 2.2 (b) of the Credit Agreement that Interest on
each Loan shall be paid monthly in arrears on the last Business Day of each
month solely with respect to the months ended November 30, 2002 and
February 28, 2003.
2. The requirement of Section 4.8 of the Credit Agreement that as soon as
practical and in any event not later 7 days from the Effective Date with
respect to investment accounts, and 45 days from the Effective Date with
respect to all other accounts, the Borrower shall cause all or
substantially all Deposit Accounts of the Credit Parties, other than
payroll accounts and unused accounts to be closed by the Borrower
identified on Schedule 4.8 to the Credit Agreement, to be transferred to
and maintained with one or more Lenders or third party depository
institutions, subject to control agreements granting to the Agent on behalf
of the Lenders a security interest in such Deposit Accounts.
3. The requirement of Section 8.20 of the Credit Agreement that upon request
by the Required Lenders, the Borrower promptly appoint (and in any event
not later than ten (10) Business Days after such request) a chief
restructuring officer acceptable to the Required Lenders and on terms and
conditions approved by the Required Lenders.
4. The requirement of Section 8.21 of the Credit Agreement pursuant to which
the Borrower agreed to effectuate, no later than January 15, 2003, the
sale, disposition or liquidation of the Whitney Companies as acceptable to
the applicable Lenders.
Sch. -4