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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D)(4)
OF THE SECURITIES EXCHANGE ACT OF 1934
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THE UNION CORPORATION
(Name of Subject Company)
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THE UNION CORPORATION
(Name of Person(s) Filing Statement)
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COMMON STOCK, PAR VALUE $.50 PER SHARE
(Title of Class of Securities)
906072 10 3
(CUSIP number of Class of Securities)
WILLIAM B. HEWITT
PRESIDENT
THE UNION CORPORATION
SUITE 100
211 KING STREET
CHARLESTON, SOUTH CAROLINA 29401
(803) 958-3800
(Name, address and telephone number of person authorized to receive
notice and communications on behalf of person(s) filing statement)
WITH A COPY TO:
ROBERT H. HAINES, ESQ.
ZIMET, HAINES, FRIEDMAN & KAPLAN
460 PARK AVENUE
NEW YORK, NEW YORK 10022
(212) 486-1700
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is The Union Corporation, a Delaware
corporation (the "Company"). The address of the principal executive offices of
the Company is Suite 100, 211 King Street, Charleston, South Carolina 29401. The
title of the class of equity securities to which this statement relates is the
Company's Common Stock, par value $.50 per share (collectively, with the Rights
(the "Rights") issued pursuant to the Rights Agreement dated as of March 14,
1988, as amended, between the Company and First National Bank of Boston, as
Rights Agent (the "Rights Agreement"), the "Shares").
ITEM 2. TENDER OFFER OF THE BIDDER.
This statement relates to the tender offer (the "Offer") made by Sherman
Acquisition Corporation ("Purchaser"), a Delaware corporation and a wholly owned
subsidiary of Outsourcing Solutions Inc. ("Parent"), a Delaware corporation,
disclosed in a Tender Offer Statement on Schedule 14D-1 (the "Schedule 14D-1")
dated December 24, 1997, to purchase all outstanding Shares at a price of $31.50
per Share, net to the seller in cash without interest thereon (the "Offer
Price"), upon the terms and subject to the conditions set forth in the Offer to
Purchase dated December 24, 1997 (the "Offer to Purchase"), and the related
Letter of Transmittal (which together constitute the "Offer Documents").
The Offer is being made pursuant to a Share Purchase Agreement and Plan of
Merger, dated as of December 22, 1997, by and among the Company, Purchaser and
Parent (as such agreement may be amended and supplemented from time to time, the
"Merger Agreement"), which provides for the making of the Offer by Purchaser,
subject to the conditions and upon the terms of the Merger Agreement, and for
the subsequent merger of Purchaser with and into the Company (the "Merger").
Concurrently with the execution of the Merger Agreement, Purchaser and
Parent entered into an agreement (the "Tender Agreement") with all of the
directors and executive officers (the "Designated Stockholders") of the Company.
As of the date hereof, the Designated Stockholders own, in the aggregate,
approximately 240,000 Shares, representing approximately 4% of the outstanding
Shares. Pursuant to the Tender Agreement, the Designated Stockholders have each
agreed to validly tender (and not to withdraw) all of the Shares currently owned
or hereafter acquired by each of them prior to the termination of the Merger
Agreement, at a price of $31.50 per Share (or any greater amount per Share paid
in the Offer) pursuant to and in accordance with the Offer.
The Purchaser has informed the Company that the principal executive offices
of Purchaser are located at 390 South Woods Mill Road, Suite 150, Chesterfield,
Missouri 63017.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and business address of the Company, which is the person filing
this statement, are set forth in Item 1 above.
(b) Certain contracts, agreements, arrangements and understandings and any
actual or potential conflict of interest between the Company and certain of its
executive officers, directors, and affiliates are described in the Company's
Information Statement (the "Information Statement") pursuant to Section 14(f) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Rule
14f-1 thereunder, which is annexed hereto as Annex A and incorporated herein by
reference in its entirety.
Certain other contracts, agreements and understandings and any actual or
potential conflict of interest between the Company and its directors, executive
officers and affiliates or between the Company, Purchaser and Parent are set
forth below:
(i) MERGER AGREEMENT. The following is a summary of the material terms of
the Merger Agreement. This summary is not a complete description of the terms
and conditions thereof and is qualified in its entirety by reference to the full
text thereof which is incorporated herein by reference and a copy of which has
been filed with the Securities and Exchange Commission (the "SEC") as Exhibit
(a) hereto.
THE OFFER. The Merger Agreement provides that, subject to certain
conditions which Purchaser and Parent have expressly reserved the right to
waive, Parent shall cause Purchaser to consummate the Offer as
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promptly as reasonably practicable after the date of the Merger Agreement (but
in no event later than five business days thereafter). The Merger Agreement
provides that the Offer shall remain open for a period of not less than 20
business days. Without the prior written consent of the Company, Purchaser has
agreed that it will not (i) decrease the Offer Price, (ii) decrease the number
of Shares sought pursuant to the Offer, (iii) impose additional conditions to
the Offer, (iv) amend or change the terms and conditions of the Offer in any
manner materially adverse to the holders of Shares (other than Parent and
Purchaser and its subsidiaries), (v) change the consideration payable in the
Offer to anything other than all cash, (vi) reduce the time period during which
the Offer shall remain open, or (vii) except as described below, extend the time
period during which the Offer shall remain open. Purchaser has agreed, subject
to the terms and conditions of the Offer and the Merger Agreement, that,
following the satisfaction or waiver of the conditions of the Offer, it will
accept for payment and pay for all Shares validly tendered and not withdrawn
pursuant to the Offer as soon as permitted pursuant to applicable law.
Notwithstanding the foregoing, Purchaser and Parent may, without the consent
of the Company, (x) extend the Offer beyond the scheduled expiration date and
any subsequent scheduled expiration date (but not beyond the date 120 days after
commencement of the Offer), if at such date any of the Tender Offer Conditions
(as defined in the Merger Agreement and described below) shall not be satisfied
or waived, until such time as such conditions are satisfied or waived, and (y)
extend the Offer for any period required by any rule, regulation, interpretation
or the SEC (but not beyond the date 120 days after commencement of the Offer).
TENDER OFFER CONDITIONS. Notwithstanding any other provision of the Offer
or the Merger Agreement, Purchaser shall not be required to accept for payment
or, subject to any applicable rules and regulations of the SEC, pay for any
Shares tendered pursuant to the Offer and may terminate or amend the Offer as
provided in the Merger Agreement and may delay the acceptance for payment of
Shares tendered, if (i) any applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), shall not have expired or been terminated, (ii) at the expiration of the
Offer, the number of Shares validly tendered and not withdrawn shall not
represent two-thirds of the total voting power of all outstanding Shares on a
fully diluted basis, (iii) Parent shall not have received financing necessary
for it and Purchaser to consummate the Offer and the other transactions
contemplated by the Merger Agreement in accordance with the terms of the bank
commitment letter dated December 22, 1997 to Parent from Goldman Sachs Credit
Partners L.P., The Chase Manhattan Bank and Chase Securities Inc. or (iv) at any
time after the date of the Merger Agreement and prior to the acceptance for
payment of Shares, any of the following events shall occur:
(a) there shall be instituted or pending any action or proceeding by any
government or governmental authority or agency, domestic or foreign, or by
any other person, domestic or foreign, before any court or governmental
authority or agency, domestic or foreign, (i) challenging or seeking to, or
which could reasonably be expected to make illegal, impede, delay or
otherwise directly or indirectly materially restrain, prohibit or make more
costly the Offer or the Merger or seeking to obtain material damages, (ii)
seeking to prohibit or materially limit the ownership or operation by Parent
or Purchaser of all or any material portion of the business or assets of the
Company or any of its subsidiaries taken as a whole or to compel Parent or
Purchaser to dispose of or hold separately all or any material portion of
the business or assets of Parent or Purchaser or the Company or any of its
subsidiaries taken as a whole or seeking to impose any material limitation
by reason of the transactions contemplated by the Merger Agreement on the
ability of Parent or Purchaser to conduct its business or own such assets,
(iii) seeking to impose limitations on the ability of Parent or Purchaser
effectively to exercise full rights of ownership of the Shares, including,
without limitation, the right to vote any Shares acquired or owned by
Purchaser or Parent on all matters properly presented to the Company's
shareholders, (iv) seeking to require divestiture by Parent or Purchaser of
any Shares, (v) otherwise directly or indirectly relating to the Offer or
the Merger and which, could reasonably be expected to materially adversely
affect the Company or any of its subsidiaries or Purchaser or Parent,
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or (vi) otherwise having a material adverse effect on the Company and its
subsidiaries taken as a whole;
(b) there shall be any action taken, or any statute, rule, regulation,
legislation, interpretation, judgment, order or injunction proposed,
enacted, enforced, promulgated, amended, issued or deemed applicable to (i)
Parent, Purchaser, the Company or any subsidiary of the Company or (ii) the
Offer or the Merger, by any legislative body, court, government or
governmental, administrative or regulatory authority or agency, domestic or
foreign, other than the routine application of the waiting period provisions
of the HSR Act to the Offer or to the Merger, which could reasonably be
expected to directly or indirectly, result in any of the consequences
referred to in clauses (i) through (vi) of paragraph (a) above;
(c) any change (other than as a result of general economic conditions)
shall have occurred, or Parent shall have become aware of any fact, that is
reasonably likely to have a material adverse effect on the Company and its
subsidiaries taken as a whole;
(d) any of the representations or warranties made by the Company in the
Merger Agreement that are qualified as to materiality shall be untrue or
incorrect in any respect or any of such representations and warranties that
are not so qualified shall be untrue or incorrect in any material respect as
of the date of the Merger Agreement or immediately prior to Purchaser
accepting for payment and paying for the Shares pursuant to the Offer
(hereinafter referred to as the "Share Purchase");
(e) the Company's Board of Directors shall have withdrawn, modified or
amended in any respect adverse to Parent or Purchaser its recommendation of
the Offer or the Merger, or shall have resolved to do so;
(f) the Company shall have failed to perform in any material respect any
material obligation or to comply in any material respect with any material
agreement or material covenant of the Company to be performed or complied
with by it under the Merger Agreement; or
(g) the Merger Agreement shall have been terminated in accordance with
its terms,
which, in the reasonable judgment of Purchaser, makes it inadvisable to proceed
with such acceptance for payment or payment.
The foregoing conditions are for the sole benefit of Parent and Purchaser
and may be asserted by any of them, or may be waived by Parent or Purchaser, in
whole or in part at any time or from time to time in its discretion subject to
the terms and conditions of the Merger Agreement. The failure of Parent or
Purchaser at any time to exercise any of the foregoing rights shall not be
deemed a waiver of any such right, and each such right shall be deemed an
ongoing right which may be asserted at any time and from time to time.
BOARD REPRESENTATION. Promptly upon the Share Purchase, Purchaser shall be
entitled to designate such number of directors, rounded up to the next whole
number, on the Board of Directors of the Company (the "Board") as will give
Purchaser representation on the Board equal to at least the number of directors
which equals the product of the total number of directors on the entire Board
(giving effect to the directors elected pursuant to this sentence) and the
percentage that such number of Shares so purchased (together with any other
Shares otherwise acquired or owned by Parent or Purchaser) bears to the number
of Shares outstanding, and the Company shall, at such time, take any and all
such action needed to cause Purchaser's designees to be appointed to the Board
(including to cause directors to resign).
Promptly upon the Share Purchase, the Company and the Board shall take such
further action as may be requested by Purchaser to cause Purchaser's designees
to constitute at least a majority of the Board of Directors of each direct or
indirect subsidiary of the Company (other than Allied Bond & Collection Agency,
Inc.). Subject to applicable law, the Company shall take all action requested by
Parent which is
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reasonably necessary to effect any such election, including mailing to its
shareholders an Information Statement containing the information required by
Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder, and the
Company has agreed to make such mailing with the mailing of this Schedule 14D-9
so long as Purchaser shall have provided to the Company on a timely basis all
information required to be included in such Information Statement with respect
to Purchaser's designees. In furtherance thereof, the Company will increase the
size of the Board, or use its reasonable efforts to secure the resignation of
directors, or both, as is necessary to permit Purchaser's designees to be
elected to the Board. The Merger Agreement provides that, upon the Share
Purchase, all directors of the Company, other than Purchaser's designees and two
directors of Company, and, unless otherwise agreed, all officers of the Company
shall resign.
THE MERGER. The Merger Agreement provides that, subject to the terms and
conditions thereof, and in accordance with applicable law, Purchaser shall be
merged with and into the Company as soon as practicable following the
satisfaction or waiver of certain conditions to the Merger (which conditions are
described below under the caption "Conditions to the Merger"). Following the
Merger, the separate corporate existence of Purchaser will cease and the Company
shall be the surviving corporation in the Merger (the "Surviving Corporation")
and shall continue its existence under the laws of Delaware. At the Effective
Time (as defined below), the Certificate of Incorporation of the Company as in
effect immediately prior to the Effective Time shall be the Certificate of
Incorporation of the Surviving Corporation and shall be amended such that it is
substantially in the form of the Amended and Restated Certificate of
Incorporation attached as an exhibit to the Merger Agreement, the By-Laws of the
Purchaser as in effect immediately prior to the Effective Time shall be the
By-Laws of the Surviving Corporation, and the directors and officers of
Purchaser immediately prior to the Effective Time shall be the directors and
officers, respectively, of the Surviving Corporation until their respective
successors are duly elected and qualified. Each share of the capital stock of
Purchaser issued and outstanding immediately prior to the Effective Time shall
be converted into and become one fully paid and nonassessable share of common
stock of the Surviving Corporation, which will thereupon become a direct wholly
owned subsidiary of Parent. The parties to the Merger shall cause the Merger to
be consummated by filing with the Secretary of State of the State of Delaware a
duly executed certificate of merger, as required by the General Corporation Law
of the State of Delaware (the "Delaware GCL"), and the Merger shall become
effective upon such filing or at such time thereafter as is provided in the
certificate of merger (referred to herein as the "Effective Time").
CONSIDERATION TO BE PAID IN THE MERGER. Pursuant to the Merger Agreement,
each Share issued and outstanding immediately prior to the Effective Time (other
than (i) Shares held by Purchaser, by Parent or in the treasury of the Company,
all of which Shares will be cancelled and none of which shall receive any
payment with respect thereto, and (ii) Shares held by shareholders who perfect
their appraisal rights under the Delaware GCL ("Dissenting Shares")), shall, by
virtue of the Merger and without any action on the part of the holder thereof,
be converted into and represent the right to receive in cash an amount per Share
equal to $31.50 (or any greater amount per Share paid in the Offer), without
interest.
TERMINATION OF STOCK OPTIONS AND STOCK OPTION PLANS. Pursuant to the Merger
Agreement, the Board adopted appropriate resolutions and authorized the Company
to take all actions necessary to obtain the consent of each holder of an
outstanding option to purchase Shares ("Options") to the effect that, upon the
Share Purchase, each Option, whether or not then vested or exercisable, shall no
longer be exercisable for the purchase of Shares but shall entitle each holder
thereof, in cancellation and settlement therefor, to a payment in cash (subject
to any applicable withholding taxes, the "Cash Payment"), equal to the product
of (x) the total number of Shares subject to such Option as to which such Option
could have been exercised and (y) the excess of $31.50 per share (such amount,
or any greater amount per Share paid pursuant to the Offer, being hereinafter
referred to as the "Per Share Amount") over the exercise price per Share subject
to such Option, each such Cash Payment to be paid to each holder (or, without
duplication, the beneficial owner) of an outstanding Option on the date of the
Share Purchase. Pursuant to the Merger Agreement,
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all stock option plans of the Company (the "Stock Plans") shall terminate as of
the Effective Time and the provisions in any other employee benefit plan
providing for the issuance, transfer or grant of any capital stock of the
Company or any interest in respect of any capital stock of the Company shall be
deleted as of the Effective Time, and the Company shall ensure that following
the Effective Time no holder of an Option or any participant in any Stock Plan
shall have any right thereunder to acquire any capital stock of the Company,
Parent or the Surviving Corporation. The Company will ensure that neither the
Company nor any of its subsidiaries is or will be bound by any Options, other
options, warrants, rights or agreements which would entitle any person, other
than Parent or its affiliates, to own any capital stock of the Surviving
Corporation or any of its subsidiaries or to receive any payment in respect
thereof.
STOCKHOLDER MEETING. The Merger Agreement provides that if required by
applicable law to consummate the Merger, the Company shall, promptly following
the Share Purchase, call, convene and hold a special meeting of its stockholders
(the "Stockholders Meeting") for the purpose of adopting the Merger Agreement
and the transactions contemplated thereby.
The Merger Agreement provides that if stockholder approval of the Merger is
required by law, as promptly as practicable following the Share Purchase, the
Company will prepare and file a preliminary proxy statement with the SEC and
will use its best efforts to respond to the comments of the SEC in connection
therewith and to furnish all information required to prepare the definitive
proxy statement (including, without limitation, financial statements and
supporting schedules and certificates and reports of independent public
accountants). Promptly following the Share Purchase, if required by the Delaware
GCL in order to consummate the Merger, the Company will cause the definitive
proxy statement to be mailed to the shareholders of the Company and, if
necessary, after the definitive proxy statement shall have been so mailed,
promptly circulate amended, supplemental or supplemented proxy material and, if
required in connection therewith, resolicit proxies. The Company has agreed to
use its reasonable best efforts to solicit from its stockholders proxies, and to
take all other action necessary and advisable, to secure the vote of
stockholders required by applicable law to obtain the approval for the Merger
Agreement and the Merger. Subject to certain limited exceptions to the Company's
obligation not to solicit Acquisition Proposals (as defined in the Merger
Agreement), the Company has agreed that it will include in any such proxy
statement the recommendation of its Board that holders of Shares approve and
adopt the Merger Agreement and approve the Merger. If Purchaser acquires at
least two-thirds of the outstanding Shares, Purchaser will have sufficient
voting power to approve the Merger, even if no other stockholder votes in favor
of the Merger.
Notwithstanding the foregoing, in the event Purchaser acquires at least 90%
of the outstanding Shares, the Company has agreed, subject to certain
conditions, to take all necessary and appropriate action to cause the Merger to
become effective as soon as reasonably practicable after such acquisition,
without a meeting of the Company's shareholders, in accordance with Section 253
of the Delaware GCL.
REPRESENTATIONS AND WARRANTIES. The Merger Agreement contains various
representations and warranties of the parties thereto. These include
representations and warranties by the Company with respect to corporate
existence and good standing, capital structure, subsidiaries, indebtedness,
corporate authorization, absence of changes, filings with the SEC, consents and
approvals, no violations of laws or of material contracts, employee benefits,
labor, litigation, taxes, compliance with applicable laws, environmental
matters, intellectual property, title to properties, insurance, financial
statements, undisclosed liabilities, finders' fees and other matters.
Purchaser and Parent have also made certain representations and warranties
with respect to corporate existence and good standing, corporate authorization,
financial statements, consents and approvals, no violations of laws or of
material contracts, availability of financing to consummate the Offer and the
Merger, litigation and other matters.
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CONDUCT OF BUSINESS AND OTHER COVENANTS PENDING THE MERGER. Pursuant the
Merger Agreement, the Company has agreed that, except as otherwise consented to
or approved in writing by Parent (which consent or approval shall not be
unreasonably withheld or delayed), during the period from the date of the Merger
Agreement until the closing of the Merger (the "Closing"), or, if sooner, the
termination of the Merger Agreement:
(a) the Company and each of its subsidiaries shall conduct their
respective businesses substantially in the same manner as conducted prior to
the date of the Merger Agreement, and shall not engage in any transaction or
activity, enter into any agreement or commitment (or materially amend any
agreement or commitment existing on the date of the Merger Agreement),
except (i) in the ordinary course of business and consistent with past
practices or pursuant to an agreement to which the Company or any of its
subsidiaries was a party on the date of the Merger Agreement, (ii) which
would not be reasonably likely to have a Material Adverse Effect (as defined
in the Merger Agreement) on the Company and its subsidiaries, taken as a
whole, (iii) as contemplated by the Merger Agreement or (iv) as previously
disclosed to Parent and Purchaser in the Merger Agreement;
(b) neither the Company nor any of its subsidiaries, except as otherwise
permitted by or disclosed in the Merger Agreement, shall (i) intentionally
take any action which would cause, or intentionally omit to take any
reasonable action that in all likelihood would prevent, any of its
representations and warranties contained in the Merger Agreement which are
qualified as to materiality to fail to be true and correct in any respect or
any representation or warranty not so qualified to fail to be true and
correct in all material respects, as if such representations and warranties
were deemed to be made at and as of the Closing (except to the extent
expressly made only as of a different date), (ii) acquire (by merger,
consolidation or acquisition of stock or assets) any corporation,
partnership or other business organization or division thereof or make any
material investment in any other entity which is not a wholly-owned
affiliate of the Company, (iii) acquire any material assets or properties or
dispose of, mortgage or encumber any of its material assets or properties
(except in each case in the ordinary course of business and consistent with
past practice or pursuant to an agreement in effect on the date of the
Merger Agreement), (iv) make or commit to make any capital expenditures in
excess of $150,000, (v) make any change in its accounting principles, except
as may be required by generally accepted accounting principles or
regulations of the SEC, (vi) sell or pledge or agree to sell or pledge any
stock owned by it in any of its subsidiaries, (vii) except to the extent
required under existing employee and director benefit plans, agreements or
arrangements as in effect on the date of the Merger Agreement, increase the
compensation or fringe benefits of any of its directors, officers or
employees, except for increases in salary, wages or commissions of employees
of the Company or its subsidiaries who are not officers of the Company in
the ordinary course of business in accordance with past practice, or grant
any severance or termination pay not currently required to be paid under
existing severance plans or agreements or enter into any employment,
consulting or severance agreement or arrangement with any present or former
director, officer or other employee of the Company or any of its
subsidiaries, or establish, adopt, enter into or amend or terminate any
collective bargaining, bonus, profit sharing, thrift, compensation, stock
option, restricted stock, pension, retirement, deferred compensation,
employment, termination, severance or other plan, agreement, trust, fund,
policy or arrangement for the benefit of any directors, officers or
employees, (viii) except for transactions between the Company and
subsidiaries or in the ordinary course of business, transfer, lease,
license, guarantee, sell, mortgage, pledge, dispose of, encumber or subject
to any lien, any material assets or incur or modify any indebtedness or
other liability (other than indebtedness incurred under the Amended and
Restated Credit Agreement dated December 31, 1994, between the Company and
Bank of Boston, Connecticut (the "Existing Credit Facility"); PROVIDED that
there shall not be any material increase in the amounts outstanding under
the Existing Credit Facility, other than in the ordinary course of business,
or otherwise as an accommodation, except for guarantees by Company of
obligations of subsidiaries or guarantees by subsidiaries of obligations of
subsidiaries, become responsible for the obligations of any person or, other
than in the
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ordinary course of business consistent with past practice, make any loan or
other extension of credit except for intercompany transactions between
Company and subsidiaries and between subsidiaries, (ix) agree to the
settlement of any material claim or litigation (including, but not limited
to, any claim or litigation in respect of, related to or arising out of any
environmental laws or environmental matters), (x) make any material tax
election or settle or compromise any material tax liability, (xi) permit any
insurance policy naming it as beneficiary or a loss payable payee to be
cancelled without notice to Parent, except for the cancellation of insurance
policies required to be maintained by third parties for the benefit of the
Company or any subsidiary of which such cancellation neither the Company nor
any subsidiary has notice, (xii) adopt a plan of complete or partial
liquidation, dissolution, merger, consolidation, restructuring,
recapitalization or other reorganization of the Company or any of its
subsidiaries not constituting an inactive subsidiary (other than the
Merger), or (xiii) agree, in writing or otherwise, to take any of the
foregoing actions;
(c) neither the Company nor any of its subsidiaries will (i) change or
amend its Certificate of Incorporation or By-laws, (ii) issue or sell any
shares of its capital stock (other than shares issuable upon exercise of
currently outstanding options), or issue options (other than automatic
issuances pursuant to the terms of a plan as in effect on the date of the
Merger Agreement), warrants to purchase, or rights to subscribe to, any
shares of its capital stock, or enter into any arrangement with respect to
any of the foregoing, or (iii) make any other material changes in its
capital structure, other than dividends and other intercompany transfers,
allocations and transactions in the ordinary course of business between any
wholly-owned subsidiary and the Company or any other wholly-owned
subsidiary;
(d) except as previously disclosed to Parent, the Company will use all
reasonable efforts to preserve the business, business organization and good
will of the Company and each of its subsidiaries, keep in place their
present executive officers and key employees, and preserve their present
relationships with persons having business dealings with them;
(e) the Company will use all commercially reasonable efforts to
maintain, and cause each of its subsidiaries to maintain, insurance
substantially at current levels on all property, real, personal and mixed,
owned or leased by them;
(f) the Corporation will use its best efforts to duly comply, and cause
each of its subsidiaries to duly comply, in all material respects with all
laws applicable to them and their respective properties, operations,
business and employees, except where the failure to do so is not reasonably
likely to have a Material Adverse Effect on the Company;
(g) the Company will duly file all reports required to be filed by it
with the SEC pursuant to the Exchange Act and will submit copies thereof to
Parent simultaneously with the time of filing thereof;
(h) the Company shall not redeem the Rights or amend (other than to
delay the Distribution Date (as defined in the Rights Agreement)) or to
render the Rights inapplicable to the Offer and the Merger) or terminate the
Rights Agreement prior to the Effective Time without the consent of the
Parent unless required to do so by a court of competent jurisdiction; and
(i) the Company will not declare, pay or set aside for payment any
dividend or distributions, including a distribution of rights, in respect of
its capital stock or redeem, purchase or otherwise acquire any shares of its
capital stock, except as contemplated by the Merger Agreement, in connection
with the cancellation or exercise of stock options, or any such dividends,
distributions or payments made by or to any subsidiary.
NO SOLICITATION; ACQUISITION PROPOSALS. The Merger Agreement provides that
the Company and its affiliates and each of their respective officers, directors,
employees, representatives and agents shall immediately cease any discussions or
negotiations with any other parties that may be ongoing with respect to any
Acquisition Proposal (as defined below). Neither the Company nor any of its
affiliates, shall, directly
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or indirectly, take (and the Company shall not authorize or permit its
affiliates, officers, directors, employees, representatives, consultants,
investment bankers, attorneys, accountants or other agents or affiliates, to so
take) any action to (i) encourage, solicit or initiate the making of any
Acquisition Proposal, (ii) enter into any agreement with respect to any
Acquisition Proposal, or (iii) participate in any way in discussions or
negotiations with, or furnish or disclose any information to, any person (other
than Parent or Purchaser or their representatives) in connection with, or take
any other action to facilitate any inquiries or the making of any proposal
(including without limitation by taking any action (except as required by the
Merger Agreement) that would make the Rights Agreement, Section 203 of the
Delaware GCL or the provisions of Article FIFTH of the Company's Certificate of
Incorporation inapplicable to an Acquisition Proposal) that constitutes, or may
reasonably be expected to lead to, any Acquisition Proposal; PROVIDED, HOWEVER,
that the Company, in response to an unsolicited Acquisition Proposal and in
compliance with certain disclosure obligations under the Merger Agreement (as
more fully described below), may participate in discussions or negotiations with
or furnish information to any third party which proposes a transaction which the
Board reasonably determines will result in a Superior Proposal (as defined
below) if the Board believes (and has been advised in writing by independent
outside counsel) that failing to take such action would constitute a breach of
its fiduciary duties under applicable law. In addition, neither the Board nor
any committee thereof shall (x) withdraw or modify, or propose to withdraw or
modify, in a manner adverse to Parent or Purchaser, the approval and
recommendation of the Offer and the Merger Agreement or (y) approve or
recommend, or propose to approve or recommend, any Acquisition Proposal,
provided that the Company may recommend to its shareholders an Acquisition
Proposal and in connection therewith withdraw or modify its approval or
recommendation of the Offer or the Merger if (i) the Board has determined that
the Acquisition Proposal is a Superior Proposal, (ii) all the conditions to the
Company's right to terminate the Merger Agreement pursuant to clause (e) of the
section hereunder entitled "Termination and Abandonment" below have been
satisfied (including the expiration of the three day period described therein
and the payment of the Termination Fee (as defined below) and all other amounts
required to be paid pursuant to the Merger Agreement), (iii) simultaneously with
such withdrawal, modification or recommendation, the Merger Agreement is
terminated in accordance with its terms, and (iv) the Acquisition Proposal does
not provide for any breakup fee or other inducement to the acquiror other than
reimbursement of out of pocket expenses incurred in connection with such
Acquisition Proposal.
