**Exhibit 4.3**

 

FIRST AMENDMENT TO SUBORDINATION AND INTERCREDITOR AGREEMENT

 

This FIRST AMENDMENT TO SUBORDINATION ANDINTERCREDITOR AGREEMENT (this “Amendment”) is dated as of April 14, 2003and made by and among Wynnchurch Capital Partners, L.P. (“Wynnchurch Capital”),Wynnchurch Capital Partners Canada, L.P. (“Wynnchurch Canada”),Wynnchurch Capital, Ltd., Alternative Resources Corporation (“ARC”), ARCService, Inc.(“Service”), ARC Solutions, Inc. (“Solutions”), ARCMidholding, Inc. (“Midholding”), Writers Inc. (“Writers”), ARCTechnology Management LLC (“ARC Technology”), ARC Staffing ManagementLLC (“ARC Staffing”), ARC Shared Services LLC (“ARC Shared Services”),and Fleet Capital Corporation (the “FCC”).  Wynnchurch Capital and Wynnchurch Canada are from time to timecollectively referred to herein as “Wynnchurch”.  ARC, Service, Solutions, Midholding,Writers, ARC Technology, ARC Staffing and ARC Shared Services are from time totime collectively referred to herein as the “Borrowers”)

 

WHEREAS, the Borrowers and FCC are parties to a Creditand Security Agreement dated as of January 31, 2002, as amended by that certainFirst Amendment to Credit Agreement and Waiver dated as of August 8, 2002, thatcertain Second Amendment to Credit Agreement dated as of August 30, 2002, thatcertain Third Amendment to Credit Agreement dated as of November 14, 2002, thatcertain Waiver, Joinder and Fourth Amendment to Credit Agreement dated as ofDecember 27, 2002 (the “Fourth Amendment”), and that certain FifthAmendment to Credit Agreement and Waiver dated as of the date hereof (the “FifthAmendment”)(as so amended, the “Credit Agreement”);

 

WHEREAS, Wynnchurch, ARC, Service, Solutions,Midholding, Writers, and FCC are parties to that certain Subordination andIntercreditor Agreement dated as of January 31, 2002 (the “SubordinationAgreement”);

 

WHEREAS, pursuant to the Fourth Amendment, ARCTechnology, ARC Staffing, and ARC Shared Services became “Borrowers” under theCredit Agreement, the Subordination Agreement, and the other Loan Documents (asdefined in the Credit Agreement);

 

WHEREAS, pursuant to the Fifth Amendment, theBorrowers and FCC amended the Credit Agreement, among other things, to makeprovision for the issuance and repayment of certain additional Senior SubordinatedSecured Convertible Promissory Notes of ARC which may be issued to Wynnchurchand/or Wynnchurch Capital, Ltd., as consideration for payments made byWynnchurch pursuant to a Guaranty dated as of the date hereof made byWynnchurch for the benefit of FCC (the “New Wynnchurch Subordinated Notes”),

 

WHEREAS, Wynnchurch, the Borrowers and the Lenderdesire to amend the Subordination Agreement to reflect the addition of ARCTechnology, ARC Staffing and ARC Shared Services as Borrowers under the CreditAgreement, to reflect the terms of the Credit Agreement relating to theissuance and repayment of the New Wynnchurch Subordinated Notes, and to addWynnchurch Capital, Ltd., as a “Subordinated Creditor” thereunder;

 

NOW, THEREFORE, in consideration of the foregoing andfor other good and valuable consideration, the receipt and sufficiency of whichare hereby acknowledged, the parties hereto do hereby agree as follows:

 

1.                                       CapitalizedTerms.

 

Capitalized terms used herein which are defined in theSubordination Agreement have the same meanings herein as therein, except to theextent that such meanings are amended hereby.

 

----

 

2.                                       Amendments.

 

(a)                                  Amendmentsto Section 1 of the Subordination Agreement.

 

(i)                                     Thedefinition of “Borrowers” contained in Section 1.1 of the SubordinationAgreement is hereby deleted in its entirety and replaced with the following newdefinition:

 

“‘Borrowers’ means, collectively, ARC, Service,Solutions, Midholding, Writers, ARC Technology Management LLC, ARC StaffingManagement LLC, and ARC Shared Services LLC, together with their respectivesuccessors and assigns and any additional subsidiaries of any of the foregoingthat become “Borrowers” under the Senior Credit Agreement or guarantors of theobligations of the Borrowers under the Senior Credit Agreement.”

