**EXHIBIT 4.1**

** **

FIRST AMENDMENT TO CREDIT AGREEMENT AND WAIVER

 

This FIRST AMENDMENT TO CREDIT AGREEMENT AND WAIVERdated as of August 7, 2002 (this “Amendment”), among AlternativeResources Corporation (“ARC”), ARC Service, Inc., ARC Solutions, Inc.,ARC Midholding, Inc., and Writers Inc. (collectively, the “Borrowers”),and Fleet Capital Corporation (the “Lender”), amends the Credit andSecurity Agreement dated as of January 31, 2002 (the “Credit Agreement”),between the Borrowers and the Lender.

 

WHEREAS, ARC and its Subsidiaries failed to satisfythe Fixed Charge Coverage Ratio set forth in Section 8.10(b) of the CreditAgreement for the period of two fiscal quarters ended June 30, 2002 and suchfailure constitutes an Event of Default under Section 9.1(c) of the CreditAgreement (the “June 30, 2002 Event of Default”);

 

WHEREAS, the Credit Parties have requested that theLender waive the June 30, 2002 Event of Default as provided herein, and amendcertain provisions of the Credit Agreement; and

 

WHEREAS, the Lender has agreed to waive the June 30,2002 Event of Default and to amend certain provisions of the Credit Agreement,all subject to the terms, conditions and limitations set forth 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 theCredit Agreement have the same meanings herein as therein, except to the extentthat such meanings are amended hereby.

 

2.                                       Waiverof June 30, 2002 Event of Default.

 

Subject to the satisfaction of the terms andconditions set forth in Section 5 hereof, the Lender hereby waives the June 30,2002 Event of Default.  The partiesagree that the foregoing waiver is limited solely to the Event of Defaultarising out of the failure of ARC and its Subsidiaries to satisfy the FixedCharge Coverage Ratio covenant set forth in Section 8.10(b) of the CreditAgreement for the period of two fiscal quarters ended June 30, 2002, and nothingherein shall be construed as a waiver of any other presently existing or futureEvent of Default (including without limitation, any Event of Default caused byreason of the failure of the Borrowers to comply with Section 8.10(b) of theCredit Agreement, as amended hereby, on any other occasion or for any otherperiod) or any failure of the Borrowers to comply with any other provision,term or condition of the Loan Documents.

 

3.                                       Amendments.

 

Subject to the satisfaction of the terms andconditions set forth in Section 7 hereof, the Borrowers and the Lender agreethat the Credit Agreement is hereby amended, effective as of the date hereof,as follows:

 

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(a)*           Amendmentsto Section 1.1 of the Credit Agreement. *Section 1.1 of the Credit Agreement is hereby amended asfollows:

 

(i)            The definition of *“BorrowingBase”* set forth in Section 1.1 of the Credit Agreement is herebyamended by replacing clause (c) in the definition of “*Borrowing Base”* in itsentirety with the following new clause (c):

 

“(c)  the lesser of:

 

(i)             70%of the aggregate of (x) Billed Restricted Product Line Accounts and (y)Unbilled Restricted Product Line Accounts, and

 

(ii)          $**5,500,000,**minus”

 

(ii)           The definition of *“Change ofControl”* set forth in Section 1.1 of the Credit Agreement is herebyamended by replacing clause (e) in the definition of “*Change of Control”* in itsentirety with the following new clause (e):

 

“(e) any two of (i) George Watts, (ii) Steven Purcell or (iii) VicFricas shall for any reason cease to serve in their present capacities asofficers of ARC, and ARC shall fail, within ninety (90) days of the date thatthe last of any two such Persons cease to serve in such capacities, to retain areplacement for at least one of such persons who has comparable industryexperience.”

 

(iii)          The following new defined term *“FixedCharges”* shall be added to Section 1.1 of the Credit Agreementimmediately preceding the definition of *“Fixed Charge Coverage Ratio”*:

 

“‘Fixed Charges’means, for any period, the sum for the Borrowers and all Subsidiaries(determined on a consolidated basis without duplication in accordance withGAAP), of (i) the aggregate amount of Interest Expense for such period(excluding, for the purpose of computing Fixed Charges, that certain amendmentfee required to be paid by the Borrowers to the Lender in connection with thatcertain First Amendment to Credit Agreement and Waiver dated as of August 7,2002 among the Borrowers and the Lender) plus (ii) the aggregate amountof regularly scheduled payments of principal in respect of Indebtedness forborrowed money (including the principal component of any payments in respect ofCapital Lease Obligations) paid or required to be paid during such period, plus(c) the aggregate amount of cash disbursements made by the Borrowers after June30, 2002, pursuant to that certain severance agreement between ARC and itsformer Chief Executive Officer.”

