EQUITY APPRECIATION RIGHTS AGREEMENT
THIS AGREEMENT made and entered into as of this February 8, 2002 by and
among PERSONNEL GROUP OF AMERICA, INC., a Delaware corporation (herein called
the "Borrower"), BANK OF AMERICA, N.A., a national banking association, as Agent
(in such capacity, the "Agent") for the lenders (the "Lenders") party to the
Amended and Restated Credit Agreement dated as of June 23, 1997, as amended by
Amendment No. 1 to Amended and Restated Credit Agreement dated as of March 17,
1998, Amendment No. 2 to Amended and Restated Credit Agreement dated as of
September 29, 1999, Amendment No. 3 to Amended and Restated Credit Agreement
dated as of March 21, 2001, a Waiver Agreement dated as of December 14, 2001 and
an Amendment No. 4 to Amended and Restated Credit Agreement dated as of the date
hereof (collectively, as modified, amended or syndicated from time to time, the
"Credit Agreement'), among the Borrower, the Guarantors party thereto, the
Agent, and the Lenders, and the UNDERSIGNED LENDERS.
W I T N E S S E T H:
WHEREAS, in order to induce the Agent and the Lenders to enter into the
Amendment No. 4 to Amended and Restated Credit Agreement dated as of the date
hereof ("Amendment No. 4"), the Borrower has agreed to grant to the Agent and
the Lenders the equity appreciation rights described herein.
NOW, THEREFORE, in consideration of the entering into of Amendment No.
4 by the Agent and the Lenders, the Borrower does hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01 DEFINITIONS. For purposes of this Agreement, in addition
to the definitions of terms set forth elsewhere herein, the following words and
terms shall have the following meanings, respectively, unless the context
clearly requires otherwise:
"Agreement" means this Equity Appreciation Rights Agreement,
as the same may be modified, amended or supplemented from time to time.
"Consolidated Group" means the Borrower and its Subsidiaries.
"Credit Agreement" shall have the meaning set forth above;
such Credit Agreement to be deemed to continue in effect for purposes
of this Agreement, including Section 2.05 hereof.
"EBITDA" means for the Consolidated Group, for the four most
recent fiscal quarters ending prior to the date of determination, the
aggregate amount of earnings from continuing operations on a
consolidated basis before interest expense, taxes, depreciation,
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amortization, any other nonrecurring or restructuring charges (other
than any nonrecurring or restructuring charges representing expenses or
charges incurred in the ordinary course of business) and without giving
effect to any extraordinary gain or loss or gains or losses from asset
sales outside of the ordinary course of business. EBITDA shall be
determined in accordance with generally accepted accounting principles.
"Exercise Date" means the date of the Exercise Notice.
"Exercise Notice" means the notice of the exercise of the
Agent's right (on behalf of the Lenders) to receive the Rights Fee
pursuant to Section 2.01 hereof.
"Exercise Period" means the period (i) beginning on the
earlier to occur of (A) January 1, 2004 or (B) occurrence of an Event
of Default under the Credit Agreement and (ii) ending on January 1,
2006.
"Fair Market Value" means the enterprise value (taking into
account, among other things, the assets and liabilities, including
debts, of the Consolidated Group) of the Consolidated Group determined
by an Independent Financial Expert, using a multiple of EBITDA (with
such adjustments as are deemed appropriate by the Independent Financial
Expert) which shall represent the average multiples used in valuations
of comparable entities (in the opinion of the Independent Financial
Expert) for the twelve month period prior to the date of determination
of Fair Market Value (or such shorter period for which such information
shall be available). In determining such average multiple, the
Independent Financial Expert shall be directed to make adjustments
determined appropriate by the Independent Financial Expert.
Notwithstanding the foregoing, if the capital stock of the Borrower is
registered under the Securities and Exchange Act of 1934, as amended,
and traded on a national stock exchange (including NASDAQ National
Market System), "Fair Market Value" shall be the product of (i) the
average closing bid price of such stock for the forty-five (45) day
period preceding the Exercise Date and (ii) the number of shares of
capital stock of Borrower outstanding on the Exercise Date.
