Exhibit 10.2
SECURITY AGREEMENT
SOS STAFFING SERVICES, INC.
INTELIANT CORPORATION
SERVCOM STAFF MANAGEMENT, INC.
SOS COLLECTION SERVICES, INC.
DEVON & DEVON PERSONNEL SERVICES, INC.
TO
STATE STREET BANK AND TRUST COMPANY,
AS COLLATERAL AGENT
DATED AS OF JULY 30, 2001
SECURITY AGREEMENT
SECURITY AGREEMENT (as may be amended, restated, supplemented or
otherwise modified from time to time, this "AGREEMENT"), dated as of July 30,
2001, among each of SOS STAFFING SERVICES, INC., a Utah corporation (together
with its successors and assigns, the "COMPANY"), INTELIANT CORPORATION, a
Delaware corporation and wholly-owned subsidiary of the Company (together with
its successors and assigns, "INTELIANT"), SERVCOM STAFF MANAGEMENT, INC., a Utah
corporation and wholly-owned subsidiary of the Company (together with its
successors and assigns, "SERVCOM"), SOS COLLECTION SERVICES, INC., an Arizona
corporation and wholly-owned subsidiary of the Company (together with its
successors and assigns, "SOS COLLECTION") and DEVON & DEVON PERSONNEL SERVICES,
INC., a California corporation and wholly-owned subsidiary of the Company
(together with its successors and assigns, "DEVON;" Inteliant, ServCom, SOS
Collection, and Devon individually, a "SUBSIDIARY OBLIGOR," and collectively,
the "SUBSIDIARY OBLIGORS;" and the Subsidiary Obligors and the Company
collectively, the "OBLIGORS"), and STATE STREET BANK AND TRUST COMPANY, as
collateral agent (in such capacity, together with its successors and assigns
acting in such capacity pursuant to the Intercreditor Agreement (defined below),
the "COLLATERAL AGENT"), for the benefit of (a) XXXXX FARGO BANK, NATIONAL
ASSOCIATION ("XXXXX FARGO"), as administration agent under the Bank Credit
Agreement (as defined below) (in such capacity, together with its successors and
assigns in such capacity, the "BANK AGENT"), (b) the financial institutions
which from time to time are a party to the Bank Credit Agreement as lenders
thereunder (including Xxxxx Fargo as a lender under the Bank Credit Agreement,
together with the successors and assigns of all such parties, the "BANKS") and
(c) each of XXXXXXX NATIONAL LIFE INSURANCE COMPANY, GREAT WEST LIFE & ANNUITY
INSURANCE COMPANY, FARM BUREAU LIFE INSURANCE COMPANY OF MICHIGAN, FARM BUREAU
MUTUAL INSURANCE COMPANY OF MICHIGAN, THE CANADA LIFE ASSURANCE COMPANY, CANADA
LIFE INSURANCE COMPANY OF America, and CANADA LIFE INSURANCE COMPANY OF NEW YORK
(collectively, together with their successors and assigns, and future holders
from time to time of the Notes (as defined below), the "NOTEHOLDERS" and,
collectively with the Banks, the "SECURED PARTIES"). All capitalized terms used
herein have the respective meanings ascribed thereto in the Recitals and in
Section 1.
R E C I T A L S
WHEREAS, the Company, the Bank Agent and the Banks have entered into
the Amended and Restated Credit Agreement, dated as of July 27, 1998, by and
among the Company and the Banks (as amended and as further amended, restated,
refinanced, supplemented or otherwise modified from time to time, the "BANK
CREDIT AGREEMENT");
WHEREAS, pursuant to those separate Note Purchase Agreements, each
dated as of September 1, 1998 (as amended and as further amended, restated,
refinanced, supplemented or otherwise modified from time to time, the "NOTE
PURCHASE AGREEMENTS"), the Company issued to the "Purchasers" (as defined
therein) $5,000,000 of its Senior Notes, Series A, due September 1, 2003 and
$30,000,000 of its Senior Notes, Series B, due September 1, 2008 (collectively,
as amended and as further amended, restated, refinanced or otherwise modified
from time to time, the "NOTES");
WHEREAS, all obligations of the Company under the Bank Credit
Agreement and all obligations of the Company under the Notes and the Note
Purchase Agreements have been guaranteed by the Subsidiary Obligors and may be
guaranteed from time to time by certain other Subsidiaries as provided in the
Financing Agreements (such guarantors referred to as the "GUARANTORS" and such
guaranties referred to as the "GUARANTIES");
WHEREAS, pursuant to that certain Intercreditor Agreement, dated as of
the date hereof, among the Bank Agent (on behalf of itself and the Banks), the
Noteholders and the Collateral Agent, and acknowledged and agreed to by the
Company and its Subsidiaries (as amended, restated, supplemented or otherwise
modified from time to time, the "INTERCREDITOR AGREEMENT"), the Secured Parties
appointed the Collateral Agent to act on behalf of all Secured Parties regarding
the Collateral (as defined below) and certain other matters, all as more fully
provided therein, and, among other things, further defined the rights, duties,
authority and responsibilities of the Collateral Agent and the relationship
among the Secured Parties regarding their PARI PASSU interests in the
Collateral;
WHEREAS, it is a condition under the Bank Credit Agreement and the
Note Purchase Agreements that the Obligors execute and deliver to the Collateral
Agent this Agreement; and
WHEREAS, the Obligors wish to grant security interests in favor of the
Collateral Agent, for the benefit of the Secured Parties, as herein provided;
NOW, THEREFORE, in consideration of the promises contained herein and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
1. DEFINITIONS. All capitalized terms used herein without definitions
herein shall have the respective meanings provided therefor in the Intercreditor
Agreement. The term "STATE", as used herein, means the State of [New York]. All
terms defined in the Uniform Commercial Code of the State and used herein shall
have the same definitions herein as specified therein. However, if a term is
defined in Article 9 of the Uniform Commercial Code of the State differently
than in another Article of the Uniform Commercial Code of the State, the term
has the meaning specified in Article 9. The term "OBLIGATIONS", as used herein,
means all of the indebtedness, obligations and liabilities of the Obligors to
the Banks and the Noteholders, individually or collectively, whether direct or
indirect, joint or several, absolute or contingent, due or to become due, now
existing or hereafter arising under or in respect of the Bank Credit Agreement,
the Notes, the Note Purchase Agreements and the Guaranties, any promissory notes
or other instruments or agreements executed and delivered pursuant to any of the
foregoing or in connection therewith or this Agreement, and the term "EVENT OF
DEFAULT", as used herein, has the meaning given to such term under and within
the meaning of the Bank Credit Agreement or the Note Purchase Agreements.
