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;
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 including the Bank
Maturity Date, subject, however, to the provisions of Section
3(e) hereof;
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(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
3
by the Company 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),
4
subject however to the provisions of Section 9 of the Seventh Amendment
and Limited Waiver.
SECTION 2. AMENDMENTS TO GOVERNING DOCUMENTS
(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) Xxxxx 00, 0000,
(x) 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
5
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 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
6
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 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
7
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;
(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")
8
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;
(vii) Duly executed, irrevocable proxies (in form and
substance acceptable to the Holders) of Xxxx X. Xxxxxxxxx, Xxxxx
X. Xxxxxxx, G. Xxxxx Xxxxxxxx, Xxxx X. Xxxxx and Xxxxxxx X.
Xxxxxxx 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
9
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 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 Xxxxxxx Berlin Shereff
Xxxxxxxx, 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
10
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 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, Xxxxxxxx X. Xxxxxx, Xxx
XxXxxx, Xxxx X. Feshe, Xxxxx X. Xxxxxx Trust, Xxx Xxxxxxx and Xxxxx X.
Xxxxxx 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.
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(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.
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
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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/Xxxxxxxx & Xxxxx, X.X. Unterberg, Towbin,
LeBouef, Lamb, Xxxxxx & XxxXxx L.L.P., Weil, Gotshal & Xxxxxx LLP,
Xxxxxxx Berlin Shereff Xxxxxxxx, LLP and O'Melveny & Xxxxx 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:
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
13
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 X.X. Xxxxxxxxx, 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:
(i) as soon as practicable and in any event not later
than September 4, 2001, engage X. X. Xxxxxxxxx, 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
14
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.
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
15
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 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.
16
(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 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
17
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.
18
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:_________________________________
Name:
Title:
(Signature page to Headway Corporate Resources, Inc. Limited Waiver and
Amendment)
GARMARK PARTNERS, L.P. BANC OF AMERICA
SECURITIES LLC, SUCCESSOR IN INTEREST
TO NATIONSBANC XXXXXXXXXX SECURITIES, LLC
By:
------------------------------
Name:
Title By:
-------------------------------------
Name:
Title
XXXXX GLOBAL INVESTMENT, LTD. REMINGTON INVESTMENT STRATEGIES, L.P.
By: By:
------------------------------- -------------------------------------
Name: Name:
Title Title
STATE STREET BANK AND TRUST
COMPANY, N.A., AS TRUSTEE
By:
-------------------------------
Name:
Title