"Independent Financial Expert" means a nationally recognized
investment banking firm reasonably acceptable to the Borrower (i) which
does not (and whose directors, officers and affiliates do not) have a
direct or indirect financial interest in any of the Consolidated Group
and is not an affiliate of a Lender, (ii) which has not been, and, at
the time it is called upon to give independent financial advice to any
of the Consolidated Group, is not (and none of whose directors,
officers, employees or affiliates is) a promoter, director or officer
of any of the Consolidated Group or any of its affiliates, or any
underwriter with respect to any of the Consolidated Group's securities
and (iii) which does not provide any advice or opinions to the Borrower
or any of its affiliates except as an independent financial expert. An
Independent Financial Expert may be compensated by the Borrower for
opinions or services it provides as an Independent Financial Expert.
"Loans" means the Loans as that term is defined in the Credit
Agreement.
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"Rights" means the equity appreciation right granted to the
Agent and Lenders pursuant to this Agreement.
"Rights Fee" means the value of the Rights as at the date of
determination as provided in Section 2.02 hereof.
ARTICLE II
RIGHTS
SECTION 2.01 GRANT. The Borrower hereby grants, transfers, conveys and
assigns to the Agent for the benefit of the Lenders the right to receive the
Rights Fee. The Agent shall exercise the rights hereunder by the giving to the
Borrower, at any time during the Exercise Period, an Exercise Notice in the
manner provided in Section 3.01 hereof. Such Exercise Notice shall be dated the
Exercise Date and shall set forth the name of an Independent Financial Expert
selected by the Agent in consultation with the Borrower (it being understood
that the Independent Financial Expert must be reasonably acceptable to the
Borrower), if the Agent shall require that an Independent Financial Expert
determine the Fair Market Value.
SECTION 2.02 RIGHTS FEE.
(a) Except as provided in Sections 2.02(b), 2.03 and
2.05, the Rights Fee shall be the greater of:
(i) the product of 10% times the Fair Market
Value; or
(ii) $3,000,000.00.
(b) In the event all of the Borrower's Obligations (as
defined in the Credit Agreement) have been indefeasibly paid in full by
January 1, 2004 and the Termination Date (as defined in the Credit
Agreement) shall have occurred by January 1, 2004, the Rights Fee shall
be $0.
SECTION 2.03 COMPUTATION. If the Borrower's capital stock is traded on
a national stock exchange the Fair Market Value shall be determined in the
manner set forth in the definition of such term based on the price of such
capital stock. If the Borrower's capital stock is not listed for trading or
otherwise capable of being traded on a national stock exchange the Agent may (in
its sole discretion) require that Borrower promptly, upon receipt of the
Exercise Notice, retain at Borrower's expense the Independent Financial Expert
specified in the Exercise Notice to determine the Fair Market Value. The
Borrower shall furnish to the Independent Financial Expert all financial
information and such other information regarding the Consolidated Group as the
Independent Financial Expert shall reasonably request from time to time. The
Borrower further agrees that it will permit the Independent Financial Expert to
examine the corporate books and financial records of the Consolidated Group and
make copies or extracts therefrom
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and to discuss the affairs, finances and accounts of any such corporations with
the principal officers of the Borrower and its independent public accountants,
all at such reasonable times and as often as the Independent Financial Expert
may reasonably request. The Borrower acknowledges and agrees that the prompt
engagement of the Independent Financial Expert and furnishing of reasonably
requested information is necessary for the determination of the Rights Fee. The
Independent Financial Expert shall deliver to the Agent its report, in scope and
detail reasonably satisfactory to the Agent, not later than sixty (60) days
following the Exercise Date. In the event the Borrower fails to engage such
Independent Financial Expert within twenty (20) days following the Exercise Date
or fails at any time promptly to furnish information reasonably requested in
writing by the Independent Financial Expert under this Section 2.03 (which
information the Borrower has the capacity to furnish and after providing the
Borrower a reasonable period of time in which to furnish; it being understood
that the Borrower shall not be deemed to have failed to furnish such information
in accordance with this Section 2.03 for so long as the Borrower is using its
good faith and commercially reasonable efforts to furnish such information),
then the Rights Fee shall be equal to $5,000,000 and shall be immediately due
and payable.
SECTION 2.04 PAYMENT. Within three (3) days of the establishment of the
Rights Fee and in no event later than the 90th day after the Exercise Date, the
Borrower shall pay the Rights Fee in immediately available funds.
SECTION 2.05 FINANCIAL INFORMATION. The Borrower hereby covenants and
agrees to furnish to the Agent the financial information described in Section
7.1 of the Credit Agreement by the date required under the Credit Agreement
whether or not the Credit Agreement shall then be in full force and effect or
any of the Borrower's Obligations remain unpaid thereunder. In the event the
Borrower shall fail at any time during the Exercise Period to furnish such
information, and such failure continues for thirty (30) days following written
notice of such failure from the Agent (and provided the Borrower has the
capacity to furnish such information within such time period; it being
understood that the Borrower shall not be deemed to have failed to furnish such
information in accordance with this Section 2.05 for so long as the Borrower is
using its good faith and commercially reasonable efforts to furnish such
information), no Exercise Notice shall be required hereunder and the Rights Fee
shall become immediately due and payable and shall be equal to $5,000,000. Such
Rights Fee shall be paid immediately to the Agent without further demand or
notice.
ARTICLE III
MISCELLANEOUS
SECTION 3.01 NOTICE. Any notice or communication shall be in writing
and delivered by telecopy or in person or mailed by first-class mail or
overnight courier addressed as follows:
If to the Borrower: Personnel Group of America, Inc.
0000 Xxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
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Attn: Xxxxx X. Xxxx, Chief Financial
Officer
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
If to the Agent: Bank of America, N.A.
Bank of America Corporation Center,
22nd Floor
000 Xxxxx Xxxxx Xxxxxx, XX0-000-00-00
Xxxxxxxxx, XX 00000-0000
Attention: Xxxxxxx Xxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
If to a Lender: At the relevant address set forth on
Schedule 2.1(a) to the Credit
Agreement.
The Borrower or the Agent by notice may designate additional or
different addresses for subsequent notices or communications.
SECTION 3.02 SHARING OF RIGHTS FEE; DIRECTION TO EXERCISE RIGHTS. The
Borrower and the Agent acknowledge and agree that the Rights Fee shall be paid
by the Borrower to the Agent for the benefit of the Lenders. The Rights Fee paid
to the Agent shall be paid by the Agent to the Lenders in the manner described
in Section 3.14 of the Credit Agreement so long as a Lender shall have fulfilled
its obligations to the Agent and the other Lenders under the Credit Agreement.
The Agent and the Lenders acknowledge and agree that the Agent shall exercise
the rights hereunder, during the Exercise Period and in accordance with the
terms hereof, upon the request and at the direction of the Required Lenders (as
defined in the Credit Agreement). The parties hereto further acknowledge and
agree that the Required Lenders may, in their sole discretion, decline to direct
the Agent to exercise the rights hereunder.
SECTION 3.03 GOVERNING LAW; SEVERABILITY. THE LAW OF THE STATE OF NORTH
CAROLINA SHALL GOVERN THIS AGREEMENT BUT WITHOUT GIVING EFFECT TO APPLICABLE
PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF
ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. IF ONE OR MORE PROVISIONS OF
THIS AGREEMENT ARE HELD TO BE UNENFORCEABLE UNDER APPLICABLE LAW, SUCH
PROVISIONS SHALL BE SEVERED FROM THIS AGREEMENT AS IF SUCH PROVISIONS WERE NOT
INCLUDED AND THE BALANCE OF THIS AGREEMENT SHALL BE ENFORCEABLE IN ACCORDANCE
WITH ITS TERMS.
SECTION 3.04 JURISDICTION; CONSENT TO SERVICE OF PROCESS.
(a) The Borrower hereby irrevocably and unconditionally submits,
for itself and its property, to the jurisdiction of any North Carolina State
court or Federal court of the United States of America sitting in Charlotte,
North Carolina, and any Appellate court from any thereof, in any action or
proceeding arising out of or relating to this Agreement or any related
documents, or for recognition or enforcement of any judgment, and each of the
parties hereto hereby
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irrevocably and unconditionally agrees that all claims in respect of any such
action or proceeding may be heard and determined in North Carolina or, to the
extent permitted by law, in such Federal court. Each of the parties hereto
agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law.
(b) The Borrower hereby irrevocably and unconditionally waives, to
the fullest extent it may legally and effectively do so, any objection that it
may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement in any North Carolina
State or Federal court. Each of the parties hereto hereby irrevocably waives, to
the fullest extent permitted by law, the defense or any inconvenient forum to
the maintenance of such action or proceeding in any such court.
(c) Each party to this Agreement irrevocably consents to service
of process in the manner provided for notices in Section 3.01. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement, to be duly executed and delivered by their proper and duly
authorized officers as of the day and year first above written.
BORROWER: PERSONNEL GROUP OF AMERICA, INC.,
a Delaware corporation
By: /s/ Xxxxx X. Xxxx
------------------------------------
Name: Xxxxx X. Xxxx
Title: President and
Chief Financial Officer
LENDERS: BANK OF AMERICA, N.A.,
formerly known as NationsBank, N.A.
and Bank of America Illinois,
as Agent and as a Lender
By: /s/ H. Xxxxxxx Xxxxxx
------------------------------------
Name: H. Xxxxxxx Xxxxxx
Title: Managing Director
Signature Page to Equity Appreciation Rights Agreement
among Personnel Group of America, Inc.,
Bank of America, N.A., as Agent and the Lenders party thereto
February 2002
BNP PARIBAS
By: /s/ Xxxxx Xxxxxxxxx
---------------------------------------
Name: Xxxxx Xxxxxxxxx
Title: Director & Head of US Midcap Group
BNP PARIBAS
By: /s/ Shayn March
---------------------------------------
Name: Shayn March
Title: Vice President
Signature Page to Equity Appreciation Rights Agreement
among Personnel Group of America, Inc.,
Bank of America, N.A., as Agent and the Lenders party thereto
February 2002
COMERICA BANK
By: /s/ Xxxx X. Xxxxx
---------------------------------------
Name: Xxxx X. Xxxxx
Title: Account Officer
Signature Page to Equity Appreciation Rights Agreement
among Personnel Group of America, Inc.,
Bank of America, N.A., as Agent and the Lenders party thereto
February 2002
CREDIT LYONNAIS NEW YORK BRANCH
By: /s/ Xxxxxx X. Xxxxxxx
---------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Senior Vice President
Signature Page to Equity Appreciation Rights Agreement
among Personnel Group of America, Inc.,
Bank of America, N.A., as Agent and the Lenders party thereto
February 2002
BANK ONE, NA
By: /s/ Xxxxxx X. Xxxxx
---------------------------------------
Name: Xxxxxx X. Xxxxx
Title: First Vice President
Signature Page to Equity Appreciation Rights Agreement
among Personnel Group of America, Inc.,
Bank of America, N.A., as Agent and the Lenders party thereto
February 2002
PNC BANK, NATIONAL ASSOCIATION
By: /s/ Xxxxxx X. Xxxxxxxx
---------------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: Assistant Vice President
Signature Page to Equity Appreciation Rights Agreement
among Personnel Group of America, Inc.,
Bank of America, N.A., as Agent and the Lenders party thereto
February 2002
FIRST UNION NATIONAL BANK
By: /s/ Xxxx X. Xxxxxx
---------------------------------------
Name: Xxxx X. Xxxxxx
Title: Vice President
Signature Page to Equity Appreciation Rights Agreement
among Personnel Group of America, Inc.,
Bank of America, N.A., as Agent and the Lenders party thereto
February 2002
WACHOVIA BANK, NA
By: /s/ Xxxx X. Xxxxxx
---------------------------------------
Name: Xxxx X. Xxxxxx
Title: Vice President
Signature Page to Equity Appreciation Rights Agreement
among Personnel Group of America, Inc.,
Bank of America, N.A., as Agent and the Lenders party thereto
February 2002
