LOCKUP AND PURCHASE AGREEMENT
This Lockup and Purchase Agreement is made as of the 11th day of May, 2004
by and among Xxxxxxx IT Solutions, Inc., a Delaware corporation ("Parent"), and
Wynnchurch Capital Partners, L.P. ("Wynnchurch US"), a Delaware limited
partnership, Wynnchurch Capital Partners Canada, L.P. ("Wynnchurch Canada"), an
Alberta, Canada limited partnership and Wynnchurch Capital, Ltd., a Delaware
corporation (Wynnchurch US, Wynnchurch Canada and Wynnchurch Capital, Ltd. are
collectively "Wynnchurch").
RECITALS:
A. Wynnchurch is a holder of the number and type of securities of
Alternative Resources Corporation, a Delaware corporation (the "Company"), as
described in Exhibit A attached hereto and incorporated herein by reference (all
such securities collectively referred to as the "Company Securities" and all of
the warrants and contingent warrants collectively referred to as the "Warrants")
which were issued to Wynnchurch pursuant to a Securities Purchase Agreement (the
"Purchase Agreement") between the Company and Wynnchurch dated January 31, 2002,
as amended.
B. In connection with the Purchase Agreement, the Company and/or its
subsidiaries and Wynnchurch are parties to some or all of the following
agreements:
1. Senior Subordinated Secured Convertible Promissory Note dated
January 31, 2002 of the Company in favor of Wynnchurch US in the principal
amount of $4,920,208;
2. Senior Subordinated Secured Convertible Promissory Note dated
January 31, 2002 of the Company in favor of Wynnchurch Canada in the principal
amount of $5,079,792;
3. Warrant W-1 to purchase 4,920,208 shares of Company common
stock, par value $.01 per share ("Shares") issued to Wynnchurch US;
4. Warrant W-2 to purchase 5,079,792 Shares issued to Wynnchurch
Canada;
5. Contingent Warrant C-1 to purchase 492,021 Shares issued to
Wynnchurch US;
6. Contingent Warrant C-2 to purchase 507,979 Shares issued to
Wynnchurch Canada;
7. Registration Rights Agreement dated January 31, 2002 among the
Company, Wynnchurch US and Wynnchurch Canada;
8. Guaranty dated January 31, 2002 among the subsidiaries of the
Company, Wynnchurch US and Wynnchurch Canada;
9. Company Security Agreement January 31, 2002 among the Company,
Wynnchurch US and Wynnchurch Canada;
10. Stock Pledge Agreement January 31, 2002 among the Company,
Wynnchurch US and Wynnchurch Canada;
11. Guarantor Security Agreement January 31, 2002 among the
subsidiaries of the Company, Wynnchurch US and Wynnchurch Canada;
12. Subordination and Intercreditor Agreement January 31, 2002
among the Company, Wynnchurch US, Wynnchurch Canada and Fleet Capital
Corporation, as amended (and Wynnchurch Capital, Ltd. with respect to the
amendment);
13. Joinder Agreement dated August 5, 2002 among the Company,
Wynnchurch US, Wynnchurch Canada and Xxxxxx Xxxxxxxx;
14. Guaranty Agreement dated April 14, 2003 among the among the
Company, Wynnchurch US, Wynnchurch Canada and Fleet Capital Corporation, as
amended (the "Guaranty Agreement");
15. Letter Agreement dated August 14, 0000 xxxxxxx Xxxxxxxxxx XX,
Xxxxxxxxxx Xxxxxx and the Company;
16. Letter Agreement dated October 10, 2003 among the Company,
Wynnchurch US, Wynnchurch Canada and Fleet Capital Corporation;
17. Letter Agreement dated October 10, 2003 among the Company,
Wynnchurch US and Wynnchurch Canada;
18. Letter Agreement dated March 29, 2004 among the Company,
Wynnchurch US, Wynnchurch Canada and Fleet Capital Corporation; and
19. Letter Agreement dated March 31, 2004 among the Company,
Wynnchurch US and Wynnchurch Canada.