 

(ii)                                  Thedefinition of “Subordinated Creditor” contained in Section 1.11 of theSubordination Agreement is hereby deleted in its entirety and replaced with thefollowing new definition:

 

“‘Subordinated Creditors’ means Wynnchurch Capital,Wynnchurch Canada, and Wynnchurch Capital, Ltd., together with theirsuccessors, assigns and affiliates, and any other holder from time to time ofall or any portion of the Subordinated Obligations.”

 

(iii)                               Thedefinition of “Subordinated Note and Warrant Documents” contained in Section1.12 of the Subordination Agreement is hereby deleted in its entirety andreplaced with the following new defintion:

 

“‘Subordinated Note and Warrant Documents’ means,collectively, the Securities Purchase Agreement dated as of January 31, 2002 byand between ARC and Wynnchurch, the Subordinated Notes, the New SubordinatedNotes, the Guaranty, the Stock Purchase Warrants issued by ARC in favor ofWynnchurch and all other instruments, agreements and documents executed ordelivered by ARC or any of the other Borrowers to Wynnchurch in connection withthe foregoing, as the same may be assigned or transferred to one or moreSubordinated Creditors.”

 

(iv)                              Thefollowing definition of “New Subordinated Notes” is hereby inserted as a newSection 1.15 of the Subordination Agreement:

 

“‘New Subordinated Notes’ means any SeniorSubordinated Secured Convertible Promissory Notes, substantially in the form ofthe Subordinated 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.”

 

(v)                                 Thefollowing definition of “Wynnchurch Guaranty” is hereby inserted as a newSection 1.16 of the Subordination Agreement:

 

“‘Wynnchurch Guaranty’ means that certain GuarantyAgreement dated as of April 14, 2003 made by Wynnchurch for the benefit of FCC,as the same may be amended, supplemented or otherwise modified from time totime.”

 

2

----

 

(b)                                 Amendmentsto Section 2.6 of the Subordination Agreement.

 

(i)                                     Section2.6(a) of the Subordination Agreement is hereby amended and restated in itsentirety as follows

 

(a)                                  Notwithstandinganything to the contrary set forth herein, so long as (i) no Payment Defaultexists, (ii) no Blockage Period shall be continuing, and (iii) no Event ofDefault shall result from the making of such payment, ARC may pay or cause tobe paid to Wynnchurch and any other Subordinated Creditor, and Wynnchurch and anyother Subordinated Creditor may accept and retain regularly scheduled quarterlypayments of interest but no principal in respect of the Subordinated Notes orthe New Subordinated Notes on the dates and in the amounts provided for in theSubordinated Notes (as in effect on January 31, 2002) and the New SubordinatedNotes (as in effect on the date of issuance thereof); provided that so long asthe FCC Senior Credit Agreement shall remain in effect in no event shall theaggregate amount of interest payments made in respect of the Subordinated Notesor the New Subordinated Notes during any calendar quarter beginning with thecalendar quarter beginning January 1, 2002 and ending with the calendar quarterending December 31, 2005 exceed 1.875% of the outstanding principal balance ofthe Subordinated Notes and the New Subordinated Notes without the prior writtenconsent of the Senior Creditor, except that (1) if (v) the Senior Creditor hasreceived a Compliance Certificate indicating that the Borrowers are in compliancewith Section 8.10(b) of the FCC Senior Credit Agreement for the periodfrom January 1, 2002 through June 30, 2002 or any other two consecutivefiscal quarters following the Effective Time, (w) no Payment Default exists,(x) no Blockage Period shall have commenced and be continuing, (y) no Event ofDefault shall result from the making of such payment, and (z) prior to suchpayment, the Borrowers shall have delivered evidence to the Senior Creditorthat after giving effect to such payment, Excess Availability (as defined inthe Senior Credit Agreement) shall equal or exceed $5,000,000, the aggregateamount of interest payments made in respect of the Subordinated Notes duringany calendar quarter may total up to (xx) 4.50% of the outstanding principal balanceof the Subordinated Notes plus (yy) the amount of prior interestpayments that were not paid as a result of the prior existence of a PaymentDefault or prior commencement of a Blockage Period, and (2) if (w) no PaymentDefault exists, (x) no Blockage Period shall have commenced and be continuing,(y) no Event of Default shall result from the making of such payment, and (z)prior to such payment, the Borrowers shall have delivered evidence to theSenior Creditor that (xx) for the period of thirty days immediately prior togiving effect to such payment, Excess Availability on each day shall haveequaled or exceeded, on average, $1,000,000, (yy) during such thirty dayperiod, there shall not have been more than four days on which daily ExcessAvailability shall not have equaled or exceeded $500,000, and (zz) after givingeffect to such payment, Excess Availability shall equal or exceed $1,000,000,ARC may pay or cause to be paid to Wynnchurch and any other SubordinatedCreditor, and Wynnchurch and any other Subordinated Creditor may accept andretain payments of principal and interest in respect of the New SubordinatedNotes (including without limitation the amount of prior interest payments thatwere not paid in respect of the New Subordinated Notes as a result of the priorexistence of a Payment Default or prior commencement of a BlockagePeriod).  Notwithstanding anything tothe contrary set forth herein, beginning with the