2. GRANT OF SECURITY INTEREST. Each of the Obligors hereby grants to
the Collateral Agent, to secure the payment and performance in full of all of
the Obligations, a security interest in and pledges and assigns to the
Collateral Agent the following properties, assets and rights of such Obligor,
wherever located, whether now owned or hereafter acquired or arising, and all
proceeds and products thereof (all of the same being hereinafter called the
"COLLATERAL"): all of such Obligor's personal and fixture property of every kind
and nature including without limitation all goods (including inventory,
equipment and any accessions thereto), instruments (including promissory notes),
documents, accounts (including health-care-insurance receivables), chattel paper
(whether tangible or electronic), deposit accounts, letter-of-credit rights
(whether or not the letter of credit is evidenced by a writing), commercial tort
claims, securities and all such Obligor's other investment property, supporting
obligations, any other contract rights or rights to the payment of money,
insurance claims and proceeds, and all general intangibles (including all
payment intangibles). The Collateral Agent acknowledges that the attachment of
its security interest in any commercial tort claim as original collateral is
subject to the Obligors' compliance with ss.4.7.
3. AUTHORIZATION TO FILE FINANCING STATEMENTS. Each Obligor hereby
irrevocably authorizes the Collateral Agent at any time and from time to time to
file in any filing office in any Uniform Commercial Code jurisdiction any
initial financing statements and amendments thereto that (a) indicate the
Collateral (i) as all assets of such Obligor or words of similar effect,
regardless of whether any particular asset comprised in the Collateral falls
within the scope of Article 9 of the Uniform Commercial Code of the State or
such jurisdiction, or (ii) as being of an equal or lesser scope or with greater
detail, and (b) provide any other information required by part 5 of Article 9 of
the Uniform Commercial Code of the State or such other jurisdiction for the
sufficiency or filing office acceptance of any financing statement or amendment,
including (i) whether such Obligor is an organization, the type of organization
and any organization identification number issued to such Obligor and, (ii) in
the case of a financing statement filed as a fixture filing or indicating
Collateral as as-extracted collateral or timber to be cut, a sufficient
description of real property to which the Collateral relates. The Obligors agree
to furnish any such information to the Collateral Agent promptly upon the
Collateral Agent's request.
4. OTHER ACTIONS. Further to insure the attachment, perfection and
first priority of, and the ability of the Collateral Agent to enforce, the
Collateral Agent's security interest in the Collateral, each Obligor agrees, in
each case at the Obligors' expense, to take the following actions with respect
to the following Collateral and without limitation on the Obligors' other
obligations contained in this Agreement:
4.1. PROMISSORY NOTES AND TANGIBLE CHATTEL PAPER. If any Obligor
shall, now or at any time hereafter, hold or acquire any promissory
notes or tangible chattel paper, such Obligor shall forthwith endorse,
assign and deliver the same to the Collateral Agent, accompanied by
such instruments of transfer or assignment duly executed in blank as
the Collateral Agent may from time to time specify.
4.2. DEPOSIT ACCOUNTS. For each deposit account that any Obligor
at any time opens or maintains, such Obligor shall, at the Collateral
Agent's request and option, pursuant to an agreement in form and
substance satisfactory to the Collateral Agent, either (a) cause the
depositary bank to agree to comply, without further consent of such
Obligor, at any time with instructions from the Collateral Agent to
such depositary bank directing the disposition of funds from time to
time credited to such deposit account, or (b) arrange for the
Collateral Agent to become the customer of the depositary bank with
respect to the deposit account, with such Obligor being permitted,
only with the consent of the Collateral Agent, to exercise rights to
withdraw funds from such deposit account. The Collateral Agent agrees
with each Obligor that the Collateral Agent shall not give any such
instructions or withhold any withdrawal rights from any of the
Obligors, unless an Event of Default has occurred and is continuing,
or, if effect were given to any withdrawal not otherwise permitted by
the Financing Agreements would occur. The provisions of this paragraph
shall not apply to any deposit accounts specially and exclusively used
for payroll, payroll taxes and other employee wage and benefit
payments to or for the benefit of the Obligors' salaried employees.
4.3. INVESTMENT PROPERTY. If any Obligor shall at any time hold
or acquire any certificated securities, such Obligor shall forthwith
endorse, assign and deliver the same to the Collateral Agent,
accompanied by such instruments of transfer or assignment duly
executed in blank as the Collateral Agent may from time to time
specify. If any securities now or hereafter acquired by such Obligor
are uncertificated and are issued to such Obligor or its nominee
directly by the issuer thereof, such Obligor shall immediately notify
the Collateral Agent thereof and, at the Collateral Agent's request
and option, pursuant to an agreement in form and substance
satisfactory to the Collateral Agent, either (a) cause the issuer to
agree to comply, without further consent of such Obligor or such
nominee, at any time with instructions from the Collateral Agent as to
such securities, or (b) arrange for the Collateral Agent to become the
registered owner of the securities. If any securities, whether
certificated or uncertificated, or other investment property now or
hereafter acquired by any Obligor are held by such Obligor or its
nominee through a securities intermediary or commodity intermediary,
such Obligor shall immediately notify the Collateral Agent thereof
and, at the Collateral Agent's request and option, pursuant to an
agreement in form and substance satisfactory to the Collateral Agent,
either (i) cause such securities intermediary or (as the case may be)
commodity intermediary to agree to comply, in each case without
further consent of such Obligor or such nominee, at any time, with
entitlement orders or other instructions from the Collateral Agent to
such securities intermediary as to such securities or other investment
property, or (as the case may be) to apply any value distributed on
account of any commodity contract as directed by the Collateral Agent
to such commodity intermediary, or (ii) in the case of financial
assets or other investment property held through a securities
intermediary, arrange for the Collateral Agent to become the
entitlement holder with respect to such investment property, with such
Obligor being permitted, only with the consent of the Collateral
Agent, to exercise rights to withdraw or otherwise deal with such
investment property. The Collateral Agent agrees with the Obligors
that the Collateral Agent shall not give any such entitlement orders
or instructions or directions to any such issuer, securities
intermediary or commodity intermediary, and shall not withhold its
consent to the exercise of any withdrawal or dealing rights by any of
the Obligors, unless an Event of Default has occurred and is
continuing, or, after giving effect to any such investment and
withdrawal rights not otherwise permitted by the Financing Agreements,
would occur. The provisions of this paragraph shall not apply to any
financial assets credited to a securities account for which the
Collateral Agent is the securities intermediary.