 

(iv)          Thedefinition of *“Fixed Charge Coverage Ratio”* set forth in Section 1.1 ofthe Credit Agreement is hereby amended and restated in its entirety to read asfollows:

 

“‘Fixed ChargeCoverage Ratio’ means, for any period, the ratio of (a) (i) EBITDA of theBorrowers and all Subsidiaries for such period (determined on a consolidatedbasis without duplication in accordance with GAAP) minus (ii) theaggregate amount of all Non-Financed Capital Expenditures during such period minus(iii) the aggregate amount paid, or required to be paid (without duplication),in cash in respect of the current portion of all income taxes for such period minus(iv) the aggregate amount of dividends and distributions permitted to be paidunder Section 8.6 and actually paid in cash during such period to (b) theaggregate amount of Fixed Charges for such period.”

 

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(v)           The definition of *“RevolvingCredit Commitment”* set forth in Section 1.1 of the Credit Agreementis hereby amended by deleting the amount “$30,000,000” contained therein, andreplacing it with the amount “$28,000,000”.

 

(b)           *Amendment to Section 7.1 of the Credit Agreement*.  Section 7.1 of the Credit Agreement ishereby amended by: (i) deleting the term “and” at the end of subsection (h)thereof, (ii) deleting the period at the end of subsection (i) thereof andreplacing it with a semi-colon, and (iii) adding the following to the endthereof as a new subsection (j):

 

“(j)          not later than 2:00 p.m. (Boston time)on each Business Day, a Collateral Update Certificate.”

 

(c)           *Amendment to Section 8.10 of the Credit Agreement*.  Section 8.10 of the Credit Agreement ishereby amended and restated in its entirety to read as follows:

 

“8.10       **Certain Financial Covenants**.

 

(a)           Tangible Capital Base.  ARC and its Subsidiaries shall not (i) as ofJune 30, 2002, have a consolidated Tangible Capital Base of less than$8,000,000 or (ii) as of the end of any fiscal quarter commencing with thefiscal quarter ending September 30, 2002, have a consolidated Tangible CapitalBase of less than the sum of (x) $8,000,000 plus (y) on a cumulativebasis, 50% of positive consolidated net income (without reduction for losses)for each fiscal quarter ending after June 30, 2002.

 

(b)           Fixed Charge Coverage Ratio.  The Fixed Charge Coverage Ratio of ARC andits Subsidiaries shall not at any time during any period set forth below to be lessthan the ratio set opposite such period:

 
| **Period**                                     |   | **Minimum Fixed Charge  Coverage Ratio** |   |
|------------------------------------------------|--------|------------------------------------------|--------|
|                                           |   |                                     |   |
| October 1, 2002 through December 31, 2002      |   | 1.00x                                    |   |
|                                           |   |                                     |   |
| October 1, 2002 through  March 31, 2003        |   | 1.00x                                    |   |
|                                           |   |                                     |   |
| October 1, 2002 through  June 30, 2003         |   | 1.00x                                    |   |
|                                           |   |                                     |   |
| October 1, 2002 through  September 30, 2003    |   | 1.00x                                    |   |
|                                           |   |                                     |   |
| Thereafter (on a  rolling four quarters basis) |   | 1.00x                                    |   |

 

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(c)           Fixed Charge Coverage Shortfall.  The amount by which (i) the aggregate FixedCharges of ARC and its Subsidiaries, exceeds (ii) the consolidated EBITDA ofARC and its Subsidiaries, for each fiscal **period******set forth below shall not be greater thanthe maximum shortfall amount set opposite such fiscal **period****:**

 
| **Fiscal Period**                  |   | **Maximum  Shortfall  Amount** |    |
|------------------------------------|--------|--------------------------------|---------|
|                               |   |                           |    |
| July 1 through  July 31, 2002      |   | $                              | 250,000 |   |
|                               |   |                           |    |
| July 1 through  August 31, 2002    |   | $                              | 150,000 |   |
|                               |   |                           |    |
| July 1 through  September 30, 2002 |   | $                              | 250,000 |   |

 

(d)           Capital Expenditures.  The Credit Parties shall not make anyCapital Expenditures (including, without limitation, incurring any CapitalLease Obligations) which, in the aggregate exceed (i) $600,000 at any timeduring the fiscal quarter ending March 31, 2002, and (ii) $2,500,000 atany time during any fiscal year, commencing with the fiscal year endingDecember 31, 2002.”

 

(d)           *Amendment ofExhibit D to the Credit Agreement*. Exhibit D to the Credit Agreement is hereby replaced with the new formof Exhibit D attached thereto.

