**Exhibit 4.2**

 

**FIFTH AMENDMENT TO SECURITIESPURCHASE AGREEMENTAND WAIVER**

 

This FIFTH AMENDMENT TO SECURITIES PURCHASE AGREEMENTAND WAIVER dated as of April 14, 2003 (this “Amendment”), amongAlternative Resources Corporation, a Delaware corporation  (the “Company”), with headquarterslocated at 600 Hart Road, Suite 300, Barrington, Illinois 60010,  Wynnchurch Capital Partners, L.P., aDelaware limited partnership and Wynnchurch Capital Partners Canada, L.P., anAlberta, Canada limited partnership (each a “Purchaser,” andcollectively, the “Purchasers”), amends the Securities PurchaseAgreement dated as of January 31, 2002, as amended by the First Amendment toSecurities Purchase Agreement and Waiver dated August 8, 2002, the SecondAmendment to Securities Purchase Agreement dated August 30, 2002, the ThirdAmendment to Securities Purchase Agreement and Waiver dated as of November 14,2002, and the Fourth Amendment to Securities Purchase Agreement and Consentdated as of December 27, 2002 (such Securities Purchase Agreement, as soamended, the “Securities Purchase Agreement”), each among the Companyand the Purchasers.

 

WHEREAS, the Company has advised Purchasers that theCompany failed to satisfy various financial covenants set forth in theSecurities Purchase Agreement, which failures constitute Events of Defaultunder the Securities Purchase Agreement (the “December 31, 2002 Events ofDefault”);

 

WHEREAS,the Company has further advised Purchasers that the Company will not be able tosatisfy the financial covenants set forth in the Securities Purchase Agreementfor the fiscal quarter ending March 31, 2003;

 

WHEREAS, the Company and Fleet Capital Corporation, asLender pursuant to that certain Credit and Security Agreement dated as ofJanuary 31, 2002 (the “Credit Agreement”) have requested that thePurchasers waive the December 31, 2002 Event of Default and any other existingdefaults by the Company as provided herein, and amend certain provisions of theSecurities Purchase Agreement, among other things, to revise the financialcovenants contained therein; and

 

WHEREAS, the Purchasers have agreed to waive the theDecember 31, 2002 Events of Default and to amend certain provisions of theSecurities Purchase Agreement, among other things, to revise the financial covenantscontained therein, all subject to the terms, conditions and limitations setforth herein;

 

NOW, THEREFORE, in consideration of the foregoing andthe agreements contained herein, the parties hereby agree as follows:

 

1.  CapitalizedTerms.

 

Capitalized terms used herein which are defined in theSecurities Purchase Agreement have the same meanings herein as therein, exceptto the extent that such meanings are amended hereby.  The Securities Purchase Agreement, together with the Notes, theNew Wynnchurch Subordinated Notes**,**the Warrants, the SubordinationAgreement, the Company Security Agreement, the Guaranty executed and deliveredby the subsidiaries of the Company, the Guarantor Security Agreement executedand delivered by the subsidiaries of the Company, the Pledge Agreement executedby Services and any other related documents, in each case as the same have beenamended, modified or supplemented to date, are referred to herein as the “SubordinatedDebt Documents.”

 

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2.  Waiverof Defaults.

 

Subject to the satisfaction of the terms andconditions set forth in Section 6 hereof, the Purchasers hereby waive theDecember 31, 2002 Event of Default and any other existing defaults by theCompany pursuant to the Securities Purchase Agreement and the otherSubordinated Debt Documents.  Theparties agree that nothing herein shall be construed as a waiver of any futureEvent of Default (including without limitation, any Event of Default caused byreason of the failure of the Company to comply with Section 7.5(h) of theSecurities Purchase Agreement, as amended hereby, on any other occasion or forany other period) or any failure of the Company to comply with any otherprovision, term or condition of the Subordinated Debt Documents.

 

3.  Amendments.

 

Subject to the satisfaction of the terms andconditions set forth in Section 6 hereof, the Company and the Purchasers agreethat the Securities Purchase Agreement is hereby amended, effective as of thedate hereof, as follows:

 

## (a)  Recital A to the Securities PurchaseAgreement is hereby amended by the insertion of the phrase “,as amended fromtime to time” immediately following the phrase “15% Secured SubordinatedConvertible Promissory Notes” in clause (i) and also immediately following thephrase “each of the B-1 Warrants and B-2 Warrants” in clause (ii).