4.4. COLLATERAL IN THE POSSESSION OF A BAILEE. If any Collateral
is at any time in the possession of a bailee, the Obligors shall
promptly notify the Collateral Agent thereof and, at the Collateral
Agent's request and option, shall promptly obtain an acknowledgement
from the bailee, in form and substance satisfactory to the Collateral
Agent, that the bailee holds such Collateral for the benefit of the
Collateral Agent and such bailee's agreement to comply without further
consent of any of the Obligors, at any time with instructions of the
Collateral Agent as to such Collateral. The Collateral Agent agrees
with the Obligors that the Collateral Agent shall not give any such
instructions unless an Event of Default has occurred and is continuing
or would occur after taking into account any action by the Obligors
with respect to the bailee.
4.5. ELECTRONIC CHATTEL PAPER AND TRANSFERABLE RECORDS. If any
Obligor at any time holds or acquires an interest in any electronic
chattel paper or any "transferable record," as that term is defined in
Section 201 of the federal Electronic Signatures in Global and
National Commerce Act, or in ss.16 of the Uniform Electronic
Transactions Act as in effect in any relevant jurisdiction, such
Obligor shall promptly notify the Collateral Agent thereof and, at the
request and option of the Collateral Agent, shall take such action as
the Collateral Agent may reasonably request to vest in the Collateral
Agent control, under ss.9-105 of the Uniform Commercial Code, of such
electronic chattel paper or control under Section 201 of the federal
Electronic Signatures in Global and National Commerce Act or, as the
case may be, ss.16 of the Uniform Electronic Transactions Act, as so
in effect in such jurisdiction, of such transferable record. The
Collateral Agent agrees with the Obligors that the Collateral Agent
will arrange, pursuant to procedures satisfactory to the Collateral
Agent and so long as such procedures will not result in the Collateral
Agent's loss of control, for any of Obligors to make alterations to
the electronic chattel paper or transferable record permitted under
UCC ss.9-105 or, as the case may be, Section 201 of the federal
Electronic Signatures in Global and National Commerce Act or ss.16 of
the Uniform Electronic Transactions Act for a party in control to make
without loss of control, unless an Event of Default has occurred and
is continuing or would occur after taking into account any action by
any of the Obligors with respect to such electronic chattel paper or
transferable record.
4.6. LETTER-OF-CREDIT RIGHTS. If any Obligor is at any time a
beneficiary under a letter of credit now or hereafter, such Obligor
shall promptly notify the Collateral Agent thereof and, at the request
and option of the Collateral Agent, such Obligor shall, pursuant to an
agreement in form and substance satisfactory to the Collateral Agent,
either (a) arrange for the issuer and any confirmer or other nominated
person of such letter of credit to consent to an assignment to the
Collateral Agent of the proceeds of the letter of credit or (b)
arrange for the Collateral Agent to become the transferee beneficiary
of the letter of credit, with the Collateral Agent agreeing, in each
case, that the proceeds of the letter of credit are to be applied as
provided in the Intercreditor Agreement.
4.7. COMMERCIAL TORT CLAIMS. If any Obligor shall, now or at any
time hereafter, hold or acquire a commercial tort claim, such Obligor
shall immediately notify the Collateral Agent in a writing signed by
such Obligor of the particulars thereof and grant to the Collateral
Agent in such writing a security interest therein and in the proceeds
thereof, all upon the terms of this Agreement, with such writing to be
in form and substance satisfactory to the Collateral Agent.
4.8. OTHER ACTIONS AS TO ANY AND ALL COLLATERAL. Each Obligor
further agrees, upon request of the Collateral Agent and at the
Collateral Agent's option, to take any and all other action as the
Collateral Agent may determine to be necessary or useful for the
attachment, perfection and first priority of, and the ability of the
Collateral Agent to enforce, the Collateral Agent's security interest
in any and all of the Collateral, including, without limitation, (a)
executing, delivering and, where appropriate, filing financing
statements and amendments relating thereto under the Uniform
Commercial Code, to the extent, if any, that such Obligor's signature
thereon is required therefor, (b) causing the Collateral Agent's name
to be noted as secured party on any certificate of title for a titled
good if such notation is a condition to attachment, perfection or
priority of, or ability of the Collateral Agent to enforce, the
Collateral Agent's security interest in such Collateral, (c) complying
with any provision of any statute, regulation or treaty of the United
States as to any Collateral if compliance with such provision is a
condition to attachment, perfection or priority of, or ability of the
Collateral Agent to enforce, the Collateral Agent's security interest
in such Collateral, (d) obtaining governmental and other third party
waivers, consents and approvals in form and substance satisfactory to
the Collateral Agent, including, without limitation, any consent of
any licensor, lessor or other person obligated on Collateral, (e)
obtaining waivers from mortgagees and landlords in form and substance
satisfactory to the Collateral Agent and (f) taking all actions under
any earlier versions of the Uniform Commercial Code or under any other
law, as reasonably determined by the Collateral Agent to be applicable
in any relevant Uniform Commercial Code or other jurisdiction,
including any foreign jurisdiction.
