**THIRDAMENDMENT TO CREDIT AGREEMENT AND WAIVER**

 

This THIRD AMENDMENT TOCREDIT AGREEMENT AND WAIVER dated as of November 14, 2002 (this “Amendment”),among Alternative Resources Corporation (“ARC”), ARC Service, Inc., ARCSolutions, 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 Subsidiariesfailed to have the minimum Tangible Capital Base required by Section 8.10(a) ofthe Credit Agreement for the fiscal quarter ended September 30, 2002 and suchfailure constitutes an Event of Default under Section 9.1(c) of the CreditAgreement (the “September 30, 2002 Event of Default”);

WHEREAS, the CreditParties have requested that the Lender waive the September 30, 2002 Event ofDefault as provided herein, and amend certain provisions of the CreditAgreement; and

WHEREAS, the Lender hasagreed to waive the September 30, 2002 Event of Default and to amend certainprovisions of the Credit Agreement, all subject to the terms, conditions andlimitations set forth herein;

NOW, THEREFORE, inconsideration of the foregoing and the agreements contained herein, the partieshereby agree as follows:

1.             CapitalizedTerms.

Capitalized terms usedherein which are defined in the Credit Agreement have the same meanings hereinas therein, except to the extent that such meanings are amended hereby.

2.             Waiverof September 30, 2002 Event of Default.

                Subject to the satisfaction ofthe terms and conditions set forth in Section 5 hereof, the Lender herebywaives the September 30, 2002 Event of Default.  The parties agree that the foregoing waiver is limited solely tothe Event of Default arising out of the failure of ARC and its Subsidiaries tosatisfy the minimum Tangible Capital Base covenant set forth in Section 8.10(a)of the Credit Agreement for the fiscal quarter ended September 30, 2002, andnothing herein shall be construed as a waiver of any other presently existingor future Event of Default (including without limitation, any Event of Defaultcaused by reason of the failure of the Borrowers to comply with Section 8.10(a)of the Credit Agreement, as amended hereby, on any other occasion or for anyother period) or any failure of the Borrowers to comply with any otherprovision, term or condition of the Loan Documents.

3.             Amendments.

Subject to thesatisfaction of the terms and conditions set forth in Section 5 hereof, theBorrowers and the Lender agree that the Credit Agreement is hereby amended,effective as of the date hereof, as follows:

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

                                (i)  The definition of the term *“FixedCharges”* set forth in Section 1.1 of the Credit Agreement is herebyamended and restated in its entirety to read as follows:

 

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“‘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 (a) 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 8,2002 among the Borrowers and the Lender and that certain amendment fee requiredto be paid by the Borrowers to the Lender in connection with that certain ThirdAmendment to Credit Agreement and Waiver dated as of November 14, 2002 amongthe Borrowers and the Lender) plus (b) the aggregate amount of regularlyscheduled payments of principal in respect of Indebtedness for borrowed money(including the principal component of any payments in respect of Capital LeaseObligations) paid or required to be paid during such period, plus (c)the aggregate amount of cash disbursements made by the Borrowers after June 30,2002, pursuant to that certain severance agreement between ARC and its formerChief Executive Officer, plus (d) the aggregate amount of cashdisbursements made by the Borrowers to reduce the accrued restructuringliability created as of September 30, 2002 in connection with the relocation ofthe Borrowers’ Client Services Management.”

                                (ii) The definition of the term *“TangibleNet Worth”* set forth in Section 1.1 of the Credit Agreement ishereby amended and restated in its entirety to read as follows:

“‘Tangible Net Worth’ means, at any time anamount (determined on a consolidated basis without duplication in accordancewith GAAP) equal to (a) the book net worth of the Borrowers and allSubsidiaries on a consolidated basis, minus (b) the total book value ofall assets of the Borrowers and all Subsidiaries on a consolidated basis whichwould be treated as intangible assets under GAAP, including without limitation,such items as goodwill, customer lists, Patents, Copyrights and Trademarks, andrights (including rights under licenses) with respect to the foregoing, minus(c) the aggregate amount of liabilities which are or would be accounted for as“Loan Origination Fees” on the Borrower’s balance sheet based on theapplication of GAAP used in connection with the preparation of the Borrower’sbalance sheet dated September 30, 2002 (notwithstanding any term contained inthis Agreement to the contrary, including without limitation Section 1.3).

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

                (a)           Tangible Capital Base.  ARC and its Subsidiaries shall not (i) as ofSeptember 30, 2002, have a consolidated Tangible Capital Base of less than$2,750,000 or (ii) as of the end of any fiscal quarter commencing with thefiscal quarter ending December 31, 2002, have a consolidated Tangible CapitalBase of less than the sum of (x) $2,750,000 plus (y) on a cumulativebasis, 50% of positive consolidated net income (without reduction for losses)for each fiscal quarter ending after September 30, 2002.

                (c)           *Amendment of Exhibit D to the Credit Agreement*.  Exhibit D to the Credit Agreement is herebyreplaced with the new form of Exhibit D attached thereto.

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4.             NoDefault; Representations and Warranties, etc.

                TheBorrowers hereby represent, warrant and confirm that: (a) the representationsand warranties of the Credit Parties contained in Article 5 of the CreditAgreement are true and correct on and as of the date hereof as if made on suchdate (except to the extent that such representations and warranties expresslyrelate to an earlier date); (b) after giving effect to this Amendment, theBorrowers are in compliance with all of the terms and provisions set forth inthe Credit Agreement and the other Loan Documents; (c) after giving effect tothis Amendment, no Default has occurred and is continuing; and (d) theexecution, delivery and performance by the Borrowers of this Amendment (i) havebeen duly authorized by all necessary action on the part of the Borrowers, (ii)will not violate any applicable law or regulation or the organizationaldocuments of any Borrower, (iii) will not violate or result in a default underany indenture, agreement or other instrument binding on any Borrower or any ofits assets, including without limitation, any Subordinated Debt Document, and(iv) do not require any consent, waiver or approval of or by any Person (otherthan the Lender) which has 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;

(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 awritten acknowledgement from Wynnchurch with respect to the existence of theSeptember 30, 2002 Event of Default and the modifications to the CreditAgreement contemplated 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 $10,000.

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 September 30, 2002 Event of Defaultexpressly set forth herein.

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(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.

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IN WITNESS WHEREOF, theparties hereto have caused this Amendment to be duly executed by theirrespective authorized officers as of the day and year first 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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