Exhibit 10.41
AMENDMENT TO MEMORANDUM OF UNDERSTANDING
This AMENDMENT TO MEMORANDUM OF UNDERSTANDING (this "Amendment"), dated as
of June 12, 2003, by and among TEAM America, Inc., an Ohio corporation ("Team"),
Stonehenge Opportunity Fund, LLC, a Delaware limited liability company ("SOF"),
Provident Financial Group, Inc., an Ohio corporation ("PFG"), and Professional
Staff Management, Inc., a Utah corporation ("PSMI"), amends that certain
Memorandum of Understanding, dated as of March 27, 2003 (the "MOU"), and
executed by Team, SOF, PFG and PSMI. Capitalized terms contained in this
Amendment and not otherwise defined herein shall have the same meaning as in the
MOU.
RECITALS
(a) Team has executed a Merger Agreement (the "Merger Agreement"), dated
as of the date hereof, by and among Team, Vsource, Inc., a Delaware
corporation ("Vsource"), and a wholly-owned subsidiary of Team (the
"Merger Sub"). On the terms and subject to the conditions set forth in
the Merger Agreement, (i) Team is to reincorporate in Delaware by
forming a new wholly-owned subsidiary Delaware corporation ("Team
Newco") and merging Team into Team Newco, with Team Newco being the
surviving corporation (the "Reincorporation Transaction"), and then
(ii) the Merger Sub is to merge with and into Vsource, with Vsource
being the surviving entity as a wholly-owned subsidiary of Team Newco,
and the holders of the capital stock of Vsource are to receive capital
stock of Team Newco, in a reverse triangular merger structure (the
"Merger"). The Reincorporation Transaction and the ensuing Merger are
expected to close
on or before October 31, 2003 (such closing referred to herein as the
"Merger Closing").
(b) The Restructuring of Team's Senior Credit Agreement closed on March
28, 2003. At the Merger Closing, it is expected that there will be a
further restructuring of the Senior Credit Agreement consistent with
the term sheet attached hereto as Exhibit A (the "Further Credit
Restructuring").
(c) In light of the foregoing, the Preferred Holders and Team now desire
to amend the MOU as set forth herein.
NOW, THEREFORE, for valuable consideration, the receipt and adequacy of
which are hereby acknowledge, the parties agree in this Amendment as follows:
1. The first sentence of Paragraph 1.3 of the MOU is modified to provide
that the interest rate on the Subdebt Note will be 150 basis points
per annum over the rate set in the Further Credit Restructuring,
compounded annually. In addition, the Subdebt Note shall be entitled
to rights comparable to those set forth in Paragraph 2.6 of this
Amendment. All other terms of said Paragraph 1.3 remain in effect.
2. All references to "New Preferred Shares" in the MOU are amended to
delete such references, and Paragraph 2 of the MOU is deleted and
replaced in its entirety with the following:
"2. At the Recap Closing, each of the Preferred Holders agrees to
surrender its shares of Class A Preferred and its Old Warrants,
including all rights and powers related thereto, in exchange for both
(i) the
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consideration referred to in Section 3 hereof and (ii) a New Subordinated Note
(each an "NSN") having the following terms:
2.1 The original principal amount of the NSN received by SOF will be
$1,818,000.00. The original principal amount of the NSN received by
PFG will be $227,375.00. The original principal amount of the NSN
received by PSMI will be $454,625.00.
2.2 Each NSN will accrue interest commencing at the Recap Closing at an
annual rate of 150 basis points over the rate set in the Further
Credit Restructuring. The interest shall accrue at the applicable rate
but shall not be paid in cash to the holders of the NSNs until all of
the Senior Obligations and all of the obligations under the Subdebt
Note are paid in full, or the holders of such Senior Obligations and
the Subdebt Note agree otherwise.
2.3 The NSNs will be subordinate to the same extent as provided in Section
1.1 of the MOU and, in addition, will be subordinate to the Subdebt
Note.
2.4 Each NSN will have a maturity date of July 1, 2006, at which time all
principal, accrued interest and other amounts due thereunder will
become due and payable.
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2.5 Among other provisions protective of the payees of the NSNs, the NSNs
(and/or the other Definitive Documents) will contain language
providing for the following: (i) cognovit/confession of judgment; (ii)
waiver of the right to a jury trial; and (iii) cross-default with the
Subdebt Note.
2.6 Until the NSNs and the Subdebt are paid in full, the holder or holders
of a majority of the aggregate outstanding principal amount of the
NSNs and Subdebt Note will be allowed to object to any increase, and
prevent Team from taking any action, that would increase the principal
amount of senior debt (i.e., any indebtedness senior in priority or
right of payment to the Subdebt Note or the NSNs) (the "Senior Debt")
to an aggregate principal amount which, when combined with the
outstanding principal amount of the NSNs and Subdebt Note, would be
greater than $15,000,000 (such amount referred to as the "Threshold
Amount"). If Team proposes to take any action that would increase the
total Senior Debt after the proposed increase to equal or exceed the
Threshold Amount, then Team shall immediately notify in writing the
then
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outstanding holders of the NSNs and Subdebt of the proposed
increase in Senior Debt (the "Proposal Notice"). The holders of
not less than a majority of the aggregate outstanding principal
amount of the NSNs and Subdebt Note must object in a writing
delivered to Team to such proposed increase in Senior Debt within
ten (10) business days of receiving the Proposal Notice (the
"Objection"). If Team does not timely receive the Objection, then
the outstanding holders of the NSNs and Subdebt will be deemed to
have approved such proposed increase in Senior Debt.
3. The second sentence of Paragraph 3 of the MOU is deleted in its entirety
and the following language is inserted in lieu thereof:
"At the Recap Closing, each of the Preferred Holders, as additional
consideration for the surrender of its Old Warrants, will receive the
following common shares of Team: SOF will receive 606,857 common
shares, PFG will receive 75,899 common shares, and PSMI will receive
151,756 common shares (collectively, the "Additional New Common
Shares"). In the event that Team undergoes an issuance or offering of
shares of its Common Stock after the Merger Closing (a "Subsequent
Common Stock Offering") pursuant to which any members of management or
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stockholders beneficially owning 5% of more of the then outstanding
Common Stock are given the opportunity to sell some or all of his, her
or its shares of Common Stock in connection with such Subsequent
Common Stock Offering, then each of SOF, PFG and PSMI, to the extent
SOF, PFG or PSMI, as applicable, still beneficially owns its New
Common Shares and Additional New Common Shares, shall be provided the
same pro rata sale rights for its New Common Shares and Additional New
Common Shares in such Subsequent Common Stock Offering on terms no
less favorable to the recipients thereof than those of any other
stockholder of Team participating in such Subsequent Common Stock
Offering (the "Participation Rights"). The Participation Rights shall
not be transferable. At the Recap Closing, the Registration Rights
Agreement, dated as of December 28, 2000, among Team, SOF and PFG,
shall be terminated."
4. References in the MOU to the New Warrants are amended to delete such
references, and Paragraph 4 of the MOU is deleted in its entirety and the
following is inserted in lieu thereof: "[Intentionally omitted.]".
5. The first sentence of Paragraph 5 of the MOU is amended to delete the
following language: "and O.R.C. Chapter 1704". All other terms of said
Paragraph 5 remain in effect.
6. Paragraph 6 of the MOU is deleted in its entirety and the following is
inserted in lieu thereof: "[Intentionally omitted.]". The Board of
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Directors of Team following the Merger will be as provided for in the
Merger Agreement.
7. Section (c) of Paragraph 11 of the MOU is deleted and the following is
inserted in lieu thereof: "(c) the failure of the Closing Conditions, as
defined below, to be met on or before October 31, 2003". All other terms of
said Paragraph 11 remain in effect.
8. The words "the terms of the New Preferred Shares and the New Warrants" in
the first sentence of Paragraph 12 of the MOU are deleted and the following
is inserted in lieu thereof: "the NSNs".
9. The second sentence of Paragraph 12 of the MOU is deleted in its entirety
and the following is inserted in lieu thereof:
"Upon the execution and delivery of this MOU by the parties hereto,
counsel for Team shall commence drafting the Definitive Documents,
subject to review and approval by counsel for SOF."
10. The fourth sentence of Paragraph 12 of the MOU is deleted in its entirety
and the following is inserted in lieu thereof:
"Without limiting the generality of the foregoing, the Closing
Conditions will include the taking of the actions of the directors and
shareholders of Team as referred to herein, a requirement that the
Merger Closing occur immediately subsequent to the Recap Closing, the
contemporaneous or prior closing of the Further Credit Restructuring
and the delivery to SOF, PFG and PSMI of a
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legal opinion addressed to them in form and substance reasonably
satisfactory to SOF rendered by outside Ohio legal counsel to Team
reasonably satisfactory to SOF, dated the date of the Recap Closing,
to the following effects: (i) the Definitive Agreements have been duly
authorized, executed and delivered by Team and are enforceable against
Team (subject to bankruptcy, insolvency and other similar laws
affecting the rights and remedies of creditors generally and general
principles of equity), without conflict with Team's governing
documents, other material agreements or applicable law; (ii) the New
Common Shares and Additional New Common Shares issued in the
Recapitalization are duly authorized and are validly issued and
outstanding, fully paid and non-assessable; (iii) any amendments to
Team's Articles of Incorporation have been validly adopted, approved
and effected; and (iv) such other matters of law as SOF may reasonably
request."
11. Except as provided in this Amendment, the MOU remains in full force and
effect. In the event that the Merger Closing does not occur by October 31,
2003, this Amendment shall be of no force and effect, except as to the
modification to Paragraph 11 Section (c) of the MOU set forth above in
Paragraph 7.
12. Each party hereto represents and warrants that it has the requisite
authority to enter into this Amendment, and that this Amendment is binding
upon
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and enforceable against such party. This Amendment shall be governed by and
construed in accordance with the internal laws of the State of Ohio,
without regard to conflicts of law principles.
13. Team represents, warrants and covenants that, following the Reincorporation
Transaction, all obligations of Team hereunder shall be, and shall be
deemed for all purposes to be, obligations of Team Newco.
14. This Amendment may be executed in one or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one
of the same instrument.
15. Any controversy or claim arising out of or relating to this Amendment shall
be settled in accordance with Paragraph 17 of the MOU.
***** signature page follows *****
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IN WITNESS WHEREOF, this Amendment is duly executed by the parties as of
the date first written above.
TEAM AMERICA, INC.
By: /s/ S. CASH XXXXXXXXX
------------------------------------
Name: S. CASH XXXXXXXXX
------------------------------
Title: CHIEF EXECUTIVE OFFICER
-----------------------------
STONEHENGE OPPORTUNITY FUND, LLC
By: /s/ XXXXXX X. XXXXXX
------------------------------------
Name: XXXXXX X. XXXXXX
------------------------------
Title: PRINCIPAL
-----------------------------
PROVIDENT FINANCIAL GROUP, INC.
By: /s/ XXXXX X. XXXXXX
------------------------------------
Name: XXXXX X. XXXXXX
------------------------------
Title: EXECUTIVE VICE PRESIDENT
-----------------------------
PROFESSIONAL STAFF MANAGEMENT, INC.
By: /s/ XXXX X. XXXXX, XX.
------------------------------------
Name: XXXX X. XXXXX, XX.
------------------------------
Title: PRESIDENT
-----------------------------
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TERM SHEET
From: The Huntington National Bank
To: Team America, Inc.
Date: June 11, 2003
Re: Team America Restructure
This term sheet ("Term Sheet") describes the terms of the restructure of
outstanding credit facilities between Team and Lender (the "Restructure"):
Effective Date: The Restructure outlined below will become effective upon
closing of the Merger (the "Closing").
Borrowers: Team America, Inc., an Ohio corporation ("Team") and Vsource,
Inc., a Delaware corporation ("Vsource"), which will be a 100%
subsidiary by way of a reverse triangular merger (the "Merger").
Guarantors: All of the subsidiaries of Team and Vsource ("Guarantors").
Lender: The Huntington National Bank ("Huntington" or "Lender").
Designee: A party or parties ("Designee") designated by Vsource to purchase
concurrent with and not prior to the Closing of the Restructure
("Purchase Agreement") The Provident Bank's ("Provident") pro
rata share of the Term A and Term B loan facilities
("Subordinated Debt") arising under the Third Amendment to Credit
Agreement dated March 28, 2003 among Huntington, Provident and
Team ("Third Amendment"). The identity of Designee and the form
and content of the Purchase Agreement shall be subject to
Huntington's review and approval, which shall not be unreasonably
withheld.
Facilities: The facilities ("Facilities") to be extended to Borrowers by
Lender will be as follows:
(i) $4,077,078.79 senior term loan (the "Term Loan"). The Term
Loan amount is intended to include all amounts due and
owing to Lender pursuant to the terms of the Third
Amendment and may be adjusted, if necessary, upon
confirmation of such amount by Lender;
(ii) $411,300 standby letter of credit facility (the "First LC
Facility"); and
(iii) $2,000,000 standby letter of credit facility, which is
further described below (the "Second LC Facility").
Second LC Facility Lender and Team hereby acknowledge that the Second LC
Facility is evidenced by a certain Standby Letter of Credit
and Addendum thereto, each dated April 3, 2002, and
documents related thereto (the "Letter of Credit Agreement")
pursuant to which Lender issued a Letter of Credit in favor
of The Hartford Insurance Company in the amount of
$2,000,000 (the "Hartford Letter of Credit"). The Second LC
Facility is secured by those certain Stock Pledge Agreements
of Xxxxxx X. Xxxxxxxxx, Xxxx Xxxxxx, and Stonehenge
Opportunity Fund, LLC. Except as provided in the next
following sentence, nothing herein shall be construed to
amend or modify the terms of the Second LC Facility.
Additionally, the parties hereby agree that the Second LC
Facility (i) shall be further secured by any security
agreements executed in favor of Lender in connection with
the Restructure; and (ii) shall be senior to the
Subordinated Debt.
Subordinated Debt: To induce Lender to extend the Facilities to Borrowers,
Designee shall agree to enter into a subordination agreement
to provide for the subordination of (i) the Subordinated
Debt to the Facilities; and (ii) all liens on the Collateral
granted to Designee to the liens on the Collateral granted
to Lender. The form and content of the subordination
agreement shall be satisfactory to Lender in its absolute
discretion and shall contain standard intercreditor and
subordination provisions regarding payment and collection,
provided, however, the duration of the standstill period
shall be until all amounts owing to Huntington shall have
been indefeasibly paid in full.
Designee will assign the rights to the Subordinated Debt to
Lender which will remain in existence until all amounts
payable to Lender under the Facilities and the Huntington
Payment have been indefeasibly paid in full (the
"Assignment"). The Assignment will be re-assigned by Lender
to Designee (inclusive of principal and accrued interest
amounts due under the Subordinated Debt) upon payment of all
amounts due to Lender under the Facilities, provided,
however, Lender shall have a priority right to receive
payment in an amount equal to $500,000 ("Huntington
Payment").
Borrower shall not make any distribution of funds on any
Subordinated Debt until such time as the Facilities have
been indefeasibly paid in full and the transactions
contemplated by this Term Sheet with respect to the
Facilities shall have been irrevocably terminated; provided,
however, Borrower may pay and Designee may receive regularly
scheduled payments of interest at a rate not to exceed Prime
plus one percent (1%) per annum on the $1,600,000 tranche of
the Subordinated Debt so long as no event of default shall
have occurred and be continuing.
Collateral: At Closing, Borrowers will provide cash collateral as
security in respect of the Facilities in an amount equal to
$1,000,000, which may decline on a dollar for dollar basis,
as the exposure to Lender under the Facilities reduces below
$1,000,000.
Borrowers will provide a cash collateral deposit by June 18,
2003 in an amount equal to $100,000 ("Cash Deposit") with
Lender as further security for the monthly principal
payments payable to Lender commencing on July 1, 2003.
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Lender will also have first priority liens on and security
interests in all tangible and intangible real and personal
property of Borrowers and Guarantors, including but not
limited to, accounts receivable, inventory, equipment,
customer lists, franchise rights, trademarks and contract
rights, and all other tangible and intangible real and
personal property of Borrowers and Guarantors now owned or
hereafter acquired, as well as first priority liens on 100%
of the common stock of all Guarantors and Vsource (the
"Collateral").
No other creditors will be permitted to have liens on or
security interests in the Collateral for the Facilities,
except for (i) usual and customary purchase money security
interests; and (ii) cash collateral deposited with The
Provident Bank as security for the Provident letter of
credit facility in an amount equal to $508,000.
The Subordinated Debt shall be permitted to have a
subordinated second lien on the Collateral. Borrowers and
Guarantors may not provide additional collateral for the
benefit of Designee without also providing such collateral
for the benefit of Lender.
Purpose: To refinance credit facilities now in place with Team.
Term Loan
Interest Rate: A variable rate equal to Huntington's Prime Commercial
Lending Rate ("Prime") plus one percent (1%).
Warrants: The Warrant Certificates (as defined in the Third Amendment)
shall be issued to Lender no later than June 16, 2003.
Lender's warrant shares shall be registered in conjunction
with the first post-Merger registration by Borrowers.
Final Maturity: The Term Loan shall mature forty-eight (48) months after the
Closing.
Amortization: Term Loan - Forty-eight (48) equal monthly payments of
principal in the amount of $84,939.14 plus interest.
First LC Facility and Second LC Facility - in the event of a
draw, amounts outstanding will be repaid in six equal
quarterly payments beginning one quarter after the date of
the draw. Notwithstanding the foregoing, all outstanding
draws shall be paid in full no later than Final Maturity.
Guarantors: All subsidiaries of Team and Vsource.
Lender Fees: Facility fee of $150,000 ("Facility Fee") payable on Closing
to Lender.
Previously contracted and fully earned cash management fee
of $25,000 payable on Closing to Lender.
Expenses: Borrowers shall reimburse Lender for all out-of-pocket costs
and expenses incurred by it in connection with the financing
transactions set
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forth herein, whether or not such transactions are
consummated and on an on-going basis after consummation,
including, without limitation, appraisal fees, consultant
fees, legal fees, UCC and other lien search fees, filing
fees, recording costs and other costs in connection with the
perfection of liens and security interests.
Borrower shall also pay outstanding legal fees of Lender's
legal counsel in (i) an amount not less than $25,000 on or
before June 20, 2003; and (ii) an aggregate amount of
$55,000 on or before July 20, 2003.
Borrower shall pay the legal fees of Huntington's legal
counsel as they accrue weekly.
Representations
And Warranties: Customary and appropriate representations
and warranties shall be contained in the loan documents,
including without limitation, due organization and
authorization, enforceability, financial condition, no
material adverse changes, clear title to properties, liens,
litigation, payment of taxes, no material adverse
agreements, compliance with laws, employee benefit
liabilities, environmental liabilities, perfection and
priority of liens, full disclosure and the accuracy of all
representations and warranties.
Covenants: Those covenants contained in the Credit Agreement
dated December 28, 2000, as amended by First, Second and
Third Amendments thereto (the "Existing Agreement"), among
Huntington, Provident and Team, except that the financial
covenants set forth therein shall be adjusted as necessary
in order to reflect the combined operations of Team and
Vsource after giving effect to the Merger.
In addition, such other covenants which Lender determines to
be necessary and appropriate, including without limitation a
liquidity ratio, shall also be required.
Events of Default: Customary and appropriate events of default (subject to
customary and appropriate grace periods) shall be contained
in the loan documents, including without limitation failure
to make payments when due, defaults under other agreements
or instruments of indebtedness, noncompliance with
covenants, breaches of representations and warranties,
bankruptcy, judgments in excess of specified amounts,
invalidity of guaranties, impairment of security interests
in collateral, and "changes of control."
Closing Date: On or before September 30, 2003.
Documentation: All documentation shall be in a form and content
satisfactory to Huntington and to Vsource and their
respective legal counsel in their absolute discretion and
shall contain standard conditions required in such
documents, including, without limitation, the terms hereof.
Borrowers and Guarantors shall duly execute and deliver such
instruments, documents, certificates, opinions, assurances,
and do such
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other acts and things as Lender may reasonably request, to
effect the purpose of the transaction described herein.