5. RELATION TO OTHER SECURITY DOCUMENTS. The provisions of this
Agreement supplement the provisions of any real estate mortgage or deed of trust
granted by any of the Obligors to the Collateral Agent and which secures the
payment or performance of any of the Obligations. Nothing contained in any such
real estate mortgage or deed of trust shall derogate from any of the rights or
remedies of the Collateral Agent hereunder. In addition, to the provisions of
this Agreement being so read and construed with any such mortgage or deed of
trust, the provisions of this Agreement shall be read and construed with the
other Security Documents referred to below in the manner so indicated.
5.1. STOCK PLEDGE AGREEMENT. Concurrently herewith the Company is
executing and delivering to the Collateral Agent a stock pledge
agreement pursuant to which the Company is pledging to the Collateral
Agent all of the shares of the capital stock of Inteliant, SOS
Collection, ServCom and Devon. Such pledge shall be governed by the
terms of such stock pledge agreement and not by the terms of this
Agreement.
5.2. TRADEMARK ASSIGNMENTS. Concurrently herewith the Obligors
are executing and delivering to the Collateral Agent the Trademark
Assignment pursuant to which the Obligors are assigning to the
Collateral Agent certain Collateral consisting of trademarks, service
marks and trademark and service xxxx rights, together with the
goodwill appurtenant thereto. The provisions of the Trademark
Assignment are supplemental to the provisions of this Agreement, and
nothing contained in the Trademark Assignment shall derogate from any
of the rights or remedies of the Collateral Agent hereunder. Neither
the delivery of, nor anything contained in, the Trademark Assignment
shall be deemed to prevent or postpone the time of attachment or
perfection of any security interest in such Collateral created hereby.
6. REPRESENTATIONS AND WARRANTIES CONCERNING OBLIGORS' LEGAL STATUS.
The Obligors have previously delivered to the Collateral Agent a document
entitled "Collateral Questionnaire" (the "COLLATERAL Questionnaire"), a copy of
which is attached hereto on Exhibit B. Each Obligor represents and warrants to
the Collateral Agent as follows: (a) such Obligor's exact legal name is
indicated on the Collateral Questionnaire and on the signature page hereof, (b)
such Obligor is an organization of the type, and is organized in the
jurisdiction, set forth in the Collateral Questionnaire, (c) the Collateral
Questionnaire accurately sets forth such Obligor's organizational identification
number or accurately states that such Obligor has none, (d) the Collateral
Questionnaire accurately sets forth such Obligor's place of business or, if more
than one, its chief executive office, as well as such Obligor's mailing address,
if different, (e) all other information set forth on the Collateral
Questionnaire pertaining to such Obligor is accurate and complete and (f) there
has been no change in any of such information since the date on which the
Collateral Questionnaire was delivered by the Obligors.
7. COVENANTS CONCERNING OBLIGORS' LEGAL STATUS. Each Obligor covenants
with the Collateral Agent as follows: (a) without providing at least 30 days
prior written notice to the Collateral Agent, such Obligor will not change its
name, its place of business or, if more than one, chief executive office, or its
mailing address or organizational identification number if it has one, (b) if
such Obligor does not have an organizational identification number and later
obtains one, such Obligor will forthwith notify the Collateral Agent of such
organizational identification number, and (c) such Obligor will not change its
type of organization, jurisdiction of organization or other legal structure.
8. REPRESENTATIONS AND WARRANTIES CONCERNING COLLATERAL, ETC. The
Obligors further represent and warrant, jointly and severally; to the Collateral
Agent as follows: (a) each Obligor is the owner of or has other rights in or
power to transfer its respective Collateral, free from any right or claim of any
person or any adverse lien, security interest or other encumbrance, except for
the security interest created by this Agreement and other liens permitted by the
Financing Agreements, (b) none of the Collateral constitutes, or is the proceeds
of, "farm products" as defined in ss.9-102(a)(34) of the Uniform Commercial Code
of the State, (c) less than 5% of the account debtors or other persons obligated
on any of the Collateral is a governmental authority covered by the Federal
Assignment of Claims Act or like federal, state or local statute or rule in
respect of such Collateral, (d) no Obligor holds any commercial tort claim
except as indicated on the Collateral Questionnaire, (e) each Obligor has at all
times operated its business in compliance with all applicable provisions of the
federal Fair Labor Standards Act, as amended, and with all applicable provisions
of federal, state and local statutes and ordinances dealing with the control,
shipment, storage or disposal of hazardous materials or substances, (f) all
other information set forth on the Collateral Questionnaire pertaining to the
Collateral is accurate and complete, and (g) there has been no change in any of
such information since the date on which the Collateral Questionnaire was
delivered by the Obligors.
9. COVENANTS CONCERNING COLLATERAL, ETC. Each of the Obligors further
covenants with the Collateral Agent as follows: (a) the Collateral, to the
extent not delivered to the Collateral Agent pursuant to ss.4, will be kept at
those locations listed on the Collateral Questionnaire and no Obligor will
remove the Collateral from such locations, without providing at least 30 days
prior written notice to the Collateral Agent, (b) except for the security
interest herein granted and liens permitted by the Financing Agreements, each
Obligor shall be the owner of or have other rights in its respective Collateral
free from any right or claim of any other person or any lien, security interest
or other encumbrance, and each Obligor shall defend the same against all claims
and demands of all persons at any time claiming the same or any interests
therein adverse to the Collateral Agent, (c) no Obligor shall pledge, mortgage
or create, or suffer to exist any right of any person in or claim by any person
to any of the Collateral, or any security interest, lien or other encumbrance in
the Collateral in favor of any person, other than the Collateral Agent except
for liens permitted by the Financing Agreements, (d) each Obligor will keep the
Collateral in good order and repair and will not use the same in violation of
law or any policy of insurance thereon, (e) each Obligor will permit the
Collateral Agent, or its designee, to inspect the Collateral at any reasonable
time, wherever located, (f) each Obligor will pay promptly when due all taxes,
assessments, governmental charges and levies upon the Collateral or incurred in
connection with the use or operation of the Collateral or incurred in connection
with this Agreement, (g) each Obligor will continue to operate its business in
compliance with all applicable provisions of the federal Fair Labor Standards
Act, as amended, and with all applicable provisions of federal, state and local
statutes and ordinances dealing with the control, shipment, storage or disposal
of hazardous materials or substances, and (h) no Obligor will sell or otherwise
dispose, or offer to sell or otherwise dispose, of the Collateral or any
interest therein except for (i) sales and leases of inventory in the ordinary
course of its business and (ii) so long as no Event of Default has occurred and
is continuing, sales or other dispositions permitted by the Financing Agreements
so long as the proceeds of any such sale or disposition are applied in
accordance with the Financing Agreements and the Intercreditor Agreement.