 

3

----

 

calendar quarter beginning January 1, 2006, so long asno Payment Default exists, no Blockage Period shall have commenced and becontinuing, and no Event of Default shall result from the making of suchpayment, ARC may pay or cause to be paid to Wynnchurch and any otherSubordinated Creditor, and Wynnchurch and any other Subordinated Creditors mayaccept and retain, scheduled quarterly payments of interest but no principal(unless the payment of principal is otherwise permitted pursuant to exception(2) to Section 2.6(a)(ii) above) in respect of the Subordinated Notes and theNew Subordinated Notes on the dates and in the amounts provided for in theSubordinated Notes and the New Subordinated Notes (in each case, as in effecton the date of issuance thereof).  IfWynnchurch or any other holder of the Subordinated Indebtedness receivespayment from the Borrowers pursuant to the first sentence of this Section2.6(a), such payment shall be deemed to constitute a representation of theBorrowers to the Senior Creditor and to the Subordinated Creditors that noEvent of Default exists, and that such payment is permitted to be paid by theBorrowers under this Agreement; and the Subordinated Creditors shall beentitled to keep and retain such payment unless prior to the SubordinatedCreditors’ receipt of such payment there shall occur a Payment Default or theSenior Creditor shall have sent a Blockage Notice to the SubordinatedCreditors, in which case the Subordinated Creditors shall forthwith deliversuch payment or an amount of cash equal thereto to the Senior Creditor forapplication in payment of the Senior Obligations.  Notwithstanding anything to the contrary set forth herein, theSenior Creditor shall not be entitled to block payments pursuant to the deliveryof Blockage Notices hereunder for more than 180 days during any 360 day periodor commence more than three Blockage Periods during the term of this Agreement.

 

(ii)                                  Section2.6(c) of the Subordination Agreement is hereby amended and restated in itsentirety as follows:

 

(b)                                 Inaddition to the foregoing limitations, the Borrowers and the SubordinatedCreditors agree that so long as any of the Senior Obligations shall remainoutstanding, the Borrowers shall not pay and no Subordinated Creditor shallaccept or receive, any management, consulting, advisory or other fees, exceptthat (i) so long as no Payment Default exists and no Blockage Period iscontinuing:  (A) the Borrowers may payreasonable directors’ fees and reimburse the Subordinated Creditors forreasonable costs and expenses incurred by the Subordinated Creditors inconnection with the Subordinated Obligations, and (B) with the written consentof the Senior Creditor, which consent shall not be unreasonably withheld ordelayed, the Borrowers may retain Wynnchurch or any other Subordinated Creditorto perform, and pay to Wynnchurch or such other Subordinated Creditor fees for,advisory services at market rates, and (ii) so long as (A) no Payment Defaultexists, (B) no Blockage Period shall have commenced and be continuing, (C) noEvent of Default shall result from the making of such payment, and (D) prior tosuch payment, the Borrowers shall have delivered evidence to the SeniorCreditor that (x) for the period of thirty days immediately prior to givingeffect to such payment, Excess Availability on each day shall have equaled orexceeded, on average, $1,000,000, (y) during such thirty day period, thereshall not have been more than four days on which daily Excess Availabilityshall not have equaled or exceeded $500,000, and (z) after giving effect tosuch payment, Excess Availability shall equal or exceed $1,000,000, ARC may payor cause to be paid to Wynnchurch and any other Subordinated Creditor, and

 

4

----

 

Wynnchurch and any other Subordinated Creditor mayaccept and retain fees in an aggregate amount of up to $250,000 in connectionwith the payment of any obligations under the Wynnchurch Guaranty byWynnchurch.