(together with any and all other agreements between the Company, its
subsidiaries and Wynnchurch and its affiliates, including the instruments
representing the Company Securities, collectively, the "Investment Documents").
C. Parent and Xxxxxxx Acquisition Sub, Inc. ("Subsidiary"), a Delaware
corporation and wholly-owned subsidiary of Parent, and the Company have entered
into an Agreement and Plan of Merger dated as of the date hereof (the "Merger
Agreement"), providing for the Merger of the Subsidiary with and into Company
(the "Merger"). The Merger Agreement contemplates that, upon consummation of the
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Merger, holders of shares of the common stock of the Company will receive cash
in exchange for their shares of common stock of the Company.
NOW THEREFORE, in consideration of the recitals stated above and the
promises, agreements and covenants hereinafter contained, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, intending to be legally bound, the parties agree as follows:
1. REPRESENTATIONS AND WARRANTIES OF WYNNCHURCH. Wynnchurch, jointly and
severally, represents and warrants to Parent and Subsidiary as follows:
(a) Wynnchurch is the holder of record and, together with the
individuals and entities listed on Schedule 13D/A filed on November 21, 2003,
the sole "beneficial owner" (as defined in Rule 13d-3 under the Securities
Exchange Act of 1934, as amended) of the Company Securities, and Wynnchurch has
good and valid title to the Company Securities, free and clear of any liens,
pledges, security interests, adverse claims, equities, options, proxies,
charges, encumbrances or restrictions of any nature, other than restrictions on
transfer of the Company Securities under federal and state securities laws.
Except as described herein, Wynnchurch is not a party to any other agreement
that grants an option to purchase, or any other right with respect to, any of
the Company Securities, other than agreements with Xxxxxx Xxxxxxxx. Wynnchurch
has no other debt or equity securities in the Company other than the Company
Securities listed herein.
(b) Wynnchurch has full power and authority to execute and deliver this
Agreement and to perform its obligations hereunder. Without limiting the
generality of the foregoing, the general partners of Wynnchurch have duly
authorized the execution, delivery, and performance of this Agreement by
Wynnchurch. This Agreement constitutes the valid and legally binding obligation
of Wynnchurch, enforceable in accordance with its terms and conditions.
(c) With respect to a sale of the Warrants and the retirement of debt
related to the other Company Securities, there is no requirement under Canadian
laws to withhold any amounts for taxes, except with respect to withholding for
the payment of interest on the Subordinated Secured Convertible Promissory
Notes.
(d) Wynnchurch understands that the representations, warranties and
covenants set forth in this Agreement will be relied upon by Parent, Subsidiary
and its counsel and for purposes of determining whether Parent should proceed
with the Merger.
2. PURCHASE OF WARRANTS. In connection with the Merger, and on condition
that the Merger is consummated, Wynnchurch agrees to sell and Parent agrees to
purchase (concurrent with consummation of the Merger) all of the Warrants for
the amount equal to the difference between the merger consideration of US$.70
per share (or such higher price per share in the event the Merger Agreement is
amended to provide for a higher merger consideration per share) and the
respective exercise price per share under the
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respective warrant agreements for the Warrants (including that certain Amendment
to the Warrants dated as of April 14, 2003 between the Company and Wynnchurch),
multiplied by the number of shares subject to the Warrants (the "Purchase
Price") as full payment for the Warrants. Wynnchurch shall deliver to Parent
immediately prior to the closing of the Merger all of its Warrants in exchange
for the payment of the Purchase Price by Parent to the appropriate Wynnchurch
entity by wire transfer in immediately available funds.