10. INSURANCE.
10.1. MAINTENANCE OF INSURANCE. Each Obligor will maintain with
financially sound and reputable insurers insurance with respect to its
respective properties and business against such casualties and
contingencies as shall be in accordance with general practices of
businesses engaged in similar activities in similar geographic areas.
Such insurance shall be in such minimum amounts that the Obligors will
not be deemed a co-insurer under applicable insurance laws,
regulations and policies and otherwise shall be in such amounts,
contain such terms, be in such forms and be for such periods as may be
reasonably satisfactory to the Collateral Agent. In addition, all such
insurance shall be payable to the Collateral Agent as loss payee.
Without limiting the foregoing, the Obligors will (a) keep all of
their physical property insured with casualty or physical hazard
insurance on an "all risks" basis, with broad form flood and
earthquake coverages and electronic data processing coverage, with a
full replacement cost endorsement and an "agreed amount" clause in an
amount equal to 100% of the full replacement cost of such property to
the extent consistent with commercially reasonably past practices of
such Obligor, (b) maintain all such workers' compensation or similar
insurance as may be required by law and (c) maintain, in amounts and
with deductibles equal to those generally maintained by businesses
engaged in similar activities in similar geographic areas, general
public liability insurance against claims of bodily injury, death or
property damage occurring, on, in or about the properties of the
Obligors; business interruption insurance; and product liability
insurance.
10.2. INSURANCE PROCEEDS. The proceeds of any casualty insurance
in respect of any casualty loss of any of the Collateral shall,
subject to the rights, if any, of other parties with an interest
having priority in the property covered thereby, (a) so long as no
Default or Event of Default has occurred and is continuing and to the
extent that the amount of such proceeds is less than $500,000, be
disbursed to the Obligors for direct application by the Obligors
solely to the repair or replacement of the Obligors' property so
damaged or destroyed and (b) in all other circumstances, be held by
the Collateral Agent as cash collateral for the Obligations. The
Collateral Agent may, at its sole option, disburse from time to time
all or any part of such proceeds so held as cash collateral, upon such
terms and conditions as the Collateral Agent may reasonably prescribe,
for direct application by the Obligors solely to the repair or
replacement of the Obligors' property so damaged or destroyed, or the
Collateral Agent may apply all or any part of such proceeds to the
Obligations in accordance with the Intercreditor Agreement.
10.3. CONTINUATION OF INSURANCE. All policies of insurance shall
provide for at least 30 days prior written cancellation notice to the
Collateral Agent. In the event of failure by any of the Obligors to
provide and maintain insurance as herein provided, the Collateral
Agent may, at its option, provide such insurance and charge the amount
thereof to the Obligors. The Obligors shall furnish the Collateral
Agent with certificates of insurance and policies evidencing
compliance with the foregoing insurance provision.
11. COLLATERAL PROTECTION EXPENSES; PRESERVATION OF COLLATERAL.
11.1. EXPENSES INCURRED BY COLLATERAL AGENT. In the Collateral
Agent's discretion, if any of the Obligors fail to do so, the
Collateral Agent may discharge taxes and other encumbrances at any
time levied or placed on any of the Collateral, make repairs thereto
and pay any necessary filing fees or insurance premiums. The Obligors
agree to reimburse the Collateral Agent on demand for all expenditures
so made. The Collateral Agent shall have no obligation to the Obligors
to make any such expenditures, nor shall the making thereof be
construed as a waiver or cure of any Default or Event of Default.
11.2. COLLATERAL AGENT'S OBLIGATIONS AND DUTIES. Anything herein
to the contrary notwithstanding, the Obligors shall remain obligated
and liable under each contract or agreement comprised in the
Collateral to be observed or performed by any of the Obligors
thereunder. The Collateral Agent shall not have any obligation or
liability under any such contract or agreement by reason of or arising
out of this Agreement or the receipt by the Collateral Agent of any
payment relating to any of the Collateral, nor shall the Collateral
Agent be obligated in any manner to perform any of the obligations of
any of the Obligors under or pursuant to any such contract or
agreement, to make inquiry as to the nature or sufficiency of any
payment received by the Collateral Agent in respect of the Collateral
or as to the sufficiency of any performance by any party under any
such contract or agreement, to present or file any claim, to take any
action to enforce any performance or to collect the payment of any
amounts which may have been assigned to the Collateral Agent or to
which the Collateral Agent may be entitled at any time or times. The
Collateral Agent's sole duty with respect to the custody, safe keeping
and physical preservation of the Collateral in its possession, under
ss.9-207 of the Uniform Commercial Code of the State or otherwise,
shall be to deal with such Collateral in the same manner as the
Collateral Agent deals with similar property for its own account.
12. SECURITIES AND DEPOSITS. The Collateral Agent may at any time
following and during the continuance of a Default and Event of Default, at its
option, transfer to itself or any nominee any securities constituting
Collateral, receive any income thereon and hold such income as additional
Collateral or apply it to the Obligations in accordance with the Intercreditor
Agreement. Whether or not any Obligations are due, the Collateral Agent may
following and during the continuance of a Default and Event of Default demand,
xxx for, collect, or make any settlement or compromise which it deems desirable
with respect to the Collateral. Regardless of the adequacy of Collateral or any
other security for the Obligations, any deposits or other sums at any time
credited by or due from the Collateral Agent to the Obligors may at any time be
applied to or set off against any of the Obligations then due and owing.