 

3.                                       Ratification.

 

TheSubordination Agreement, as modified and amended by this Amendment remains infull force and effect.  The Borrowersand the Subordinated Creditors hereby confirm for the benefit of FCC thecontinued subordination of the Subordinated Obligation (including withoutlimitation, any and all indebtedness, liabilities and obligations in respect ofthe New Wynnchurch Subordinated Notes) to the Senior Obgligations.

 

4.                                       Successorsand Assigns.

 

ThisAmendment shall be binding upon and inure to the benefit of the parties heretoand their respective successors and assigns

 

5.                                       Counterparts;Governing Law.

 

ThisAmendment may be executed in any number of counterparts which together shallconstitute one agreement and delivery of an executed signature page byfacsimile transmission shall be effective as delivery of a manually executedcounterpart.  This Amendment shall begoverned and construed in accordance with the laws (other than the conflict oflaws rules) of the Commonwealth of Massachusetts.

 

 

[Remainder of Page Left Intentionally Blank]

 

5

----

 

INWITNESS WHEREOF, the parties hereto have caused this Amendment to be dulyexecuted by their respective authorized officers as of the day and year firstabove written.

 

 
|   | WYNNCHURCH  CAPITAL PARTNERS, L.P.                         |
|--------|------------------------------------------------------------|
|   |                                                       |
|   |                                                       |
|   | By:Wynnchurch  Partners, L.P., its General Partner         |
|   |                                                       |
|   | By:  Wynnchurch Management Inc., its General Partner       |
|   |                                                       |
|   |                                                       |
|   | 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       |
|   |                                                       |
|   |                                                       |
|   | By:                                                        |   |   |
|   | Name:                                                      |
|   | Title:                                                     |
|   |                                                       |
|   |                                                       |
|   | WYNNCHURCH  CAPITAL, LTD.                                  |
|   |                                                       |
|   |                                                       |
|   | By:                                                        |   |   |
|   | Name:                                                      |
|   | Title:                                                     |
|   |                                                       |
|   |                                                       |
|   | ALTERNATIVE  RESOURCES CORPORATION                         |
|   |                                                       |
|   |                                                       |
|   | By:                                                        |   |   |
|   | Name:                                                      |
|   | Title:                                                     |
|   |                                                       |
|   |                                                       |
|   | ARC SERVICE,  INC.                                         |
|   |                                                       |
|   |                                                       |
|   | By                                                         |   |   |
|   | Name:                                                      |
|   | Title:                                                     |

 

6

----

 
|   | ARC  SOLUTIONS, INC.                                      |
|--------|-----------------------------------------------------------|
|   |                                                      |
|   |                                                      |
|   | By                                                        |   |   |
|   | Name:                                                     |
|   | Title:                                                    |
|   |                                                      |
|   |                                                      |
|   | ARC  MIDHOLDING, INC.                                     |
|   |                                                      |
|   |                                                      |
|   | By                                                        |   |   |
|   | Name:                                                     |
|   | Title:                                                    |
|   |                                                      |
|   |                                                      |
|   | WRITERS  INC.                                             |
|   |                                                      |
|   |                                                      |
|   | By                                                        |   |   |
|   | Name:                                                     |
|   | Title:                                                    |
|   |                                                      |
|   |                                                      |
|   | 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 |
|   |                                                      |
|   | By:                                                       |   |   |
|   | Name:                                                     |
|   | Title:                                                    |
|   |                                                      |
|   |                                                      |
|   | ARC  SHARED SERVICES LLC                                  |
|   |                                                      |
|   |                                                      |
|   | By:  ARC SERVICE, INC., its Manager and sole  member |
|   |                                                      |
|   | By:                                                       |   |   |
|   | Name:                                                     |
|   | Title:                                                    |

 

7

----

 
|   | FLEET CAPITAL CORPORATION, as Lender |
|--------|--------------------------------------|
|   |                                 |
|   | By                                   |   |   |
|   | Name:                                |
|   | Title:                               |

 

8

----