Conditions
Precedent: No Default or Event of Default (as defined therein) shall
have occurred and be continuing under the Third Amendment.
As of the Closing Date, the Merger shall have been
consummated (i) substantially in accordance with the merger
agreement previously provided to, and approved by, Lender;
and (ii) in full compliance with all applicable laws. No
amendments to the merger agreement shall have occurred which
materially affect Lender.
As of the Closing Date, Borrower and the other parties
thereto shall have executed and consummated the
Recapitalization Agreement contemplated by the Memorandum of
Understanding dated March 27, 2003, among Parent, Stonehenge
Opportunity Fund, LLC, Provident Financial Group, Inc. and
Professional Staff Management, Inc.
Huntington has reviewed and approved the terms and
conditions of the Terms for Sale of Loan Participation and
Equity Interests Relating to Team America, Inc. dated June
11, 2003 between Provident and Team ("Provident Term
Sheet"). The form and content of all definitive
documentation executed in connection with the Provident Term
Sheet (together with the Provident Term Sheet, the
"Provident Documents") shall be subject to Huntington's
review and approval, which shall not be unreasonably
withheld. Once approved by Huntington, the Provident
Documents shall not be amended without Huntington's written
consent.
As of the Closing Date, Borrowers shall have reimbursed
Lender for all of its out-of-pocket expenses incurred
through such date, including but not limited to legal fees
and disbursements.
To the extent that Borrowers fail to timely make any payment
of principal, interest, charges, costs or expenses that is
or becomes due to Lender under the Existing Agreement or any
documents related thereto, other than this Term Sheet,
Lender shall forbear from exercising its rights and remedies
arising solely as a result of any such failure to pay said
amounts as and when due; provided, however, that the
foregoing shall not constitute a waiver of, and shall not
preclude the exercise of, any right, power or remedy granted
to Bank (under the Existing Agreement or otherwise, or as
provided by law) as a result of any other default or failure
to comply in all respects with the terms of provisions of
the Existing Agreement; and provided, further that in the
event Borrowers fail to timely make any such payments,
Lender shall assess a separate forbearance fee in an amount
equal to $100,000 for each and every such missed or late
payment ("Restructure Forbearance Fee"). Any amounts not
paid as and when due and the total Restructure Forbearance
Fee assessed shall be added to those amounts which are due
and payable by Borrowers to Lender at Closing. Lender shall
apply the amounts paid by Borrowers to Lender at Closing
first to the payment of any such Restructure Forbearance
Fee, then to the satisfaction of the
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missed payments, prior to satisfaction of any other amounts
owing to Lender.
The foregoing provisions shall be set forth in a Fourth
Amendment to Credit Agreement which shall be executed and
delivered by Borrowers to Lender and Provident not later
than June 18, 2003 which Fourth Amendment shall (i) specify
that the Cash Deposit shall be the exclusive security of
Lender, and (ii) amend Section 2.7(b)(i) of the Existing
Agreement to provide that the Restructure Forbearance Fee
shall be payable after payment of principal as provided in
subsection 2.7(i)(c) thereof and prior to any payment to
Borrowers as provided in subsection 2.7(i)(d) thereof.
Mutual Releases: Borrowers and S. Cash Xxxxxxxxx, on the one hand, and
Lender, on the other will execute mutual releases of
all claims arising prior to the date of this Term Sheet.
Other: In the event that the post-Merger company obtains
additional equity capital following Closing in an amount of
at least $10 million, 20% of the proceeds from the new
equity capital will be applied to reduce the Term Loan
facility.
If the foregoing is acceptable to you, please indicate your acceptance of and
agreement to the terms hereof by signing in the appropriate space below no later
than close of business June 11, 2003 and returning to Huntington the enclosed
duplicate originals of this Term Sheet.
The Huntington National Bank
By: /S/ XXXXXXX X. XXXXX
--------------------
Name: Xxxxxxx X. Xxxxx
Its: Senior Vice President
ACCEPTED THIS 11TH DAY OF JUNE, 2003
Team America, Inc.
By: /S/ S. CASH XXXXXXXXX
---------------------
Name: S. Cash Xxxxxxxxx
Its: Chairman and CEO
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