13. NOTIFICATION TO ACCOUNT DEBTORS AND OTHER PERSONS OBLIGATED ON
COLLATERAL. If a Default or an Event of Default shall have occurred and be
continuing, each of the Obligors shall, at the request and option of the
Collateral Agent, notify its account debtors and other persons obligated on any
of the Collateral of the security interest of the Collateral Agent in any
account, chattel paper, general intangible, instrument or other Collateral and
that payment thereof is to be made directly to the Collateral Agent or to any
financial institution designated by the Collateral Agent as the Collateral
Agent's agent therefor, and the Collateral Agent may itself, if a Default or an
Event of Default shall have occurred and be continuing, without notice to or
demand upon the Obligors, so notify account debtors and other persons obligated
on Collateral. After the making of such a request or the giving of any such
notification, each Obligor shall hold any proceeds of collection of accounts,
chattel paper, general intangibles, instruments and other Collateral received by
such Obligor as trustee for the Collateral Agent without commingling the same
with other funds of such Obligor and shall turn the same over to the Collateral
Agent in the identical form received, together with any necessary endorsements
or assignments. The Collateral Agent shall apply the proceeds of collection of
accounts, chattel paper, general intangibles, instruments and other Collateral
received by the Collateral Agent pursuant to the Intercreditor Agreement.
14. POWER OF ATTORNEY.
14.1. APPOINTMENT AND POWERS OF COLLATERAL AGENT. Each Obligor
hereby irrevocably constitutes and appoints the Collateral Agent and
any officer or agent thereof, with full power of substitution, as its
true and lawful attorneys-in-fact with full irrevocable power and
authority in the place and stead of such Obligor or in the Collateral
Agent's own name, for the purpose of carrying out the terms of this
Agreement, to take any and all appropriate action and to execute any
and all documents and instruments that may be necessary or useful to
accomplish the purposes of this Agreement and, without limiting the
generality of the foregoing, hereby gives said attorneys the power and
right, on behalf of such Obligor, without notice to or assent by the
such Obligor, to do the following:
(a) upon the occurrence and during the continuance of a
Default or an Event of Default, generally to sell, transfer,
pledge, make any agreement with respect to or otherwise dispose
of or deal with any of the Collateral in such manner as is
consistent with the Uniform Commercial Code of the State and as
fully and completely as though the Collateral Agent were the
absolute owner thereof for all purposes, and to do, at the
Obligors' expense, at any time, or from time to time, all acts
and things which the Collateral Agent deems necessary or useful
to protect, preserve or realize upon the Collateral and the
Collateral Agent's security interest therein, in order to effect
the intent of this Agreement, all no less fully and effectively
as such Obligor might do, including, without limitation, (i) the
filing and prosecuting of registration and transfer applications
with the appropriate federal, state or local agencies or
authorities with respect to trademarks, copyrights and patentable
inventions and processes, (ii) upon written notice to such
Obligor, the exercise of voting rights with respect to voting
securities, which rights may be exercised, if the Collateral
Agent so elects, with a view to causing the liquidation of assets
of the issuer of any such securities and (iii) the execution,
delivery and recording, in connection with any sale or other
disposition of any Collateral, of the endorsements, assignments
or other instruments of conveyance or transfer with respect to
such Collateral; and
(b) to the extent that any of such Obligor's authorizations
given in ss.3 is not sufficient, to file such financing
statements with respect hereto, with or without such Obligor's
signature, or a photocopy of this Agreement in substitution for a
financing statement, as the Collateral Agent may deem appropriate
and to execute in such Obligor's name such financing statements
and amendments thereto and continuation statements which may
require such Obligor's signature.
14.2. RATIFICATION BY OBLIGORS. To the extent permitted by law,
the Obligors hereby ratify all that said attorneys shall lawfully do
or cause to be done by virtue hereof. This power of attorney is a
power coupled with an interest and is irrevocable.
14.3. NO DUTY ON COLLATERAL AGENT. The powers conferred on the
Collateral Agent hereunder are solely to protect its interests in the
Collateral and shall not impose any duty upon it to exercise any such
powers. The Collateral Agent shall be accountable only for the amounts
that it actually receives as a result of the exercise of such powers,
and neither it nor any of its officers, directors, employees or agents
shall be responsible to any of the Obligors for any act or failure to
act, except for the Collateral Agent's own gross negligence or willful
misconduct.
15. REMEDIES. If an Event of Default shall have occurred and be
continuing, the Collateral Agent, without any other notice to or demand upon any
of the Obligors, shall have in any jurisdiction in which enforcement hereof is
sought, in addition to all other rights and remedies, the rights and remedies of
a secured party under the Uniform Commercial Code of the State and any
additional rights and remedies as may be provided to a secured party in any
jurisdiction in which Collateral is located, including, without limitation, the
right to take possession of the Collateral, and for that purpose the Collateral
Agent may, so far as any of the Obligors can give authority therefor, enter upon
any premises on which the Collateral may be situated and remove the same
therefrom. The Collateral Agent may in its discretion require each Obligor to
assemble all or any part of the Collateral at such location or locations within
the jurisdictions of the Obligors' principal offices or at such other locations
as the Collateral Agent may reasonably designate. Unless the Collateral is
perishable or threatens to decline speedily in value or is of a type customarily
sold on a recognized market, the Collateral Agent shall give to the Obligors at
least five Business Days prior written notice of the time and place of any
public sale of Collateral or of the time after which any private sale or any
other intended disposition is to be made. The Obligors hereby acknowledge that
five Business Days prior written notice of such sale or sales shall be
reasonable notice. In addition, each Obligor waives any and all rights that it
may have to a judicial hearing in advance of the enforcement of any of the
Collateral Agent's rights and remedies hereunder, including, without limitation,
its right following an Event of Default to take immediate possession of the
Collateral and to exercise its rights and remedies with respect thereto.