As used herein and in the Merger Agreement, "Acquisition Proposal" shall
mean any inquiry, proposal or offer from any person relating to any direct or
indirect acquisition or purchase of a substantial amount of assets of the
Company or any of its subsidiaries or of over 10% of any class of equity
securities of the Company or any of its subsidiaries, any tender offer or
exchange offer that if consummated would result in any person beneficially
owning 10% or more of any class of equity securities of the Company or any of
its subsidiaries, any merger, consolidation, business combination, sale of
substantially all the assets, recapitalization, liquidation, dissolution or
similar transaction involving the Company or any of its subsidiaries, other than
the transactions contemplated by the Merger Agreement, or any other transaction
the consummation of which could reasonably be expected to impede, interfere
with, prevent or materially delay the Offer or the Merger or which would
reasonably be expected to dilute materially the benefits to Parent of the
transactions contemplated hereby. As used herein and in the Merger Agreement,
"Superior Proposal" shall mean a BONA FIDE proposal made by a third party to
acquire all of the outstanding Shares pursuant to a tender offer, a merger or a
sale of all of the assets of the Company (x) on terms which a majority of the
members of the Board determines in its good faith reasonable judgement (based on
the advice of independent outside financial and legal advisors) to be more
favorable to the Company and its stockholders than the transactions contemplated
by the Merger Agreement, (y) for which in the good faith reasonable judgement of
the Board adequate financing or other consideration is then available and (z)
which does not provide for any breakup fee or other inducement to the acquiror
other than reimbursement of documented out-of-pocket expenses incurred in
connection with the Superior Proposal.
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In addition to the obligations of the Company set forth above, the Company
has agreed that, on the date of receipt thereof, the Company shall advise Parent
of any request for information or of any Acquisition Proposal, or any inquiry or
proposal with respect to any Acquisition Proposal, and the material terms and
conditions of such request or takeover proposal.
CONDITIONS TO THE MERGER. The respective obligations of Parent and
Purchaser, on the one hand, and the Company, on the other hand, to effect the
Merger are subject to the satisfaction or waiver (subject to applicable law) at
or prior to the Effective Time of each of the following conditions:
(a) to the extent required by applicable law, the Merger Agreement and
the Merger shall have been approved and adopted by holders of the requisite
number of outstanding Shares entitled to vote in accordance with applicable
law (if required by applicable law) and the Company's Certificate of
Incorporation and By-Laws;
(b) any waiting period (and any extension thereof) under the HSR Act
applicable to the Merger shall have expired or been terminated;
(c) no preliminary or permanent injunction or other order shall have
been issued by any court or by any governmental or regulatory agency, body
or authority which prohibits the consummation of the Merger and the
transactions contemplated by the Merger Agreement and which is in effect at
the Effective Time; PROVIDED, HOWEVER, that, in the case of a decree,
injunction or other order, each of the parties shall have used reasonable
efforts to prevent the entry of any such injunction or other order and to
appeal as promptly as possible any decree, injunction or other order that
may be entered; and
(d) no statute, rule, regulation, executive order, decree or order of
any kind shall have been enacted, entered, promulgated or enforced by any
court or governmental authority which prohibits the consummation of the
Merger or has the effect of making the purchase of the Shares illegal.
TERMINATION AND ABANDONMENT. The Merger Agreement may be terminated prior
to the Share Purchase and the Merger may be abandoned after the Share Purchase:
(a) by mutual written consent of the Company, on the one hand, and of
Parent and Purchaser, on the other hand;
(b) by either Parent, on the one hand, or the Company, on the other
hand, if any governmental or regulatory agency shall have issued an order,
decree or ruling or taken any other action permanently enjoining,
restraining or otherwise prohibiting the acceptance for payment of, or
payment for Shares pursuant to the Offer and such order, decree or ruling or
other action shall have become final and nonappealable;
(c) by Parent, on the one hand, or the Company, on the other hand, if
the Share Purchase shall not have occurred within 120 days after
commencement of the Offer, unless the Share Purchase shall not have occurred
because of a material breach of any representation, warranty, obligation,
covenant, agreement or condition set forth in the Merger Agreement on the
part of the party seeking to terminate the Merger Agreement;
(d) by Parent, in the event of a breach by the Company of any
representation, warranty, covenant or agreement contained in the Merger
Agreement which (A) would give rise to the failure of a condition set forth
in clauses (d) or (f) of the section hereunder entitled "Tender Offer
Conditions" above, and (B) cannot or has not been cured prior to the earlier
of (i) 15 days after the giving of written notice of such breach to the
Company and (ii) two business days prior to the date on which the Offer
expires;
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(e) by either Parent, on the one hand, or the Company, on the other
hand, if the Board determines that an Acquisition Proposal constitutes a
Superior Proposal and the Board believes (and has been advised by
independent outside counsel) that a failure to terminate the Merger
Agreement and enter into an agreement to effect the Superior Proposal would
constitute a breach of its fiduciary duties; PROVIDED, HOWEVER, the Company
may not terminate the Merger Agreement pursuant to this clause (e) unless
and until three days have elapsed following delivery to Parent of a written
notice of such determination by the Board and during such three day period
the Company has fully cooperated with the Parent, including, without
limitation, informing the Parent of the terms and conditions of such
Superior Proposal with the intent of enabling both parties to agree to a
modification of the terms and conditions of the Merger Agreement so that the
transactions contemplated thereby may be effected; and PROVIDED FURTHER that
at the end of such three day period the Board determines that the
Acquisition Proposal constitutes a Superior Proposal and the Board continues
to believe (and has again been advised by independent outside counsel) that
a failure to terminate the Merger Agreement and enter into an agreement to
effect the Superior Proposal would constitute a breach of its fiduciary
duties; PROVIDED FURTHER that the Merger Agreement shall not terminate
pursuant to this clause (e) unless (i) prior to such termination Parent has
received all fees and expenses set forth in the Merger Agreement and
described below under the section hereof entitled "Payment of Certain Fees
and Expenses Upon Termination" by wire transfer in same day funds and (ii)
simultaneously with such termination the Company enters into a definitive
acquisition, merger or similar agreement to effect the Superior Proposal
which acquisition agreement (x) permits the Company to terminate the
acquisition agreement in the event the Board determines to effect a
transaction with Parent and (y) does not provide for breakup fee or other
inducement to the acquiror other than reimbursement of documented out of
pocket expenses incurred in connection with such Superior Proposal; or
(f) by the Company, in the event of a breach by the Parent or Purchaser
of any representation, warranty, covenant or agreement contained in the
Merger Agreement which cannot or has not been cured within 15 days after the
giving of written notice of such breach to the Parent and Purchaser, except,
in any case where such failure is not reasonably likely to affect adversely
Parent's or Purchaser's ability to complete the Offer and/or Merger.
In the event of the termination of the Merger Agreement pursuant to the
terms described above by Parent or Purchaser, on the one hand, or the Company,
on the other hand, written notice thereof shall forthwith be given to the other
party or parties specifying the provision of the Merger Agreement pursuant to
which such termination is made, and the Merger Agreement shall become void and
have no effect, and there shall be no liability thereunder on the part of
Parent, Purchaser or the Company, except that certain provisions of the Merger
Agreement relating to confidentiality and certain fees and expenses shall
survive any termination of the Merger Agreement. Nothing in the foregoing
provisions shall relieve any party to the Merger Agreement of liability for
breach of the Merger Agreement.
PAYMENT OF CERTAIN FEES AND EXPENSES UPON TERMINATION. Except as provided
in the next succeeding sentence, all costs and expenses incurred in connection
with the Merger Agreement and the consummation of the transactions contemplated
thereby shall be paid by the party incurring such costs and expenses. If the
Merger Agreement is terminated: (i) by Parent because of an event set forth in
clause (e) of the section hereunder entitled "Tender Offer Conditions" above;
(ii) by Parent or the Company in accordance with the terms of clause (e) of the
section hereunder entitled "Termination and Abandonment" above; or (iii) by the
Company pursuant to the terms of clause (c) of the section hereunder entitled
"Termination and Abandonment" above, if, prior to such termination, the Company
shall have directly or indirectly notified any of its stockholders that a third
party has made an Acquisition Proposal or a third party shall have announced an
Acquisition Proposal, and within twelve months after such termination, the
Company or any of its subsidiaries enters into an agreement with respect to any
merger or any other business combination, sale or other disposition of any
material amount of assets, sale of shares of capital stock which would give the
acquirors not less than 10% of the issued Shares, a tender offer or exchange
offer or
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similar transaction involving the Company or one or more of its subsidiaries
accounting for more than 10% of the Company's consolidated income in its prior
fiscal year (a "Third Party Acquisition"), or a Third Party Acquisition occurs
within twelve months after the Company's termination of the Merger Agreement
pursuant to clause (c) of the section hereunder entitled "Termination and
Abandonment" above, involving any such party (or any affiliate or associate
thereof) (x) with whom the Company or any subsidiary (or their respective
representatives) during the term of the Merger Agreement had any discussions
with respect to a Third Party Acquisition, (y) to whom the Company or any
subsidiary (or any of their respective representatives) during the term of the
Merger Agreement furnished information with respect to or with a view toward a
Third Party Acquisition, or (z) who during the term of the Merger Agreement had
submitted a proposal or expressed any interest publicly or to the Company or any
subsidiary (or their respective representatives) in a Third Party Acquisition,
which Third Party Acquisition contemplates a direct or indirect consideration
for Shares in excess of the Merger Consideration (as defined in the Merger
Agreement), in the case of each of the foregoing clauses (x), (y) and (z) prior
to such termination, then the Company shall (except as required to be earlier
paid in accordance with the Merger Agreement) pay to Parent in same day funds
$7,700,000.00, which shall be deemed to include reimbursement for all out-of-
pocket fees and expenses incurred by Parent or on its behalf in connection with
the transactions contemplated by the Merger Agreement.
INDEMNIFICATION AND INSURANCE. The Merger Agreement provides that from and
after the Share Purchase, Parent shall cause the Company to (i) maintain in
effect in its Certificate of Incorporation the provisions with respect to the
indemnification set forth in Article VII of its Certificate of Incorporation as
in effect at the Share Purchase, which provisions shall not be amended, repealed
or otherwise modified for a period of six (6) years from the Effective Time in
any manner that would adversely affect the rights thereunder of individuals (or
their estates) who at the date of the Merger Agreement and/or as of the closing
of the Share Purchase are or were directors, officers, employees or agents of
the Company or its subsidiaries, unless such modification is required by law and
(ii) maintain in effect for a period of six (6) years from the Share Purchase
each indemnification agreement in effect (as of such date) between the Company
or any of its subsidiaries and officers and directors of the Company and its
subsidiaries, which indemnification agreements shall not be amended or modified
during such period in any manner that would adversely affect the rights of the
individuals who are parties thereto. Prior to the Share Purchase, the Company
shall purchase a six year "tail" insurance policy with its current insurance
carrier substantially identical in all respects to the Company's directors' and
officers' liability insurance coverage in effect at the time of the execution of
the Merger Agreement (and providing for certain minimum liability coverage and
reinstatement options as set forth in the Merger Agreement) covering those
persons who at such time were covered by the Company's directors' and officers'
liability insurance policy.
AMENDMENT. Subject to applicable law, the Merger Agreement may be amended,
modified or supplemented only by the mutual written agreement of the parties
thereto at any time prior to the Effective Time with respect to any of the terms
contained therein except that certain provisions relating to certain payments
triggered upon the consummation of the Offer, certain employee benefits and
indemnification and insurance shall not be amended or supplemented to the
detriment of any intended third party beneficiary thereof without the express
written consent of such beneficiary.
COMPENSATION AND EMPLOYEE BENEFITS. Pursuant to the Merger Agreement, until
the first anniversary of the Effective Time, (i) Parent shall ensure that all
employees and officers of the Company and its subsidiaries receive compensation
and benefits in the aggregate substantially comparable to the compensation and
benefits received by such individuals immediately prior to the date of the
Merger Agreement. Notwithstanding the foregoing, following the Effective Time,
the Parent may terminate the employment of any employee (subject to the payment
of severance benefits payable to the employee in connection with such
termination), and (ii) Parent shall keep in effect all severance policies that
are applicable to employees and officers of the Company and its subsidiaries
immediately prior to the date of the Merger Agreement. Following the Effective
Time, for purposes of eligibility and vesting, Parent shall honor all
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service credit accrued by the employees, officers and directors of the Company
and its subsidiaries under all employee benefit plans up to (and including) the
Effective Time.
CERTAIN "CHANGE OF CONTROL" AND SEVERANCE PAYMENTS. The Merger Agreement
provides that, contemporaneous with the Share Purchase, Parent shall make or
cause the Company and each of its subsidiaries to make all payments which are
required to be made on or after such time under any agreement in effect on the
date of the Merger Agreement between the Company or any of such subsidiaries and
any officer or other employee thereof as a result of a "change of control" (as
defined in any such agreement) having occurred or as a result of the termination
of such officer's or employee's employment. For a description of certain "change
of control" arrangements between the Company and certain of its executive
officers, see the section entitled "Executive Compensation-Employment Agreements
and Change in Control Arrangements" in the Information Statement, which is
annexed hereto as Annex A and incorporated herein by reference.
OTHER COVENANTS. Pursuant to the Merger Agreement, each party has agreed to
cooperate with each other and to take all reasonable actions that may be
necessary or desirable to consummate as soon as practicable the transactions
contemplated by the Merger Agreement including, without limitation, (i)
furnishing to each other, or reviewing, the information relating to each of them
required by applicable statutes, rules and regulations for the purpose of
preparing the Offer Documents, (ii) preparing and filing all requisite
applications, documents and notifications (including filing with the Federal
Trade Commission and the Department of Justice the Notification and Report Forms
under the HSR Act and cooperating with each other with respect to the filing of
any additional information with respect thereto) in connection with the
transactions contemplated by the Merger Agreement required by applicable law,
(iii) responding as promptly as practicable to all inquiries in connection
therewith, (iv) removing or satisfying, if reasonably practicable, any
objections to the validity or legality of the Share Purchase, and (v) satisfying
the conditions to the consummation of the Share Purchase set forth in the Merger
Agreement.
TIMING. The exact timing and details of the Share Purchase and the Merger
will depend upon legal requirements and a variety of other factors, including
the number of Shares acquired by Purchaser pursuant to the Offer. Although
Parent has agreed to cause the Share Purchase and the Merger to be consummated
on the terms and subject to the conditions set forth above, there can be no
assurance as to the timing of the Share Purchase or the Merger, or that either
the Share Purchase or the Merger will be consummated.
(ii) TENDER AGREEMENT.
The following is a summary of the material terms of the Tender Agreement.
This summary is not a complete description of the terms and conditions thereof
and is qualified in its entirety by reference to the full text thereof which is
incorporated herein by reference and a copy of which has been filed with the SEC
as Exhibit (b) hereto.
TENDER OF SHARES. Each of the Designated Stockholders has agreed to validly
tender (and not to withdraw), in a timely manner and in accordance with the
terms of the Offer, the Shares held by such stockholder and the Rights
associated therewith (including any Shares acquired by such stockholder after
the date of the Tender Agreement). As of the date of the Merger Agreement, the
Designated Stockholders collectively own approximately 240,000 Shares,
constituting approximately 4% of the outstanding Shares on such date.
VOTING OF SHARES. Until the first to occur of the Effective Time and the
termination of the Tender Agreement, at any meeting of the stockholders of the
Company or in connection with any written consent of stockholders of the
Company, each Designated Stockholder has agreed that such stockholder shall vote
(or cause to be voted) all Shares held by such stockholder (i) in favor of the
Merger and each of the other actions contemplated thereby, (ii) against any
action that would result in a breach by the Company of any covenant,
representation, warranty or other obligation of the Company under the Merger
Agreement, and
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(iii) against certain other actions, including any action that could reasonably
be expected to or is intended to interfere with, delay or otherwise adversely
affect the Share Purchase, the Merger, or any transactions contemplated by the
Merger Agreement.
RESTRICTIONS ON TRANSFER. Until the termination of the Tender Agreement, no
Designated Stockholder shall, directly or indirectly: (i) offer for sale, sell,
transfer, tender, pledge, encumber, assign or otherwise dispose of, or enter
into any agreement, arrangement or understanding with respect to, or consent to
the offer for sale, transfer, tender, pledge, encumbrance, assignment or other
disposition of, any or all of such stockholder's Shares or any interest in those
Shares, (ii) except as contemplated by the Tender Agreement, grant any proxies
or powers of attorney, deposit any Shares into a voting trust or enter into a
voting agreement with respect to any Shares, or (iii) take any action that would
have the effect of preventing or disabling such stockholder from performing its
obligations under the Tender Agreement.
TERMINATION. The Tender Agreement shall terminate upon the termination of
the Merger Agreement pursuant to its terms (as described in the section
"Termination and Abandonment" above).
(iii) OPTION EXCHANGE AGREEMENTS. The Board of Directors has authorized the
Company, promptly following the date of the Merger Agreement, to enter into
agreements (the "Option Exchange Agreements") with all of the Company's
directors and executive officers and employees of the Company and its
subsidiaries who hold options to purchase Shares. These agreements are expected
to provide that each such person shall agree to the cancellation of his or her
respective options in consideration for a cash payment, to be made at or prior
to the Share Purchase, in an amount equal to the product of (a) the excess of
the Offer Price (or any greater amount per Share paid in the Offer) over the
applicable per share exercise price of the relevant option, and (b) the number
of Shares subject to such option, net of applicable withholding taxes.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) RECOMMENDATION.
On December 22, 1997, the Board of Directors unanimously approved the Merger
Agreement and the transactions contemplated thereby in all respects, and
determined that each of the Offer and the Merger is fair to, and in the best
interest of, the stockholders of the Company. THE BOARD RECOMMENDS THAT ALL
HOLDERS OF SHARES ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE
OFFER.
(b) BACKGROUND; OPINION OF FINANCIAL ADVISOR; REASONS FOR RECOMMENDATION.
Background.
Pursuant to an engagement letter dated September 15, 1997, the Company
retained CIBC Oppenheimer Corp. ("Oppenheimer") as its financial adviser in
connection with the Merger. Oppenheimer issued its written opinion dated
December 22, 1997, that, based upon and subject to the various considerations
set forth therein, the proposed merger consideration is fair to the stockholders
of the Company from a financial point of view. No limitations were imposed by
the Company upon Oppenheimer with respect to investigations made or procedures
followed by Oppenheimer in rendering its opinion.
THE FULL TEXT OF OPPENHEIMER'S OPINION DATED DECEMBER 22, 1997, WHICH SETS
FORTH ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITS ON THE REVIEW UNDERTAKEN
BY OPPENHEIMER, IS ATTACHED HERETO AS EXHIBIT (C). The Company's shareholders
are urged to read the opinion in its entirety. Oppenheimer's opinion is
addressed to the company's board, is directed only to the fairness of the merger
consideration and does not constitute a recommendation to any shareholder of the
company as to whether or not shareholders should tender their common shares
pursuant to the offer. The summary set forth in this Schedule 14D-9 of the
Oppenheimer opinion is qualified in its entirety by reference to the full text
of the opinion attached hereto as Exhibit (c).
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Oppenheimer's relationship with the Company started in July 1994, when the
Company and Oppenheimer entered into an agreement for Oppenheimer to act as the
Company's exclusive financial advisor. On June 4, 1996, the Company announced
publicly that Oppenheimer had been retained as financial advisor to explore
strategic alternatives to maximize shareholder value. Oppenheimer suggested a
sale of the Company as the preferred alternative. A large scale marketing effort
was begun during the months of June, July, August and September. Approximately
200 candidates were approached during this time with 100 candidates signing
Confidentiality Agreements. On behalf of the Company, Oppenheimer received 17
indications of interest with 12 advancing to the next round following a request
for new bids. This narrowing of bidders, during the months of August and
September 1996, was followed by a period where each bidder was given a chance to
conduct due diligence. All 12 conducted preliminary legal and environmental due
diligence with three dropping out. Nine were invited to management presentations
during the months of September, October and November; two declined and seven
parties attended the management presentations. Ultimately, one bidder offered a
price of $28.00 per share, 95% ($26.60) cash and 5% stock, and proceeded to go
forward on diligence and drafting of a proposed agreement. The proposed
transaction was terminated in early to mid-1997 following a reduction by the
bidder of the proposed offering price and certain other conditions deemed not to
be in the best interest of the stockholders of the Company. Thereafter, all
marketing efforts relating to a sale of the Company were terminated. In
September 1997, Parent, one of the original 12 bidders, made an unsolicited
indication to Oppenheimer of its interest in the Company. The Company thereafter
commenced negotiations with Parent and on December 22, 1997, the Board held a
special meeting in which its financial and legal advisors participated and at
which the Board approved the Merger Agreement and the transactions contemplated
thereby, including the Offer and the Merger.
Opinion of Financial Advisor.
In connection with rendering its opinion dated December 22, 1997,
Oppenheimer reviewed among other things: (a) the Merger Agreement; (b) the
Tender Agreement; (c) audited consolidated financial statements and management's
discussion and analysis of the financial condition and results of operations for
the Company for the three fiscal years ended June 30, 1997; (d) certain other
publicly available business and financial information relating to the Company;
(e) certain internal financial analyses, budgets, projections and forecasts for
the Company, prepared by and reviewed with the management of the Company; (f)
the views of senior management of the Company of the past and current business
operations, results thereof, financial condition and future prospects; (g) a
comparison of certain financial information for the Company, in each case with
similar information for certain other companies considered comparable to the
Company; (h) the financial terms of certain recent business combinations in the
accounts receivable industry; (i) the current market environment generally and
the accounts receivable environment in particular; and (j) such other
information, financial studies, analyses and investigations and financial,
economic and market criteria as Oppenheimer considered appropriate in the
circumstances.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to a partial analysis or summary description.
Oppenheimer believes that its analyses must be considered as a whole and that
selecting portions of its analyses, without considering the analyses taken as a
whole, would create an incomplete view of the process underlying the analyses
set forth in its opinion. In addition, Oppenheimer considered the results of all
such analyses and did not assign relative weights to any of the analyses, so
that the ranges of valuations resulting from any particular analysis described
above should not be taken to be Oppenheimer's view of the actual value of the
Company or the combined entity.
The following is a summary of the analyses presented by Oppenheimer to the
Company's Board in connection with Oppenheimer's written opinion dated December
22, 1997, the date the Company's Board of Directors approved the Offer and the
Merger:
Comparable Company Analysis. Using publicly available information, Oppenheimer
compared selected financial information for the Company with similar information
for eight selected comparable companies
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in the receivables management industry. However, no company is exactly
comparable. Oppenheimer notes that of the group of selected companies, two
companies are pure play collection companies: FCA International ("FCA") and the
NCO Group ("NCO"). FCA is a Canadian company in financial difficulty, while NCO
recently completed an initial public offering and has a limited history of
operations and is thinly traded. For each of these companies, Oppenheimer
calculated, among other things, return on average assets, return on average
equity, price/book, market capitalization/revenues, price/earnings per share
("EPS") for the latest twelve months ended September 30, 1997 ("LTM"),
forecasted 1997 and forecasted 1998, and compared the results of these
calculations to calculations made by Oppenheimer for the Company.
This analysis showed, as of December 15, 1997, that the Company had a return
on average assets of 6.73%, above the group average of 6.23%. The Company's
return on average equity of 12.36% is below the group average of 17.55%. The
Company's price/book and market capitalization/revenues of 2.19x and 1.31x are
both below the group averages of 4.90x and 5.15x, respectively. In addition, the
Company's EPS for the LTM, 1997 and 1998 of 20.59x, 15.47x and 13.56x,
respectively, are all below the group's averages of 27.30x, 23.88x and 18.33x
respectively. Further, the trailing twelve months earnings before interest,
taxes, depreciation and amortization ("EBITDA") and net income margins for the
Company of 15.81% and 6.82% are both below the comparable group mean of 26.61%
and 15.69%.
Discounted Cash Flow Analysis. Using a discounted cash flow analysis,
Oppenheimer estimated the present value of the future streams of after-tax cash
flows that the Company could produce through June 30, 2002. In this analysis,
Oppenheimer estimated the terminal value multiple of cash flows to be a range
from 9 to 12 times the Company's estimated after-tax cash flows for the twelve
months ended June 30, 2002. This range of multiples reflects Oppenheimer's
estimate of reasonable market expectations for trading values in the future. The
after-tax cash flows and terminal values were discounted to present values using
different rates (ranging from 11%-16%) chosen to reflect different assumptions
regarding the required rates of return. The Company's weighted average cost of
capital is approximately 11%, but Oppenheimer believes 15%-16% is more
reasonable given market expectations. Oppenheimer prepared a discounted cash
flow analysis, using the Company's earning estimates for 1998. Fiscal year 1999
was derived by taking the average net income margins for the last 6 months of
forecasted 1998 (with a 5% reduction) multiplied by forecasted operating
revenues minus corporate expense. Fiscal year 2000 to fiscal year 2002 is
assumed to grow at that same rate. This analysis, using a 15% and 16% discount
rate, indicated an implied range of values of the Company ranging from $157.4
million to $152.1 million.
Comparable Transactions Analysis. Oppenheimer compared the financial terms of
the Merger to the financial terms, to the extent publicly available, of seven
transactions Oppenheimer believed to be comparable for purposes of determining
the imputed values of the Share Purchase and the Merger.
The seven recent acquisitions involving companies providing accounts
receivable management services included the following: Allied Bond & Collection
Agency/The Union Corporation; Payco American Corporation/OSI Holdings
Corporation (now known as Outsourcing Solutions Inc.); National Revenue/ Deluxe
Corp.; National Action Financial Services/Sitel Corp.; Trans Union Corp.
(Collections Division)/ NCO; Management Adjustment Bureau/NCO and CRW Financial,
Inc. (Collections Division)/NCO.
For each of these transactions, Oppenheimer reviewed firm value/trailing
twelve months multiples to sales, earnings before interest and taxes ("EBIT")
and EBITDA. Oppenheimer calculated the Company's firm value/trailing twelve
months multiples to sales, EBIT and EBITDA to be 1.5, 9.2 and 11.9,
respectively. The comparable accounts receivable companies reviewed by
Oppenheimer had a mean firm value/ trailing twelve months multiples to sales,
EBIT and EBITDA of 1.1, 6.6 and 12.8, respectively. In addition, for each of
these transactions, Oppenheimer calculated the high, mean, median, and trimmed
mean of offer value/trailing twelve months multiples to net income and book
value and compared the results of these calculations to calculations made by
Oppenheimer for the proposed Merger. The Company's offer
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value/trailing twelve months multiples to net income and book value of 22.7 and
2.7, respectively, were both lower than the comparable accounts receivable
companies of 23.2 and 8.2, respectively.
The purchase price of $31.50 per share is above the mean and median averages
for both the imputed firm value and the imputed equity value. The offer price is
nearly 11% higher than the mean imputed firm value and over 28% greater than the
median imputed firm value. The mean imputed equity value is $31.39, while the
median imputed equity value of the Company is $27.54, 14.4% lower than the
$31.50 purchase price.
In performing its analyses, Oppenheimer made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of the Company. The analyses
performed by Oppenheimer are not necessarily indicative of actual values, which
may be significantly more or less favorable than suggested by such analyses.
Such analyses were prepared solely to enable Oppenheimer to render its December
22, 1997 written opinion. The analyses do not purport to be appraisals or to
reflect the prices at which a company might actually be sold.
In determining the valuation for the Company, Oppenheimer also considered
these valuation factors: 1) History of Sales Process: Oppenheimer conducted two
separate exclusive sales efforts for the Company. Approximately seventy parties
were contacted during the first exclusive sales effort which started in 1994.
The bids that were received were not deemed acceptable by management and the
Board of Directors. Approximately two hundred parties were contacted for the
second exclusive sale effort conducted during 1996. More than half of the
seventeen parties that submitted bids dropped out due to concerns relating to
environmental matters. The one party that was selected to proceed ultimately
lowered its bid because of concerns relating to environmental matters, and the
transaction was terminated due to concerns relating to environmental matters and
price issues. 2) Environmental Matters: The Company has accrued approximately $4
million for future liabilities relating to environmental matters. A large number
of potential bidders in the previous sales processes either dropped from the
bidding process or deeply discounted their bids due to varying estimates on
future liabilities relating to environmental matters. 3) Corporate History: The
Company has a history of uneven earnings growth and periodic write-offs, prior
to fiscal year 1996. Moreover, the initial terms of several of the Company's
large call center outsourcing contracts are scheduled to expire within eighteen
months.
The Company's Board retained Oppenheimer based upon its experience and
expertise. Oppenheimer is a nationally recognized investment banking and
advisory firm. Oppenheimer, as part of its investment banking business, is
continuously engaged in the valuation of business and securities in connection
with mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for corporate and other purposes. In the course of its market
making and other trading activities, Oppenheimer may, from time to time, have a
long or short position in, and may buy or sell, securities of the Company both
for its own account and for the accounts of customers.
As compensation for Oppenheimer's services as financial advisor, the Company
has agreed to pay Oppenheimer a fee equal to $4,250,000, plus reasonable
out-of-pocket expenses. The Company has been informed that, of this amount, a
research analyst formerly employed by Oppenheimer and currently employed by
Lazard Freres & Co. LLC will be entitled to 10% of the net fee paid by the
Company to Oppenheimer.
Reasons for Recommendation.
In reaching its conclusions set forth in Item 4(a), above, the Board of
Directors considered a number of factors, including, without limitation, the
following:
16
<PAGE>
(i) the opinion of Oppenheimer, described above, to the effect that, as
of the date of Oppenheimer's opinion, the consideration to be received by
the stockholders of the Company in the Offer and the Merger is fair, from a
financial point of view, to the stockholders of the Company;
(ii) a review of the financial condition, results of operations,
business and prospects of the Company;
(iii) the terms and conditions of the Merger Agreement, including the
Offer, and the Tender Agreement;
(iv) a review of the possible alternatives to the Offer and the Merger,
including, among others, the possibility of continuing to operate the
Company as an independent entity; and
(v) the trading price of the Shares, and that the $31.50 price per share
to be paid to the stockholders of the Company in the Offer and the Merger
represents a premium of approximately 14.5% over the closing price for the
Shares on The New York Stock Exchange on December 22, 1997, the last trading
day prior to the public announcement of the Merger Agreement.
In view of the wide variety of factors considered in connection with its
evaluation of the Offer and the Merger, the Board of Directors found it
impracticable to, and did not, quantify or otherwise attempt to assign relative
weight to the specific factors considered in reaching its determination.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The Company retained Oppenheimer on an exclusive basis for the purpose of
(i) identifying and analyzing strategic financial alternatives for the Company
including, but not limited to, a sale of the Company; (ii) advising the Company
concerning an appropriate course of action which would be in the best interests
of the Company; and (iii) as requested by the Company, participating on the
Company's behalf in negotiations concerning such alternatives. The agreement
pursuant to which the Company retained Oppenheimer, as amended (the "Oppenheimer
Agreement"), provides that Oppenheimer is to receive a fee for its services in
the amount of $4,250,000, plus reasonable out-of-pocket expenses. Twenty percent
of the aggregate fee payable to Oppenheimer under the Oppenheimer Agreement was
paid on the signing of the Merger Agreement, with the balance to be paid upon
the consummation of the Share Purchase. The Oppenheimer fee paid to date and
payable on the Share Purchase (other than $250,000 which was paid in respect of
the Oppenheimer opinion delivered to the Board) is contingent upon the
completion of the Share Purchase. The Company has been informed that 10% of the
net fee payable to Oppenheimer under the Oppenheimer Agreement will be paid to a
research analyst formerly employed by Oppenheimer and currently employed by
Lazard Freres & Co. LLC.
The Company has agreed to indemnify and hold harmless Oppenheimer against
any losses, claims, damages or liabilities to which it may become subject
arising out of the rendering of services pursuant to the Oppenheimer Agreement
and to reimburse Oppenheimer for its reasonable out-of-pocket expenses incurred
during the period of its engagement.
Neither the Company nor any person acting on its behalf has employed,
retained or compensated, nor does the Company intend to employ, retain or
compensate, any other person to make solicitations or recommendations to the
stockholders of the Company in connection with the Offer or the Merger.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) To the best of the Company's knowledge, no transactions in Shares have
been effected within the past 60 days by the Company or by any executive
officer, director, affiliate or subsidiary of the Company except for (i) the
Designated Stockholders entering into the Tender Agreement, and (ii) the
exercise on December 1, 1997 by Nicholas P. Gill, an executive officer of the
Company, of options to purchase 2,000 Shares under a stock option granted on
June 4, 1987 and scheduled to expire on December 3, 1997.
17
<PAGE>
(b) To the best of the Company's knowledge, all of the Company's executive
officers and directors currently intend to tender their Shares pursuant to the
Offer.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY SUBJECT COMPANY.
(a) Except as described in Item 3 above, no negotiation is being undertaken
or is underway by the Company in response to the Offer that relates to or would
result in (1) an extraordinary transaction, such as a merger or reorganization,
involving the Company or any subsidiary of the Company; (2) a purchase, sale or
transfer of a material amount of assets by the Company or any subsidiary of the
Company; (3) a tender offer for, or other acquisition of, securities by or of
the Company; or (4) any material change in the present capitalization or
dividend policy of the Company.
(b) Except as set forth in Items 3(b) and 4 above, there are no
transactions, Board resolutions, agreements in principle or signed contracts in
response to the Offer which relate to or would result in one or more of the
events referred to in Item 7(a) above.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
The information statement attached as Annex A hereto is being furnished in
connection with the possible designation by Parent, pursuant to the Merger
Agreement, of certain persons to be appointed to the Board of Directors of the
Company other than at a meeting of the Company's stockholders.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
(a) Share Purchase Agreement and Plan of Merger, dated as of December 22,
1997, among the Company, Parent and Purchaser.
(b) Agreement, dated as of December 22, 1997, among Parent, Purchaser and
the stockholders named therein.
(c) Opinion of CIBC Oppenheimer Corp. dated December 22, 1997.*
(d) Letter to stockholders of the Company dated December 23, 1997.*
(e) Press release issued by the Company on December 23, 1997.
- ------------------------
* Included in copies mailed to stockholders.
18
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
THE UNION CORPORATION
BY: /S/ NICHOLAS P. GILL
-----------------------------------------
Nicholas P. Gill
EXECUTIVE VICE PRESIDENT, CHIEF FINANCIAL
OFFICER, SECRETARY AND TREASURER
Dated: December 24, 1997
19
<PAGE>
ANNEX A
THE UNION CORPORATION
211 King Street
Suite 100
Charleston, South Carolina 29401
------------------------
INFORMATION STATEMENT PURSUANT TO
SECTION 14(F) OF THE SECURITIES EXCHANGE ACT
OF 1934, AS AMENDED, AND RULE 14(F)-1 THEREUNDER
------------------------
This Information Statement is being mailed on or about December 24, 1997 as
part of The Union Corporation's (the "Company's") Solicitation/Recommendation
Statement on Schedule 14D-9 (the "Schedule 14D-9") to the holders of record of
the Company's common stock, par value $.50 per share (the "Shares"). Capitalized
terms used herein and not otherwise defined shall have the meanings ascribed to
such terms in the Schedule 14D-9. You are receiving this Information Statement
in connection with the possible election of persons designated by Sherman
Acquisition Corporation ("Acquisition"), a wholly-owned subsidiary of
Outsourcing Solutions Inc. ("Parent"), to seats on the Company's Board of
Directors (the "Board"). You are urged to read this Information Statement
carefully. You are not, however, required to take any action.
The Share Purchase Agreement and Plan of Merger dated as of December 22,
1997 among the Company, Parent and Acquisition (the "Merger Agreement") provides
that, promptly upon the Share Purchase (as defined in the Merger Agreement),
Acquisition shall be entitled to designate such number of directors, rounded up
to the next whole number, on the Board as shall give Acquisition, subject to
compliance with Section 14(f) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), representation on the Board of at least the number of
directors which equals the product of the total number of directors on the Board
(giving effect to the directors elected pursuant to this sentence) multiplied by
a fraction, the numerator of which shall be the number of Shares accepted for
payment and paid for pursuant to the Offer or otherwise acquired or owned by
Acquisition or Parent and the denominator of which shall be the number of Shares
then outstanding. The Company shall promptly increase the size of the Board or
exercise all reasonable efforts to secure the resignations of such number of
directors as is necessary to provide Acquisition with such level of
representation and shall cause Acquisition's designees to the Board (the
"Acquisition Designees") to be elected. In addition, the Board shall, upon
request by Acquisition, take such further action to cause the Acquisition
Designees to constitute at least a majority of the Board of Directors of each of
the Company's direct or indirect subsidiaries other than Allied Bond &
Collection Agency, Inc. ("Allied Bond"). This Information Statement is required
by Section 14(f) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and Rule 14f-1 promulgated thereunder.
Pursuant to the Merger Agreement, on December 24, 1997 Parent commenced the
Offer. The Offer is scheduled to expire at 12:00 midnight, New York City time,
on January 23, 1998, unless extended pursuant to the terms of the Offer. The
terms of the Merger Agreement, a summary of the events leading up to the Offer
and the execution of the Merger Agreement and other information concerning the
Offer and the Merger are contained in the Schedule 14D-9.
The information contained in this Information Statement concerning
Acquisition and the Acquisition Designees has been furnished to the Company by
Parent, and the Company assumes no responsibility for the accuracy or
completeness of such information.
A-1
<PAGE>
INFORMATION WITH RESPECT TO THE COMPANY
The outstanding voting securities of the Company as of December 22, 1997,
consisted of 5,802,641 shares of common stock, par value $.50 per share (the
"Common Stock") and each such share is entitled to one vote.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of December 22, 1997
as to the beneficial ownership of the Common Stock by (i) each person known by
the Company to own beneficially more than 5% of the issued and outstanding
shares of Common Stock, (ii) all directors of the Company, (iii) the Named
Executives Officers (as defined in the Summary Compensation Table under the
caption Executive Compensation contained herein), and (iv) all executive
officers and directors of the Company as a group:
<TABLE>
<CAPTION>
NUMBER AND PERCENTAGE OF
SHARES BENEFICIALLY OWNED
------------------------------------------
<S> <C> <C>
BENEFICIAL OWNER NUMBER OF SHARES(1) PERCENT OF CLASS(2)
- ------------------------------------------------------------------------- ------------------- ---------------------
5% STOCKHOLDERS
Southeastern Asset Management, Inc....................................... 1,201,200(3) 20.7%
6075 Poplar Avenue, Suite 900
Memphis, Tennessee 38119
Schwerin Boyle Capital Management, Inc................................... 948,460(4) 16.3%
1391 Main Street
Springfield, Massachusetts 01103
Quest Advisory Corp...................................................... 396,800(5) 6.8%
1414 Avenue of the Americas
New York, New York 10019
John D. Weil............................................................. 360,000(6) 6.2%
200 N. Broadway, Suite 825
St. Louis, Missouri 63102
Dimensional Fund Advisors Inc............................................ 297,900(7) 5.1%
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401
NAMED EXECUTIVES AND DIRECTORS
Melvin L. Cooper......................................................... 165,276(8) 2.8%
Herbert A. Denton........................................................ -0- *
Gordon S. Dunn........................................................... 110,000 1.9%
Nicholas P. Gill......................................................... 51,500 *
William B. Hewitt........................................................ 170,000 2.9%
Robert A. Kerr........................................................... 27,190(9) *
George M. Macaulay....................................................... 73,384(10) 1.3%
Robert A. Marshall....................................................... -0- *
James M. McCormick....................................................... -0- *
</TABLE>
A-2
<PAGE>
<TABLE>
<CAPTION>
NUMBER AND PERCENTAGE OF
SHARES BENEFICIALLY OWNED
------------------------------------------
BENEFICIAL OWNER NUMBER OF SHARES(1) PERCENT OF CLASS(2)
- ------------------------------------------------------------------------- ------------------- ---------------------
<S> <C> <C>
James C. Miller III...................................................... 16,200(11) *
Herbert R. Silver........................................................ 24,000(12) *
ALL DIRECTORS AND EXECUTIVE OFFICERS, AS A GROUP (13 PERSONS)............ 687,550 11.8%
</TABLE>
- ------------------------
* Less than 1%
(1) Unless otherwise indicated, each of the parties listed in the table has
sole investment and voting power over the shares of Common Stock set forth
opposite their names. The number of shares indicated includes in each case
the number of shares of Common Stock issuable upon the exercise of options
to the extent that such options are currently exercisable. For purposes of
this table, options are deemed to be "currently exercisable" if they may be
exercised within sixty days of this Information Statement, including
certain options that will become exercisable upon a change of control,
which includes the Share Purchases.
(2) Based on 5,802,641 shares issued and outstanding and entitled to vote
December 22, 1997. In addition, treated as outstanding for the purpose of
computing the percentage ownership of each director or executive officer
and of all directors and officers as a group are shares of Common Stock
issuable to such individual or group upon the exercise of currently
exercisable options to purchase shares of Common Stock.
(3) According to Amendment No. 8 to Schedule 13G, dated January 31, 1997, filed
with the Securities and Exchange Commission ("SEC") by Southeastern Asset
Management, Inc. ("Southeastern"), O. Mason Hawkins, the Chairman of the
Board and Chief Executive Officer of Southeastern, Longleaf Partners Fund
("Longleaf Fund") and Longleaf Partners Small-Cap Fund ("Longleaf Small-Cap
Fund"), (i) Southeastern has sole power to vote and dispose of 619,000
shares, shares power to vote and dispose of 579,200 shares and possesses no
power to vote or dispose of 3,000 shares, (ii) Longleaf Fund shares power
to vote and dispose of 279,200 shares but does not have the sole power to
vote or dispose of any shares and (iii) Longleaf Small-Cap Fund shares
power to vote and dispose of 300,000 shares but does not have the sole
power to vote or dispose of any shares. The Amendment further states that,
with respect to shares as to which Southeastern shares voting and
dispositive powers, certain of such shares are owned by Longleaf Fund and
certain of such shares are owned by Longleaf Small-Cap Fund, each of which
is a series of Longleaf Partners Fund Trust, an open-end management
investment company. Mr. Hawkins, as Chairman of the Board and Chief
Executive Officer of Southeastern, may be deemed to have the ability to
exert control over Southeastern. Mr. Hawkins disclaims beneficial ownership
of the Company's shares held by Southeastern.
(4) According to Amendment No. 4 to Schedule 13G, dated March 28, 1997, filed
with the SEC by Schwerin Boyle Capital Management, Inc. ("Schwerin Boyle"),
Schwerin Boyle has sole power to dispose of 948,460 shares and the sole
power to vote 75,000 shares.
(5) According to Amendment No. 2 to Schedule 13G, dated February 14, 1996,
filed with the SEC by Quest Advisory Corp. ("Quest") and Charles M. Royce,
as a group, Quest has sole power to vote and dispose of 396,800 shares. The
Schedule also reports that Charles M. Royce may be deemed to be the
controlling person of Quest and, as such, may be deemed to beneficially own
the 396,800 shares beneficially owned by Quest.
(6) According to Amendment No. 2 to Schedule 13D, dated July 15, 1997, filed
with the SEC, all 360,000 shares of Common Stock of the Company are owned
by Woodbourne Partners, L.P. ("Woodbourne"). On November 1, 1996, all of
the shares previously reported as beneficially owned by Mr. Weil, members
of his family, family trusts or the partnership controlled by Mr. Weil were
transferred to Woodbourne. The Schedule 13D further states that Mr. Weil
has sole power to vote or dispose of all of the shares of the Company's
Common Stock which are held by Woodbourne since he is the sole shareholder
of the corporate general partner of Woodbourne.
(7) According to Amendment No. 2 to Schedule 13G, dated February 5, 1997, filed
with the SEC by Dimensional Fund Advisors Inc. ("Dimensional"), Dimensional
has sole power to vote 238,100
A-3
<PAGE>
shares and sole power to dispose of 297,900 shares. Dimensional disclaims
beneficial ownership of such shares. The Schedule 13G further states that
individuals who are officers of Dimensional also serve as officers of DFA
Investment Dimensions Group Inc. (the "DFA Fund") and The DFA Investment
Trust Company (the "DFA Trust"), each an open-end management investment
company, and in their capacities as officers of the DFA Fund and the DFA
Trust, such individuals have the power to vote 20,700 additional shares
owned by the DFA Fund and 39,100 shares owned by the DFA Trust.
(8) Includes (i) 5,800 shares held in Mr. Cooper's profit sharing plan and (ii)
109,476 shares held by the trustees of a revocable trust of which Mr.
Cooper is the sole beneficiary and a co-trustee.
(9) Includes 2,000 shares owned by Mr. Kerr's wife and 1,000 shares held in Mr.
Kerr's HR-10 Plan.
(10) Includes 2,400 shares owned jointly by Mr. Macaulay and his wife and 1,650
shares held in Mr. Macaulay's account in the profit sharing plan of a
wholly-owned subsidiary of the Company.
(11) Includes 5,700 shares owned jointly by Mr. Miller and his wife.
(12) Includes 1,000 shares owned by Mr. Silver's wife.
A-4
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS
CURRENT DIRECTORS. The information set forth below, furnished to the
Company by the respective individuals, shows as to each director of the Company
(i) his name and age; (ii) his principal position with the Company and principal
occupation or employment and (iii) the year in which he began to serve as a
director of the Company. No family relationship exists among any of the
executive officers and directors of the Company, except that Herbert Silver is
the brother of Bernard Silver, Co-Chairman of Allied Bond.
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE PRINCIPAL OCCUPATION SINCE
- ------------------------------------------------ --- ------------------------------------------------ -----------
<S> <C> <C> <C>
Melvin L. Cooper................................ 70 Chairman of the Board of the Company 1984
Herbert A. Denton............................... 50 President of Providence Capital, Inc. 1997
Gordon S. Dunn.................................. 67 Chairman of Transworld Systems Inc. (a 1991
subsidiary of the Company)
William B. Hewitt............................... 59 President and Chief Executive Officer of the 1991
Company; Chairman and Chief Executive Officer of
Capital Credit Corporation, Interactive
Performance, Inc. and High Performance Services,
Inc. (each a subsidiary of the Company)
Robert A. Kerr.................................. 77 Retired; formerly Chairman and Chief Executive 1984
Officer of Banc One, Dayton, Ohio
Robert A. Marshall.............................. 56 Consultant; formerly Executive Vice President of 1997
Advanta Corp. and President of Credit Card
Division of Advanta Corp.
James M. McCormick.............................. 50 President of First Manhattan Consulting Group, 1997
Inc.
James C. Miller III............................. 55 Counselor, Citizens for a Sound Economy (a 1991
not-for-profit corporation); formerly Director
of the Federal Office of Management and Budget
Herbert R. Silver............................... 62 Co-Chairman of Allied Bond & Collection Agency, 1992
Inc. (a subsidiary of the Company)
</TABLE>
BIOGRAPHICAL INFORMATION OF THE CURRENT DIRECTORS
MESSRS. COOPER, KERR AND MILLER have each been engaged in the principal
occupation identified above for more than the past five years. Mr. Cooper is
also a director of Golden Cycle Gold Corporation. Mr. Kerr is also a director of
First Bank, N.A. ("First Bank") of Beaufort, South Carolina and of First Bank
Corporation, the parent of First Bank. Mr. Miller is also a director of Atlantic
Coast Airlines, Inc. and Washington Mutual Investors, Inc.
MR. SILVER served as Co-Chairman and Co-Chief Executive Officer of Allied
Bond, a subsidiary of the Company, from December 1992, when the Company acquired
substantially all of the assets and assumed certain liabilities of Allied Bond &
Collection Agency, a Pennsylvania general partnership (the "Partnership"), until
June 30, 1997. Mr. Silver continues to serve as Co-Chairman of Allied Bond. For
more than
A-5
<PAGE>
five years prior to December 1992, he and his brother, Bernard Silver, served as
general partners of the Partnership, which they founded in 1958. Pursuant to the
terms of the purchase agreement, Herbert R. Silver was elected to the Board of
Directors of the Company, and the Company agreed that, for so long as either
Herbert R. Silver or Bernard Silver is employed by Allied Bond under their
respective employment agreements, the Company would include one of them as a
nominee for election to the Board of Directors.
MR. DUNN has served as Chairman of Transworld Systems Inc. ("TSI"), a
subsidiary of the Company, since July 1, 1994. Prior to becoming Chairman, Mr.
Dunn served as President and Chief Executive Officer of TSI since 1978.
MR. HEWITT became Chairman and Chief Executive Officer of Capital Credit
Corporation ("CCC"), a subsidiary of the Company, in September 1991, Chairman
and Chief Executive Officer of Interactive Performance, Inc. ("IPI"), a
subsidiary of the Company, in November 1995 and Chairman and Chief Executive
Officer of High Performance Services, Inc. ("HPSI"), a subsidiary of the
Company, in May 1996. Effective July 1, 1997, Mr. Hewitt was appointed President
and Chief Executive Officer of the Company and prior to that he served as
President and Chief Operating Officer of the Company since May 1995. From 1980
until joining CCC, Mr. Hewitt was Executive Vice President of First Manhattan
Consulting Group, Inc. ("FMCG"), a management consulting firm.
MR. DENTON has been the President of Providence Capital, Inc., an
independent National Association of Securities Dealers' registered broker, for
at least the last five years. He is also a director of Capsure Holdings Corp.
MR. MARSHALL currently serves as a consultant to the banking industry. For
at least the last five years he served as Executive Vice President of Advanta
Corp. ("Advanta") and as President of Advanta's Credit Card division. Mr.
Marshall also serves as a director of Arcadia Financial, Inc.
MR. MCCORMICK has been President and a member of FMCG's Board of Directors
for at least the last five years.
EXECUTIVE OFFICERS OF THE COMPANY
Messrs. Cooper, Dunn, Hewitt, Nicholas P. Gill (Executive Vice President,
Chief Financial Officer, Treasurer and Secretary of the Company), George M.
Macaulay (President and Chief Executive Officer of TSI), Herbert R. Silver,
Bernard Silver (Co-Chairman of Allied Bond and President of IPI) and Sheldon
Zucker (President and Chief Executive Officer of Allied Bond) are members of the
Company's Executive Management Group and constitute all of the executive
officers of the Company. Mr. Gill, age 42, became Executive Vice President of
the Company effective July 1, 1997 and has served as Vice President of the
Company since January 1995, as Chief Financial Officer of the Company since
February 1991 and as Treasurer and Secretary since 1989, and served as
Controller from 1986 through 1990. Mr. Macaulay, age 57, was appointed President
and Chief Executive Officer of TSI in November 1996 and, prior thereto, he had
been President of TSI since July 1, 1994. He was Vice President of TSI from 1989
to June 30, 1994, President of the Credit Management Services division of TSI
since 1988 and Vice President of such division prior thereto. Bernard Silver,
age 59, currently Co-Chairman of Allied Bond, served as Co-Chairman and Co-Chief
Executive Officer and Secretary of Allied Bond from December 1992 until June 30,
1997 and President of IPI since November 1995. Prior to December 1992, he was a
general partner of the Partnership. Mr. Zucker, age 49, became President and
Chief Executive Officer of Allied Bond effective July 1, 1997, and he has held
the positions of Executive Vice President and Chief Operating Officer of Allied
Bond since December 1992. For more than five years prior thereto, he was the
Chief Operating Officer of the Partnership.
ACQUISITION DESIGNEES. Certain of the following persons will be designated
by Acquisition to serve on the Board. The information set forth below shows as
to each Acquisition Designee (i) his name and age and (ii) his principal
occupation or employment. The current business address for each Acquisition
A-6
<PAGE>
Designee listed below is 390 South Woods Mill Road, Suite 150, Chesterfield, MO
63017, unless otherwise set forth herein. The information set forth below has
been furnished to the Company by Parent and the Company assumes no
responsibility for the accuracy or completeness of such information.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT, MATERIAL POSITIONS
NAME AGE HELD DURING THE PAST FIVE YEARS
- ------------------------------------------ --- ---------------------------------------------------------------
<S> <C> <C>
Jeffrey E. Stiefler....................... 51 Chairman of the Board of Directors of Parent since January
1996. From June 1993 to September 1995, Mr. Stiefler was
President and Director of American Express Company, where he
had previously served in various capacities since 1983,
including President and Chief Executive Officer of IDS
Financial Services. Prior to joining Parent, Mr. Stiefler held
various positions with the Meritor Financial Group, including
Chairman of the Meritor Savings Bank Florida and the Meritor
Savings Bank Washington, D.C., and Citicorp, including Vice
President and Regional Business Manager of the New York Banking
Division and Senior Vice President and Regional Business
Manager of Nationwide Financial Services. Mr. Stiefler is an
Operating Partner of McCown De Leeuw & Co. Mr. Stiefler
currently serves as a director of National Computer Systems and
chairman of International Data Response Corporation.
Timothy G. Beffa.......................... 46 President, Chief Executive Officer and director of Parent since
August 1996. From August 1995 until August 1996, Mr. Beffa
served as President and Chief Operating Officer of DIMAC
Corporation ("DIMAC") and DIMAC DIRECT Inc. ("DDI"), divisions
of Heritage Media Corp., and as a director of DDI. From 1989
until August 1995, Mr. Beffa had served as a Vice President of
DIMAC and as Senior Vice President and Chief Financial Officer
of DDI. Prior to joining DIMAC, Mr. Beffa was Vice President of
Administration and Controller for the International Division of
Pet Incorporated, a food and consumer products company, where
previously he had been Manager of Financial Analysis. Mr Beffa
currently serves as a director of AmeriComm Holdings, Inc.
David E. De Leeuw......................... 53 Director of Parent since September 1995. Mr. De Leeuw is a
managing general partner of MDC Management Company III, L.P.
("MDC Management"), which is the general partner of McCown De
Leeuw & Co. III, L.P. ("McCown") and McCown De Leeuw & Co.
(Europe) III, L.P. ("McCown Europe"), a managing general
partner of MDC Management Company IIIA, L.P. ("MDC IIIA"),
which is the general partner of McCown De Leeuw & Co. III
(Asia), L.P. ("McCown Asia") and a member of Gamma Fund, LLC
("Gamma"). Mr. De Leeuw currently serves as a director of Vans,
Inc., AmeriComm Holdings,
</TABLE>
A-7
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT, MATERIAL POSITIONS
NAME AGE HELD DURING THE PAST FIVE YEARS
- ------------------------------------------ --- ---------------------------------------------------------------
Inc., Nimbus CD International, Inc., Aurora Foods Inc. and
American Residential Investment Trust.
<S> <C> <C>
David E. King............................. 38 Secretary, Treasurer and director of Parent since September
1995. Mr. King is a general partner of MDC Management, which is
the general partner of McCown and McCown Europe, a general
partner of MDC IIIA, which is the general partner of McCown
Asia and a member of Gamma. Mr. King has been associated with
McCown De Leeuw & Co. since 1990. He currently serves as a
director of AmeriComm Holdings, Inc., International Data
Response Corporation, Fitness Holdings Inc., Sarcom, Inc. and
RSP Manufacturing Corporation.
Tyler T. Zachem........................... 32 Vice President and director of Parent since September 1995. Mr.
Zachem is a principal of MDC Management, which is the general
partner of McCown and McCown Europe, and a principal of MDC
IIIA, which is the general partner of McCown Asia. Mr. Zachem
has been associated with McCown De Leeuw & Co. since July 1993.
Mr. Zachem previously worked at McKinsey & Co. ("McKinsey") and
McDonald & Company. Mr. Zachem currently serves as a director
of RSP Manufacturing Corporation, The Brown Schools, Inc.,
Aurora Foods Inc. and Papa Gino's, Inc.
David G. Hanna............................ 33 Director of Parent since September 1995. Mr. Hanna served as
President of Account Portfolios, L.P. from November 1992 to
September 1995 and as President of Account Portfolios, Inc.
("API") from September 1995 to September 1996. From 1989 to
November 1992, Mr. Hanna served as President of the
Governmental Division of Nationwide Credit, Inc.,
("Nationwide"), a large accounts receivable company. David G.
Hanna is the brother of Frank J. Hanna, III. Mr. Hanna is
currently a director of The Button Gwinnett Financial Corp.
Frank J. Hanna, III....................... 35 Director of Parent since September 1995. Mr. Hanna founded
Account Portfolios, L.P. in July 1989 and served as its Chief
Executive Officer until its acquisition by Parent in September
1995. From September 1995 to September 1996, Mr. Hanna served
as Chief Executive Officer of API. From February 1988 to
January 1990, Mr. Hanna served as Group Vice President of
Nationwide. Frank J. Hanna, III is the brother of David G.
Hanna. Mr. Hanna currently serves as a director of Cerulean
Companies, Inc.
Peter C. Rosvall.......................... 46 Executive Vice President and director of Parent since January
1996. From June 1980 until its acquisition by Parent in January
1996, Mr. Rosvall served as President of Continental Credit
Services, Inc.
</TABLE>
A-8
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT, MATERIAL POSITIONS
NAME AGE HELD DURING THE PAST FIVE YEARS
- ------------------------------------------ --- ---------------------------------------------------------------
<S> <C> <C>
Dennis G. Punches......................... 61 Director of Parent since November 1996. From May 1988 to
October 1988 and January 1990 to November 1996, Mr. Punches
served as Chairman of the Board of Directors of Payco American
Corporation ("Payco"). From October 1988 to January 1990, Mr.
Punches served as Co-Chairman of the Board of Directors of
Payco. From 1969 to January 1990, Mr. Punches served as
President and Chief Executive Officer of Payco. Mr. Punches is
currently a director of Analysis & Technology Corp. and Intrum
Justicia B.V.
Nathan W. Pearson, Jr..................... 46 Director of Parent since September, 1997. Mr. Pearson is an
operating affiliate of McCown De Leeuw & Co. Mr. Pearson has
been affiliated with McCown De Leeuw & Co. since 1997. Since
1996, Mr. Pearson has been Managing Director of Commonwealth
Holdings, a private investment firm. From 1988 to 1995, Mr.
Pearson was Executive Vice President and Chief Financial
Officer of Broadcasting Partners, Inc. ("BPI"), a radio
broadcasting leveraged buyout organization and since 1995, Mr.
Pearson has been a principal of investment and management at
Broadcasting Partners LLC. Prior to joining BPI, Mr. Pearson
was a management consultant with McKinsey from 1982 to 1988.
Daniel J. Dolan........................... 45 Executive Vice President and Chief Financial Officer of Parent
since October 1997. From June 1974 to September 1997, Mr. Dolan
was a member of Ernst & Young LLP. For the last eleven years at
Ernst & Young LLP, Mr. Dolan was a partner, primarily serving
large multi-national clients in the service and manufacturing
industries.
</TABLE>
None of the Acquisition Designees or their associates is a director of, or
holds any position with, the Company. To the best knowledge of the Company, none
of the Acquisition Designees or their associates beneficially owns any equity
securities, or rights to acquire any equity securities, of the Company or has
been involved in any transactions with the Company or any of its directors or
executive officers that are required to be disclosed pursuant to the rules and
regulations of the Securities and Exchange Commission (the "SEC").
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Board has a standing Audit Committee, Employee Compensation and Benefit
Committee, Stock Option Committee and Executive Committee. None of the directors
who serve on either the Audit Committee, Employee Benefit and Compensation
Committee or the Stock Option Committee is an employee of the Company or any of
its subsidiaries. The Board has no nominating committee; the full Board performs
such function.
The Audit Committee reviews the preparations for and scope of the audit of
the Company's annual financial statements, reviews drafts of such statements,
makes recommendations as to the engagement and fees of the independent auditors
and monitors the functioning of the Company's accounting and internal control
systems by meeting with the representatives of management, the independent
auditors and the
A-9
<PAGE>
Company's internal auditor. The Committee has direct access to the independent
auditors, the internal auditor, counsel to the Company and the Chief Financial
Officers of the respective subsidiaries of the Company, and it performs such
other duties relating to the maintenance of proper books of account and records
of the Company and its subsidiaries and other matters as the Board may assign
from time to time. The Audit Committee met twice during fiscal 1997. Messrs.
Angle, Kerr, Miller and Northrop were members of the Audit Committee during all
of fiscal 1997. Mr. Angle tendered his resignation from the Board, effective
November 19, 1997, and Mr. Northrop passed away in September 1997. Messrs. Kerr
and Miller, along with Messrs. Denton and Marshall, who were appointed to the
Audit Committee on June 10, 1997, are the current members of the Audit
Committee. Mr. Kerr is the Chairman of the Audit Committee.
The Employee Compensation and Benefit Committee supervises and makes
recommendations with respect to compensation levels of key employees and all
benefit plans involving employees of the Company and its subsidiaries. It also
approves, upon the recommendation of the President or other appropriate officer,
the terms of employment of all officers of the Company (except the Chairman of
the Board and the President) and recommends the terms of employment of the
Chairman of the Board and the President to the Board for approval. The Employee
Compensation and Benefit Committee met four times during fiscal 1997, with two
of those meetings being held jointly with the Stock Option Committee. Messrs.
Angle, Kerr, Miller and Northrop were members of the Employee Compensation and
Benefit Committee during all of fiscal 1997. Messrs. Kerr and Miller, along with
Messrs. Denton, Marshall and McCormick, who were appointed to the Employee
Compensation and Benefit Committee on June 10, 1997, are the current members of
the Employee Compensation and Benefit Committee. Mr. Kerr serves as Chairman of
the Employee Compensation and Benefit Committee.
The Stock Option Committee administers the Company's stock option plans,
including the grant of options thereunder. The Stock Option Committee met twice
during fiscal 1997, with both of these meetings being held jointly with the
Employee Compensation and Benefit Committee. Messrs. Angle, Kerr, Miller and
Northrop were members of the Stock Option Committee during all of fiscal 1997.
Messrs. Kerr and Miller, along with Messrs. Denton, Marshall and McCormick, who
were appointed to the Stock Option Committee on June 10, 1997, are the current
members of such committee. Mr. Kerr serves as Chairman of the Stock Option
Committee.
The Executive Committee has all the powers of the Board in the management of
the business and affairs of the Company, except as such powers are limited by
Delaware General Corporation Law. The Executive Committee met once during fiscal
1997. Messrs. Cooper, Hewitt, Kerr and Northrop were members of the Executive
Committee during all of fiscal 1997. Mr. Cooper serves as Chairman of the
Executive Committee.
The Board of Directors met six times in fiscal 1997. No director attended
fewer than 75% of the total number of meetings of the Board of Directors and all
committees thereof which he was eligible to attend.
On the Share Purchase it is expected that all the current directors, other
than two current directors, will resign from the Board.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors and officers, and persons who
own more than ten percent of a registered class of the Company's equity
securities, to file reports of ownership and changes in ownership of such
securities with the SEC and to furnish the Company with copies of such reports.
Based solely on its review of the copies of such forms furnished to the
Company by such reporting persons during the fiscal year ended June 30, 1997, or
on written representations that no reports were required for those persons with
respect to such period, the Company believes that during the fiscal year
A-10
<PAGE>
ended June 30, 1997 all filing requirements applicable to its directors,
officers and greater than ten percent beneficial owners were complied with.
DIRECTORS' COMPENSATION
1997 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN. Prior to the adoption of
the Company's 1997 Non-Employee Directors' Stock Option Plan (the "1997
Directors' Stock Option Plan"), which was approved by the stockholders of the
company at the Annual Meeting of Stockholders held on November 19, 1997 (the
"Annual Meeting"), directors of the Company who were not employees of the
Company or any of its subsidiaries (each a "Non-Employee Director") were
eligible to receive an annual retainer of $20,000 (the "Annual Retainer"), paid
on a quarterly basis. In addition, each Non-Employee Director who was a member
of the Board of Directors on June 9, 1997 (a "Non-Employee Incumbent Director")
is entitled to receive a lump sum payment, payable upon retirement from the
Board, equal to the discounted present value of a specified percentage of the
Annual Retainer (the "Deferred Annual Retainer" discussed below).
In addition, pursuant to the Company's the 1997 Directors' Stock Option
Plan, (i) each Non-Employee Incumbent Director who elects to participate in the
1997 Directors' Stock Option Plan and (ii) all Non-Employee Directors who were,
or in the future are, first elected to the Board on or after June 10, 1997,
shall, in lieu of the Annual Retainer, be granted, effective on the date of each
annual meeting of the stockholders of the Company, a stock option to purchase
5,000 shares of the Common Stock of the Company (the "Annual Grant"). The per
share exercise price for each Annual Grant shall be $5.00 below the fair market
value of a share of Common Stock on the date of grant and each grant shall vest,
subject to acceleration in the event of a change in control of the Company (as
defined in the plan), as to 50% of the underlying shares on the first
anniversary of the date of grant and shall become fully vested on the second
anniversary of the date of grant.
Each Non-Employee Incumbent Director, until such time as he elects to
participate in the 1997 Directors' Stock Option Plan, remains eligible to
receive the Annual Retainer and is not entitled to any grants under the 1997
Directors' Stock Option Plan. Although the 1997 Directors' Stock Option Plan was
approved at the Annual Meeting, the Board of Directors suspended the awarding of
any options under the 1997 Directors' Stock Option Plan pending the outcome of
the proposed transaction.
DEFERRED ANNUAL RETAINER. Each Non-Employee Incumbent Director who has
served as a director for more than five years prior to his retirement from the
Board or the effective date of his election to participate in the 1997
Directors' Stock Option Plan is, and will remain, entitled to receive the
Deferred Annual Retainer. The Deferred Annual Retainer is a lump sum payment,
payable to each such Non-Employee Incumbent Director (or his estate) upon his
retirement from the Board, equal to the discounted net present value of a
specified percentage of the Annual Retainer based upon the number of years such
director has served on the Board prior to his retirement from the Board or the
effective date of his election to participate in the 1997 Directors' Stock
Option Plan. If a Non-Employee Incumbent Director has served on the Board more
than five years, but less than six years, prior to such retirement or election,
such director (or his estate) shall be entitled to receive, in a lump sum
payment, an amount equal to the discounted net present value of 50% of the
Annual Retainer over a period of ten years. The percentage of the Annual
Retainer to be paid to such a director (or his estate) shall increase for each
year of service thereafter by 10% until such director has served more than ten
years, at which time he (or his estate) shall, upon retirement, be entitled to
receive, in a lump sum payment, an amount equal to the discounted net present
value of 100% of the Annual Retainer for a period of ten years. Upon the
election by a Non-Employee Incumbent Director to participate in the 1997
Directors' Stock Option Plan, such director shall thereafter no longer be
eligible for the Annual Retainer (other than payment of the Annual Retainer in
respect of the quarter in which such election is made) and his right to the
Deferred Annual Retainer will be fixed based upon the number of years the
director has served on the Board to the effective date of such election.
A-11
<PAGE>
On the Share Purchase, the Deferred Annual Retainer shall be paid to all
eligible Non-Employee Incumbent Directors.
BOARD FEES. In addition to the foregoing, each director of the Company who
is neither an employee of the Company nor any of its subsidiaries is entitled to
receive $500 for each Board and/or committee meeting attended during the fiscal
year and each such non-employee director who serves as chairman of a committee
of the Board is also paid a quarterly fee of $250 for each such position.
1991 DIRECTORS' PLAN. Under the Company's 1991 Non-Employee Directors'
Stock Option Plan (the "1991 Directors' Plan"), which expired on December 31,
1995, each non-employee director who served in such capacity for at least one
full year automatically received an option to purchase 3,500 shares of the
Company's Common Stock on November 19th of each year, until the director
received options to purchase a total of 10,500 shares. Options were granted at
an exercise price equal to the fair market value of a share of such Common Stock
on the date of such grant. Prior to the expiration of the 1991 Directors' Plan,
all eligible directors had received options to purchase 10,500 shares, the
maximum permitted under that plan. The exercise price of options granted under
the 1991 Directors' Plan may be paid in cash or, subject to certain
restrictions, with shares of Common Stock with a fair market value equal to the
exercise price on the date of exercise. Options may be exercised within the
period commencing six months after the date of grant and ending on the earlier
to occur of the tenth anniversary of the date of grant or the first anniversary
of the director's death or disability. The expiration of the 1991 Directors'
Plan does not affect rights under outstanding options which were not exercised
prior thereto.
Effective as of the date on which Acquisition is merged with and into the
Company (the "Effective Time"), all stock option plans of the Company, including
the 1997 and 1991 Directors' Stock Option Plans, shall terminate.
A-12
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following Summary Compensation Table sets forth certain information
regarding compensation earned in each of the last three completed fiscal years
by Mr. Cooper, the Chairman of the Board and Chief Executive Officer of the
Company through fiscal 1997, and by each of the four most highly compensated
executive officers of the Company other than Mr. Cooper who were serving as
executive officers of the Company at the end of fiscal 1997 (collectively, the
"Named Executive Officers"):
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
--------------------------------------------- AWARD
NAME AND FISCAL OTHER ANNUAL ------------- ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) OPTIONS COMPENSATION(2)
- -------------------------------------- ----------- ---------- ---------- --------------------- ------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Melvin L. Cooper 1997 $ 344,818 $ 344,818 -- 50,000 $ 44,110
Chairman of the Board of the 1996 335,323 335,323 -- -- 55,817
Company(3).......................... 1995 326,243 326,243 -- -- 127,494
Gordon S. Dunn 1997 200,000 250,000 -- -- 91,300
Chairman of TSI, a subsidiary 1996 200,000 225,000 -- -- 91,300
of the Company...................... 1995 150,000 100,000 -- -- 103,174
Nicholas P. Gill 1997 185,000 125,000 -- 15,000 4,750
Executive Vice President, 1996 175,000 75,000 -- -- 6,820
Chief Financial Officer, 1995 166,250 50,000 -- -- 4,800
Treasurer and
Secretary of the Company............
William B. Hewitt 1997 300,000 435,500 -- 62,477(4) 17,805
President and Chief Executive 1996 296,117 337,500 -- 40,000(5) 10,994
Officer of the Company and 1995 296,117 249,569 -- 7,523(6) 9,793
Chairman and Chief Executive
Officer of CCC, IPI and
HPSI, each a subsidiary of the
Company(3)..........................
George M. Macaulay 1997 300,000 450,000 -- 25,000 58,459
President and Chief Executive 1996 300,000 400,000 -- -- 58,459
Officer of TSI, a subsidiary of 1995 300,000 400,000 -- -- 58,459
the Company.........................
</TABLE>
- ------------------------
(1) The dollar value of perquisites and other personal benefits for each of the
Named Executive Officers did not exceed, in each case, the lesser of either
$50,000 or 10% of the total of annual salary and bonus for such Named
Executive Officer.
(2) The amounts listed under All Other Compensation for Messrs. Cooper, Dunn,
Hewitt and Macaulay for fiscal 1997 include $44,110, $46,300, $12,105, and
$28,459, respectively, which represent premiums paid by the Company or a
subsidiary of the Company for disability and/or life insurance policies for
the benefit of the respective executive officer. The amounts listed under
All Other Compensation for Messrs. Dunn, Gill, Hewitt and Macaulay for
fiscal 1997 include $15,000, $4,750, $5,700 and $15,000, respectively, which
represent amounts contributed by the Company or a subsidiary of the Company
to defined contribution plans for the benefit of the respective executive
officer. The amounts listed under All Other Compensation for Messrs. Dunn
and Macaulay also include $30,000 and $15,000, respectively, accrued by a
subsidiary of the Company for non-qualified retirement benefits.
A-13
<PAGE>
(3) Mr. Hewitt succeeded Mr. Cooper as the Chief Executive Officer of the
Company effective July 1, 1997.
(4) Consists of (i) 30,000 shares under option that were granted to Mr. Hewitt
in September 1997 based on the consolidated financial results of the Company
for fiscal 1997 and (ii) 32,477 shares under option that were granted to Mr.
Hewitt in August 1996 that became exercisable upon his appointment as Chief
Executive Officer of the Company in July 1997, each such grant being issued
pursuant to the terms of Mr. Hewitt's employment agreement. See also
"Employment Agreements and Change in Control Arrangements--Employment
Agreement with Mr. Hewitt" below.
(5) Represents options granted to Mr. Hewitt in August 1996 based on the
combined financial results of CCC, IPI and HPSI for fiscal 1996 and issued
pursuant to the terms of Mr. Hewitt's employment agreement.
(6) Represents options granted to Mr. Hewitt in August 1995 based on the
financial results of CCC for fiscal 1995 and issued pursuant to the terms of
Mr. Hewitt's employment agreement.
OPTION GRANTS DURING FISCAL 1997
The following table provides information related to options granted to the
Named Executive Officers during fiscal 1997.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
% OF TOTAL VALUE AT ASSUMED
OPTIONS ANNUAL RATES OF
NUMBER OF GRANTED STOCK
SECURITIES TO EXERCISE PRICE APPRECIATION
UNDERLYING EMPLOYEES OR BASE FOR OPTION TERM(1)
OPTIONS IN FISCAL PRICE EXPIRATION ------------------------
NAME GRANTED YEAR ($/SH) DATE 5% 10%
- ----------------------------------------------- ----------- ------------- ---------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Melvin L. Cooper............................... 50,000 16.0% $ 22.50 12/09/07 $ 753,300 $ 1,938,850
Gordon S. Dunn................................. -- -- -- -- -- --
Nicholas P. Gill............................... 15,000 4.8% $ 22.50 12/09/07 $ 225,990 $ 581,655
William B. Hewitt(2)........................... 32,477 10.4% $ 26.375 08/26/06 $ 573,576 $ 1,476,242
40,000 12.8% $ 22.9375 08/26/06 $ 614,380 $ 1,581,260
George M. Macaulay............................. 25,000 8.0% $ 22.50 12/09/07 $ 376,650 $ 969,425
</TABLE>
- ------------------------
(1) The values set forth in these columns represent the gain which would be
realized by each Named Executive Officer assuming (i) the option granted in
fiscal 1997 is exercised at the end of its term and (ii) the value of a
share of the Company's Common Stock has increased annually by a rate of 5%
and 10%, respectively, during the term of the option. These growth rates are
prescribed by the SEC and are not intended to forecast possible future
appreciation of the Company's Common Stock or to establish a present value
of options. In addition, no gain to the optionees will be realized unless
there is an increase in the Company's stock price, which will benefit all
stockholders commensurately.
(2) The number of securities underlying options granted to Mr. Hewitt does not
include 30,000 shares of Common Stock underlying an option granted to Mr.
Hewitt pursuant to the terms of his employment agreement in September 1997
based on the fiscal 1997 consolidated financial results of the Company.
OPTION EXERCISES DURING FISCAL 1997 AND YEAR END OPTION/SAR VALUES
The following table provides information related to options exercised by the
Named Executive Officers during fiscal 1997 and the number and value of options
and stock appreciation rights held at fiscal
A-14
<PAGE>
year-end. No stock appreciation rights were granted or exercised during fiscal
1997 and no SARs are currently outstanding.
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS IN-THE-MONEY OPTIONS/SARS
SHARES AT FY-END(#) AT FY-END ($)(1)
ACQUIRED ON VALUE -------------------------- ---------------------------
NAME EXERCISE (#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------------- ------------ ------------ ----------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Melvin L. Cooper................... 131,000 $ 1,883,125(2) 50,000 -0- $ 187,500 -0-
Gordon S. Dunn..................... -- -- 100,000 -0- $ 1,262,500 -0-
Nicholas P. Gill................... -- -- 49,000 -0- $ 470,935 -0-
William B. Hewitt.................. -- -- 42,507 37,493 $ 161,331 $ 57,684
George M. Macaulay................. -- -- 44,334 25,000 $ 505,262 $ 93,750
</TABLE>
- ------------------------
(1) The values of Unexercised In-the-Money Options represent the aggregate
amount of the excess of $26.25, the closing price for a share of Common
Stock on June 30, 1997, over the relevant exercise prices of all
"in-the-money" options.
(2) The value realized upon the exercise of such options represents the
aggregate amount of the excess of the fair market value for a share of
Common Stock on the date of such exercise ($25.125 per share) over the
exercise price of such options ($10.75 per share).
STOCK OPTION PLANS
As of June 30, 1997, the Company had outstanding options to purchase Common
Stock under two stock option plans for the benefit of employees--the 1994
Incentive Stock Plan (the "1994 Plan") and the 1984 Stock Option Plan (the "1984
Plan"). The 1994 Plan and the 1984 Plan are interpreted and administered by the
Stock Option Committee of the Board.
So long as the Merger Agreement is in effect, no options will be granted
under any of the Company's stock option plans. Effective as of the date on which
Acquisition is merged with and into the Company (the "Effective Time"), all
stock option plans of the Company, including the 1984 Plan and the 1994 Plan,
shall terminate.
THE 1994 PLAN. The 1994 Plan, as amended, provides that 750,000 shares is
the maximum number of shares of Common Stock with respect to which awards may be
granted pursuant to the plan. Shares issuable under the 1994 Plan may be either
treasury shares or authorized but unissued shares. The number of shares
available for issuance will be subject to adjustment to prevent dilution in the
event of stock splits, stock dividends or other changes in the capitalization of
the Company.
The 1994 Plan is currently administered by a committee consisting of not
less than three (3) members of the Board who are "disinterested" within the
meaning of Rule 16b-3 promulgated under the Exchange Act and "outside directors"
within the meaning of Section 162(m) of the Code (including persons who may be
deemed outside directors by virtue of certain transitional rules adopted by the
Internal Revenue Service implementing such Section). The Board has designated
the Stock Option Committee (the "Committee") as administrator of the 1994 Plan.
The Stock Option Committee has the authority to determine the persons to whom
awards will be granted under the 1994 Plan, the type of award and, if
applicable, the number of shares to be covered by any such award. During any
fiscal year, no person may be granted under the 1994 Plan awards aggregating
more than 150,000 shares (which number shall be subject to adjustment to prevent
dilution in the event of stock splits, stock dividends or other changes in
capitalization of the Company).
A-15
<PAGE>
TYPES OF AWARDS:
STOCK OPTIONS. Options granted under the 1994 Plan may be "incentive stock
options" within the meaning of Section 422 of the Code ("Incentive Options") or
stock options which are not incentive stock options ("Non-Incentive Options"
and, collectively with Incentive Options, hereinafter referred to as "Employee
Options"). The Committee determines the persons to whom Employee Options will be
granted, the number of shares subject to each Employee Option granted, the
prices at which Employee Options may be exercised (which shall not be less than
the Fair Market Value, as defined in the 1994 Plan, of shares of Common Stock on
the date of grant), whether an Employee Option will be an Incentive Option or a
Non-Incentive Option, the time or times and the extent to which Employee Options
may be exercised and all other terms and conditions of Employee Options.
Each Incentive Option shall terminate no later than ten years from the date
of grant, except as provided below with respect to Incentive Options granted to
10% Stockholders (as hereinafter defined). No Employee Option may be granted at
any time after August 24, 2004. The exercise price at which the shares may be
purchased may not be less than the Fair Market Value of shares of Common Stock
at the time the Employee Option is granted, except as provided below with
respect to Incentive Options granted to 10% Stockholders. Employee Options
granted to executive officers may not be exercised at any time prior to six
months after the date of grant.
The Code requires that the exercise price of an Incentive Option granted to
a person possessing more than 10% of the total combined voting power of all
shares of stock of the Company or a subsidiary of the Company ("10%
Stockholder") shall in no event be less than 110% of the Fair Market Value of
the shares of the Common Stock at the time the Incentive Option is granted and
that the term of an Incentive Option granted to a 10% Stockholder shall not
exceed five years from the date of grant.
The exercise price of the shares to be purchased pursuant to each Employee
Option shall be paid (i) in full in cash, (ii) by delivery (i.e., surrender) of
shares of the Company's Common Stock owned by the optionee at the time of the
exercise of the Employee Option, (iii) by directing the Company to withhold a
portion of the shares which would otherwise be issuable upon exercise of the
Employee Option, (iv) in installments, payable in cash, if permitted by the
Committee or (v) any combination of the foregoing. The stock-for-stock payment
method permits an optionee to deliver one or more shares of Common Stock of the
Company in satisfaction of the exercise price of subsequent Employee Options.
The optionee may use the shares obtained on each exercise to purchase a larger
number of shares on the next exercise. (The foregoing assumes an appreciation in
value of previously acquired shares). The result of the stock-for-stock payment
method is that the optionee can generally avoid immediate tax liability with
respect to any appreciation in the value of the stock utilized to exercise the
Employee Option.
LIMITED STOCK APPRECIATION RIGHTS. The Committee is authorized, in
connection with any Employee Option granted under the 1994 Plan, to grant the
holder of such Employee Option a limited stock appreciation right ("LSAR"),
entitling the holder to receive, within 60 days following a Change in Control
(as defined in the 1994 Plan) of the Company, an amount in cash equal to the
difference between the exercise price of the Employee Option and the market
value of the Common Stock on the effective date of the Change in Control. The
LSAR may be granted in tandem with an Employee Option or subsequent to the grant
of the Employee Option. The LSAR will only be exercisable to the extent the
related Employee Option is exercisable and will terminate if and when the
Employee Option is exercised or terminated.
RESTRICTED AND DEFERRED STOCK. An award of restricted stock or deferred
stock may be granted under the 1994 Plan. Restricted stock is subject to
restrictions on transferability and other restrictions as may be imposed by the
Committee at the time of grant. In the event the holder of restricted stock
ceases to be employed by the Company during the applicable restrictive period,
restricted stock that is at the time subject to restrictions shall be forfeited
and reacquired by the Company. Except as otherwise provided by the Committee at
the time of grant, a holder of restricted stock shall have all the rights of a
stockholder
A-16
<PAGE>
including, without limitation, the right to vote restricted stock and the right
to receive dividends thereon. An award of deferred stock is an award that
provides for the issuance of stock upon expiration of a deferral period
established by the Committee. Except as otherwise determined by the Committee,
upon termination of employment of the recipient of the award during the
applicable deferral period, all stock that is at the time subject to deferral
shall be forfeited. Until such time as the stock which is the subject of the
award is issued, the recipient of the award has no rights as a stockholder.
DIVIDEND EQUIVALENT RIGHTS. A dividend equivalent right gives the recipient
the right to receive cash or other property equal in value to the dividends that
would be paid if the recipient held a specified number of shares of Common
Stock. A dividend equivalent right may be granted as a component of another
award or as a free standing award.
BONUS SHARES AND OTHER SHARE-BASED AWARDS. The 1994 Plan authorizes the
Committee to grant shares as a bonus, or to grant shares or other awards in lieu
of obligations of the Company to pay cash under other plans or compensatory
arrangements, upon such terms as shall be determined by the Committee. The 1994
Plan also authorizes the Committee to grant other forms of awards based upon,
payable in or otherwise related in whole or in part to Common Stock of the
Company, including, without limitation, convertible or exchangeable debentures
or other debt securities, other rights convertible or exchangeable into shares,
purchase rights for shares, awards contingent upon performance of the Company,
and awards valued by reference to the book value of shares of Common Stock or
awards determined by reference to the value of securities of, or the performance
of, specified subsidiaries.
PERFORMANCE-BASED AWARDS TO CERTAIN EXECUTIVE OFFICERS. The 1994 Plan
permits the Committee to specify that the exercisability or settlement of awards
(other than an Employee Option granted with an exercise price equal to 100% of
the fair market value of a share of Common Stock at the time of grant) may be
conditioned upon the achievement of objective performance goals, if the award is
granted to an executive officer of the Company whose compensation, at the time
of grant, is subject to the limit on deductible compensation under Section
162(m) of the Code. The 1994 Plan contemplates that the following performance
goals may be selected by the Committee: (1) pre-tax income from continuing
operations of either the Company or a subsidiary or business unit of the
Company, (2) consolidated net income of the Company, (3) revenues of either the
Company or a subsidiary or business unit of the Company, (4) annual earnings per
common share or (5) annual return on common equity. The Committee is authorized
to make adjustments in the terms and conditions of, and the criteria included
in, awards in recognition of unusual or nonrecurring events, extraordinary items
or discontinued operations affecting the Company or a subsidiary of the Company
or the financial statements of the Company or a subsidiary of the Company, or in
response to changes in applicable laws, regulations or accounting principles, or
tax rates and regulations or business conditions to the extent permitted under
Section 162(m) of the Code. Achievement of the goals will be measured over a
performance period that may extend for up to four years, as specified by the
Committee. The 1994 Plan contemplates that the Committee will, prior to the
performance period, establish the targets applicable to the performance goals
for each performance period. The 1994 Plan permits the Committee to provide that
awards will be payable upon achievement of any one of the performance goals or
upon achievement of two or more goals applicable to the performance period. The
1994 Plan permits the Committee to exercise discretion to reduce the amount of
any award payable upon achievement of the performance goals.
OTHER PROVISIONS:
PAYMENT FOR AWARDS. Awards may be issued at no cost to the recipient or for
such cost as maybe required by law. Upon grant or exercise of an award, the
Committee may, in its discretion, permit the payment of any exercise or purchase
price or other consideration required to be delivered to the Company in
connection thereto, in whole or in part, in installments. Each such installment
payment arrangement will be evidenced by a promissory note, the terms and
conditions of which shall be determined by the
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Committee subject to the following: (a) the maximum term of any note shall be
ten years from the date of the note, (b) the minimum interest rate with respect
to amounts borrowed shall in no event be less than the rate required to avoid
imputation of interest under the provisions of the Code and (c) unless the
Committee determines otherwise, the unpaid principal amount of any note will
become due and payable upon the sale of any of the shares so purchased, but in
no event later than 30 days after an optionee's employment with the Company
terminates.
CHANGE IN CONTROL. Upon a Change in Control of the Company, which includes
the Share Purchase, any award carrying a right to exercise that was not
previously exercisable shall become fully exercisable, the restrictions,
deferral limitations and forfeiture conditions applicable to any other award
granted shall lapse and any performance conditions imposed with respect to
awards shall be deemed to be fully achieved (except in certain circumstances
involving performance goals for executive officers whose compensation exceeds
$1,000,000, in which case the performance goal shall be deemed achieved to the
extent of actual achievement on the date of the Change in Control).
TRANSFERS. Awards under the 1994 Plan (other than Incentive Options) may
not be transferred, pledged, mortgaged, hypothecated or otherwise encumbered
other than by will or under the laws of descent and distribution, except that
the Committee may permit transfers of awards for estate planning purposes if,
and to the extent, such transfers do not cause a participant who is then subject
to Section 16 of the Exchange Act to lose the benefit of the exemption under
Rule 16b-3 for such transactions.
AMENDMENTS AND TERMINATIONS. The Board may further amend, alter, suspend,
discontinue or terminate the 1994 Plan at any time, except that any such action
shall be subject to stockholder approval at the annual meeting next following
such Board action if such stockholder approval is required by federal or state
law or regulation or the rules of any exchange or automated quotation system on
which the Common Stock may then be listed or quoted, or if the Board otherwise
determines to submit such action for stockholder approval. In addition, no
amendment, modification, suspension, discontinuation or termination to the 1994
Plan may materially impair the rights of any participant with respect to any
award without such participant's consent. Unless terminated earlier by action of
the Board, the 1994 Plan will terminate on the earlier of the Effective Time and
August 24, 2004.
TAX CONSEQUENCES OF THE 1994 PLAN
GENERAL
The following discussion of tax consequences of various awards under the
1994 Plan is subject to the limitations imposed by Section 162(m) of the Code on
the deductibility of compensation to certain executive officers of the Company
in excess of $1,000,000 in certain circumstances. See "Application of Section
162(m) of the Code" below for a more complete discussion of those limitations.
EMPLOYEE OPTIONS. The Company believes that under present Federal tax laws
the grant of an Employee Option will create no taxable income consequences for
an optionee or deduction for the Company. The optionee will generally have no
taxable income upon exercising an Incentive Option (except that the alternative
minimum tax may apply), and the Company will receive no deduction when an
Incentive Option is exercised. The optionee must recognize a specified amount of
ordinary income with respect to the exercise of a Non-Incentive Option, and the
Company (or its subsidiary) will generally be entitled to a deduction for the
same amount. The tax treatment to an optionee of a disposition of shares
acquired under the 1994 Plan depends on how long the shares have been held and
on whether such shares were acquired by exercising an Incentive Option or a
Non-Incentive Option. Generally, there will be no tax consequence to the Company
in connection with a disposition of shares acquired under an Employee Option,
except that the Company (or its subsidiary) will generally be entitled to a
deduction in the case of a disposition of shares acquired under an Incentive
Option before the applicable Incentive Option holding period has been satisfied.
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LSARS. The grant of an LSAR in connection with an Employee Option does not
create taxable income to the holder of the Employee Option. Upon exercise of an
LSAR, the holder will realize compensation income to the extent of the cash paid
and the Company will generally be entitled to a deduction for such amount.
RESTRICTED STOCK. With respect to restricted stock, the recipient will
realize compensation income, in an amount equal to the fair market value of such
stock less any amount paid for such stock, at the earlier of the time when the
employee's rights with respect to such stock are no longer subject to a
substantial risk of forfeiture and the time when such stock is transferable,
unless the recipient elects to be taxed at the time of the receipt of the award
(as if the restrictions did not exist). The Company will generally be entitled
to a deduction under the Code at the time and equal to the amount that
compensation income is realized by the recipient of the restricted stock.
DEFERRED STOCK; BONUS STOCK. The recipient of deferred stock or bonus stock
will realize compensation income in an amount equal to the fair market value of
such stock as and when the same becomes payable to the recipient, less any
amount paid for such stock. The Company generally will be entitled to a
deduction under the Code at the time and equal to the compensation income
realized by the recipient.
DIVIDEND EQUIVALENT RIGHTS. The recipient of a dividend equivalent right
will realize compensation income equal to the cash (or fair market value of the
shares, if payment is made in such form) as and when the same becomes payable to
the recipient, with the Company generally entitled to a simultaneous deduction
equal to the amount of the compensation realized.
APPLICATION OF SECTION 162(M) OF THE CODE
Section 162(m) of the Code limits to $1 million per year the federal income
tax deduction available to public companies for compensation paid to its chief
executive officer and its four other highest paid executive officers. However,
Section 162(m) provides an exception to this limitation for certain
"performance-based" compensation if various requirements are satisfied. The 1994
Plan is designed to satisfy the exception for stock options issued thereunder.
THE 1984 PLAN. The 1984 Plan authorized the grant of stock options (both
"incentive stock options" within the meaning of Section 422 of the Code and
non-incentive stock options) and stock appreciation rights to employees of the
Company or any of its subsidiaries, including employees who were also directors
of the Company, who shared primary responsibility for the management, growth or
protection of the business of the Company or any of its subsidiaries. Under the
1984 Plan, stock appreciation rights could have been granted in tandem with
either type of option, and generally permitted the holder to receive Common
Stock or cash (at the option of the Stock Option Committee) equal to a certain
percentage (not to exceed 100%) of the excess of the fair market value of the
stock subject to the related option over the exercise price of the option. The
exercise price of all options granted under the 1984 Plan was equal to 100% of
the fair market value of the Common Stock on the applicable date of grant. Under
the 1984 Plan, in the event of a Change of Control (as defined in the 1984
Plan), which includes the Share Purchase, outstanding stock options shall,
subject to certain exceptions, become immediately and fully exercisable. The
1984 Plan expired on September 17, 1994, and no options were permitted to be
issued under the 1984 Plan after that date. The expiration of the 1984 Plan does
not affect rights under outstanding options and stock appreciation rights which
were not exercised prior thereto. As of the date hereof, there are no stock
appreciation rights outstanding under the 1984 Plan.
As noted above, pursuant to the Merger Agreement, all stock option plans of
the Company shall terminate as of the Effective Time.
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EMPLOYMENT AGREEMENTS AND CHANGE IN CONTROL ARRANGEMENTS
EMPLOYMENT AGREEMENT WITH MR. COOPER.
The Company and Mr. Cooper entered into an employment agreement, dated as of
January 1, 1986, which agreement was amended on September 30, 1986, amended and
restated as of November 10, 1988 and was further amended as of September 13,
1990, as of September 1, 1992, as of March 15, 1995 and as of July 1, 1997. As
of July 1, 1997, Mr. Cooper relinquished the title of Chief Executive Officer.
The agreement expires on December 31, 1998, subject to earlier termination upon
certain conditions, including without limitation a Change in Control Event (as
defined in the agreement) of the Company. Under the employment agreement, Mr.
Cooper is entitled to receive an annual salary of not less than $225,000,
subject to adjustment for increases in the Consumer Price Index. The annual
salary under the agreement is currently $349,260. He is also entitled to an
annual bonus each fiscal year in which he is employed, which bonus shall not
exceed 100% of the salary earned in such fiscal year, equal to 10% of the amount
by which the Company's pre-tax income, as adjusted for discontinued operations
and certain unusual, nonrecurring items, in such fiscal year exceeds the product
of the Company's net worth at the beginning of such fiscal year times the
average coupon equivalent rate during such fiscal year for thirteen-week
treasury bills. Mr. Cooper is also entitled to amounts, not to exceed 10% of his
salary in each year, for legal and accounting services rendered to him, and the
Company is required to provide disability insurance, $1,000,000 of life
insurance and $1,000,000 of travel and accident insurance on Mr. Cooper's life,
payable to his designated beneficiary.
Under the agreement, Mr. Cooper is entitled to receive upon his termination
of employment a lump sum payment equal to the salary plus pro rata bonus to
which he was entitled at the time of such termination for the year in which such
termination occurs. Mr. Cooper is also entitled to receive upon the termination
of his employment, including his voluntary retirement prior to the expiration of
his employment agreement, a lump sum payment equal to the discounted present
value of (i) the annual payments for his remaining life expectancy, as
calculated in accordance with specified actuarial assumptions, equal to 50% of
the highest aggregate annual compensation (salary plus bonus) paid to him during
the last three years of his employment, plus (ii) the premiums payable on the
insurance policies described above. If Mr. Cooper dies during the term of his
employment agreement, his designated beneficiary shall receive the lump sum
amount payable pursuant to clause (i) above, except that such payment shall be
based on a period of ten years. The employment agreement further provides that
if Mr. Cooper dies during the term of his employment agreement, his designated
beneficiary will also be entitled to a lump sum payment equal to the discounted
present value of one year's compensation. Upon the termination of Mr. Cooper's
employment, the Company shall continue to include Mr. Cooper and his spouse in
its medical and hospitalization plan for the life of Mr. Cooper and his spouse.
Mr. Cooper will also be retained as a consultant for the remainder of his life
(which consulting period, prior to the July 1997 amendment to Mr. Cooper's
employment agreement, was to have continued for the ten-year period following
the termination of his employment). For such consulting services, Mr. Cooper
shall be paid a monthly consulting fee equal to one-half of the highest average
aggregate monthly compensation (including base salary and bonus) paid to him by
the Company in any 12 months during the last three years of his employment.
Pursuant to the employment agreement, the Company is required to deposit into a
trust at the time of Mr. Cooper's termination or retirement an amount equal to
the discounted present value of the aggregate consulting fees to be paid by the
Company to Mr. Cooper during such consulting period.
On the Share Purchase, Mr. Cooper is expected to receive a lump sum payment
in respect of all payments due him under his employment agreement as a result of
a change of control.
EMPLOYMENT AGREEMENT WITH MR. HEWITT. Pursuant to an employment agreement
between Mr. Hewitt, the Company and CCC which became effective on July 1, 1995
and amended as of July 1, 1997, Mr. Hewitt is employed as President and Chief
Executive Officer of the Company and as Chairman and Chief Executive Officer of
CCC. The agreement expires on June 30, 2000, subject to earlier termination upon
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certain conditions, including without limitation the occurrence of certain
Events (as defined in the agreement) relating to the Company (including, without
limitation, a "change in control" of the Company). Under this agreement, Mr.
Hewitt is currently entitled to a base salary of $300,000 per annum and is also
entitled to a bonus for each fiscal year during the term of the agreement, which
bonus shall include (i) a pre-tax income component (not to exceed $225,000 in
any year) based on the extent to which the pre-tax income of the Company for
such fiscal year exceeds the highest pre-tax income of the Company for any prior
fiscal year commencing with the 1995 fiscal year (except that, for the 1996
fiscal year, the pre-tax income component was based on the extent to which the
combined pre-tax income for CCC, IPI and HPSI exceeded the pre-tax income of CCC
for fiscal 1995); (ii) a pre-tax margin component (not to exceed $112,500 in any
year) based on the extent to which the Company's pre-tax margin for such fiscal
year exceeds 9.0% (except that, for the 1996 fiscal year, the pre-tax margin
component was based on the extent to which the combined pre-tax income of CCC,
IPI and HPSI exceeded 9.0% of the combined revenues for CCC, IPI and HPSI for
fiscal 1996); and (iii) a discretionary component (not to exceed $112,500 in any
year) based on whether certain objectives established by the Board have been
met. Mr. Hewitt is also entitled during the term of the agreement to amounts,
not exceeding 10% of his base salary in each year, for legal, accounting and tax
advisory services rendered to him, and other miscellaneous expenses, and the
Company is required to provide $1,000,000 of life insurance on Mr. Hewitt's
life, as well as a disability income insurance policy which provides Mr. Hewitt
with a $1,000,000 benefit. Upon the termination of Mr. Hewitt's employment, the
Company shall continue to include Mr. Hewitt and his spouse in its medical and
hospitalization plan for the life of Mr. Hewitt and his spouse. Mr. Hewitt will
also be retained as a consultant for a ten-year period following the termination
of his employment. For such consulting services, Mr. Hewitt shall be paid a
consulting fee equal to one-half of the highest average aggregate monthly
compensation (including base salary and bonus) paid to him by the Company in any
12 months during the last three years of his employment.
In addition, pursuant to this employment agreement, the Company granted Mr.
Hewitt an option to purchase up to 40,000 shares of Common Stock based on the
extent to which the combined pre-tax income of CCC, IPI and HPSI during the
fiscal year ended June 30, 1996 exceeded the pre-tax income of CCC in fiscal
year 1995 (see footnote 5 to Summary Compensation Table above), and an option to
purchase up to 30,000 shares of Common Stock based on the extent to which the
pre-tax income of the Company during the fiscal year ending June 30, 1997
exceeded the pre-tax income of the Company in fiscal year 1995 or fiscal year
1996, whichever is higher (see footnote 4 to Summary Compensation Table above).
In addition, the Company has agreed to provide Mr. Hewitt with an option to
purchase up to 30,000 shares of Common Stock based on the extent to which the
pre-tax income of the Company during the fiscal year ending June 30, 1998
exceeds the pre-tax income of the Company in fiscal year 1995, 1996 or 1997,
whichever is highest.
Pursuant to the employment agreement, the Company also granted to Mr. Hewitt
on August 27, 1996 an option to purchase 32,477 shares of Common Stock at an
initial exercise price of $22.9375 (see footnote 4 to Summary Compensation Table
above). Such option, which was granted under the 1994 Plan, was exercisable at
that price only if there was a "change in control" of the Company prior to the
time Mr. Hewitt was appointed as Chief Executive Officer of the Company. As a
result of Mr. Hewitt's appointment as Chief Executive Officer, effective July 1,
1997, the exercise price of the option was adjusted to $26.375, the fair market
value of the Common Stock on the effective date of such appointment.
On the Share Purchase, Mr. Hewitt is expected to receive a lump sum payment
in respect of all payments due him under his employment agreement as a result of
a change of control.
EMPLOYMENT AGREEMENT WITH MR. GILL. Pursuant to an employment agreement
effective January 1, 1995 between Mr. Gill and the Company, which agreement was
amended effective August 27, 1996 and further amended in February 1997 and as of
July 1, 1997, Mr. Gill is employed as Executive Vice President, Chief Financial
Officer, Secretary and Treasurer of the Company. The agreement expires on June
30, 2000,
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subject to earlier termination upon the occurrence of one or more events,
including without limitation, Mr. Gill's election to treat a change in control
of the Company as a material breach of the agreement.
Under the employment agreement, Mr. Gill is currently entitled to a base
salary of not less than $200,000 per annum and may also receive a discretionary
bonus as determined by the Employee Compensation and Benefit Committee or the
Board of Directors. The employment agreement also provides that the Company is
required to provide Mr. Gill with $500,000 in disability benefits and $500,000
in life insurance benefits.
On the Share Purchase, Mr. Gill is expected to receive a lump sum payment in
respect of all payments due him under his employment agreement as a result of a
change of control.
EMPLOYMENT AGREEMENT WITH MR. DUNN. Pursuant to an employment agreement
effective July 1, 1995 and amended as of November 14, 1996 between Mr. Dunn, the
Company and TSI, Mr. Dunn is employed as Chairman of the Board of TSI. Under the
employment agreement, Mr. Dunn is required to devote not less than 75% of his
business time and efforts to his employment as Chairman of the Board of TSI. The
agreement expires on June 30, 1998, subject to earlier termination upon the
occurrence of one or more events, including, without limitation, Mr. Dunn's
election to terminate the agreement in the event of a change in control of the
Company.
Pursuant to his employment agreement, Mr. Dunn is entitled to a base salary
of $200,000 per annum. He is also entitled to a bonus during each year of the
agreement based on the adjusted pre-tax earnings of TSI, which bonus shall not
exceed $250,000 in any such year. If Mr. Dunn's employment is terminated for any
reason during the term of the agreement, other than for cause, the amount of
such bonus shall be prorated to reflect the portion of the year in which Mr.
Dunn was employed. In accordance with Mr. Dunn's employment agreement, TSI
deposited approximately $1,500,000 into a trust during fiscal 1996, which amount
represented the deferred bonuses, and related interest, previously earned by Mr.
Dunn. In accordance with the agreement, Mr. Dunn withdrew $250,000 in January
1996 and may withdraw $250,000 in each January thereafter until the entire
amount deposited in the trust, including all earnings and accretions (or losses)
thereon, has been paid. Upon the termination of Mr. Dunn's employment with TSI,
the balance in the trust, together with any earnings or net of any losses
thereon, shall be paid to Mr. Dunn (or to his designated beneficiary in the
event of his death), at his option, either in a lump sum payment or in equal
monthly installments over a period not to exceed 120 months. During the term of
Mr. Dunn's employment agreement, the Company will also be required to contribute
$30,000 per year to a non-qualified retirement plan established for him.
Pursuant to Mr. Dunn's employment agreement, TSI is required to maintain a
total of $2,000,000 face amount of life insurance on the life of Mr. Dunn. In
November 1995, the Employee Compensation and Benefit Committee, with Mr. Dunn's
consent, approved an amendment to Mr. Dunn's employment agreement pursuant to
which, effective at such time, TSI substituted a $2,000,000 universal
second-to-die life insurance policy, payable to a beneficiary designated by Mr.
Dunn. The premiums for such insurance are paid by TSI. TSI has agreed to
transfer to Mr. Dunn, upon termination of his employment at the end of the term
of the employment agreement or earlier under certain circumstances, the
$2,000,000 policy. TSI has the right to receive the return of the premiums that
TSI has paid on the policy, from the proceeds of the policy when such proceeds
are paid. In addition, if Mr. Dunn retires from regular employment with TSI, he
shall be entitled to continued medical insurance coverage paid by TSI.
The employment agreement also provides that, upon the termination of the
agreement in accordance with its terms on June 30, 1998, or in the event Mr.
Dunn voluntarily terminates his employment prior to such date, TSI may, at its
option, elect to continue his employment through June 30, 2001 or such earlier
date as TSI may choose in order to continue various requirements of the
agreement. In the event of any such extension of the term of his employment, the
only compensation to which Mr. Dunn shall be entitled is the sum of $50,000 per
annum for each year of such extension period, and TSI shall not be obligated to
make the $30,000 per annum contribution to the non-qualified retirement plan
established for him or to
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maintain the life insurance policies described above. The agreement further
provides that, during any such extension period, Mr. Dunn shall not be required
to devote any specified amount of his business time and efforts to the business
of the Company.
On the Share Purchase, Mr. Dunn is expected to receive a lump sum payment in
respect of all payments due him under his employment agreement as a result of a
change of control.
EMPLOYMENT AGREEMENT WITH MR. MACAULAY. Pursuant to an employment agreement
effective July 1, 1995 and amended as of November 14, 1996 between Mr. Macaulay
and TSI, Mr. Macaulay is employed as the President and Chief Executive Officer
of TSI. The agreement expires on June 30, 1999, subject to earlier termination
upon the occurrence of one or more events, including without limitation, Mr.
Macaulay's election to treat certain events which may involve a change in
control of the Company as a material breach of the agreement.
Under the employment agreement, Mr. Macaulay is entitled to a base salary of
$300,000 per annum and is also entitled to receive a bonus during each fiscal
year during the term of the employment agreement, which shall not exceed
$600,000 in any such fiscal year, based on the Adjusted Pre-tax Income (as
defined) of TSI. During the term of Mr. Macaulay's employment agreement, TSI
will be required to contribute $15,000 per annum to a non-qualified retirement
plan established for him ($30,000 beginning with fiscal 1998). The employment
agreement also provides that TSI will provide Mr. Macaulay with $1,000,000 in
disability insurance benefits and $1,000,000 in life insurance benefits. In
addition, if Mr. Macaulay retires from regular employment with TSI, he shall be
entitled to continued medical insurance coverage paid by TSI.
The employment agreement also provides that, upon the termination of the
agreement in accordance with its terms on June 30, 1999, or in the event Mr.
Macaulay voluntarily terminates his employment prior to such date, TSI may, at
its option, elect to continue his employment through June 30, 2001 or such
earlier date as TSI may choose in order to continue various requirements of the
agreement. In the event of any such extension of the term of his employment, the
only compensation to which Mr. Macaulay shall be entitled is the sum of $50,000
per annum for each year of such extension period, and TSI shall not be obligated
to make the $30,000 per annum contribution to the non-qualified retirement plan
established for him or to provide the disability and life insurance benefits
described above. The agreement further provides that Mr. Macaulay shall not be
required to devote any specified amount of his business time and efforts to the
business of the Company during any such extension period.
EMPLOYMENT AGREEMENTS WITH MR. HERBERT R. SILVER AND MR. BERNARD
SILVER. Pursuant to identical employment agreements, dated as of December 1,
1992 and amended as of November 11, 1996, between each of Mr. Herbert R. Silver
and Mr. Bernard Silver and the Company and Allied Bond, Herbert R. Silver and
Bernard Silver are employed as Co-Chairmen of Allied Bond. Each agreement
expires on June 30, 1998, subject to earlier termination upon the occurrence of
one or more events including, without limitation, the executive's election to
treat certain events which may involve a change in control of the Company as a
material breach of the agreement. Each executive may also elect to terminate his
employment in the event that the Co-Chairmen and/or their nominees no longer
constitute a majority of the members of the Board of Directors of Allied Bond.
In such event, Allied Bond would continue to pay base salary due through the
remaining term of the agreement plus the pro-rated share of any bonus due
through the date of termination.
Under these employment agreements, each executive is entitled to an initial
base salary of $125,000 per annum, subject to adjustment annually for increases
in the Consumer Price Index. The employment agreement provides for the payment
of bonuses equal to a specified percentage of base salary paid during the fiscal
year if the Adjusted Pre-tax Income (as defined therein) of Allied Bond for the
fiscal year exceeds the highest Adjusted Pre-tax Income for any of the fiscal
years during the period of employment under the employment agreement. The
employment agreement also provides that Allied Bond is required
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to provide each executive with $1,000,000 in disability insurance benefits and
$1,000,000 in life insurance benefits.
EMPLOYMENT AGREEMENT WITH MR. ZUCKER. Pursuant to an employment agreement,
effective July 1, 1997, Mr. Zucker is employed as President and Chief Executive
Officer of Allied Bond. The agreement expires on June 30, 1999, subject to
earlier termination under certain circumstances at Mr. Zucker's election
including a change in control of the Company.
Under the employment agreement, Mr. Zucker is entitled to an initial base
salary of $275,000 per annum, subject to adjustment annually by an amount equal
to the annual increase in the Consumer Price Index. The employment agreement
provides for the payment of performance-related bonuses equal to (i) a specified
percentage (up to 50%) of base salary paid during the fiscal year based upon the
Operating Income (as defined therein) of Allied Bond as compared to certain
prior fiscal years and (ii) up to 25% of his base salary if the operating
margins (as defined) exceed certain specified targets. At the discretion of the
Board of Directors of Allied Bond, Mr. Zucker may also receive a discretionary
bonus of up to 25% of annual base salary, provided, however, that the sum of the
performance related bonuses and the discretionary bonus for any fiscal year may
not exceed 100% of annual base salary for such fiscal year. The employment
agreement also requires Allied Bond to provide Mr. Zucker with disability income
insurance which will provide a monthly benefit of $7,500 per month and
$1,000,000 in life insurance benefits. If Mr. Zucker's employment is terminated
without "cause", Mr. Zucker shall be entitled to severance equal to the greater
of one year of his annual base salary and the remaining base salary that would
have been paid to him from the date of termination to the expiration date of the
agreement. In such event, he shall also be entitled to the pro-rated share of
any bonus due for such year in which his employment is so terminated.
CHANGE IN CONTROL ARRANGEMENTS. Each of the employment agreements with
Messrs. Cooper, Hewitt, Gill, Dunn, Macaulay, H. Silver, B. Silver and Zucker
contains provisions providing for payments in the event of a change in control
of the Company (as described in the respective agreements). In the case of
Messrs. Macaulay, H. Silver, B. Silver and Zucker, such payments are only
required to be made if such change in control occurs without the approval of the
Board of the Company. The agreements entered into with Messrs. Macaulay, H.
Silver and B. Silver generally provide that if the employee elects to terminate
his employment following a change in control, he will be entitled to receive
299% of his "base amount" (as defined under the Code) within a specified period
following such termination. The agreements with Messrs. Cooper (as described
below), Hewitt and Gill generally provide for payments of similar amounts upon a
change in control regardless of whether such employee elects to terminate his
employment with the Company. In addition, in the event of a change in control of
the Company which has not been approved by the Board, Herbert R. Silver and
Bernard Silver shall also be entitled to receive (i) up to an aggregate of $6.9
million, which represents amounts they would have been eligible to receive based
on the financial performance of Allied Bond, as provided in the purchase
agreement, as amended, pursuant to which the Company acquired substantially all
of the assets of the Partnership, and (ii) certain other amounts payable to them
under such agreement. Following a change in control of Allied Bond which has not
been approved by the Board of Allied Bond, Mr. Zucker's agreement also provides
that he may elect to terminate his employment and receive within a specified
period following such termination 299% of his "base amount". Mr. Dunn's
agreement specifies that, in the event of a change in control of the Company (as
defined in the agreement), he will receive the lesser of $1,500,000 or 299% of
his "base amount" and will be entitled to the insurance policies described
above. The "base amount", as defined under the Code, is the average annual
compensation paid for the five taxable years (or such shorter period during
which services are performed on behalf of the Company) prior to a change in
control of the Company.
Mr. Cooper's agreement provides that if there is a change in control of the
Company (as defined therein), he will receive an amount equal to the discounted
present value of the sum of (i) unpaid salary and bonus to which he would have
been entitled under the agreement through December 31, 1998 (assuming a 5%
yearly increase in the annual salary and a bonus in each year equal to the
amount of the
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annual salary paid during such year), (ii) the pension that would have been
payable to Mr. Cooper starting in 1999 based on his life expectancy at the time
of termination of his employment agreement assuming that his employment had
continued with the Company until December 31, 1998, (iii) the amount that would
be payable to Mr. Cooper as a consultant for the remainder of his life, (iv) 10%
of Mr. Cooper's annual salary for each remaining year of the agreement for legal
and accounting services to which Mr. Cooper was entitled under the agreement and
(iv) the premiums payable on (x) medical and hospitalization coverage for Mr.
Cooper and his spouse based upon their life expectancies at such time and (y)
the life insurance, disability, and travel and accident policies then maintained
by the Company for Mr. Cooper's benefit based on his life expectancy at that
time. The foregoing amounts shall be limited to the extent the aggregate
payments exceed 299% of Mr. Cooper's "base amount" (as defined under the Code).
A portion of any payments which may be made to employees upon a change in
control of the Company may be deemed an "excess parachute payment" within the
meaning of the Code, in which event such portion will not be a tax-deductible
expense for the Company.
On the Share Purchase, Messrs. Cooper, Hewitt, Gill and Dunn are each
expected to receive a lump sum payment in respect of all payments due under
their respective employment agreements as a result of the change in control.
SHAREHOLDER RIGHTS PLAN. On February 17, 1988, the Board of Directors of
the Company declared a dividend distribution of one common stock purchase right
(a "Right") for each outstanding share of Common Stock. The dividend was payable
to holders of record of Common Stock at the close of business on March 14, 1988
(the "Rights Record Date").
The Rights were issued pursuant to a Rights Agreement dated as of March 14,
1988 between the Company and Registrar and Transfer Company, as Rights Agent
(the "Rights Agreement"), which Rights Agreement has been amended effective as
of May 23, 1990 and as of September 16, 1992. Pursuant to an agreement dated as
of August 22, 1994, The First National Bank of Boston was substituted as the
Rights Agent under the Rights Agreement. The Rights will not be exercisable
until the Distribution Date (as defined below) and will expire at the close of
business on December 31, 1998, unless earlier redeemed by the Company as
described below. Each Right entitles the registered holder to purchase from the
Company one-half of one share of Common Stock at an exercise price of $30 per
whole share (the "Exercise Price"), subject to adjustment. The Exercise Price
may be paid, at the option of the holder, in cash or shares of Common Stock
having a market value at the time of exercise equal to the Exercise Price.
Pursuant to an amendment to the Rights Agreement dated as of December 22,
1997, the definition of Acquiring Person under the Rights Agreement was amended,
so long as the Merger Agreement remains in effect, to exclude Parent and
Acquisition.
Until the earlier to occur of (i) 30 days following a public announcement
that a person or group of affiliated or associated persons ("Acquiring Person"),
other than Parent and Acquisition (so long as the Merger Agreement is in effect)
and certain Exempted Persons and Schedule 13G Filers, as defined in the Rights
Agreement, have acquired, or obtained the right to acquire, beneficial ownership
of 15% or more of the outstanding shares of Common Stock, and (ii) the tenth
business day following the commencement, or announcement, of a tender offer or
exchange offer, the consummation of which would result in a person or group
(other than Exempted Persons) beneficially owning 30% or more of such
outstanding shares of Common Stock (the earlier of such dates is hereafter
referred to as a "Distribution Date"), the Rights will be evidenced by Common
Stock certificates and will be transferred with and only with such Common Stock
certificates. The transfer of any certificates for Common Stock outstanding will
also constitute the transfer of the Rights associated with the Common Stock
represented by such certificate. Common Stock certificates issued after the
Rights Record Date contain a notation incorporating the Rights Agreement by
reference. Under the Rights Agreement, "Exempted Persons" are defined to include
American Diversified Enterprises, Inc. and its subsidiaries, affiliates and
associates, and "Schedule 13G Filers" are defined as certain persons or entities
who have filed and remain eligible to file a Schedule 13G under Regulations
13d-1(b) and 13d-2(b) promulgated under the Exchange Act.
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In the event that (i) the Company is the surviving corporation in a merger
or other business combination with an Acquiring Person and the Company's Common
Stock remains outstanding and unchanged, (ii) after the Distribution Date a
person becomes the beneficial owner of 40% or more of the then outstanding
shares of Common Stock except pursuant to an offer for all outstanding shares of
Common Stock at a price at least equal to or greater than $30 per share cash net
to seller (the "Minimum Cash Amount"), (iii) an Acquiring Person engages in one
or more "self-dealing" transactions as set forth in the Rights Agreement, or
(iv) during such time as there is an Acquiring Person, an event occurs which
results in such Acquiring Person's ownership interest being increased by more
than 1% (e.g., a reverse stock split), the number of shares of Common Stock to
be acquired upon exercise of a Right shall be adjusted so that each holder of
record of a Right, other than Rights that are beneficially owned by the
Acquiring Person or certain transferees of the Acquiring Person (which will
thereafter be void), will thereafter have the right to receive, upon exercise of
each Right, that number of shares of Common Stock having a market value equal to
two times the Exercise Price of the Right, provided, however, that such
adjustment shall not be applicable if the stockholders of the Company have
previously approved any such transaction in accordance with the provisions of
the Company's Certificate of Incorporation. For example, if the Exercise Price
were $30 and the current market price were $20, each Right not owned by an
Acquiring Person (or certain transferees) following an event set forth in the
preceding paragraph would entitle its holder to purchase three shares of Common
Stock for $30 (payable in cash or shares of Common Stock).
In the event there is insufficient Common Stock authorized to satisfy the
exercise of all Rights outstanding, the Company may suspend the exercise of
Rights for a period of 90 days to obtain stockholder approval for authorization
of a sufficient number of shares of Common Stock, and if such approval is not
obtained, the Rights Agreement provides for the payment in cash to each holder
of record of a Right in an amount equal to two times the Exercise Price, subject
to the limitations of any applicable loan or other restrictive agreements.
In the event that, at any time after there exists an Acquiring Person and a
public announcement to that effect has been made, (i) the Company is acquired in
a merger or other business combination transaction in which the Company is not
the surviving corporation or in which its Common Stock is changed or exchanged,
or (ii) 50% or more of the Company's assets or earning power is sold or
transferred, each holder of a Right (except Rights held by an Acquiring Person,
or certain transferees of an Acquiring Person) thereafter will have the right to
receive, upon exercise of each Right, that number of shares of common stock of
the acquiring company having a fair market value equal to two times the Exercise
Price of the Right, unless the stockholders of the Company have approved any
such transaction in accordance with the provisions of the Certificate of
Incorporation.
The Exercise Price payable and the number of shares of Common Stock or other
securities or property issuable upon exercise of the Rights are subject to
adjustment from time to time to prevent dilution (i) in the event of a stock
dividend on or a subdivision, combination or reclassification of the Common
Stock, (ii) if holders of the Common Stock are granted certain rights or
warrants to subscribe for Common Stock or securities convertible into Common
Stock at less than the current market price of the Common Stock, or (iii) upon
the distribution to holders of the Common Stock of evidences of indebtedness or
assets (excluding cash dividends out of earnings or retained earnings at a rate
not in excess of $1.00 per annum) or of subscription rights or warrants (other
than those referred to above). The Minimum Cash Amount is also subject to
similar adjustment. With certain exceptions, no adjustment in the Exercise Price
will be required until cumulative adjustments amount to at least 1% of the
Exercise Price. No fractional shares or Rights will be issued and, in lieu
thereof, an adjustment in cash will be made based on the market price of the
Common Stock on the last trading date prior to the date of exercise.
At any time until 30 days following the date on which a person becomes an
Acquiring Person, the Company may redeem the Rights in whole, but not in part,
at a price of $.01 per Right. After the redemption period has expired, the
Company's right of redemption may be reinstated if no triggering event (as
defined in the Rights Agreement) has occurred and an Acquiring Person reduces
its beneficial
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<PAGE>
ownership to 10% or less of the outstanding shares of Common Stock in a
transaction or series of transactions not involving the Company at a time when
there exists no other Acquiring Person. Immediately upon the action of the Board
of Directors ordering redemption of the Rights, the Rights will terminate and
the holders of Rights only will be entitled to receive the $.01 per Right
redemption price.
Any of the provisions of the Rights Agreement may be amended by the Board of
Directors of the Company prior to the Distribution Date. After the Distribution
Date, the provisions of the Rights Agreement may be amended by the Board of
Directors in order to cure any ambiguity, to make changes which do not adversely
affect the interests of holders of Rights (excluding the interests of any
Acquiring Person), or to shorten or lengthen any time period under the Rights
Agreement; provided, however, that no amendment to lengthen the time period
governing redemption shall be made at such time as the Rights are not
redeemable.
INDEMNIFICATION AGREEMENTS WITH DIRECTORS AND EXECUTIVE OFFICERS
The Company has entered into indemnification agreements with each of its
directors and executive officers. Under those agreements, the Company has agreed
to indemnify such directors and executive officers against certain liabilities
arising out of their service as a director or officer of the Company and/or any
subsidiary of the Company. The indemnification agreements provide, as a contract
right, substantially the same protection as is currently provided by the
Company's Certificate of Incorporation and By-Laws and also provide a clear
procedure for pursuit of a claim to indemnification. In addition, the agreements
provide for the creation and funding of a trust to satisfy indemnification
claims in the event of the occurrence of a Potential Change in Control (as
defined in such indemnification agreements). The indemnification agreements are
applicable to claims asserted after their respective effective dates arising
from acts or omissions occurring before or after their effective dates.
CERTAIN TRANSACTIONS
In December 1992, Allied Bond, a subsidiary of the Company, acquired
substantially all of the assets and assumed certain liabilities of Allied Bond &
Collection Agency, a Pennsylvania general partnership (the "Partnership"), for
an initial purchase price of $40,300,000, which included acquisition related
costs. Contingent payments not to exceed approximately $8,300,000 may be payable
by the Company if the earnings of Allied Bond exceed certain levels over the
five and one-half year period ending June 30, 1998. During the fiscal year ended
June 30, 1997, the Company made contingent payments of approximately $227,000 to
the Partnership. Herbert R. Silver, a director and executive officer of the
Company, and Bernard Silver, an executive officer of the Company, were the
general partners of the Partnership.
Allied Bond leases its main facility from a partnership of which Herbert R.
Silver and Bernard Silver are general partners pursuant to a lease agreement
that expires in July 2002. The Company believes the terms of the lease are
comparable to those that would have been obtained under arrangements with
unrelated third parties. During the fiscal year ended June 30, 1997, Allied Bond
paid approximately $566,000 to the partnership pursuant to such lease.
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<PAGE>
EXHIBIT 99(a)
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- ------------------------------------------------------------------------------
SHARE PURCHASE AGREEMENT AND PLAN OF MERGER
BY AND AMONG
OUTSOURCING SOLUTIONS INC.
SHERMAN ACQUISITION CORPORATION
AND
THE UNION CORPORATION
Dated as of December 22, 1997
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I - THE TENDER OFFER . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.1. The Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.3. Composition of the Board of Directors. . . . . . . . . . . . . 5
SECTION 1.4. Stock Options and Other Plans . . . . . . . . . . . . . . . . . 5
ARTICLE II - THE MERGER AND RELATED MATTERS. . . . . . . . . . . . . . . . . . . . 6
SECTION 2.1. The Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 2.2. Conversion of Stock.. . . . . . . . . . . . . . . . . . . . . . 7
SECTION 2.3. Dissenting Stock. . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 2.4. Surrender of Certificates . . . . . . . . . . . . . . . . . . . 8
SECTION 2.5. Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 2.6. No Further Rights of Transfers. . . . . . . . . . . . . . . . . 10
SECTION 2.7. Certificate of Incorporation of the Surviving
Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 2.9. Directors and Officers of the Surviving Corporation . . . . . . 10
SECTION 2.10. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 2.11. Proxy Statement, Schedule 14D-9 and
Schedule 14D-1. . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF THE CORPORATION. . . . . . . . . . 12
SECTION 3.1. Corporate Existence and Power . . . . . . . . . . . . . . . . . 12
SECTION 3.2. Corporate Authorization . . . . . . . . . . . . . . . . . . . . 12
SECTION 3.3. Consents and Approvals; No Violations . . . . . . . . . . . . . 13
SECTION 3.4. Compliance with Laws. . . . . . . . . . . . . . . . . . . . . . 13
SECTION 3.5. Capitalization. . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 3.6. Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 3.7. SEC Filings . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 3.8. Financial Statements. . . . . . . . . . . . . . . . . . . . . . 16
SECTION 3.9. No Undisclosed Liabilities. . . . . . . . . . . . . . . . . . . 16
SECTION 3.10. Absence of Certain Changes. . . . . . . . . . . . . . . . . . . 16
SECTION 3.11. Title to Properties; Encumbrances . . . . . . . . . . . . . . . 17
SECTION 3.12. Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 3.13. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 3.14. Employee Benefit Plans. . . . . . . . . . . . . . . . . . . . . 20
SECTION 3.15. Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 3.16. Environmental Matters . . . . . . . . . . . . . . . . . . . . . 22
SECTION 3.17. Proprietary Rights. . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 3.18. Material Contracts and Leases . . . . . . . . . . . . . . . . . 25
SECTION 3.19. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 3.20. Labor Relations . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 3.21. Voting Requirements . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 3.22. Rights Agreement. . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 3.23. Customers Relations . . . . . . . . . . . . . . . . . . . . . . 27
</TABLE>
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<TABLE>
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ARTICLE IV - REPRESENTATIONS AND WARRANTIES
OF PARENT AND SUB . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 4.1. Corporate Existence and Power . . . . . . . . . . . . . . . . . 28
SECTION 4.2. Corporate Authorization . . . . . . . . . . . . . . . . . . . . 28
SECTION 4.3. Consents and Approvals. . . . . . . . . . . . . . . . . . . . . 28
SECTION 4.4. No Violation. . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 4.5. Financial Statements. . . . . . . . . . . . . . . . . . . . . . 29
SECTION 4.6. Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 4.7. Offer Documents; Other Information. . . . . . . . . . . . . . . 30
SECTION 4.8. Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE V - CONDUCT OF BUSINESS BY THE CORPORATION
PENDING THE CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 5.1. Regular Course of Business. . . . . . . . . . . . . . . . . . . 30
SECTION 5.2. Charter Documents and Capital Changes . . . . . . . . . . . . . 32
SECTION 5.3. Organization and Good Will. . . . . . . . . . . . . . . . . . . 33
SECTION 5.4. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 5.5. Compliance With Laws. . . . . . . . . . . . . . . . . . . . . . 33
SECTION 5.6. SEC Reports . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 5.7. Proxy Statement . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 5.8. Shareholder Approval. . . . . . . . . . . . . . . . . . . . . . 33
SECTION 5.9. No Solicitation of Other Offers . . . . . . . . . . . . . . . . 34
SECTION 5.10. Notification of Certain Matters . . . . . . . . . . . . . . . . 36
SECTION 5.11. Rights Agreement. . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 5.12. Properties; Material Contracts. . . . . . . . . . . . . . . . . 37
SECTION 5.13. Dividends, Etc. . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 5.14. Full Access . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE VI - COVENANTS OF PARTIES. . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 6.1. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 6.2. Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 6.3. Filings; Consents; Removal of Objections. . . . . . . . . . . . 40
SECTION 6.4. Public Announcements. . . . . . . . . . . . . . . . . . . . . . 40
SECTION 6.5. Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 6.6. Indemnification and Insurance . . . . . . . . . . . . . . . . . 41
SECTION 6.7. Resignation of Directors. . . . . . . . . . . . . . . . . . . . 42
SECTION 6.8. Confidentiality Agreement . . . . . . . . . . . . . . . . . . . 42
SECTION 6.9. Certain Actions of Parent and Sub . . . . . . . . . . . . . . . 42
ARTICLE VII - CONDITIONS TO CONSUMMATION OF THE MERGER . . . . . . . . . . . . . . 43
SECTION 7.1. Conditions Precedent to Obligations of Parent, Sub and the
Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE VIII - TERMINATION AND ABANDONMENT . . . . . . . . . . . . . . . . . . . . 44
SECTION 8.1. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 8.2. Effect of Termination . . . . . . . . . . . . . . . . . . . . . 45
</TABLE>
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ARTICLE IX - MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 9.1. Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 9.2. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 9.3. Termination of Representations and Warranties . . . . . . . . . 48
SECTION 9.4. Amendments. . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 9.5. Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 9.6. Successors and Assigns. . . . . . . . . . . . . . . . . . . . . 48
SECTION 9.7. Governing Law and Forum . . . . . . . . . . . . . . . . . . . . 49
SECTION 9.8. Counterparts; Effectiveness . . . . . . . . . . . . . . . . . . 49
SECTION 9.9. Entire Agreement; Schedules and Exhibits. . . . . . . . . . . . 49
SECTION 9.10. Headings and Table of Contents. . . . . . . . . . . . . . . . . 49
ARTICLE X - DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
ANNEX I to Share Purchase Agreement and Plan of Merger
Conditions to the Share Purchase . . . . . . . . . . . . . . . . . . . . . . .A-I
</TABLE>
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<PAGE>
SHARE PURCHASE AGREEMENT AND PLAN OF MERGER
This Share Purchase Agreement and Plan of Merger (this "Agreement") dated
as of December 22, 1997 is made by and among Outsourcing Solutions, Inc., a
Delaware corporation ("Parent"), Sherman Acquisition Corporation, a Delaware
corporation and a direct wholly-owned subsidiary of Parent ("Sub"), and The
Union Corporation, a Delaware corporation (the "Corporation"). Capitalized
terms used herein and not otherwise defined in the Preamble or in Articles I
through IX of this Agreement shall have the respective meanings ascribed to such
terms in Article X hereto.
PREAMBLE
WHEREAS, the Boards of Directors of Parent, Sub and the Corporation have
each determined that it is in the best interests of their respective
stockholders for Parent to acquire up to all of the issued and outstanding
Common Stock, par value $.50 per share, of the Corporation (the "Corporation
Stock") (all issued and outstanding shares of Corporation Stock being
hereinafter collectively referred to as the "Shares") upon the terms and subject
to the conditions set forth herein; and
WHEREAS, in furtherance thereof, it is proposed that Sub shall make a cash
tender offer (the "Offer") to acquire all of the issued and outstanding Shares
for $31.50 per share (such amount, or any greater amount per Share paid pursuant
to the Offer, being hereinafter referred to as the "Per Share Amount"), net to
the seller in cash, in accordance with the terms provided herein and in the
Offer; and
WHEREAS, to complete such acquisition, the respective Boards of Directors
of Parent, Sub and the Corporation have approved the merger of Sub with and into
the Corporation (the "Merger"), pursuant to and subject to the terms and
conditions of this Agreement; and
WHEREAS, the Directors of the Corporation have unanimously determined that
each of the Offer and the Merger are fair to, and in the best interests of, the
holders of Common Stock, approved the Offer and the Merger and recommended the
acceptance of the Offer and approval and adoption of this Agreement by the
shareholders of the Corporation; and
NOW, THEREFORE, in consideration of the mutual covenants, representations
and warranties herein set forth, and the mode of carrying the same into effect,
the parties hereto hereby agree as follows:
<PAGE>
ARTICLE I - THE TENDER OFFER
SECTION 1.1. THE OFFER. (a) Provided that this Agreement shall not have
been terminated in accordance with Article VIII hereof and so long as none of
the events set forth in Annex I hereto (the "Tender Offer Conditions") shall
have occurred and be continuing and shall not have been waived by Parent, Parent
shall cause Sub to commence (within the meaning of Rule 14d-2 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules
and regulations thereunder) the Offer for all issued and outstanding Shares as
promptly as reasonably practicable after the date hereof, but in no event later
than five (5) business days after the date of this Agreement. The Offer shall
remain open for a period of not less than twenty (20) business days. The
obligation of Sub to accept for payment Shares tendered pursuant to the Offer
shall be subject to the satisfaction of the Tender Offer Conditions. Parent and
Sub expressly reserve the right to waive any such condition, to increase the Per
Share Amount payable in the Offer, and to make any other change in the terms and
conditions of the Offer; provided, however, that, without the written consent of
the Corporation, no change may be made which (A) decreases the Per Share Amount
payable in the Offer, (B) reduces the number of Shares to be purchased in the
Offer, (C) imposes conditions to the Offer in addition to the Tender Offer
Conditions, (D) amends or changes the terms and conditions of the Offer in any
manner materially adverse to the holders of Shares (other than Parent and Sub
and its subsidiaries), (E) changes the consideration payable in the Offer to
anything other than all cash, (F) reduces the time period during which the Offer
shall remain open or (G) except as provided in the next sentence, extends the
time period during which the Offer shall remain open. Notwithstanding the
foregoing, Parent and Sub may, without the consent of the Corporation, (i)
extend the Offer beyond the scheduled expiration date and any subsequent
scheduled expiration date (but not beyond the date referred to in Section 8.1(c)
hereof), if at such date any of the Tender Offer Conditions shall not be
satisfied or waived, until such time as such conditions are satisfied or waived,
and (ii) extend the Offer for any period required by any rule, regulation,
interpretation or position of the SEC (but not beyond the date referred to in
Section 8.1(c) hereof). The Per Share Amount shall be net to the seller in
cash, upon the terms and subject to the Tender Offer Conditions. Following the
satisfaction or waiver of the Tender Offer Conditions, Sub shall accept for
payment and pay for (hereinafter referred to as the "Share Purchase"), in
accordance with the terms of the Offer, all Shares validly tendered pursuant to
the Offer and not withdrawn, as soon as it is permitted to do so pursuant to the
Exchange Act or other applicable law or regulation, whichever is later.
2
<PAGE>
(b) As soon as practicable on the date of the commencement of the Offer,
Parent and Sub shall file with the United States Securities and Exchange
Commission (the "SEC") a Tender Offer Statement on Schedule 14D-1 (together with
all amendments and supplements thereto, the "Schedule 14D-1") with respect to
the Offer. The Schedule 14D-1 will contain an offer to purchase (the "Offer to
Purchase") and form of the related letter of transmittal and any summary
advertisement (which Schedule 14D-1, Offer to Purchase and other documents,
together with any supplements or amendments thereto, are referred to herein
collectively as the "Offer Documents"). The Corporation and its counsel shall
be given the opportunity to review and comment upon the Offer Documents prior to
their filing with the SEC. Parent, Sub and the Corporation agree promptly to
correct any information provided by any of them for use in the Offer Documents
that shall have become false or misleading in any material respect, and Parent
and Sub further agree to take all steps necessary to cause the Schedule 14D-1 as
so corrected to be filed with the SEC and the other Offer Documents as so
corrected to be disseminated to holders of Shares, in each case as and to the
extent required by applicable federal securities laws. Parent and Sub each
agree to provide the Corporation and its counsel with any comments either of
them, or their counsel, may receive from the SEC or its staff with respect to
the Offer Documents promptly after the receipt of such comments and shall
provide the Corporation and its counsel an opportunity to participate, including
by way of discussions with the SEC or its staff, in their response to such
comments.
SECTION 1.2. CORPORATE ACTION. (a) The Corporation hereby approves of
and consents to the Offer and the Merger and represents that (i) its Board of
Directors, at a meeting duly called, has unanimously (A) determined that this
Agreement and the transactions contemplated hereby are fair to and in the best
interests of the holders of Shares, (B) approved and adopted this Agreement and
the transactions contemplated hereby and recommends that the stockholders of the
Corporation accept the Offer, and (C) taken all other applicable action
necessary to render, so long as this Agreement remains in effect, (x) Section
203 of the General Corporation Law of the State of Delaware (the "DGCL") and
other state takeover statutes; (y) Article FIFTH of the Corporation's
Certificate of Incorporation (except for the requirement that the Merger be
approved by the holders of not less than two-thirds of the outstanding Shares),
and (z) the Rights Agreement dated as of March 14, 1988, as amended (the "Rights
Agreement"), inapplicable to the Offer and the Merger; and (ii) CIBC Oppenheimer
Corp. has delivered to the Board of Directors of the Corporation its written
opinion that the consideration to be received by the holders of Shares pursuant
to the Offer and the Merger is fair to the holders of Shares from a financial
point of view and Corporation has delivered to Parent a copy of said opinion.
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(b) The Corporation shall file with the SEC as soon as practicable on the
date of the commencement of the Offer a Solicitation/Recommendation Statement on
Schedule 14D-9 (together with all amendments and supplements thereto, the
"Schedule 14D-9") containing, subject to the terms of this Agreement, the
recommendation of the Corporation's Board of Directors described in Section
1.2(a) and shall disseminate the Schedule 14D-9 as required by Rule 14d-9
promulgated under the Exchange Act. Parent and Sub and their counsel shall be
given the opportunity to review and comment upon the Schedule 14D-9 prior to its
filing with the SEC. The Corporation, Parent and Sub each agree promptly to
correct any information provided by any of them for use in the Schedule 14D-9
that shall have become false or misleading in any material respect, and the
Corporation further agrees to take all steps necessary to cause the Schedule
14D-9 as so corrected to be filed with the SEC and to be disseminated to holders
of Shares, in each case as and to the extent required by applicable federal
securities laws. The Corporation agrees to provide Parent and its counsel with
any comments the Corporation or its counsel may receive from the SEC or its
staff with respect to the Schedule 14D-9 promptly after the receipt of such
comments and shall provide Parent and its counsel an opportunity to participate,
including by way of discussions with the SEC or its staff, in the response of
the Corporation to such comments.
(c) The Corporation has furnished Parent with mailing labels and a list
containing the names and addresses of all record holders of Shares and will,
upon request, furnish Parent with all other available listings or computer files
containing names, addresses and security position listings of any record holders
or beneficial owners of Shares, each as of a recent date. The Corporation shall
furnish Parent with such additional information, including updated lists and
files of stockholders and security position listings, and such other related
assistance Parent or its agents may reasonably request to carry out the
transactions contemplated hereby. Subject to the requirements of applicable
law, and except for such steps as are necessary to disseminate the Offer
Documents and any other documents necessary to consummate the Share Purchase,
Parent shall hold in confidence the information contained in any of such lists
and files, shall use such information only in connection with the Offer (and the
Merger) and, if this Agreement shall be terminated, shall deliver to the
Corporation all copies of such information then in its possession. The
Corporation has been advised that each of its directors and the executive
officers intends to tender pursuant to the Offer all shares of Common Stock
owned of record and beneficially by him or her.
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SECTION 1.3. COMPOSITION OF THE BOARD OF DIRECTORS. Promptly upon the
Share Purchase, Sub shall be entitled to designate such number of directors on
the Board of Directors of the Corporation, rounded up to the next whole number,
as will give Sub, subject to compliance with Section 14(f) of the Exchange Act,
representation on such Board of Directors equal to at least that number of
directors which equals the product of the total number of directors on the Board
of Directors (giving effect to the directors elected pursuant to this sentence)
multiplied by a fraction, the numerator of which shall be the number of shares
of Common Stock so accepted for payment and paid for or otherwise acquired or
owned by Sub or Parent and the denominator of which shall be the number of
shares of Common Stock then outstanding, and the Corporation and its Board of
Directors shall, at such time, take any and all such action needed to cause
Sub's designees to be appointed to the Corporation's Board of Directors
(including to cause directors to resign). Promptly upon the Share Purchase,
Corporation and its Board of Directors shall take such further action as may be
requested by Sub to cause Sub's designees to constitute at least a majority of
the Board of Directors of each direct or indirect Subsidiary of the Corporation
(other than Allied Bond & Collection Agency, Inc.). Subject to applicable law,
the Corporation shall take all action requested by Parent which is reasonably
necessary to effect any such election, including mailing to its shareholders an
Information Statement containing the information required by Section 14(f) of
the Exchange Act and Rule 14f-1 promulgated thereunder, and the Corporation
agrees to make such mailing with the mailing of the Schedule 14D-9 so long as
Sub shall have provided to the Corporation on a timely basis all information
required to be included in such Information Statement with respect to Sub's
designees. In furtherance thereof, the Corporation will increase the size of
the Corporation's Board of Directors, or use its reasonable efforts to secure
the resignation of directors, or both, as is necessary to permit Sub's designees
to be elected to the Corporation's Board of Directors. Upon the Share Purchase
(as defined in Section 1.1 hereof) all directors of the Corporation, other than
Sub's designees and two directors of Corporation, and, unless otherwise agreed,
all officers of the Corporation shall resign.
SECTION 1.4. STOCK OPTIONS AND OTHER PLANS. (a) As soon as practicable
following the date hereof, the Board of Directors of the Corporation shall adopt
appropriate resolutions and cause the Corporation to take all actions necessary
to obtain the consent of each holder of an outstanding option to purchase Shares
("Options") to the effect that, upon the Share Purchase, each Option, whether or
not then vested or exercisable, shall no longer be exercisable for the purchase
of Shares but shall entitle each holder thereof, in cancellation and settlement
therefor, to a payment in cash (subject to any applicable withholding taxes, the
"Cash Payment"), equal to the product of
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(x) the total number of shares of Common Stock subject to such Option as to
which such Option could have been exercised and (y) the excess of the Per Share
Amount over the exercise price per share of Common Stock subject to such Option,
each such Cash Payment to be paid to each holder (or, without duplication, the
beneficial owner) of an outstanding Option on the date of the Share Purchase;
and
(b) All stock option plans of the Corporation ("Stock Plans") shall
terminate as of the Effective Time and the provisions in any other Employee
Benefit Plan providing for the issuance, transfer or grant of any capital stock
of the Corporation or any interest in respect of any capital stock of the
Corporation shall be deleted as of the Effective Time, and the Corporation shall
ensure that following the Effective Time no holder of an Option or any
participant in any Stock Plan shall have any right thereunder to acquire any
capital stock of the Corporation, Parent or the Surviving Corporation. The
Corporation will ensure that neither the Corporation nor any of its Subsidiaries
is or will be bound by any Options, other options, warrants, rights or
agreements which would entitle any Person, other than Parent or its affiliates,
to own any capital stock of the Surviving Corporation or any of its Subsidiaries
or to receive any payment in respect thereof. Notwithstanding the foregoing,
the holders of Options who did not receive the Cash Payment on the date of the
Share Purchase shall thereafter be entitled to receive the Cash Payment in
cancellation and settlement of such Options as provided in the preceding
paragraph (a).
ARTICLE II - THE MERGER AND RELATED MATTERS
SECTION 2.1. THE MERGER. (a) Subject to the terms and conditions of this
Agreement, at the time of the Closing (as defined in Section 2.11 hereof), a
certificate of merger (the "Certificate of Merger") shall be duly prepared,
executed and acknowledged by Sub and the Corporation in accordance with the DGCL
and shall be filed on the Closing Date (as defined in Section 2.11 hereof). The
Merger shall become effective upon the filing of the Certificate of Merger with
the Secretary of State of the State of Delaware in accordance with the
provisions and requirements of the DGCL. The date and time when the Merger
shall become effective is hereinafter referred to as the "Effective Time".
(b) At the Effective Time, Sub shall be merged with and into the
Corporation and the separate corporate existence of Sub shall cease, and the
Corporation shall continue as the surviving corporation under the laws of the
State of
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Delaware under the name of "The Union Corporation" (the "Surviving
Corporation").
(c) From and after the Effective Time, the Merger shall have the
effects set forth in Section 259 of the DGCL.
SECTION 2.2. CONVERSION OF STOCK. At the Effective Time:
(a) Each share of Common Stock then issued and outstanding other than
(i) any shares of Common Stock which are held by any Subsidiary of the
Corporation or in the treasury of the Corporation, or which are held,
directly or indirectly, by Parent or any direct or indirect subsidiary of
Parent (including Sub), all of which shall be cancelled and none of which
shall receive any payment with respect thereto and (ii) shares of Common
Stock held by Dissenting Shareholders (as defined in Section 2.3 hereof)
shall, by virtue of the Merger and without any action on the part of the
holder thereof, be converted into and represent the right to receive an
amount in cash, without interest, equal to the Per Share Amount (the
"Merger Consideration"); and
(b) Each share of common stock, par value $0.01 per share, of Sub
then issued and outstanding shall, by virtue of the Merger and without any
action on the part of the holder thereof, become one fully paid and
nonassessable share of common stock, $0.50 par value, of the Surviving
Corporation.
SECTION 2.3. DISSENTING STOCK. Notwithstanding anything in this Agreement
to the contrary but only to the extent required by DGCL, shares of Common Stock
that are issued and outstanding immediately prior to the Effective Time and are
held by holders of Common Stock who comply with all the provisions of Delaware
law concerning the right of holders of Common Stock to dissent from the Merger
and require appraisal of their shares of Common Stock ("Dissenting
Shareholders") shall not be converted into the right to receive the Merger
Consideration but shall become the right to receive such consideration as may be
determined to be due such Dissenting Shareholder pursuant to the laws of the
State of Delaware; PROVIDED, HOWEVER, that (i) if any Dissenting Shareholder
shall subsequently deliver a written withdrawal of his or her demand for
appraisal (with the written approval of the Surviving Corporation, if such
withdrawal is not tendered within 60 days after the Effective Time), or (ii) if
any Dissenting Shareholder fails to establish and perfect his or her entitlement
to appraisal rights as provided by applicable law, then such Dissenting
Shareholder or Shareholders, as the case may be, shall forfeit the right to
appraisal of such shares and such
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shares shall thereupon be deemed to have been converted into the right to
receive, as of the Effective Time, the Merger Consideration, without interest.
The Corporation shall give Parent and Sub (A) prompt notice of any written
demands for appraisal, withdrawals of demands for appraisal and any other
related instruments received by the Corporation, and (B) the opportunity to
direct all negotiations and proceedings with respect to demands for appraisal.
The Corporation will not voluntarily make any payment with respect to any
demands for appraisal and will not, except with the prior written consent of
Parent, settle or offer to settle any demand.
SECTION 2.4. SURRENDER OF CERTIFICATES. (a) Concurrently with or prior
to the Effective Time, Parent shall designate a bank or trust company located in
the United States to act as paying agent (the "Paying Agent") for purposes of
making the cash payments contemplated hereby. As soon as practicable after the
Effective Time, Parent shall cause the Paying Agent to mail and/or make
available to each holder of a certificate theretofore evidencing shares of
Common Stock (other than those which were held by any Subsidiary of the
Corporation or in the treasury of the Corporation or which are held directly or
indirectly by Parent or any direct or indirect subsidiary of Parent (including
Sub)) a notice and letter of transmittal advising such holder of the
effectiveness of the Merger and the procedure for surrendering to the Paying
Agent such certificate or certificates which immediately prior to the Effective
Time represented outstanding Common Stock (the "Certificates") in exchange for
the Merger Consideration deliverable in respect thereof pursuant to this Article
II. Upon the surrender for cancellation to the Paying Agent of such
Certificates, together with a letter of transmittal, duly executed and completed
in accordance with the instructions thereon, and any other items specified by
the letter of transmittal, the Paying Agent shall promptly pay to the Person
entitled thereto the Merger Consideration deliverable in respect thereto. Until
so surrendered, each Certificate shall be deemed, for all corporate purposes, to
evidence only the right to receive upon such surrender the Merger Consideration
deliverable in respect thereof to which such Person is entitled pursuant to this
Article II. No interest shall be paid or accrued in respect of such cash
payments.
(b) If the Merger Consideration (or any portion thereof) is to be
delivered to a Person other than the Person in whose name the Certificate
surrendered in exchange therefor are registered, it shall be a condition to the
payment of the Merger Consideration that the Certificates so surrendered shall
be properly endorsed or accompanied by appropriate stock powers and otherwise in
proper form for transfer, that such transfer otherwise be proper and that the
Person requesting such transfer pay to the Paying Agent any transfer or other
taxes payable by
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reason of the foregoing or establish to the satisfaction of the Paying Agent
that such taxes have been paid or are not required to be paid.
(c) In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the Person claiming
such Certificate to be lost, stolen or destroyed, the Paying Agent will issue in
exchange for such lost, stolen or destroyed Certificate the Merger Consideration
deliverable in respect thereof as determined in accordance with this Article II,
provided that, the Person to whom the Merger Consideration is paid shall, as a
condition precedent to the payment thereof, give the Surviving Corporation a
bond in such sum as it may direct or otherwise indemnify the Surviving
Corporation in a manner satisfactory to it against any claim that may be made
against the Surviving Corporation with respect to the Certificate claimed to
have been lost, stolen or destroyed.
SECTION 2.5. PAYMENT. Concurrently with or immediately prior to the
Effective Time, Parent or Sub shall deposit in trust with the Paying Agent cash
in United States dollars in an aggregate amount equal to the product of (i) the
number of shares of Common Stock outstanding immediately prior to the Effective
Time (other than shares of Common Stock which are held by any Subsidiary of the
Corporation or in the treasury of the Corporation or which are held directly or
indirectly by Parent or any direct or indirect subsidiary of Parent (including
Sub) or a Person known at the time of such deposit to be a Dissenting
Shareholder) and (ii) the Merger Consideration (such amount being hereinafter
referred to as the "Payment Fund"). The Payment Fund shall be invested by the
Paying Agent as directed by Parent only in direct obligations of the United
States, obligations for which the full faith and credit of the United States is
pledged to provide for the payment of principal and interest, commercial paper
rated of the highest quality by Moody's Investors Services, Inc. or Standard &
Poor's Ratings Group or certificates of deposit, bank repurchase agreements or
bankers' acceptances of a commercial bank having at least $100,000,000 in assets
(collectively, "Permitted Investments") or in money market funds which are
invested in Permitted Investments, and any net earnings with respect thereto
shall be paid to Parent as and when requested by Parent. The Paying Agent
shall, pursuant to irrevocable instructions, make the payments referred to in
Section 2.2(a) hereof out of the Payment Fund. The Payment Fund shall not be
used for any other purpose except as otherwise agreed to by Parent. Promptly
following the date which is three months after the Effective Time, the Paying
Agent shall return to Parent all cash, certificates and other instruments in its
possession that constitute any portion of the Payment Fund (other than net
earnings on the Payment Fund which shall be paid to Parent), and the Paying
Agent's duties shall
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terminate. Thereafter, each holder of a Certificate may surrender such
Certificate to the Surviving Corporation and (subject to applicable abandoned
property, escheat and similar laws) receive in exchange therefor the Merger
Consideration, without interest, but shall have no greater rights against the
Surviving Corporation or Parent than may be accorded to general creditors of the
Surviving Corporation or Parent under applicable law. Notwithstanding the
foregoing, neither the Paying Agent nor any party hereto shall be liable to a
holder of shares of Common Stock for any Merger Consideration delivered to a
public official pursuant to applicable abandoned property, escheat and similar
laws.
SECTION 2.6. NO FURTHER RIGHTS OF TRANSFERS. At and after the Effective
Time, each holder of a Certificate shall cease to have any rights as a
shareholder of the Corporation, except for, in the case of a holder of a
Certificate (other than shares to be cancelled pursuant to Section 2.2(a) hereof
and other than shares held by Dissenting Shareholders), the right to surrender
his or her Certificate in exchange for payment of the Merger Consideration or,
in the case of a Dissenting Shareholder, to perfect his or her right to receive
payment for his or her shares pursuant to Delaware law if such holder has
validly perfected and not withdrawn his or her right to receive payment for his
or her shares, and no transfer of shares of Common Stock shall be made on the
stock transfer books of the Surviving Corporation. Certificates presented to
the Surviving Corporation after the Effective Time shall be cancelled and
exchanged for cash as provided in this Article II. At the close of business on
the day of the Effective Time the stock ledger of the Corporation with respect
to Common Stock shall be closed.
SECTION 2.7. CERTIFICATE OF INCORPORATION OF THE SURVIVING CORPORATION.
The Certificate of Incorporation of the Corporation, as in effect immediately
prior to the Effective Time, shall be the Certificate of Incorporation of the
Surviving Corporation and shall be amended such that it is substantially in the
form of the Amended and Restated Certificate of Incorporation attached hereto as
Exhibit 2.7.
SECTION 2.8. BY-LAWS OF THE SURVIVING CORPORATION. The By-Laws of Sub, as
in effect immediately prior to the Effective Time, shall be the By-Laws of the
Surviving Corporation.
SECTION 2.9. DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION. At the
Effective Time, the directors of Sub immediately prior to the Effective Time
shall be the directors of the Surviving Corporation, each of such directors to
hold office, subject to the applicable provisions of the Certificate of
Incorporation and By-Laws of the Surviving Corporation, until the next annual
shareholders' meeting of the Surviving Corporation
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and until their respective successors shall be duly elected or appointed and
qualified. At the Effective Time, the officers of the Corporation immediately
prior to the Effective Time shall, subject to the applicable provisions of the
Certificate of Incorporation and By-Laws of the Surviving Corporation, be the
officers of the Surviving Corporation until their respective successors shall be
duly elected or appointed and qualified.
SECTION 2.10. CLOSING. The closing of the Merger (the "Closing") shall
take place at the offices of White & Case, 1155 Avenue of the Americas, New
York, New York, as soon as practicable after the last of the conditions set
forth in Article VII hereof is fulfilled or waived (subject to applicable law)
but in no event later than the fifth business day thereafter, or at such other
time and place and on such other date as Parent and the Corporation shall
mutually agree (the "Closing Date").
SECTION 2.11. PROXY STATEMENT, SCHEDULE 14D-9 AND SCHEDULE 14D-1. The
definitive proxy statement and related materials, if required, to be furnished
to the holders of Common Stock in connection with the Merger pursuant to Section
5.7 hereof (the "Proxy Statement") will comply in all material respects with the
Exchange Act and the rules and regulations thereunder and any other applicable
laws. If at any time prior to the Effective Time any event occurs which should
be described in an amendment or supplement to the Proxy Statement, the
Corporation will file and disseminate, as required, an amendment or supplement
which complies in all material respects with the Exchange Act and the rules and
regulations thereunder and any other applicable laws. None of the information
supplied by the Corporation for inclusion or incorporation by reference in (i)
the Offer Documents or (ii) the Proxy Statement, will, in the case of the Offer
Documents, at the respective times the Offer Documents are filed with the SEC,
or, in the case of the Proxy Statement, at the date such information is supplied
and at the Effective Time, contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements made,
in light of the circumstance under which they are made, not misleading. None of
the information in the Schedule 14D-9, at the respective times the Schedule 14D-
9 is filed with the SEC, will contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements made, in light of
the circumstances under which they are made, not misleading. Notwithstanding
the foregoing, no representation or warranty is made by Corporation with respect
to any information with respect to Parent, Sub or their officers, directors or
affiliates provided to the Corporation by Parent or Sub in writing for inclusion
in the Schedule 14D-9. The Schedule 14D-9 will comply in all material respects
with the Exchange Act and the rules and regulations thereunder and any other
applicable laws. If at any time prior to the expiration or termination of the
Offer any event occurs which should be described in an
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amendment or supplement to the Schedule 14D-9 or any amendment or supplement
thereto, the Corporation will file and disseminate, as required, an amendment or
supplement which complies in all material respects with the Exchange Act the
rules and regulations thereunder and any other applicable laws. Prior to its
filing with the SEC, the amendment or supplement shall be delivered to Parent
and Sub and their counsel.
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF THE CORPORATION
The Corporation represents and warrants to Parent and Sub that:
SECTION 3.1. CORPORATE EXISTENCE AND POWER. The Corporation is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all corporate power, authority and legal right
to conduct its business as it is now being conducted and to own the properties
and assets it now owns. Except as shown in Paragraph 3.1 of the Disclosure
Letter ("DL") heretofore prepared by the Corporation and delivered to Parent,
the Corporation is duly qualified or licensed to do business as a foreign
corporation and is in good standing in every jurisdiction, both domestic and
foreign, where the character of the property owned or leased by it or the nature
of its activities makes such qualification necessary, except where the continued
failure to be so qualified or licensed is not reasonably likely to have a
Material Adverse Effect on the Corporation. The Corporation has previously
delivered to Purchaser true and correct copies of the Corporation's Certificate
of Incorporation and By-Laws, as currently in effect.
SECTION 3.2. CORPORATE AUTHORIZATION. The Corporation has full corporate
power and authority to enter into this Agreement and, subject to obtaining the
necessary approval of the Merger by its stockholders, to carry out the
transactions contemplated hereby. The Board of Directors of the Corporation has
taken all actions required by applicable law and its Certificate of
Incorporation and By-Laws to authorize the execution and delivery by the
Corporation of this Agreement and, subject to obtaining the approval of the
Merger by the holders of not less than two-thirds of the outstanding shares, the
performance by the Corporation of the transactions contemplated hereby. This
Agreement has been duly and validly executed and delivered by the Corporation
and no other corporate action is necessary in connection therewith (other than
the approval of the Merger by the holders of a two- thirds of the outstanding
shares of Common Stock entitled to vote), and this Agreement (assuming the due
authorization, execution and delivery hereof by Parent and Sub) is a legal,
valid and binding obligation of the Corporation enforceable against it in
accordance with its terms,
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except to the extent that enforcement may be limited by applicable bankruptcy,
insolvency, reorganization or other similar laws affecting creditors' rights
generally and by general equitable principles (regardless of whether enforcement
is sought in equity or at law).
SECTION 3.3. CONSENTS AND APPROVALS; NO VIOLATIONS. Assuming (i) the
filings required under the HSR Act are made and the waiting period thereunder
has been terminated or has expired, (ii) the requirements of the Exchange Act
relating to the Proxy Statement (if required) and the Offer are met, (iii) the
filing of the Certificate of Merger and other appropriate merger documents, if
any, as required by DGCL are made and (iv) approval of the Merger by holders
two-thirds of the outstanding shares of Common Stock entitled to vote, if
required by the DGCL, is received, the execution and delivery of this Agreement
by the Corporation and the consummation by the Corporation of the transactions
contemplated hereby will not: (1) violate any provision of the Certificate of
Incorporation or By-Laws of the Corporation or the comparable governing
documents of any of its Subsidiaries, in each case, as amended; (2) violate any
statue, ordinance, rule, regulation, order or decree of any court or of any
governmental or regulatory body, agency or authority applicable to the
Corporation or any of its Subsidiaries or by which any of their respective
properties or assets may be bound; (3) except as set forth in DL 3.3, require
any filing with, or permit, consent or approval of, or the giving of any notice
to, any governmental or regulatory body, agency or authority; or (4) except as
set forth in DL 3.3, result in a violation or breach of, conflict with,
constitute (with or without due notice or lapse of time or both) a default (or
give rise to any right of termination, cancellation, payment or acceleration)
under, or result in the creation of any mortgage, pledge, lien, security
interest, encumbrance or charge of any kind (each an "Encumbrance") upon any of
the properties or assets of the Corporation or any of its Subsidiaries under,
any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, license, franchise, permit, agreement, lease, franchise agreement or
other instrument or obligation to which the Corporation or any of its
Subsidiaries is a party, or by which it or any of their respective properties or
assets are bound or subject, except for in the case of clauses (3) and (4) above
for any such filing, permit, consent, approval, violation, breach or Encumbrance
which would not reasonably be expected to (a) have a Material Adverse Effect on
the Corporation and its Subsidiaries, taken as a whole, or (b) prevent or
materially delay consummation of the transactions contemplated by this
Agreement.
SECTION 3.4. COMPLIANCE WITH LAWS. Subject to Section 3.16 and except as
set forth in DL 3.4, the Corporation and its Subsidiaries are in compliance with
all applicable laws, regulations, orders, judgements and decrees (including, but
not
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limited to, the Fair Debt Collection Practices Act and any state or local
counterpart or equivalent) except where the failure to so comply would not be
reasonably likely to (i) have a Material Adverse Effect on the Corporation and
its Subsidiaries taken as a whole or (ii) prevent or materially delay
consummation of the transactions contemplated by this Agreement.
SECTION 3.5. CAPITALIZATION. The authorized capital stock of the
Corporation consists of 15,000,000 shares of common stock, par value $.50 per
share, and 500,000 shares of preferred stock, par value $.50 per share. As of
December 22, 1997, there were issued and outstanding 5,802,641 shares of such
common stock (not including 2,944,837 shares held in the Corporation's
treasury), all of which are of one class, and no shares of such preferred stock.
All issued and outstanding shares of Corporation Stock have been duly authorized
and validly issued and are fully paid and nonassessable and are not subject to,
nor were they issued in violation of, any preemptive rights. As of December 22,
1997, 728,548 shares of Corporation Stock were issuable upon exercise of Options
to purchase such stock, which
Options were issued pursuant to the Stock Plans (as defined in Section 1.4),
which plans are listed in DL 3.5(i). Except as set forth in this Section, in DL
3.5(i) or in the Rights Agreement, as of the date hereof there are no, and at
the Effective Time there will be no, (i) other outstanding shares of, (ii)
securities of the Corporation convertible into or exchangeable for, (iii)
options or other rights (including any pre-emptive rights) to acquire from the
Corporation, or (iv) other contracts, understandings, arrangements or
obligations (whether or not contingent) providing for the issuance or sale by
the Corporation, directly or indirectly, of, any capital stock or other equity
or debt security of the Corporation. As of the date hereof, except as set forth
in DL 3.5(i) or in connection with the exercise of any Options, there are no,
and at the Effective Time there will be no, outstanding contractual obligations
of the Corporation to repurchase, redeem or otherwise acquire any outstanding
shares of Corporation Stock or other securities issued by the Corporation.
SECTION 3.6. SUBSIDIARIES. Attached hereto as DL 3.6 is a true and
complete list of each subsidiary of the Corporation (the "Subsidiaries"), and
except as set forth on DL 3.6, each of the Subsidiaries is duly incorporated and
validly existing as a corporation in good standing under the laws of its
jurisdiction of incorporation, with full corporate power and authority to
conduct its business as it is now conducted and to own the properties and assets
it now owns. Except as set forth in DL 3.6, each of the Subsidiaries is duly
qualified or licensed to do business as a foreign corporation and is in good
standing in every jurisdiction, both domestic and foreign, where the character
of the property owned or leased by it or the nature of its activities makes such
qualification necessary, except where
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the failure to be so qualified or licensed is not reasonably likely to have a
Material Adverse Effect on the Corporation and its Subsidiaries, taken as a
whole. All Subsidiaries are wholly owned, directly or indirectly, by the
Corporation. Except for the Subsidiaries or as set forth in DL 3.6, the
Corporation does not own, directly or indirectly, securities or other ownership
interests in any other entity and except as set forth in DL 3.6, neither the
Corporation nor any of its Subsidiaries is subject to any obligation or
requirement to provide funds for or to make any investment (in the form of a
loan, capital contribution or otherwise) to or in any entity other than a
Subsidiary. All of the shares of capital stock of the Subsidiaries have been
duly authorized and validly issued, are fully paid and nonassessable, are not
subject to, nor were they issued in violation of, any preemptive rights, and are
owned, directly or indirectly, by the Corporation free and clear of all
Encumbrances, options or claims whatsoever. No shares of capital stock of any
of the Subsidiaries are reserved for issuance and there are no outstanding or
authorized options, warrants, rights, subscriptions, claims of any character,
agreements, obligations, rights of redemption, convertible or exchangeable
securities, or other commitments, contingent or otherwise, relating to the
capital stock of any Subsidiary, pursuant to which such Subsidiary is or may
become obligated to issue any shares of capital stock of such Subsidiary or any
securities convertible into, exchangeable for, or evidenced in the right to
subscribe for, any shares of such Subsidiary. Except as set forth in DL
3.6(ii), there are no restrictions of any kind which prevent the payment of
dividends by any of the Subsidiaries.
SECTION 3.7. SEC FILINGS. (a) The Corporation has previously delivered to
Parent a true, correct and complete copy of the Corporation's Annual Reports on
Form 10-K for the years ended June 30, 1996 and June 30, 1997 (the "Corporation
10-Ks"), the Corporation's proxy statement relating to its annual meeting of
stockholders to be held on November 19, 1997, all other reports or registration
statements filed by the Corporation with the SEC since June 30, 1996, and all
amendments and supplements to the foregoing (the "Corporation Filings"). Each
of the Corporation Filings has been timely filed, subject to any allowable
extensions, and was prepared in all material respects in accordance with the
requirements of the Securities Act or a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The Corporation Filings constitute all of the documents required to
be filed by the Corporation with the SEC since June 30, 1996.
(b) None of the information supplied to Parent by the Corporation for
inclusion in the Offer Documents will, at the respective times such Offer
Documents or any amendments or
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supplements thereto are filed with the SEC or are first published, sent or given
to stockholders, as the case may be, contain any untrue statement of material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
SECTION 3.8. FINANCIAL STATEMENTS. The financial statements (including
the notes thereto) (the "Corporation Financial Statements") of the Corporation
and its Subsidiaries included in the Corporation Filings fairly present, in all
material respects, the consolidated financial position of the Corporation and
its Subsidiaries as of the respective dates thereof and the consolidated results
of its operations, cash flows and stockholders' equity for the respective
periods then ended, all in conformity with generally accepted accounting
principles applied on a consistent basis ("GAAP"), except as indicated in the
notes thereto.
SECTION 3.9. NO UNDISCLOSED LIABILITIES. Except as set forth in DL 3.9
(the "Corporation Disclosed Liabilities"), the Corporation has no liabilities,
claims or other obligations (absolute, accrued, or contingent) (herein referred
to as the "Corporation Liabilities") except (a) Corporation Liabilities which
are accrued or otherwise reflected on the Corporation Financial Statements or
disclosed in the notes thereto, (b) Corporation Liabilities incurred in the
ordinary course of business since June 30, 1997 (the "Balance Sheet Date"), (c)
Corporation Liabilities which are otherwise disclosed in the Corporation
Filings, (d) Corporation Liabilities otherwise permitted by this Agreement, and
(e) Corporation Liabilities which would not reasonably be expected to have a
Material Adverse Effect.
SECTION 3.10. ABSENCE OF CERTAIN CHANGES. Except as set forth in DL 3.10,
since the Balance Sheet Date, neither the Corporation nor any of the
Subsidiaries has:
(a) suffered any Material Adverse Effect;
(b) except for transactions contemplated by this Agreement, made any
declaration, setting aside or payment of any dividend or other distribution with
respect to its capital stock, except dividends from Subsidiaries to Corporation;
(c) made any change in accounting principles except for the adoption
of such accounting principles which have, pursuant to the rules of the
Financial Accounting Standards Board or the SEC, become effective for the
Corporation's fiscal year ending June 30, 1998;
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(d) granted any general increase in the compensation of its directors,
officers or employees or any increase in compensation payable to or to be
payable to any such director, officer, or employee, except for increases in the
ordinary course of business and consistent with past practice or as previously
disclosed to Parent;
(e) made any capital expenditures (other than (i) capital expenditures
in the ordinary course of business and consistent with past practice, (ii) as
provided in Section 5.1(b)(iii), and (iii) as otherwise provided in any Material
Contracts listed in DL 3.18);
(f) incurred any material increase in net borrowings outstanding under
the Amended and Restated Credit Agreement by and between the Corporation and The
First National Bank of Boston (now, Bank of Boston Connecticut) dated as of
December 31, 1994, as amended by the Amendment dated October 23, 1996 (the
"Credit Agreement") or incurred any other indebtedness (except in each case in
the ordinary course of business);
(g) taken any action referred to in Sections 5.1, 5.2 and 5.13, except
as permitted thereby; or
(h) agreed, whether in writing or otherwise, to take any action
described in this Section, except as otherwise contemplated herein.
SECTION 3.11. TITLE TO PROPERTIES; ENCUMBRANCES.
Except as set forth in DL 3.11:
(a) the Corporation and each of the Subsidiaries have good and
marketable title to their respective material properties and assets reflected on
the Corporation's balance sheet included in the Corporation's Form 10-K, for the
fiscal year ending June 30, 1997 (the "1997 10-K"), except for (i) assets
related to capitalized leases and (ii) properties and assets sold or disposed of
since the Balance Sheet Date in the ordinary course of business;
(b) none of the properties or assets of the Corporation or any of the
Subsidiaries is subject to any mortgage, pledge, lien, security interest,
encumbrance or charge of any kind (collectively referred to herein as "Liens")
except the following (herein called "Permitted Liens"): (i) Liens reflected on
the Corporation Financial Statements (including the notes thereto), (ii) public
or statutory Liens or liens of lessors, carriers, warehousemen, mechanics,
suppliers, materialmen, repairmen or other like Liens arising in the ordinary
course of business, (iii) Liens incurred or deposits made in connection with
workers' compensation, unemployment insurance and other types of social security
benefits, (iv) Liens
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which individually or in the aggregate do not materially detract from the value,
use or enjoyment of such properties or assets or otherwise would have a Material
Adverse Effect on the business operations of the Corporation and the
Subsidiaries, taken as a whole; and (v) Liens with respect to taxes, assessments
and charges not yet due or the validity of which are being contested in good
faith by appropriate actions.
SECTION 3.12. LITIGATION. Subject to Section 3.16 and except as set forth
in DL 3.12 or as disclosed in the Corporation Filings, there are no actions,
suits, proceedings or investigations pending or, to the knowledge of the
Corporation, threatened against the Corporation or any of the Subsidiaries
before any court or arbitrator or any governmental body, agency or official
which (i) are reasonably likely, individually or in the aggregate, to have a
Material Adverse Effect on the Corporation and the Subsidiaries, taken as a
whole, (ii) question or challenge the validity of this Agreement or the
transactions contemplated hereby, or (iii) would be reasonably likely to prevent
or materially delay consummation of the transactions contemplated hereby.
SECTION 3.13. TAXES. Except as set forth in DL 3.13 or where such failure
to duly file or pay would not be reasonably likely to have a Material Adverse
Effect on the Corporation and its Subsidiaries, taken as a whole:
(i) TAX RETURNS. The Corporation and each of its Subsidiaries has timely
filed or caused to be timely filed with the appropriate taxing authorities all
Federal and other returns, statements, forms and reports for Taxes (as
hereinafter defined) ("Returns") that are required to be filed by, or with
respect to, the Corporation and such Subsidiaries. The Returns reflect
accurately all liability for Taxes of the Corporation and such Subsidiaries for
the periods covered thereby. "Taxes" means all taxes, assessments, charges,
duties, fees, levies or other governmental charges, including, without
limitation, all Federal, state, local, foreign, and other income, franchise,
profits, capital gains, capital stock, transfer, sales, use, occupation,
property, excise, severance, windfall profits, stamp, license, payroll,
withholding and other taxes, assessments, charges, duties, fees, levies or other
governmental charges of any kind whatsoever (whether payable directly or by
withholding and whether or not requiring the filing of a Return), all estimated
taxes, deficiency assessments, additions to tax, penalties and interest and
shall include any liability for such amounts as a result either of being a
member of a combined, consolidated, unitary or affiliated group or of a
contractual obligation to indemnify any person or other entity;
(ii) PAYMENT OF TAXES. All Taxes and Tax liabilities of the Corporation
and its Subsidiaries have been timely paid or
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adequately disclosed and fully provided for as a liability on the consolidated
financial statements of the Corporation and its Subsidiaries in accordance with
GAAP; and
(iii) OTHER TAX MATTERS. (A) DL 3.13(iii)(A) sets forth (1) each taxable
year or other taxable period of the Corporation or any of its Subsidiaries for
which an audit or other examination of Taxes by the appropriate tax authorities
of any nation, state or locality is currently in progress (or, to the knowledge
of the Corporation, scheduled to be conducted) together with the names of the
respective tax authorities conducting (or scheduled to conduct) such audits or
examinations and a description of the subject matter of such audits or
examinations, (2) the most recent taxable year or other taxable period for which
an audit or other examination relating to Federal income taxes of the
Corporation and its Subsidiaries has been finally completed and the disposition
of such audit or examination, (3) the taxable years or other taxable periods of
the Corporation or any of its Subsidiaries which will not be subject to the
normally applicable statute of limitations by reason of the existence of
circumstances that would cause any such statute of limitations for applicable
Taxes to be extended, (4) the amount of any proposed adjustments (and the
principal reason therefor) relating to any Returns for Tax liability of the
Corporation or any of its Subsidiaries which have been proposed or assessed by
any taxing authority and (5) a list of all notices received by the Corporation
or any of its Subsidiaries from any taxing authority relating to any issue which
could affect the Tax liability of the Corporation or any of its Subsidiaries,
which issue has not been finally determined and which, if determined adversely
to the Corporation or any such subsidiaries, could result in a Tax liability.
(B) Except as shown in DL 3.13(iii)(B), neither the Corporation nor
any of its Subsidiaries has been included in any "consolidated," "unitary" or
"combined" Return (other than Returns which include only the Corporation and any
Subsidiaries of the Corporation) provided for under the law of the United
States, any foreign jurisdiction or any state or locality with respect to Taxes
for any taxable period for which the statute of limitations has not expired.
(C) All Taxes which the Corporation or any of its Subsidiaries is (or
was) required by law to withhold or collect have been duly withheld or
collected, and have been timely paid over to the proper authorities to the
extent due and payable.
(D) Except as previously disclosed to Parent, the Corporation is not a
party to any agreement that would require it to make any payment that would
constitute an "excess parachute
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payment" for purposes of Sections 280G and 4999 of the Internal Revenue Code of
1986, as amended (the "Code").
(E) There are no tax sharing, allocation, indemnification or similar
agreements or arrangements in effect as between the Corporation, any Subsidiary,
or any predecessor or affiliate thereof and any other party under which Parent,
Sub or the Corporation (or any of its Subsidiaries) could be liable for any
Taxes or other claims of any other party under such agreements or arrangements.
(F) No indebtedness of the Corporation or any of its Subsidiaries
consists of "corporate acquisition indebtedness" within the meaning of Section
279 of the Code.
(G) Neither the Corporation nor any of its Subsidiaries will be
required to include in income any adjustment pursuant to Section 481 of the Code
by reason of a voluntary change in accounting method initiated by the
Corporation or any of its Subsidiaries after the date hereof and during the
period ending at the time of the Share Purchase, and the Internal Revenue
Service has not initiated or proposed any such adjustment or change in
accounting method.