 

## (b)  The definition of “Interest Expense” inSection 7.2(p) of the Securities Purchase Agreement is hereby deleted in itsentirety and replaced with the following new definition:

 

“(p)                           ‘InterestExpense’ means, for any period, the sum, without duplication, for theCompany and all subsidiaries (determined on a consolidated basis withoutduplication in accordance with GAAP), of the following: (a) all interest inrespect of Indebtedness accrued or paid during such period (whether or notactually paid during such period), but excluding (i) interest accrued inrespect of the Notes and New Wynnchurch Subordinated Notes that is capitalizedand not paid in cash, (ii) capitalized debt acquisition costs (includingcapitalized fees and expenses related to this Agreement), and (iii) capitalizedcosts associated with the accounting treatment of the sale of securities underthis Agreement, plus (b) the net amounts payable (or minus the netamounts receivable) in respect of Hedging Agreements accrued during such period(whether or not actually paid (or received) during such period) excludingreimbursement of legal fees and other similar transaction costs and excludingpayments required by reason of the early termination of Hedging Agreements ineffect on the date hereof plus (c) all fees, including letter of creditfees and expenses, (but excluding reimbursement of legal fees) incurred underthe Credit Agreement during such period.”

 

## (c)  The definition of “Fixed Charges” in Section7.2(j1) of the Securities Purchase Agreement is amended by inserting, after theterm “September 30, 2002” contained in clause (d) thereof, the term “andDecember 31, 2002”.

 

## (d)  The following new definition of “NewWynnchurch Subordinated Notes” is hereby inserted in Section  7.2 of the Securities Purchase Agreement inappropriate alphabetical order:

 

“(t1)                        ‘NewWynnchurch Subordinated Notes’ means any Senior Subordinated SecuredConvertible Promissory Notes, substantially in the form of

 

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the WynnchurchSubordinated Notes, that may be issued by ARC to Wynnchurch and/or WynnchurchCapital, Ltd. in consideration for payments made by Wynnchurch to the Lenderpursuant to the Wynnchurch Guaranty, as such notes may be amended from time totime. ”

 

## (e)  The definition of “SubordinatedIndebtedness” in Section 7.2(x)  of theSecurities Purchase Agreement is hereby deleted in its entirety and replacedwith the following new definition:

 

“(x)                             ‘SubordinatedIndebtedness’ means (a) Indebtedness of the Company pursuant to the sale ofthe Notes hereunder and the New Wynnchurch Subordinated Notes, and (b) anyother Indebtedness of the Credit Parties incurred after the Closing Date withthe consent of the Lender that by its terms (or by the terms of the instrumentunder which it is outstanding and to which appropriate reference is made in theinstrument evidencing such Subordinated Indebtedness) is made subordinate andjunior in right of payment to the Loans and to the other Obligations of theCredit Parties by provisions in form and substance reasonably satisfactory tothe Lender and Special Counsel.”

 

## (f)  The definition of “Tangible Capital Base” inSection 7.2(y) of the Securities Purchase Agreement is hereby deleted in itsentirety and replaced with the following new definition:

 

“(y)                           ‘TangibleCapital Base’ means, at any time, (a) Tangible Net Worth plus (b)the outstanding principal balance of the Notes and the New WynnchurchSubordinated Notes****(including interest accrued in respect ofthe Notes and the New Wynnchurch Subordinated Notes that has been capitalizedand not paid in cash).”

 

## (g)  The following new definition of “WynnchurchGuaranty” is hereby inserted in Section 7.2 of the Securities PurchaseAgreement in the appropriate alphabetical order:

 

“(aa)                      ‘WynnchurchGuaranty’ means the Guaranty Agreement dated as of April 14, 2003, made byPurchasers for the benefit of the Lender, as the same may be amended,supplemented or otherwise modified from time to time.”

 

## (h)  Section 7.5(h) of the Securities PurchaseAgreement is hereby amended and restated in its entirety to read as follows:

 

“(h)                           CertainFinancial Covenants.

 

(i)                                     *TangibleCapital Base*.  The Companyand its subsidiaries shall not (x) as of March 31, 2003, have a consolidatedTangible Capital Base of less than ($1,050,000) or (y) as of the end ofany fiscal quarter commencing with the fiscal quarter ending June 30, 2003,have a consolidated Tangible Capital Base of less than the sum of (A) ($1,050,000)plus (B) on a cumulative basis, 45% of positive consolidated net income(without reduction for losses) for each fiscal quarter ending after March 31,2003.

 

(ii)                                  *Fixed ChargeCoverage Ratio*.  The FixedCharge Coverage Ratio of the Company and its subsidiaries shall not at any timeduring any period set forth below to be less than the ratio set opposite suchperiod:

 

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| **Period**                                     |   | **Minimum  Fixed Charge  Coverage Ratio** |
|------------------------------------------------|--------|-------------------------------------------|
|                                           |   |                                      |
| July  1, 2003 through September 30, 2003       |   | 0.95 to 1.0                               |
|                                           |   |                                      |
| July  1, 2003 through December 31, 2003        |   | 0.95 to 1.0                               |
|                                           |   |                                      |
| July  1, 2003 through March 31, 2004           |   | 0.95 to 1.0                               |
|                                           |   |                                      |
| July  1, 2003 through June 30, 2004            |   | 0.95 to 1.0                               |
|                                           |   |                                      |
| Thereafter  (on a rolling four quarters basis) |   | 0.95 to 1.0                               |

 

(iii)                               *Fixed ChargeCoverage Shortfall*.  Theamount by which (a) the aggregate Fixed Charges of the Company and itssubsidiaries for each fiscal period set forth below, exceeds (b) the total of(w) consolidated EBITDA of the Company and its Subsidiaries for such period (determinedon a consolidated basis without duplication in accordance with GAAP) minus(x) the aggregate amount of all Non-Financed Capital Expenditures during suchperiod minus (y) the aggregate amount paid, or required to be paid(without duplication), in cash in respect of the current portion of all incometaxes for such period minus (z) the aggregate amount of dividends anddistributions permitted to be paid under Section 8.6 of the Credit Agreementand actually paid in cash during such period, shall not be greater than themaximum shortfall amount set opposite such fiscal period:

 
| **Fiscal Period**                 |   | **Maximum Shortfall  Amount** |      |
|-----------------------------------|--------|-------------------------------|-----------|
|                              |   |                          |      |
| January  1 through March 31, 2003 |   | $                             | 1,050,000 |   |
|                              |   |                          |      |
| January  1 through June 30, 2003  |   | $                             | 1,470,000 |   |

 

4.  Acknowledgments.

 

The parties hereby acknowledge and agree that the NewWynnchurch Subordinated Notes shall be deemed “Notes” pursuant to theRegistration Rights Agreement, and accordingly, that any shares of Common Stockof the Company into which such New Wynnchurch Subordinated Notes are convertedshall be deemed “Registrable Securities” under the Registration RightsAgreement.  The parties hereby furtheracknowledge and agree that the New Wynnchurch Subordinated Notes shall bedeemed “Notes” pursuant to the Security Agreements.

 

5.  NoDefault; Representations and Warranties, etc.

 

TheCompany hereby represents, warrants and confirms that: (a) the representationsand warranties of the Company contained in Article 3 of the Securities PurchaseAgreement, as amended by this Amendment, are true and correct on and as of thedate hereof as if made on such date (except to the extent that suchrepresentations and warranties expressly relate to an earlier date); (b) aftergiving effect

 

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to this Amendment,the Company is in compliance with all of the terms and provisions set forth inthe Securities Purchase Agreement and the other Subordinated Debt Documents;(c) after giving effect to this Amendment, no Event of Default (as defined in theNotes) has occurred and is continuing; and (d) the execution, delivery andperformance by the Company of this Amendment (i) have been duly authorized byall necessary action on the part of the Company, (ii) will not violate anyapplicable law or regulation or the organizational documents of the Company orany of its subsidiaries, (iii) will not violate or result in a default underany indenture, agreement or other instrument binding on the Company or any ofits assets, including without limitation, the Credit Agreement or any otherLoan Document (as defined in the Credit Agreement), and (iv) do not require anyconsent, waiver or approval of or by any person (other than the Purchasers)which has not been obtained.

 

6.  Conditionsto Effectiveness.

 

Theeffectiveness of this Amendment shall be subject to the satisfaction of thefollowing conditions precedent:

 

(a)  The Purchasers shall have receivedcounterparts of this Amendment duly executed by the Company;

 

(b)  The Purchasers shall have received counterpartsof the Amendment to Notes and the Amendment to Warrants duly executed by theCompany;

 

(c)  The Purchasers shall have received aCertificate of the Secretary of the Company, certifying that this Amendment hasbeen duly authorized by the Board of Directors of the Company;

 

(d)  The Company shall have delivered to thePurchasers evidence that Lender has executed and delivered to the Company awritten amendment and waiver with respect to the Loan Documents (as defined inthe Credit Agreement), in form and substance reasonably acceptable to thePurchasers; and

 

(e)  The Company shall have reimbursed thePurchasers for all reasonable costs and expenses, including reasonable legalfees and disbursements, incurred by the Purchasers in connection with thisAmendment, the Wynnchurch Guaranty (including, without limitation, alldocuments and opinions to be issued thereunder), the Amendment to Notes, theAmendment to Warrants, the First Amendment to the Subordination Agreement andthe transactions contemplated hereby and thereby, including any purchases byPurchasers pursuant to the Wynnchurch Guaranty.