16. STANDARDS FOR EXERCISING RIGHTS AND REMEDIES. To the extent that
applicable law imposes duties on the Collateral Agent to exercise remedies in a
commercially reasonable manner, each Obligor acknowledges and agrees that it is
not commercially unreasonable for the Collateral Agent (a) to fail to incur
expenses reasonably deemed significant by the Collateral Agent to prepare
Collateral for disposition or otherwise to fail to complete raw material or work
in process into finished goods or other finished products for disposition, (b)
to fail to obtain third party consents for access to Collateral to be disposed
of, or to obtain or, if not required by other law, to fail to obtain
governmental or third party consents for the collection or disposition of
Collateral to be collected or disposed of, (c) to fail to exercise collection
remedies against account debtors or other persons obligated on Collateral or to
fail to remove liens or encumbrances on or any adverse claims against
Collateral, (d) to exercise collection remedies against account debtors and
other persons obligated on Collateral directly or through the use of collection
agencies and other collection specialists, (e) to advertise dispositions of
Collateral through publications or media of general circulation, whether or not
the Collateral is of a specialized nature, (f) to contact other persons, whether
or not in the same business as any of the Obligors, for expressions of interest
in acquiring all or any portion of the Collateral, (g) to hire one or more
professional auctioneers to assist in the disposition of Collateral, whether or
not the collateral is of a specialized nature, (h) to dispose of Collateral by
utilizing internet sites that provide for the auction of assets of the types
included in the Collateral or that have the reasonable capability of doing so,
or that match buyers and sellers of assets, (i) to dispose of assets in
wholesale rather than retail markets, (j) to disclaim disposition warranties,
(k) to purchase insurance or credit enhancements to insure the Collateral Agent
against risks of loss, collection or disposition of Collateral or to provide to
the Collateral Agent a guaranteed return from the collection or disposition of
Collateral, or (l) to the extent deemed appropriate by the Collateral Agent, to
obtain the services of brokers, investment bankers, consultants and other
professionals to assist the Collateral Agent in the collection or disposition of
any of the Collateral. Each Obligor acknowledges that the purpose of this ss.16
is to provide non-exhaustive indications of what actions or omissions by the
Collateral Agent would fulfill the Collateral Agent's duties under the Uniform
Commercial Code of the State or any other relevant jurisdiction in the
Collateral Agent's exercise of remedies against the Collateral and that other
actions or omissions by the Collateral Agent shall not be deemed to fail to
fulfill such duties solely on account of not being indicated in this ss.16.
Without limitation upon the foregoing, nothing contained in this ss.16 shall be
construed to grant any rights to any of the Obligors or to impose any duties on
the Collateral Agent that would not have been granted or imposed by this
Agreement or by applicable law in the absence of this ss.16.
17. NO WAIVER BY COLLATERAL AGENT, ETC. The Collateral Agent shall not
be deemed to have waived any of its rights and remedies in respect of the
Obligations or the Collateral unless such waiver shall be in writing and signed
by the Collateral Agent. No delay or omission on the part of the Collateral
Agent in exercising any right or remedy shall operate as a waiver of such right
or remedy or any other right or remedy. A waiver on any one occasion shall not
be construed as a bar to or waiver of any right or remedy on any future
occasion. All rights and remedies of the Collateral Agent with respect to the
Obligations or the Collateral, whether evidenced hereby or by any other
instrument or papers, shall be cumulative and may be exercised singularly,
alternatively, successively or concurrently at such time or at such times as the
Collateral Agent deems expedient.
18. SURETYSHIP WAIVERS BY OBLIGORS. Each Obligor waives demand,
notice, protest, notice of acceptance of this Agreement, notice of loans made,
credit extended, Collateral received or delivered or other action taken in
reliance hereon and all other demands and notices of any description. With
respect to both the Obligations and the Collateral, each of the Obligors assents
to any extension or postponement of the time of payment or any other indulgence,
to any substitution, exchange or release of or failure to perfect any security
interest in any Collateral, to the addition or release of any party or person
primarily or secondarily liable, to the acceptance of partial payment thereon
and the settlement, compromising or adjusting of any thereof, all in such manner
and at such time or times as the Collateral Agent may deem advisable. The
Collateral Agent shall have no duty as to the collection or protection of the
Collateral or any income therefrom, the preservation of rights against prior
parties, or the preservation of any rights pertaining thereto beyond the safe
custody thereof as set forth in ss.11.2. The Obligors further waive any and all
other suretyship defenses.
19. MARSHALLING. The Collateral Agent shall not be required to marshal
any present or future collateral security (including but not limited to the
Collateral) for, or other assurances of payment of, the Obligations or any of
them or to resort to such collateral security or other assurances of payment in
any particular order, and all of its rights and remedies hereunder and in
respect of such collateral security and other assurances of payment shall be
cumulative and in addition to all other rights and remedies, however existing or
arising. To the extent that it lawfully may, each Obligor hereby agrees that it
will not invoke any law relating to the marshalling of collateral which might
cause delay in or impede the enforcement of the Collateral Agent's rights and
remedies under this Agreement or under any other instrument creating or
evidencing any of the Obligations or under which any of the Obligations is
outstanding or by which any of the Obligations is secured or payment thereof is
otherwise assured, and, to the extent that it lawfully may, the Obligors hereby
irrevocably waive the benefits of all such laws.
20. PROCEEDS OF DISPOSITIONS; EXPENSES. The Obligors shall pay to the
Collateral Agent on demand any and all expenses, including reasonable attorneys'
fees and disbursements, incurred or paid by the Collateral Agent in protecting,
preserving or enforcing the Collateral Agent's rights and remedies under or in
respect of any of the Obligations or any of the Collateral. After deducting all
of said expenses, the residue of any proceeds of collection or sale or other
disposition of Collateral shall, to the extent actually received in cash, be
applied to the payment of the Obligations in such order or preference as is
provided in the Intercreditor Agreement. In the absence of final payment and
satisfaction in full of all of the Obligations, the Obligors shall remain liable
for any deficiency.
21. OVERDUE AMOUNTS. Upon notice and a failure to pay within three (3)
Business Days after such notice, and until paid, all amounts due and payable by
the Obligors hereunder shall be a debt secured by the Collateral and shall bear,
whether before or after judgment, interest at the Default Rate.
22. COLLATERAL AUDITS. At any time, and from time to time, upon the
reasonable request of any of the Secured Parties, an audit of the Collateral
shall be performed, in accordance with generally accepted accounting practices,
at the sole cost and expense of the Obligors; PROVIDED, however, that the
Obligors shall not be required to bear the costs and expenses of more than one
such audit in any consecutive twelve-month period.