3. CONSENT TO TRANSACTION. Wynnchurch hereby consents, solely for purposes
of the Investment Documents, to the Merger of the Company with and into the
Subsidiary on the terms set forth in the Merger Agreement, such consent being
expressly conditioned upon and subject to (i) consummation (concurrent with
consummation of the Merger) of the transactions contemplated by this Agreement,
(ii) payment in full by the Company of all amounts owed to Wynnchurch pursuant
to the Investment Documents (including without limitation, all guaranty fees)
and (iii) delivery of written documents terminating the financing commitments of
Wynnchurch to the Company (in form and substance satisfactory to Wynnchurch)
including a letter from the Company terminating Wynnchurch's commitments to
provide additional funding and delivery of a release by the Company or its
lenders (in form and substance satisfactory to Wynnchurch, as applicable) of all
guaranties previously provided by Wynnchurch in connection with indebtedness of
the Company and its Subsidiaries, including a release by Fleet Capital
Corporation of all obligations of Wynnchurch under the Guaranty Agreement.
Further, Wynnchurch agrees, in connection with the consummation of the merger,
as follows:
(a) To deliver to Parent immediately prior to the closing of the Merger
all of its outstanding Senior Subordinated Secured Convertible Promissory Notes
in exchange for, and as full payment therefor, the payment by Company , upon the
consummation of the Merger, of the principal balance outstanding plus accrued
and unpaid interest as of the effective date of the Merger; and
(b) To sell the Warrants to Parent, upon the consummation of the
Merger, for the Purchase Price. This Agreement constitutes notice to Wynnchurch
(as provided for in Section 4(e) of each of the Warrants listed above) and no
further notice of the merger is required to be given by the Company to
Wynnchurch; and
(c) Wynnchurch will cooperate with Parent and Subsidiary to consummate
the Merger in accordance with the terms of the Merger Agreement; and
(d) Immediately following payment of the Purchase Price to Wynnchurch
as provided herein and payment of all other amounts due to Wynnchurch pursuant
to the Investment Documents, Wynnchurch will file UCC Termination Statements and
take any and all action necessary to release all of its liens on any assets of
the Company or any of its subsidiaries, and will return to the Company any
assets that were pledged to Wynnchurch by Wynnchurch taking possession of such
assets.
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(e) If Wynnchurch exercises any of the Warrants or converts any of the
Subordinated Secured Convertible Promissory Notes into common stock of the
Company on or prior to the record date for the Merger, Wynnchurch will, in
addition to providing the notice required in Section 4, below, vote all such
shares of common stock owned by Wynnchurch in favor of the Merger.
4. PROHIBITIONS AGAINST TRANSFER, EXCHANGE, CONVERSION OR EXERCISE; STOP
TRANSFER INSTRUCTIONS. Wynnchurch agrees that it will not, without the prior
written consent of Parent (which consent may be withheld in its sole
discretion), and other than pursuant to the Merger Agreement and the
transactions contemplated thereby, directly or indirectly, sell, offer, contract
or grant any option to sell (including without limitation any short sale),
pledge, transfer, establish an open "put equivalent position" within the meaning
of Rule 16a-1(h) under the Securities Exchange Act of 1934, as amended, or
otherwise dispose of any Company Securities currently or hereafter owned either
of record or beneficially (as defined in Rule 13d-3 under Securities Exchange
Act of 1934, as amended) by the undersigned, or publicly announce the
undersigned's intention to do any of the foregoing, or acquire any other
securities of the Company for a period commencing on the date hereof and
continuing until the earlier to occur of (i) such date and time as the Merger
shall become effective in accordance with the terms and provisions of the Merger
Agreement and (ii) such date and time as the Merger Agreement shall be
terminated in accordance with the termination provisions of said Merger
Agreement (the "Lockup Term"). Each of the undersigned also agrees and consents
to the entry of stop transfer instructions with the Company' s transfer agent
and registrar against the transfer of Company Securities held by Wynnchurch
except in compliance with the foregoing restrictions.
5. PROHIBITIONS AGAINST TAKING ACTION UNDER THE INVESTMENT DOCUMENTS.
Wynnchurch agrees that it will not take, directly or indirectly, any action to
exercise its remedies or enforce its rights with respect to any existing or
future event of default (as defined under any of the Investment Documents) under
the Investment Documents during the Lockup Term.
6. MISCELLANEOUS PROVISIONS.
(a) SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. All
representations, warranties and agreements made by Wynnchurch in this Agreement
shall survive for a period of twelve months following the consummation of the
Merger and the other transactions contemplated hereby or, if the transactions
are not consummated, any termination or breach of the Merger Agreement other
than a termination in accordance with the termination provisions of the Merger
Agreement.
(b) NOTICES. All notices, consents or other communications required or
permitted to be given under this Agreement shall be in writing and shall be
deemed to have been duly given when delivered personally or one (1) business day
after being sent by a nationally recognized overnight delivery service, postage
or delivery charges prepaid or five (5) business days after being sent by
registered or certified mail, return receipt requested, postage charges prepaid.
Notices also may be given by facsimile and
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shall be effective on the date transmitted if confirmed within 48 hours
thereafter by a signed original sent in one of the manners provided in the
preceding sentence. Notices to Parent shall be sent to Parent at 0000 Xxxxxxxxxx
Xxxx, Xxxxxx, XX 00000, to the attention of its President and copies of notices
to Parent shall be sent simultaneously to Xxxxx X. Xxxxx III, Xxxxxxxxx &
Xxxxxxxx Xx., X.X.X., Xxxxx 0000, 000 Xxxxxx Xxxxxx, Xxxxxxxxxx, XX 00000.
Notices to Wynnchurch shall be sent to Wynnchurch's at 000 Xxxxx Xxxxx, Xxxxx
000, Xxxx Xxxxxx, XX 00000, to the attention of Xxxx Xxxxxxxx and copies of
notices to Wynnchurch shall be sent simultaneously to Xxxxx Xxxxxx, Xxxxxxx
Coie, LLP, 000 Xxxxx Xxxxxxxx Xxxxxx, 00xx Xxxxx, Xxxxxxx, Xxxxxxxx 00000-0000.
Any party may change its address for notice and the address to which copies must
be sent by giving notice of the new addresses to the other parties in accordance
with this Section 6(b), provided that any such change of address notice shall
not be effective unless and until received.
(c) ENTIRE UNDERSTANDING. This Agreement and the other agreements
referred to herein, state the entire understanding among the parties with
respect to the subject matter hereof, and supersede all prior oral and written
communications and agreements, and all contemporaneous oral communications and
agreements, with respect to the subject matter hereof. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto.
(d) WAIVERS. Except as otherwise expressly provided herein, no waiver
with respect to this Agreement shall be enforceable unless in writing and signed
by the party against whom enforcement is sought. Except as otherwise expressly
provided herein, no failure to exercise, delay in exercising, or single or
partial exercise of any right, power or remedy by any party, and no course of
dealing between or among any of the parties, shall constitute a waiver of or
shall preclude any other for further exercise of, any right, power or remedy.
(e) SEVERABILITY. If any provision of this Agreement or any part of any
such provision is held under any circumstances to be invalid or unenforceable in
any jurisdiction, then (i) such provision or part thereof shall, with respect to
such circumstances and in such jurisdiction, be deemed amended to conform to
applicable laws so as to be valid and enforceable to the fullest possible
extent, (ii) the invalidity or unenforceability of such provision or part
thereof under such circumstances and in such jurisdiction shall not affect the
validity or enforceability of such provision or part thereof under any other
circumstances or in any other jurisdiction, and (iii) the invalidity or
unenforceability of such provision or part thereof shall not affect the validity
or enforceability of the remainder of such provision or the validity or
enforceability of any other provision of this Agreement. Each provision of this
Agreement is separable from every other provision of this Agreement, and each
part of each provision of this Agreement is separable from every other part of
such provision.
(f) COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be an original
hereof, and it shall not be necessary in making proof of this Agreement to
produce or account for more than one counterpart hereof.
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(g) CONTROLLING LAW. THIS AGREEMENT IS MADE UNDER, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE
APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED SOLELY THEREIN, WITHOUT GIVING
EFFECT TO PRINCIPLES OF CONFLICTS OF LAW.