 

7.  Miscellaneous.

 

(a)  Except as specifically amended hereby or bythe Amendment to Notes and the Amendment to Warrants, all of the terms andprovisions of the Securities Purchase Agreement, the other Subordinated DebtDocuments and all related documents, shall remain in full force andeffect.  The parties hereby acknowledgeand agree that the New Wynnchurch Subordinated Notes shall be deemed “Notes”pursuant to that certain Registration Rights Agreement between the Company andPurchasers, dated as of January 31, 2002 (the “Registration Rights Agreement”),and accordingly, that any shares of Common Stock of the Company into which suchNew Wynnchurch Subordinated Notes are converted shall be deemed “RegistrableSecurities” under the Registration Rights Agreement.

 

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(b)  This Amendment may be executed in any numberof counterparts, each of which, when executed and delivered, shall be anoriginal, but all counterparts shall together constitute one instrument.  Delivery of an executed signature pagehereto by facsimile transmission shall be effective as delivery of a manuallyexecuted counterpart hereof.

 

(c)  This Amendment shall be governed by the lawsof the State of Illinois and shall be binding upon and inure to the benefit ofthe parties hereto and their respective successors and assigns.

 

[*Remainder of Page Left Intentionally Blank*]

 

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IN WITNESSWHEREOF, the parties hereto have caused this Amendment to be duly executed bytheir respective authorized officers as of the day and year first abovewritten.

 

 
| **COMPANY:**                                                                                           |
|--------------------------------------------------------------------------------------------------------|
|                                                                                                   |   |
| ALTERNATIVE  RESOURCES CORPORATION                                                                     |
|                                                                                                   |   |
| By:                                                                                                    |   |   |
|                                                                                                   | Name: |   |   |
|                                                                                                   | Title: |   |   |
|                                                                                                   |   |
| **PURCHASERS:**                                                                                        |   |
|                                                                                                   |   |
| WYNNCHURCH  CAPITAL PARTNERS, L.P.                                                                     |
| By:                                                                                                    | Wynnchurch  Partners, L.P., its general partner |
| By:                                                                                                    | Wynnchurch  Management, Inc., its general partner |
|                                                                                                   |   |
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| By:                                                                                                    |   |   |
|                                                                                                   | Name: |   |   |
|                                                                                                   | Title: |   |   |
|                                                                                                   |   |
| WYNNCHURCH  CAPITAL PARTNERS CANADA, L.P.                                                              |
| By:                                                                                                    | Wynnchurch  Partners Canada, L.P., its general partner |
| By:                                                                                                    | Wynnchurch  GP Canada, Inc., its general partner |
|                                                                                                   |   |
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| By:                                                                                                    |   |   |
|                                                                                                   | Name: |   |   |
|                                                                                                   | Title: |   |   |
|                                                                                                   |   |
| **ACKNOWLEDGED AND AGREED TO BY THE UNDERSIGNED SOLELY WITH  RESPECT TO SECTION 4 OF THIS AMENDMENT:** |
|                                                                                                   |   |
| ARC  SERVICE, INC.                                                                                     |   |
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| By:                                                                                                    |   |   |
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|                                                                                                   | Title: |   |   |
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| ARC  SOLUTIONS, INC.                                                                                   |   |
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| By:                                                                                                    |   |   |
|                                                                                                   | Name: |   |   |
|                                                                                                   | Title: |   |   |
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| ARC  MIDHOLDING, INC.                                     |   |
|-----------------------------------------------------------|--------|
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| By:                                                       |   |   |
|                                                      | Name:  |   |   |
|                                                      | Title: |   |   |
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| WRITERS  INC.                                             |   |
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| By:                                                       |   |   |
|                                                      | Name:  |   |   |
|                                                      | Title: |   |   |
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| ARC  TECHNOLOGY MANAGEMENT LLC                            |   |
|                                                      |   |
| By:  ARC SERVICE, INC., its Manager and sole  member |
|                                                      |   |
| By:                                                       |   |   |
|                                                      | Name:  |   |   |
|                                                      | Title: |   |   |
|                                                      |   |
| ARC  STAFFING MANAGEMENT LLC                              |   |
|                                                      |   |
| By:  ARC SERVICE, INC., its Manager and sole  member |
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| By:                                                       |   |   |
|                                                      | Name:  |   |   |
|                                                      | Title: |   |   |
|                                                      |   |
| ARC  SHARED SERVICES LLC                                  |   |
|                                                      |   |
| By:  ARC SERVICE, INC., its Manager and sole  member |
|                                                      |   |
| By:                                                       |   |   |
|                                                      | Name:  |   |   |
|                                                      | Title: |   |   |
|                                                           |        |  |  |  |

 

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