23. CONTINUING LIEN; DISCHARGE.
23.1. CONTINUING LIEN. The security constituted by this Agreement
shall be continuing and shall not be considered as satisfied or
discharged by any intermediate payment or settlement of the whole or
any part of the Obligations and shall be binding until all the
Obligations (other than indemnities or other contingent obligations
that survive payment in full therefor) have been discharged in full to
the satisfaction of the Collateral Agent and all of the Secured
Parties have ceased to have any obligation whether actual or
contingent to make any credit or accommodation available to any
Obligor pursuant to any of the Financing Agreements.
23.2. DISCHARGE. Upon the irrevocable payment or discharge in
full of the Obligations (except indemnities or other contingent
obligations that survive payment in full therefor), the Collateral
Agent shall, or shall cause its nominees or agents to, reassign and
deliver to the Obligors, against receipt, such of the Collateral (if
any) as shall not have been sold or otherwise applied by the
Collateral Agent pursuant to Intercreditor Agreement and the terms
hereof and shall still be held by it or any of the Secured Parties
hereunder, together with appropriate instruments of reassignment and
release, all without any recourse to, or warranty whatsoever (except
that the Collateral is then subject to no lien or encumbrance created
by the Collateral Agent or any Secured Party) by, the Collateral Agent
or any Secured Party, and at the sole cost and expense of the
Obligors; PROVIDED, HOWEVER, that all indemnities of the Obligors
contained in this Agreement or any other Financing Agreement shall
survive, and remain operative and in full force and effect regardless
of, the termination of this Agreement. Upon any such termination of
the security interests or the release of the Collateral, the
Collateral Agent will, at the Obligors' expense, execute and deliver
to the Obligors such documents as the Obligors shall reasonably
request to evidence the termination of the security interests in the
Collateral.
24. GOVERNING LAW; CONSENT TO JURISDICTION. THIS AGREEMENT IS INTENDED
TO TAKE EFFECT AS A SEALED INSTRUMENT AND SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE. The Obligors agree that any action or
claim arising out of any dispute in connection with this Agreement, any rights
or obligations hereunder or the performance or enforcement of such rights or
obligations may be brought in the courts of the State or any federal court
sitting therein and consents to the non-exclusive jurisdiction of such court and
to service of process in any such suit being made upon any Obligor by mail at
the address listed below its name on the signature page hereto. The Obligors
hereby waive any objection that it may now or hereafter have to the venue of any
such suit or any such court or that such suit is brought in an inconvenient
court.
25. WAIVER OF JURY TRIAL. EACH OF THE OBLIGORS WAIVES ITS RIGHT TO A
JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN
CONNECTION WITH THIS AGREEMENT, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THE
PERFORMANCE OR ENFORCEMENT OF ANY SUCH RIGHTS OR OBLIGATIONS. Except as
prohibited by law, each of the Obligors waives any right which it may have to
claim or recover in any litigation referred to in the preceding sentence any
special, exemplary, punitive or consequential damages or any damages other than,
or in addition to, actual damages. Each of the Obligors (a) certifies that
neither the Collateral Agent nor any representative, agent or attorney of the
Collateral Agent has represented, expressly or otherwise, that the Collateral
Agent would not, in the event of litigation, seek to enforce the foregoing
waivers or other waivers contained in this Agreement and (b) acknowledges that,
in entering into the Financing Agreements, the Collateral Agent is relying upon,
among other things, the waivers and certifications contained in this ss.23.
26. MISCELLANEOUS. The headings of each section of this Agreement are
for convenience only and shall not define or limit the provisions thereof. This
Agreement and all rights and obligations hereunder shall be binding upon the
Obligors and their respective successors and assigns, and shall inure to the
benefit of the Collateral Agent and its successors and assigns. If any term of
this Agreement shall be held to be invalid, illegal or unenforceable, the
validity of all other terms hereof shall in no way be affected thereby, and this
Agreement shall be construed and be enforceable as if such invalid, illegal or
unenforceable term had not been included herein. Each of the Obligors
acknowledges receipt of a copy of this Agreement.
[Next page is signature page.]
IN WITNESS WHEREOF, intending to be legally bound, each of the
Obligors have caused this Agreement to be duly executed as of the date first
above written.
SOS STAFFING SERVICES, INC.
By: /s/ XxXxx X. Xxxxxx
-----------------------------------------
Name: XxXxx X. Xxxxxx
Title: Chairman, President
and Chief Executive Officer
INTELIANT CORPORATION
By: /s/ Xxxxx Xxxxx
-----------------------------------------
Name: Xxxxx Xxxxx
Title: Vice President
SERVCOM STAFF MANAGEMENT, INC.
By: /s/ Xxxxxx X. Xxxxxx
----------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: President
SOS COLLECTION SERVICES, INC.
By: /s/ Xxxx Xxxxxxxx
----------------------------------------
Name: Xxxx Xxxxxxxx
Title: Vice President
DEVON & DEVON PERSONNEL SERVICES, INC.
By: /s/ XxXxx X. Xxxxxx
-------------------------------------
Name: XxXxx X. Xxxxxx
Title: President
Accepted:
STATE STREET BANK AND TRUST
COMPANY, AS COLLATERAL AGENT
By:
-------------------------------------
Name:
Title:
EXHIBIT A
DEPOSIT ACCOUNTS
EXHIBIT B
COLLATERAL QUESTIONNAIRE
CERTIFICATE OF ACKNOWLEDGMENT
COMMONWEALTH OR STATE OF *___________________)
) ss.
COUNTY OF *__________________________________)
Before me, the undersigned, a Notary Public in and for the county
aforesaid, on this [__] day of July, 2001, personally appeared [_________] to me
known personally, and who, being by me duly sworn, deposes and says that [s]he
is the [__________] of [________], and that said instrument was signed and
sealed on behalf of said corporation by authority of its Board of Directors, and
said [_________] acknowledged said instrument to be the free act and deed of
said corporation.
--------------------------
Notary Public
My commission expires:
