THIRD MODIFICATION AGREEMENT
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EFFECTIVE DATE: June 30, 1997
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PARTIES: Borrower: Employee Solutions, Inc.,
------- an Arizona corporation
Borrower 0000 Xxxx Xxxxxxxxx Xxxx, Xxxxx 000
Address: Xxxxxxx, Xxxxxxx 00000-0000
Bank: Bank One, Arizona, NA,
a national banking association
Bank X.X. Xxx 00
Address: Xxxxxxx, Xxxxxxx 00000
RECITALS:
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A. Bank has extended to Borrower credit ("Loan") in the current
principal amount of $60,000,000.00 pursuant to the Loan Agreement dated August
1, 1996 ("Credit Agreement"), and evidenced by the Secured Promissory Note dated
August 1, 1996 ("Note"). The unpaid principal of the Loan as of the date hereof
is $47,300,000.00.
B. The Loan is secured by, among other things, the Security Agreement
dated August 1, 1996, as modified by the Letter Agreement dated August 22, 1996
("Security Agreement"), between the Obligor (as defined therein) and Bank (the
agreements, documents, and instruments securing the Loan and the Note are
referred to individually and collectively as the "Security Documents").
C. Bank and Borrower have executed and delivered previously the
following agreements ("Modifications") modifying the terms of the Loan, the
Note, the Credit Agreement, and/or the Security Documents: Letter Agreement
dated August 22, 1996, Modification Agreement dated October 15, 1996, and Second
Modification Agreement dated February 19, 1997. The Note, the Credit Agreement,
the Security Documents, any arbitration resolution, any environmental
certification and indemnity agreement, and all other agreements, documents, and
instruments evidencing, securing, or otherwise relating to the Loan, as modified
in the Modifications, are sometimes referred to individually and collectively as
the "Loan Documents".
D. Borrower has requested that Bank modify the Loan and the Loan
Documents as provided herein. Bank is willing to so modify the Loan and the Loan
Documents, subject to the terms and conditions herein.
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AGREEMENT:
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For good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Borrower and Bank agree as follows:
1. ACCURACY OF RECITALS.
--------------------
Borrower acknowledges the accuracy of the Recitals.
2. MODIFICATION OF LOAN DOCUMENTS.
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2.1 The Loan Documents are modified as follows:
2.1.1 Sections 6.12.1, 6.12.2, 6.12.4, 7.4 and 7.5 of the Credit
Agreement are hereby deleted in their entirety and replaced with the following:
6.12.1 Current Ratio. A minimum current ratio, calculated by
dividing Borrower's current assets by Borrower's current liabilities,
of 1.30 to 1.00. For purposes of this calculation, this credit
facility will be considered a current liability except the portion
which was used for cash acquisitions.
6.12.2 Minimum Net Worth. Minimum Net Worth of the amounts
indicated for the end of each period specified below:
Period Amount
------ ------
fiscal quarter $45,000,000.00
ending
June 30, 1997
Each and every
fiscal quarter
thereafter $45,000,000.00 increasing by 75% of Net
Income plus 100% of any additional equity
amounts raised by Borrower.
"Net Worth" is defined as the aggregate of total stockholders' equity.
6.12.4 Funded Debt to EBITDA. Total Funded Debt divided by EBITDA
not at any time greater than the amounts indicated for each period
ending on the date specified below:
Period Ratio
------ -----
June 30, 1997 2.5:1.0
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September 30, 1997 2.5:1.0
December 31, 1997 2.5:1.0
March 31, 1998 2.25:1.0
June 30, 1998, and thereafter 2.0:1.0
"Total Funded Debt" defined as current and long term portions of all
debt, excluding accounts payables, bank overdrafts, contingent
liabilities, income taxes payable, accrued expenses and deferred
income taxes. This covenant shall be tested as of the end of each
fiscal quarter, commencing for the fiscal quarter ending September 30,
1996, for such fiscal quarter and the immediately preceding three (3)
fiscal quarters taken as a whole. In addition, pro forma EBITDA of all
companies acquired with cash by Borrower from time to time shall be
included in the calculation of this covenant, provided pro forma
EBITDA shall be substantiated by audited financial statements or other
financial statements acceptable to Bank.
7.4 Loans, Investments, Guaranties, Subordinations. Without
Bank's consent, and except as provided herein, Borrower shall not
directly or indirectly (i) make any loan or advance to any other
Person in excess of $250,000.00, (ii) purchase or otherwise acquire
any capital stock or other securities of any other Person, any limited
liability company interest or partnership interest in any other
Person, or any warrants or other options or rights to acquire any
capital stock or securities of any other Person or any limited
liability company interest or partnership interest in any other
Person, (iii) make any capital contribution to any other Person, (iv)
otherwise invest in or acquire any interest in any other Person, (v)
guaranty or otherwise become obligated in respect of any indebtedness
of any other Person, (vi) subordinate any claim against or obligation
of any other Person to Borrower to any other indebtedness of such
Person, or (vii) create, incur, assume or permit to exist any
indebtedness or liabilities resulting from borrowings, loans or
advances, whether secured or unsecured, matured or unmatured,
liquidated or unliquidated, joint or several, except (a) the
liabilities of Borrower to Bank, and (b) any other liabilities of
Borrower existing as of, and disclosed to Bank prior to June 30, 1997.
7.5 Acquisition or Disposition of All or Substantially All
Assets. Borrower shall not acquire by purchase, lease, or otherwise
all or substantially all the assets of any other Person. Borrower
shall not sell, transfer, lease, or otherwise dispose of all or any
substantial part of the assets, business, operations, or property of
Borrower. Notwithstanding the preceding, Borrower shall have the right
to acquire all or substantially all the assets of Prompt Pay, Phoenix
Capital Management, and the four companies commonly referred to as
Employer Resources Corporation (an "Acquisition").
2.1.2 The following new Sections are hereby added to the Credit
Agreement:
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6.14 Pricing Change. Notwithstanding anything contained herein or
in the Loan Documents to the contrary, effective January 1, 1998, if,
and only if, as of December 31, 1997 the Funded Debt to EBITDA ratio
as calculated and defined in accordance with Section 6.12.4 is greater
than 1.50:1.0, Borrower covenants and agrees that the interest rates
set forth in the Note shall automatically be modified to (i) with
respect to the Variable Rate, the rate per annum equal to one and
one-quarter percent (1.25%) above the rate per annum most recently
publicly announced by Bank, or its successors, in Phoenix, Arizona, as
its "prime rate", as in effect from time to time, and (ii) with
respect to the Fixed Rate, the rate per annum equal to the sum of (A)
three and one-half percent (3.50%) per annum, and (B) the rate per
annum obtained by dividing (a) the rate of interest determined by
Bank, based on Telerate System reports or such other source as may be
selected by Bank, to be the "London Interbank Offered Rate" at which
deposits in United States dollars are offered by major banks in
London, England, one (1) Business Day before the first day of the
respective Interest Period by (b) a percentage equal to one hundred
percent (100%) minus the Eurodollar Rate Reserve Percentage for the
period equal to such Interest Period.
7.7 Dividends and Other Distributions. Borrower will not, without
the prior written consent of Bank in its absolute and sole discretion,
declare, make, order, authorize, or pay, directly or indirectly: (a)
any dividend or other distribution on or on account of any shares of
any class of capital stock of Borrower now or hereafter outstanding;
(b) any management fee; (c) any loans to shareholders of Borrower; or
(d) any purchase, redemption, retirement, or other acquisition of any
shares of any class of capital stock of Borrower now or hereafter
outstanding or of any warrants or rights to purchase any such stock or
partnership interest.
2.2 Each of the Loan Documents is modified to provide that it shall be
a default or an event of default thereunder if Borrower shall fail to comply
with any of the covenants of Borrower herein or if any representation or
warranty by Borrower herein or by any guarantor in any related Consent and
Agreement of Guarantor(s) is materially incomplete, incorrect, or misleading as
of the date hereof.
2.3 Each reference in the Loan Documents to any of the Loan Documents
shall be a reference to such document as modified herein.
3. RATIFICATION OF LOAN DOCUMENTS AND COLLATERAL.
---------------------------------------------
The Loan Documents are ratified and affirmed by Borrower and shall remain in
full force and effect as modified herein. Any property or rights to or interests
in property granted as security in the Loan Documents shall remain as security
for the Loan and the obligations of Borrower in the Loan Documents.
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4. BORROWER REPRESENTATIONS AND WARRANTIES.
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Borrower represents and warrants to Bank:
4.1 No default or event of default under any of the Loan Documents as
modified herein, nor any event, that, with the giving of notice or the passage
of time or both, would be a default or an event of default under the Loan
Documents as modified herein has occurred and is continuing.
4.2 There has been no material adverse change in the financial
condition of Borrower or any other person whose financial statement has been
delivered to Bank in connection with the Loan from the most recent financial
statement received by Bank.
4.3 Each and all representations and warranties of Borrower in the
Loan Documents are accurate on the date hereof.
4.4 Borrower has no claims, counterclaims, defenses, or set-offs with
respect to the Loan or the Loan Documents as modified herein.
4.5 The Loan Documents as modified herein are the legal, valid, and
binding obligation of Borrower, enforceable against Borrower in accordance with
their terms.
4.6 Borrower is validly existing under the laws of the State of its
formation or organization and has the requisite power and authority to execute
and deliver this Agreement and to perform the Loan Documents as modified herein.
The execution and delivery of this Agreement and the performance of the Loan
Documents as modified herein have been duly authorized by all requisite action
by or on behalf of Borrower. This Agreement has been duly executed and delivered
on behalf of Borrower.
5. BORROWER COVENANTS.
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Borrower covenants with Bank:
5.1 Borrower shall execute, deliver, and provide to Bank such
additional agreements, documents, and instruments as reasonably required by Bank
to effectuate the intent of this Agreement.
5.2 Borrower fully, finally, and forever releases and discharges Bank
and its successors, assigns, directors, officers, employees, agents, and
representatives from any and all actions, causes of action, claims, debts,
demands, liabilities, obligations, and suits, of whatever kind or nature, in law
or equity, that Borrower has or in the future may have, whether known or
unknown, arising from events occurring prior to the date of this Agreement and
in respect of the Loan, the Loan Documents, or the actions or omissions of Bank
in respect of the Loan or the Loan Documents.
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5.3 Contemporaneously with the execution and delivery of this
Agreement, Borrower has paid to Bank:
5.3.1 All accrued and unpaid interest under the Note and all
amounts, other than interest and principal, due and payable by Borrower under
the Loan Documents as of the date hereof.
5.3.2 All of the internal and external costs and expenses
incurred by Bank in connection with this Agreement (including, without
limitation, inside and outside attorneys, processing, filing, and all other
costs, expenses, and fees).
5.3.3 A modification fee equal to $75,000.00.
6. EXECUTION AND DELIVERY OF AGREEMENT BY BANK.
-------------------------------------------
Bank shall not be bound by this Agreement until each of the following shall have
occurred: (i) Bank has executed and delivered this Agreement, (ii) Borrower has
performed all of the obligations of Borrower under this Agreement to be
performed contemporaneously with the execution and delivery of this Agreement,
(iii) each guarantor(s) of the Loan, if any, has executed and delivered to Bank
a Consent and Agreement of Guarantor(s), and (iv) if required by Bank, Borrower
and any guarantor(s) have executed and delivered to Bank an arbitration
resolution, an environmental questionnaire, and an environmental certification
and indemnity agreement.
7. ENTIRE AGREEMENT, CHANGE, DISCHARGE, TERMINATION, OR WAIVER.
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The Loan Documents as modified herein contain the entire understanding and
agreement of Borrower and Bank in respect of the Loan and supersede all prior
representations, warranties, agreements, arrangements, and understandings. No
provision of the Loan Documents as modified herein may be changed, discharged,
supplemented, terminated, or waived except in a writing signed by Bank and
Borrower.
8. BINDING EFFECT.
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The Loan Documents as modified herein shall be binding upon, and inure to the
benefit of, Borrower and Bank and their respective successors and assigns.
9. CHOICE OF LAW.
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This Agreement shall be governed by and construed in accordance with the laws of
the State of Arizona, without giving effect to conflicts of law principles.
10. COUNTERPART EXECUTION.
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This Agreement may be executed in one or more counterparts, each of which shall
be deemed an original and all of which together shall constitute one and the
same document. Signature pages may
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be detached from the counterparts and attached to a single copy of this
Agreement to physically form one document.
11. ARBITRATION.
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11.1 Binding Arbitration. Bank, Borrower and each guarantor executing
a Consent and Agreement of Guarantor(s) with respect to this Agreement hereby
agree that all controversies and claims arising directly or indirectly out of
this Agreement and the Loan Documents, shall at the written request of any party
be arbitrated pursuant to the applicable rules of the American Arbitration
Association. The arbitration shall occur in the State of Arizona. Judgment upon
any award rendered by the arbitrator(s) may be entered in any court having
jurisdiction. The Federal Arbitration Act shall apply to the construction and
interpretation of this arbitration agreement.
11.2 Arbitration Panel. A single arbitrator shall have the power to
render a maximum award of one hundred thousand dollars. When any party files a
claim in excess of this amount, the arbitration decision shall be made by the
majority vote of three arbitrators. No arbitrator shall have the power to
restrain any act of any party.
11.3 Provisional Remedies; Self Help; and Foreclosure. No provision of
Section 11.1 shall limit the right of any party to exercise self help remedies,
to foreclose against any real or personal property collateral, or to obtain any
provisional or ancillary remedies (including but not limited to injunctive
relief or the appointment of a receiver) from a court of competent jurisdiction.
At Bank's option, it may enforce its right under a mortgage by judicial
foreclosure, and under a deed of trust either by exercise of power of sale or by
judicial foreclosure. The institution and maintenance of any remedy permitted
above shall not constitute a waiver of the rights to submit any controversy or
claim to arbitration. The statute of limitations, estoppel, waiver, laches, and
similar doctrines which would otherwise be applicable in an action brought by a
party shall be applicable in any arbitration proceeding.
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DATED as of the date first above stated.
EMPLOYEE SOLUTIONS, INC., an Arizona
corporation
By: /s/ M D Brody
--------------------------------------
Name: Xxxxxx X. Xxxxx
------------------------------------
Title: Chief Executive Officer
-----------------------------------
BANK ONE, ARIZONA, NA, a national banking
association
By: /s/ Xxxx X. Xxxxxxxxxxx
--------------------------------------
Name: XXXX X. XXXXXXXXXXX
------------------------------------
Title: Vice President
-----------------------------------
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CONSENT AND AGREEMENT OF GUARANTOR(S)
-------------------------------------
With respect to the Third Modification Agreement dated effectively June 30,
1997 ("Agreement"), between Employee Solutions, Inc., an Arizona corporation
("Borrower") and Bank One, Arizona, NA, a national banking association ("Bank"),
the undersigned (individually and, if more than one, collectively "Guarantor")
agrees for the benefit of Bank as follows:
1. Guarantor acknowledges (i) receiving a copy of and reading the
Agreement, (ii) the accuracy of the Recitals in the Agreement, and (iii) the
effectiveness of (A) the Continuing Guaranty of Payment dated August 1, 1996, or
any later date ("Guaranty"), by the undersigned for the benefit of Bank, as
modified herein, and (B) any other agreements, documents, or instruments
securing or otherwise relating to the Guaranty, (including, without limitation,
any arbitration resolution and any environmental certification and indemnity
agreement previously executed and delivered by the undersigned), as modified
herein. The Guaranty and such other agreements, documents, and instruments, as
modified herein, are referred to individually and collectively as the "Guarantor
Documents". All capitalized terms used herein and not otherwise defined shall
have the meaning given to such terms in the Agreement.
2. Guarantor consents to the modification of the Loan Documents and all
other matters in the Agreement. Guarantor agrees to the arbitration provisions
set forth in Section 11.1 of the Agreement.
3. Guarantor fully, finally, and forever releases and discharges Bank and
its successors, assigns, directors, officers, employees, agents, and
representatives from any and all actions, causes of action, claims, debts,
demands, liabilities, obligations, and suits of whatever kind or nature, in law
or equity, that Guarantor has or in the future may have, whether known or
unknown, arising from events occurring prior to the date hereof and in respect
of the Loan, the Loan Documents, the Guarantor Documents, or the actions or
omissions of Bank in respect of the Loan, the Loan Documents, or the Guarantor
Documents.
4. Guarantor agrees that all references, if any, to the Note, the Credit
Agreement, the Deed of Trust, the Security Documents, and the Loan Documents in
the Guarantor Documents shall be deemed to refer to such agreements, documents,
and instruments as modified by the Agreement.
5. Guarantor reaffirms the Guarantor Documents and agrees that the
Guarantor Documents continue in full force and effect and remain unchanged,
except as specifically modified by this Consent and Agreement of Guarantor(s).
Any property or rights to or interests in property granted as security in the
Guarantor Documents shall remain as security for the Guaranty and the
obligations of Guarantor in the Guaranty.
6. Guarantor represents and warrants that the Loan Documents, as modified
by the Agreement, and the Guarantor Documents, as modified by this Consent and
Agreement of Guarantor(s), are the legal, valid, and binding obligations of
Borrower and the undersigned,
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respectively, enforceable in accordance with their terms against Borrower and
the undersigned, respectively.
7. Guarantor represents and warrants that Guarantor has no claims,
counterclaims, defenses, or off sets with respect to the enforcement against
Guarantor of the Guarantor Documents.
8. Guarantor represents and warrants that there has been no material
adverse change in the financial condition of any Guarantor from the most recent
financial statement received by Bank.
9. Guarantor agrees that this Consent and Agreement of Guarantor(s) may be
executed in one or more counterparts, each of which shall be deemed an original
and all of which together shall constitute one and the same document. Signature
and acknowledgment pages may be detached from the counterparts and attached to a
single copy of this Consent and Agreement of Guarantor(s) to physically form one
document.
DATED as of the date of the Agreement.
LOGISTICS PERSONNEL CORP., a Nevada corporation
By: /s/ M D Brody
--------------------------------------------
Name: Xxxxxx X. Xxxxx
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Title: Chief Executive Officer
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EMPLOYEE SOLUTIONS OF TEXAS, INC., a Texas
corporation
By: /s/ M D Brody
--------------------------------------------
Name: Xxxxxx X. Xxxxx
------------------------------------------
Title: President
-----------------------------------------
EMPLOYEE SOLUTIONS-EAST INC., a Georgia
corporation
By: /s/ M D Brody
--------------------------------------------
Name: Xxxxxx X. Xxxxx
------------------------------------------
Title: Chief Executive Office
-----------------------------------------
10
EMPLOYEE SOLUTIONS - MIDWEST, INC., a Michigan
corporation
By: /s/ M D Brody
--------------------------------------------
Name: Xxxxxx X. Xxxxx
------------------------------------------
Title: Chairman of the Board
-----------------------------------------
ESI AMERICA, INC., a Nevada corporation
By: /s/ M D Brody
--------------------------------------------
Name: Xxxxxx X. Xxxxx
------------------------------------------
Title: President
-----------------------------------------
ESI-MIDWEST, INC., a Nevada corporation
By: /s/ M D Brody
--------------------------------------------
Name: Xxxxxx X. Xxxxx
------------------------------------------
Title: Chief Executive Officer
-----------------------------------------
EMPLOYEE SOLUTIONS OF CALIFORNIA, INC., a
Nevada corporation
By: /s/ M D Brody
--------------------------------------------
Name: Xxxxxx X. Xxxxx
------------------------------------------
Title: President
-----------------------------------------
EMPLOYEE SOLUTIONS - OHIO, INC., an Indiana
corporation, formerly known as POKAGON OFFICE
SERVICES, INC.