 

4.                                       NoDefault; Representations and Warranties, etc.

 

The Borrowers herebyrepresent, warrant and confirm that: (a) the representations and warranties ofthe Credit Parties contained in Article 5 of the Credit Agreement are true andcorrect on and as of the date hereof as if made on such date (except to the extentthat such representations and warranties expressly relate to an earlier date);(b) after giving effect to this Amendment, the Borrowers are in compliance withall of the terms and provisions set forth in the Credit Agreement and the otherLoan Documents; (c) after giving effect to this Amendment, no Default hasoccurred and is continuing; and (d) the execution, delivery andperformance by the Borrowers of this Amendment (i) have been duly authorized byall necessary action on the part of the Borrowers, (ii) will not violate anyapplicable law or regulation or the organizational documents of any Borrower,(iii) will not violate or result in a default under any indenture, agreement orother instrument binding on any Borrower or any of its assets, including withoutlimitation, any Subordinated Debt Document, and (iv) do not require anyconsent, waiver or approval of or by any Person (other than the Lender) whichhas not been obtained.

 

5.                                       Conditionsto Effectiveness.

 

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

 

(a)           The Lender shall have receivedcounterparts of this Amendment duly executed by each of the Borrowers;

 

(b)           The Lender shall have received aCertificate of the Secretary of ARC, certifying that this Amendment has beenduly authorized by the Boards of Directors of ARC and each of its Subsidiaries;

 

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(c)           The Borrowers shall have delivered tothe Lender evidence that Wynnchurch has executed and delivered to the Borrowersa written amendment and waiver with respect to the Subordinated Debt Documentsin form and substance reasonably acceptable to the Lender, pursuant to whichWynnchurch shall have waived all existing defaults of the Borrowers under theSubordinated Debt Documents and amended the financial covenant provisions ofthe Subordinated Debt Documents in a manner consistent with the financialcovenant amendments set forth in this Amendment;

 

(d)           The Lender shall have received a writtenacknowledgement from Wynnchurch with respect to the existence of the June 30,2002 Event of Default and the modifications to the Credit Agreementcontemplated by this Amendment;

 

(e)           The Borrowers shall have reimbursedthe Lender for all reasonable costs and expenses, including reasonable legalfees and disbursements, incurred by the Lender in connection with thisAmendment and the transactions contemplated hereby; and

 

(f)            The Lender shall have received fromthe Borrowers, an amendment fee in an amount equal to $50,000.

 

6.             Miscellaneous.

 

(a)           Except as specifically amendedhereby, all of the terms and provisions of the Credit Agreement, the other LoanDocuments and all related documents, shall remain in full force andeffect.  Nothing contained herein shallconstitute a waiver of any provision of the Credit Agreement or the Other LoanDocuments, except for the waiver of the June 30, 2002 Event of Defaultexpressly set forth herein.

 

(b)           This Amendment may be executed in anynumber of 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 bythe laws of The Commonwealth of Massachusetts and shall be binding upon andinure to the benefit of the parties hereto and their respective successors andassigns.

 

[Remainder of Page Left Intentionally Blank]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to beduly executed by their respective authorized officers as of the day and yearfirst above written.

 

 

|   | BORROWERS                          |
|--------|------------------------------------|
|   |                               |
|   | ALTERNATIVE  RESOURCES CORPORATION |
|   |                               |
|   |                               |
|   | By                                 |   |   |
|   | Name:                              |
|   | Title:                             |
|   |                               |
|   |                               |
|   | ARC SERVICE,  INC.                 |
|   |                               |
|   |                               |
|   | By                                 |   |   |
|   | Name:                              |
|   | Title:                             |
|   |                               |
|   | ARC SOLUTIONS,  INC.               |
|   |                               |
|   |                               |
|   | By                                 |   |   |
|   | Name:                              |
|   | Title:                             |
|   |                               |
|   | ARC MIDHOLDING,  INC.              |
|   |                               |
|   |                               |
|   | By                                 |   |   |
|   | Name:                              |
|   | Title:                             |
|   |                               |
|   | WRITERS  INC.                      |
|   |                               |
|   |                               |
|   | By                                 |   |   |
|   | Name:                              |
|   | Title:                             |

 

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|   | LENDER                                        |
|--------|-----------------------------------------------|
|   |                                          |
|   | FLEET  CAPITAL CORPORATION, as Lender         |
|   |                                          |
|   |                                          |
|   | By                                            |   |   |
|   | Name:                                         |
|   | Title:                                        |
|   |                                          |
|   | ISSUING  LENDER                               |
|   |                                          |
|   | FLEET  NATIONAL BANK, as Issuing Lender       |
|   |                                          |
|   |                                          |
|   | By                                            |   |   |
|   | Name:                                         |
|   | Title:                                        |
|   |                                          |
|   | CASH  MANAGEMENT BANK                         |
|   |                                          |
|   | FLEET  NATIONAL BANK, as Cash Management Bank |
|   |                                          |
|   |                                          |
|   | By                                            |   |   |
|   | Name:                                         |
|   | Title:                                        |

 

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