(h) JURISDICTION AND PROCESS. In any action between or among any of the
parties, whether arising out of this Agreement or otherwise, (a) each of the
parties irrevocably consents to the exclusive jurisdiction and venue of the
federal and state courts located in the Commonwealth of Kentucky, (b) if any
such action is commenced in a state court, then, subject to applicable law, no
party shall object to the removal of such action to any federal court located in
the Commonwealth of Kentucky, (c) each of the parties irrevocably waives the
right to trial by jury, (d) each of the parties irrevocably consents to service
of process by first class certified mail, return receipt requested, postage
prepaid, to the address at which such party is to receive notice in accordance
with Section 6(b), and (e) the prevailing parties shall be entitled to recover
their reasonable attorneys' fees and court costs from the other parties.
(i) ASSIGNMENT; BINDING EFFECT. Parent may not assign any or all of its
rights under this Agreement, in whole or in part, without obtaining the consent
or approval of Wynnchurch. This Agreement may not be transferred or delegated by
Wynnchurch at any time. Subject to the preceding sentence, this Agreement will
inure to the benefit of Parent and its successors and assigns and will be
binding upon Wynnchurch and its successors and assigns.
(j) SPECIFIC PERFORMANCE. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement was
not performed in accordance with its specific terms or was otherwise breached.
It is accordingly agreed that Parent and Wynnchurch shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any court of proper
jurisdiction, this being in addition to any other remedy to which Parent and
Wynnchurch is entitled at law or in equity.
(k) OTHER AGREEMENTS AND INDEPENDENCE OF OBLIGATIONS. Nothing in this
Agreement shall limit any of the rights or remedies of the parties or any of the
obligations of the parties Wynnchurch under any other agreement. Except as
expressly provided herein, the covenants and obligations of the parties
Wynnchurch set forth in this Agreement shall be construed as independent of any
other agreement or arrangement between the parties. The existence of any claim
or cause of action by a party against any other party shall not constitute a
defense to the enforcement of any of such covenants or obligations against the
party having such claim or cause of action .
(l) PUBLICITY. Except as otherwise required by law or applicable stock
exchange rules, press releases concerning this Agreement shall be made only with
the prior consent of Parent. Parent acknowledges and agrees that Wynnchurch
may, without Parent's consent, report this Agreement and related matters by
amendment to its Schedule 13D on file with the SEC.
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(m) Termination. This Agreement shall terminate and be of no further
force and effect, and Wynnchurch shall have no further obligations hereunder, in
the event that the Merger Agreement is terminated in accordance with the
termination provisions of said Merger Agreement.
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IN WITNESS WHEREOF, the parties have signed this Lockup and Purchase
Agreement as of the date first written above.
PARENT WYNNCHURCH CAPITAL PARTNERS, L.P.
By Wynnchurch Partners, L.P., its general
partner
By: By: Wynnchurch Management, Inc., its
General Partner
Name: ____________________________ By: ____________________________
Title: ____________________________ Title: _________________________
WYNNCHURCH CAPITAL PARTNERS CANADA, L.P.
By: Wynnchurch Partners Canada, L.P., its
------------------------------------------
general partner
---------------
By: Wynnchurch GP Canada, Inc., its
General Partner
By: ____________________________
Title: _________________________
WYNNCHURCH CAPITAL, LTD.
By: ____________________________
Title: _________________________
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EXHIBIT A
Ownership of Company Securities
-------------------------------
Security holder Security
--------------- -----------------------------------
Wynnchurch Capital Partners, L.P. $4,920,208 Senior Subordinated
Secured Convertible Promissory Note
Warrant No. W-1
To purchase 4,920,208 shares of
common stock
Warrant No. C-1
To purchase 492,021 shares of
common stock
Right to Acquire Senior
Subordinated Secured Convertible
Promissory Note
Upon Payment under Guaranty
Wynnchurch Capital Partners Canada, L.P. $5,079,792 Senior Subordinated
Secured Convertible Promissory
Note
Warrant No. W-2
To purchase 5,079,792 shares of
common stock
Warrant No. C-2
To purchase 507,979 shares of
common stock
Right to Acquire Senior
Subordinated Secured Convertible
Promissory Note
Upon Payment under Guaranty
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