By: /s/ M D Brody
--------------------------------------------
Name: Xxxxxx X. Xxxxx
------------------------------------------
Title: Chief Executive Officer
-----------------------------------------
ESI RISK MANAGEMENT AGENCY, INC., an Arizona
corporation
By: /s/ M D Brody
--------------------------------------------
Name: Xxxxxx X. Xxxxx
------------------------------------------
Title: President
-----------------------------------------
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EMPLOYEE SOLUTIONS OF ALABAMA, INC., an
Alabama corporation
By: /s/ M D Brody
--------------------------------------------
Name: Xxxxxx X. Xxxxx
------------------------------------------
Title: President
-----------------------------------------
GCK ENTERTAINMENT SERVICES I, INC., a Delaware
corporation
By: /s/ M D Brody
--------------------------------------------
Name: Xxxxxx X. Xxxxx
------------------------------------------
Title: Chief Executive Officer
-----------------------------------------
TALENT, ENTERTAINMENT AND MEDIA SERVICES,
INC., a Delaware corporation
By: /s/ M D Brody
--------------------------------------------
Name: Xxxxxx X. Xxxxx
------------------------------------------
Title: Chief Executive Officer
-----------------------------------------
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CONSENT TO THIRD MODIFICATION AGREEMENT
---------------------------------------
With respect to the Loan, as defined in the foregoing Third
Modification Agreement dated effectively June 30, 1997, Bank One, Arizona, NA, a
national banking association ("Bank") and THE FIRST NATIONAL BANK OF CHICAGO, a
national banking association ("FNBC"), assignee of NBD Bank, a Michigan banking
corporation, have entered into that certain Participation Agreement dated August
1, 1996 (the "FNBC Participation Agreement"). In addition, Bank and Bank of
Hawaii, a Hawaiian banking corporation ("Bank of Hawaii") have entered into that
certain Participation Agreement dated February 19, 1997 (the "Hawaii
Participation Agreement").
FNBC and Bank of Hawaii hereby consent to, and approve, the foregoing
Third Modification Agreement to which this Consent to Third Modification
Agreement is attached.
Dated: August 11, 1997.
THE FIRST NATIONAL BANK OF CHICAGO,
a national banking association
By:_______________________________
Name:_____________________________
Title:____________________________
BANK OF HAWAII, a Hawaiian banking
corporation
By: /s/ Xxxxxx X. Xxxxxxxx
-------------------------------
Name: XXXXXX X. XXXXXXXX
-----------------------------
Title: VICE PRESIDENT
----------------------------
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CONSENT TO THIRD MODIFICATION AGREEMENT
---------------------------------------
With respect to the Loan, as defined in the foregoing Third
Modification Agreement dated effectively June 30, 1997, Bank One, Arizona, NA, a
national banking association ("Bank") and THE FIRST NATIONAL BANK OF CHICAGO, a
national banking association ("FNBC"), assignee of NBD Bank, a Michigan banking
corporation, have entered into that certain Participation Agreement dated August
1, 1996 (the "FNBC Participation Agreement"). In addition, Bank and Bank of
Hawaii, a Hawaiian banking corporation ("Bank of Hawaii") have entered into that
certain Participation Agreement dated February 19, 1997 (the "Hawaii
Participation Agreement").
FNBC and Bank of Hawaii hereby consent to, and approve, the foregoing
Third Modification Agreement to which this Consent to Third Modification
Agreement is attached.
Dated: August 12, 1997.
THE FIRST NATIONAL BANK OF CHICAGO,
a national banking association
By: /s/ Xxxxx X. Xxxxx
-------------------------------
Name: XXXXX X. XXXXX
-----------------------------
Title: VICE PRESIDENT
----------------------------
BANK OF HAWAII, a Hawaiian banking
corporation
By:_______________________________
Name:_____________________________
Title:____________________________
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