SECTION 3.14. EMPLOYEE BENEFIT PLANS. Set forth in DL 3.14 is an accurate
and complete list of each domestic and foreign employee benefit plan, within the
meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended, and the rules and regulations thereunder ("ERISA"), whether or not
subject to ERISA, and each stock option, stock appreciation right, restricted
stock, incentive, bonus, profit-sharing, savings, deferred compensation, health,
medical, life, disability, accident, supplemental unemployment or retirement,
employment, severance or salary or benefits continuation plan, program,
arrangement or agreement maintained by the Corporation or any of its
Subsidiaries or affiliates (including, for this purpose and for the purpose of
all of the representations in this Section 3.14, any predecessors to the
Corporation or to any such Subsidiaries or affiliates and all employers (whether
or not incorporated) that would be treated together with the Corporation and/or
any of its Subsidiaries as a single employer within the meaning of Section 414
of the Code, or to which the Corporation or any such Subsidiary or affiliate
contributes (or has any obligation to contribute), has any liability or is a
party (collectively, the "Employee Benefit Plans"). Except to the extent that
any breach of the following representations could not reasonably be expected to
have a Material Adverse Effect on the Corporation or as disclosed in DL 3.14,(i)
each Employee Benefit Plan (and each related trust, insurance contract or fund)
is in compliance with applicable law (including, without limitation, ERISA and
the Code) and has been administered and operated in all respects in accordance
with its terms;(ii) except as set forth
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in DL 3.14, each Employee Benefit Plan which is intended to be "qualified"
within the meaning of Section 401(a) of the Code has received a favorable
determination letter from the Internal Revenue Service, and no event has
occurred and no condition exists which could reasonably be expected to result in
the revocation of any such determination;(iii) no complete or partial
termination of any Employee Benefit Plan covered by Title IV of ERISA has
occurred and no proceedings have been instituted to terminate or appoint a
trustee to administer any such Employee Benefit Plan, and no such Employee
Benefit Plan has been the subject of a "reportable event" (as defined in Section
4043 of ERISA) for which the 30-day notice requirement has not been waived by
the Pension Benefit Guaranty Corporation (the "PBGC"); (iv)neither the
Corporation nor any of its Subsidiaries has incurred any unsatisfied liability
to the PBGC with respect to any Employee Benefit Plan which is an "employee
pension benefit plan" (within the meaning of Section 3(2) of ERISA), including,
without limitation, any liability under Section 4069 of ERISA or any penalty
imposed under Section 4071 of ERISA, or otherwise incurred any liability under
Title IV of ERISA or Chapter 43 of the Code with respect to any such Employee
Benefit Plan, and no event has occurred and no condition or circumstance has
existed that would give rise to any such liability;(v) no Employee Benefit Plan
subject to Section 412 of the Code or Section 302 of ERISA has incurred any
accumulated funding deficiency within the meaning of such sections of the Code
or ERISA or obtained or applied for a waiver of any minimum funding standards or
an extension of any amortization period under Section 412 of the Code or Section
303 or 304 of ERISA;(vi) the actuarial present value of the accumulated plan
benefits under any Employee Benefit Plan that is an "employee pension benefit
plan" (within the meaning of Section 3(2) of ERISA), whether or not vested and
determined in accordance with PBGC actuarial methods, factors and assumptions
applicable to such a plan terminating on the Closing Date, does not exceed the
fair value of the assets allocable thereto;(vii) no Employee Benefit Plan is a
"multi-employer plan" (as defined in the Code or Section 4001(a)(3) of ERISA) or
a "multiple employer plan" (within the meaning of the Code or ERISA) and neither
the Corporation nor any Subsidiary contributes to or has contributed to, or had
any liability or obligation with respect to any multi-employer plan;(viii) full
payment has been timely made of all amounts which the Corporation or any of its
Subsidiaries is required under applicable law or under any Employee Benefit Plan
or related agreement to have paid as of the last day of the most recent fiscal
year, of such Employee Benefit Plan or related agreement ended prior to the date
hereof, and the Corporation and its Subsidiaries have made adequate provisions,
in accordance with GAAP, in their financial statements for all obligations and
liabilities under all Employee Benefit Plans that have accrued but have not been
paid because they are not yet due under the terms of any such Employee Benefit
Plan, related agreement, or applicable law;(ix) neither the Corporation nor
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any of its Subsidiaries have any unfunded liabilities pursuant to any Employee
Benefit Plan which is an "employee pension benefit plan" (within the meaning of
Section 3(2) of ERISA) that is not intended to be qualified under Section 401(a)
of the Code; (x) the applicable requirements of Part 6 of Subtitle B of Title I
of ERISA and Section 4980B of the Code have been met with respect to each
Employee Benefit Plan that is a "group health plan" (as such term is defined in
Section 607(1) of ERISA or Section 5000(b)(1) of the Code);(xi) no Employee
Benefit Plan provides for post-employment or retiree health, life insurance or
other welfare benefits which could result in a material liability of the
Corporation or any Subsidiary;(xii) neither the Corporation nor any Subsidiary,
nor any of their respective directors, officers or employees, or, to
Corporation's knowledge, any other "disqualified person" or "party in interest"
(as defined in Section 4975(e)(2) of the Code and Section 3(14) of ERISA,
respectively) has engaged in any transaction, act or omission to act in
connection with any Employee Benefit Plan that could reasonably be expected to
result in the imposition of a penalty or fine pursuant to Section 502 of ERISA,
damages pursuant to Section 409 of ERISA or a tax pursuant to Section 4975 of
the Code;(xiii) no plan or agreement to which the Corporation or any Subsidiary
is a party or by which it may be bound will or may, by reason of the execution
of this Agreement and the consummation of the transactions contemplated hereby
(either alone or upon the occurrence of any additional or subsequent event),
result in any payment, "parachute payment" (as such term is defined in Section
280G of the Code), severance, bonus, retirement or job security or similar-type
benefit, or increase any benefits or accelerate the payment or vesting of any
benefits to any employee or former employee or director of the Corporation or
any Subsidiary, and no Employee Benefit Plan provides for the payment of
severance, termination, change in control or similar-type payments or benefits;
and (xiv) no liability, claim, action, audit, examination or litigation is
pending or, to the Corporation's knowledge, threatened with respect to any
Employee Benefit Plan (other than routine claims for benefits payable in the
ordinary course).
SECTION 3.15. BROKERS. There is no investment banker, broker, finder or
other intermediary other than CIBC Oppenheimer Corp. which or who has been
retained by, or is authorized to act for, the Corporation in connection with the
transactions contemplated by this Agreement or is otherwise entitled to payment
of any fee or commission.
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SECTION 3.16. ENVIRONMENTAL MATTERS.
(a) PROVISION CONTROLS. Anything elsewhere in this Agreement to the
contrary notwithstanding, this Section 3.16 contains the entire agreement and
understanding of the parties relating to environmental representations and
warranties concerning the Corporation and the Subsidiaries.
(b) ENVIRONMENTAL DISCLOSURES. DL 3.16 sets forth all environmental
matters that are within the scope of the specific categories set forth below
which, individually or in the aggregate, could reasonably be expected to have a
Materially Adverse Effect on the Corporation and the Subsidiaries taken as a
whole:
(1) all permits, licenses and other authorizations possessed by the
Corporation and the Subsidiaries issued under Federal, state or local laws
relating to pollution or protection of worker or public health, safety or the
environment (collectively, the "Environmental Permits"), whether based on
statute, regulation, common law, equity or any other legal theory (the
"Environmental Laws") including, but not limited to, those relating to
emissions, discharges, releases or threatened releases of hazardous substances,
pollutants, contaminants, or hazardous or toxic material or wastes into ambient
air, surface water, groundwater or land ("Releases"). Each of such Releases and
violations of an Environmental Law is referred to herein as an "Environmental
Incident";
(2) to the knowledge of the Corporation, all violations by the
Corporation or any Subsidiary of the terms and conditions of any Environmental
Permits or Environmental Laws or of any other limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, schedules and
timetables contained in Environmental Laws; applicable orders, agreements,
variances, injunctions, decrees, writs, judgments, awards or arbitration awards
relating thereto; and all past or present events, conditions, circumstances,
activities, practices, incidents, actions or plans concerning the business or
operations of the Corporation or any of its Subsidiaries or any entity that was
formerly a subsidiary or a controlled affiliate of the Corporation which may
give rise to any legal liability of the Corporation or any of its Subsidiaries
under any Environmental Law or otherwise from any claim, action, suit,
proceeding, hearing or investigation in connection with any Environmental
Incident;
(3) all orders (including, without limitations, decrees, writs,
judgments, awards or notice or demand letters) or agreements issued, entered,
promulgated or approved by any Person under or in connection with Environmental
Laws which bind, restrict, obligate, or otherwise apply to the Corporation or
any
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of the Subsidiaries or any of their respective properties or assets, which
remain in effect or which were issued or effective during the five years prior
to the date of this Agreement;
(4) all actions, claims, suits, proceedings or investigations under
any Environmental Laws either pending or, to the knowledge of the Corporation,
threatened against the Corporation or any of the Subsidiaries or any of their
respective properties or assets before any court or arbitrator or any
Governmental Authority;
(5) all agreements (including, but not limited to, consent orders and
agreements among potentially responsible parties) to which the Corporation or
any of the Subsidiaries is a party and which relate to benefits (including, but
not limited to, indemnification) or obligations of the Corporation or any of the
Subsidiaries in connection with Environmental Laws or any Environmental
Incident, and any effect that the transactions contemplated by this Agreement
will have on the benefits (including, without limitation, indemnification)
granted to the Corporation or any of the Subsidiaries under any such agreements
including any assignments or approvals required in connection with such
benefits;
(6) any Owned Real Property or Leased Real Property, whether or not
set forth in DL 3.11, that is subject to any applicable law that conditions,
restricts, prohibits, or requires any notification or disclosure in connection
with the transactions contemplated hereby for environmental reasons
("Environmental Property Transfer or Disclosure Law"). To the extent an
Environmental Property Transfer or Disclosure Law is applicable to any such
Owned Real Property or Leased Real Property in connection with the transactions
contemplated hereby, as and when appropriate the Corporation will take (or
cooperate with Parent in taking), such action as is necessary to fully comply
with the requirements of such laws; and
(7) any proceeding or investigation concerning criminal violations of
any Environmental Law to which the Corporation and its Subsidiaries or any
entity that was formerly a subsidiary or controlled affiliate of the
Corporation, are, or have been, subject at any time during the past 10 years.
(c) CONDUCT OF BUSINESS BY THE CORPORATION PENDING THE EFFECTIVE TIME.
Anything elsewhere in this Agreement to the contrary notwithstanding,
the Corporation retains the right, with prior notice to Parent, to take only the
actions and make only the payouts set forth in DL 3.16A, if required, with
respect to environmental matters.
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SECTION 3.17. PROPRIETARY RIGHTS. Except as set forth in DL 3.17, as of
the date hereof the Corporation has received no notice that it or any of its
Subsidiaries has infringed, and to the knowledge of the Corporation neither it
nor any of its Subsidiaries is now infringing, on any patent, trade name,
trademark, service mark, copyright, trade secret, technology, know-how or
process (collectively, the "Proprietary Rights") belonging to any other person,
which infringement, in the aggregate, would have a Material Adverse Effect on
the Corporation and its Subsidiaries, taken as a whole. Except as set forth in
DL 3.17, (i) the Corporation is not aware of any infringement by any third party
of any Proprietary Rights of the Corporation or any of its Subsidiaries, and
(ii) neither the Corporation nor any of its Subsidiaries is a party to any
material license, agreement or arrangement with respect to any Proprietary
Rights. DL 3.17 lists all the Proprietary Rights owned by the Corporation or
any of the Subsidiaries that are composed of registered patents, trade names,
trademarks, service marks or copyrights that are material to its business and
sets forth, if and as applicable, the registration number, country, application,
registration and expiration dates, and class with respect to such Proprietary
Rights.
SECTION 3.18. MATERIAL CONTRACTS AND LEASES. The list of agreements set
forth in DL 3.18 includes all the Material Contracts (as defined below) that the
Corporation or any of the Subsidiaries is party to, or is bound by. For
purposes of this Agreement, a "Material Contract" shall mean (i) any contract,
lease or other agreement (except for purchase orders entered into in the
ordinary course of business and contracts and agreements cancelable by the
Corporation or any of its Subsidiaries at will or on notice of 30 days or less)
to which the Corporation or any of its Subsidiaries is a party or by which the
Corporation or any of its Subsidiaries is bound, which by its terms calls for
the payment by either party to such contract or agreement of $250,000 or more in
any fiscal year or is material to the business, operations or financial
condition of the Corporation and its subsidiaries, taken as a whole,(ii) any
material agreement, contract or commitment not in the ordinary course of
business, (iii)any agreement, indenture or other instrument which contains
restrictions with respect to payment of dividends or any other distribution in
respect of its capital stock,(iv) any agreement, contract or commitment to be
performed relating to capital expenditures in excess of $100,000 in any calendar
year, or in the aggregate requiring expenditures in excess of $1,000,000,(v) any
material agreement, indenture or instrument relating to indebtedness for
borrowed money or the deferred purchase price of property (excluding trade
payables in the ordinary course of business, intercompany indebtedness,
intercompany transfers, and operating leases),(vi) any loan or advance to (other
than advances to employees in the ordinary course of business in amounts of
$25,000 or less to any individual and $100,000 in the
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aggregate to all employees), or investment in (other than investments in
Subsidiaries), any Person, or any agreement, contract or commitment relating to
the making of any such loan, advance or investment or any agreement, contract or
commitment involving a sharing of profits (except for bonus or commission
arrangements with employees entered into in the ordinary course of business
consistent with past practice),(vii) any guarantee or other contingent liability
in respect of any indebtedness or obligation of any Person (other than in the
ordinary course of business and other than with respect to any indebtedness or
obligation of the Corporation or any Subsidiary),(viii) any management service,
consulting or any other similar type of contract (other than contingent fee
agreements with collection attorneys), involving payments of more than $150,000
annually, unless terminable by the Corporation or Subsidiary on not more than 90
days notice,(ix) any agreement, contract or commitment limiting the ability of
the Corporation or any of its Subsidiaries to engage in any line of business or
to compete with any Person,(x) any warranty, guaranty or other similar
undertaking with respect to a contractual performance extended by the
Corporation or any of its Subsidiaries other than in the ordinary course of
business, or (xi) any agreement, contract or commitment to employ any of its
officers or employees, and (xii) any material amendment, modification or
supplement in respect of any of the foregoing. Neither the Corporation nor any
of its Subsidiaries is in default under any Material Contract, except for such
defaults which will not, individually or in the aggregate, have a Material
Adverse Effect on the Corporation and its Subsidiaries, taken as a whole.
Except as shown in DL 3.18, no approval or consent of, or notice to, any person
is needed in order that each such Material Contract shall continue in full force
and effect in accordance with its terms without penalty, acceleration or rights
of early termination by reason of the consummation of the transactions
contemplated by this Agreement.
SECTION 3.19. INSURANCE. DL 3.19 sets forth a list of all material
policies of insurance maintained on the date hereof by the Corporation and each
of its Subsidiaries with respect to their respective businesses, which policies
are currently in full force and effect. As of the date hereof, except as set
forth in DL 3.19, neither the Corporation nor any of its Subsidiaries has
received notice of cancellation or refusal to renew with respect to any
insurance policy set forth in DL 3.19.
SECTION 3.20. LABOR RELATIONS. Neither the Corporation nor any of its
Subsidiaries is currently party to any collective bargaining agreement with
respect to any of its employees. The Corporation has previously furnished or
made available to Parent a true, complete and correct copy of the handbooks and
administrative policies and practices relating to employees of the Corporation
and its Subsidiaries and any other material agreement regarding its relationship
with the
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Corporation's employees or those of its Subsidiaries. Except as set forth in DL
3.20 and except for any violations which, individually or in the aggregate,
would not reasonably be expected to have a Material Adverse Effect, each of the
Corporation and its Subsidiaries is in substantial compliance with all federal,
state or other applicable laws respecting employment and employment practices,
terms and conditions of employment and wages and hours, and has not and is not
engaged in any unfair labor practice. Except as disclosed in DL 3.20 or in the
Corporation Filings, there exist no employment, consulting, severance,
indemnification agreements or deferred compensation agreements between the
Corporation and any director, officer or employee of the Corporation or any
agreement that would give any Person the right to receive any payment from the
Corporation as a result of the Offer or the Merger.
SECTION 3.21. VOTING REQUIREMENTS. After the Share Purchase, the
affirmative vote of the holders of two-thirds of the outstanding shares of
Corporation Common Stock entitled to be cast approving this Agreement is the
only vote of the holders of any class or series of the Corporation's capital
stock necessary to approve this Agreement and the transactions contemplated by
this Agreement.
SECTION 3.22. RIGHTS AGREEMENT. The Corporation and the Board of
Directors of the Corporation have taken and will maintain in effect during the
term of this Agreement all necessary action to (i) render the Rights Agreement
inapplicable with respect to the Offer, the Merger and the other transactions
contemplated by this Agreement, and (ii) ensure that (x) neither Parent, nor
Sub, nor any of their Affiliates, or Associates (each as defined in the Rights
Agreement) is considered to be an Acquiring Person (as defined in the Rights
Agreement) and (y) the provisions of the Rights Agreement, including the
occurrence of a Distribution Date (as defined in the Rights Agreement), are not
and shall not be triggered by reason of the announcement or consummation of the
Offer, the Merger or the other transactions contemplated by this Agreement. The
Corporation has delivered to Parent a complete and correct copy of the Rights
Agreement as amended and supplemented to the date of this Agreement. The Board
of Directors of the Corporation, at a meeting duly called and held, has resolved
that the Rights shall be redeemed immediately prior to, and subject to, the
acceptance for payment and purchase of not less than two-thirds of the
outstanding Shares pursuant to the Offer in accordance with the terms of this
Agreement.
SECTION 3.23. CUSTOMERS RELATIONS. Except as disclosed on DL 3.23, none
of the top twenty customers of the Corporation (based on the Corporation's
consolidated revenues for the fiscal year ended June 30, 1997) has notified the
Corporation or any of its Subsidiaries that it intends to either (i)
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terminate or modify in a manner materially adverse to the Corporation or any of
its Subsidiaries its contractual arrangements with the Corporation or any of its
Subsidiaries or (ii) substantially curtail the amount of business it currently
does with the Corporation or any of its Subsidiaries.
SECTION 3.24. OPINION OF FINANCIAL ADVISOR. The Corporation has received
the opinion of CIBC Oppenheimer Corp., to the effect that, as of the date of
this Agreement, the consideration to be received in the Offer and the Merger by
the Corporation's shareholders is fair to the Corporation's shareholders form a
financial point of view, and a complete and correct signed copy of such opinion
has been, or promptly upon receipt thereof will be, delivered to Parent.
ARTICLE IV - REPRESENTATIONS AND WARRANTIES
OF PARENT AND SUB
Each of Parent and Sub represents and warrants to the Corporation that:
SECTION 4.1. CORPORATE EXISTENCE AND POWER. Each of Parent and Sub is a
corporation duly organized, validly existing and in good standing under the laws
of Delaware, and each has all corporate power, authority and legal right to
conduct its business as it is now being conducted and to own the properties and
assets it now owns. Parent and Sub have delivered to Corporation true, compete
and correct copies of their respective certificates of incorporation and
by-laws.
SECTION 4.2. CORPORATE AUTHORIZATION. Each of Parent and Sub (a) has full
corporate power and authority to enter into this Agreement and to carry out the
transactions contemplated hereby, (b) has taken all action required by
applicable law and its Certificate of Incorporation and By-Laws, including the
authorization of this Agreement and the transactions contemplated hereby by
their respective Boards of Directors and (if required) stockholders, to
authorize the execution and delivery of this Agreement and the performance by
Parent and Sub of the transactions contemplated hereby, (c) has duly and validly
executed and delivered this Agreement and no other corporate action is necessary
in connection therewith. This Agreement (assuming the due authorization,
execution and delivery hereof by the Corporation) is a legal, valid and binding
obligation of each of Parent and Sub enforceable against each of them in
accordance with its terms, except to the extent that enforcement may be limited
by applicable bankruptcy, insolvency, reorganization or other similar laws
affecting creditors' rights generally and by general equitable principles
(regardless of whether enforcement is sought in equity or at law).
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SECTION 4.3. CONSENTS AND APPROVALS. Except as contemplated by Section
4.6 hereof and except for the requirements of the federal and state securities
laws and the HSR Act, and assuming the filing of the Certificate of Merger and
other appropriate merger documents, if any, as required by the laws of the State
of Delaware, no consent, approval or authorization of, or declaration, filing or
registration with, any United States or foreign governmental or regulatory
authority or any other person or entity is required to be made or obtained by
Parent or any of its affiliates in connection with the execution, delivery and
performance of this Agreement or the consummation of the transactions
contemplated hereby.
SECTION 4.4. NO VIOLATION. The execution, delivery and performance of
this Agreement by Parent and Sub and the consummation of the transactions
contemplated hereby (a) will not violate any provision of the respective
Certificates of Incorporation or By-Laws of Parent or Sub or any of their
affiliates, (b) except as set forth in the Disclosure Letter heretofore prepared
by Parent and delivered to the Corporation, will not violate, or be in conflict
with, or constitute a default under any material contract, lease, loan
agreement, license, permit or other agreement to which Parent or any of its
affiliates is a party, or by which Parent or any of its affiliates is bound or
to which it or any of them is subject and (c) will not violate any law,
judgment, decree, order, regulation or rule of any court or governmental
authority by which Parent or any of its affiliates is bound or any of their
respective properties is subject, except in any case where the violation or
default would not materially adversely affect Parent's or Sub's ability to
consummate the transactions contemplated by this Agreement (including, without
limitation, its ability to complete the Share Purchase pursuant to the Offer).
SECTION 4.5. FINANCIAL STATEMENTS. The audited financial statements
(including the notes thereto, the "Parent Audited Financial Statements") of
Parent for its most recently completed fiscal year, a copy of which has
previously been delivered to the Corporation, present fairly, in all material
respects, the consolidated financial position of Parent and its subsidiaries as
of the date thereof and their consolidated results of operations, cash flows and
stockholders' equity for the period then ended, all in conformity with GAAP.
The unaudited financial statements (including the notes thereto) of Parent for
the period ended June 30, 1997, a copy of which has been previously delivered to
the Corporation, were prepared in a manner consistent with the basis of
presentation used in the Parent Audited Financial Statements and in accordance
with GAAP, and fairly present, in all material respects, the consolidated
financial position of Parent and its subsidiaries as at and for the periods
indicated, subject to normal recurring year-end adjustments.
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SECTION 4.6. FINANCING. Parent and Sub have obtained letters (copies of
which have been delivered to the Corporation) from responsible financial
institutions providing for, subject to certain conditions set forth therein,
commitments to provide all funds necessary, together with funds available to the
Parent and Sub, to consummate the transactions contemplated hereby.
SECTION 4.7. OFFER DOCUMENTS; OTHER INFORMATION. None of the information
contained in any of the Offer Documents (excluding information described therein
as being supplied by the Corporation with respect to itself) will, at the
respective times such Offer Documents or any amendments or supplements thereto
are filed with the SEC or are first published, sent or given to stockholders, as
the case may be, contain any untrue statement of material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading.
SECTION 4.8. LITIGATION. There are no actions, suits, proceedings or
investigations pending or, to the knowledge of Parent or Sub, threatened against
Parent or Sub or any of their affiliates before any court or arbitrator or any
governmental body, agency or official which are reasonably likely, individually
or in the aggregate, to materially adversely affect Parent's or Sub's ability to
consummate the transactions contemplated hereby or which questions or challenges
the validity of this Agreement or the transactions contemplated hereby.
ARTICLE V - CONDUCT OF BUSINESS BY THE CORPORATION PENDING THE CLOSING
From the date hereof until immediately after the Closing (or, if sooner,
the termination of this Agreement), and except as otherwise consented to or
approved by Parent in writing, which consent or approval shall not be
unreasonably withheld or delayed:
SECTION 5.1. REGULAR COURSE OF BUSINESS. (a) The Corporation will, and
will cause its Subsidiaries to, conduct business substantially in the same
manner as heretofore conducted and neither the Corporation nor any of its
Subsidiaries will engage in any transaction or activity, enter into any
agreement or make any commitment (or materially amend any Material Contract
existing on the date hereof), except (i) as set forth on DL 5.1(a),(ii) in the
ordinary course of business and consistent with past practices or pursuant to an
agreement to which the Corporation or any of such Subsidiaries is a party on the
date hereof (it being understood that transactions in the call center
outsourcing business shall be deemed to be within the ordinary
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course of business of the Corporation and any Subsidiary which is engaged in
such business as of the date hereof),(iii) as contemplated by this Agreement, or
(iv) which would not be reasonably likely to have a Material Adverse Effect.
Except as otherwise permitted by this Agreement, the Corporation will not, and
will cause the Subsidiaries not to, intentionally take any action that would
cause, or intentionally omit to take any reasonable action that in all
likelihood would prevent, any of the representations and warranties contained in
Article III which are qualified as to materiality to fail to be true and correct
in any respect or any representation or warranty not so qualified to fail to be
true and correct in all material respects, as if such representations and
warranties were deemed to be made at and as of the Closing (except to the extent
any such representation or warranty was expressly made only as of a different
date).
(b) Without limiting the generality of subsection (a) of this Section, the
Corporation will not, and will not permit any Subsidiary to, except pursuant to
this Agreement or as otherwise permitted by DL 5.1(b): (i) acquire (by merger,
consolidation or acquisition of stock or assets) any corporation, partnership or
other business organization or division thereof, make any material investment in
any other entity which is not a wholly owned affiliate of the Corporation or
relinquish any material contract rights; (ii) acquire (including by lease) any
material assets or properties or dispose of, mortgage or encumber any of its
material assets or properties (except in each case in the ordinary course of
business and consistent with past practice or pursuant to an agreement to which
the Corporation or any Subsidiary is a party on the date hereof); (iii) make or
commit to make any capital expenditures in excess of $150,000, (iv) make any
change in accounting principles (except as may be required by generally accepted
accounting principles or SEC regulations, in which event, the Corporation will
fully disclose any such change and the reason(s) therefor); (v) sell or pledge
or agree to sell or pledge any stock owned by it in any of its Subsidiaries;
(vi) except to the extent required under existing employee and director benefit
plans, agreements or arrangements as in effect on the date of this Agreement,
increase the compensation or fringe benefits of any of its directors, officers
or employees, except for increases in salary, wages or commissions of employees
of the Corporation or its Subsidiaries who are not officers of the Corporation
in the ordinary course of business in accordance with past practice, or grant
any severance or termination pay not currently required to be paid under
existing severance plans or agreements or enter into any employment, consulting
or severance agreement or arrangement with any present or former director,
officer or other employee of the Corporation or any of its subsidiaries, or
establish, adopt, enter into or amend or terminate any collective bargaining,
bonus, profit sharing, thrift, compensation, stock option, restricted stock,
pension, retirement, deferred compensation, employment, termination,
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severance or other plan, agreement, trust, fund, policy or arrangement for the
benefit of any directors, officers or employees; (vii) except for transactions
between the Corporation and Subsidiaries or in the ordinary course of business,
transfer, lease, license, guarantee, sell, mortgage, pledge, dispose of,
encumber or subject to any lien, any material assets or incur or modify any
indebtedness or other liability (other than indebtedness incurred under the
Amended and Restated Credit Agreement dated December 31, 1994, between the
Corporation and Bank of Boston, Connecticut (the "Existing Credit Facility");
PROVIDED that there shall not be any material increase in the amounts
outstanding under the Existing Credit Facility, other than in the ordinary
course of business, or otherwise as an accommodation, except for guarantees by
Corporation of obligations of Subsidiaries or guarantees by Subsidiaries of
obligations of Subsidiaries, become responsible for the obligations of any
person or, other than in the ordinary course of business consistent with past
practice, make any loan or other extension of credit except for intercompany
transactions between Corporation and Subsidiaries and between Subsidiaries;
(viii) agree to the settlement of any material claim or litigation (including,
but not limited to, any claim or litigation in respect of, related to or arising
out of any Environmental Law, Environmental Permit or Pollution Incident); (ix)
make any material tax election or settle or compromise any material tax
liability; (x) permit any insurance policy naming it as beneficiary or a loss
payable payee to be cancelled without notice to Parent, except for the
cancellation of insurance policies required to be maintained by third parties
for the benefit of the Corporation or any Subsidiary of which such cancellation
neither the Corporation nor any Subsidiary has notice; (xi) adopt a plan of
complete or partial liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or other reorganization of the Corporation or
any of its Subsidiaries not constituting an inactive Subsidiary (other than the
Merger); or (xii) agree, in writing or otherwise, to take any of the foregoing
actions.
SECTION 5.2. CHARTER DOCUMENTS AND CAPITAL CHANGES. Except as expressly
authorized by this Agreement or required by Section 1.2, neither the Corporation
nor any of its Subsidiaries will (a) change or amend its Certificate of
Incorporation, By-Laws or the Certificate of Incorporation or By-Laws of any of
its Subsidiaries, (b) issue or sell any shares of its capital stock (other than
shares issuable upon exercise of currently outstanding options), nor issue
options (other than automatic issuances pursuant to the terms of a plan in
effect on the date hereof or pursuant to the terms of any existing employment
agreement), warrants to purchase, or rights to subscribe to, any shares of its
capital stock, or enter into any arrangement or contract with respect thereto,
or (c) make any other material changes in its capital structure, other than
dividends and other
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intercompany transfers, allocations and transactions in the ordinary course of
business between any wholly-owned Subsidiary and the Corporation or any other
wholly-owned Subsidiary.
SECTION 5.3. ORGANIZATION AND GOOD WILL. Except as set forth in DL 5.3,
the Corporation will use all reasonable efforts to preserve the business,
business organization and good will of the Corporation and each of its
Subsidiaries, keep in place their present executive officers and key employees,
and preserve their present relationships with persons having business dealings
with them.
SECTION 5.4. INSURANCE. The Corporation will use all commercially
reasonable efforts to maintain, and cause each of its Subsidiaries to maintain,
insurance substantially at current levels on all property, real, personal and
mixed, owned or leased by them.
SECTION 5.5. COMPLIANCE WITH LAWS. The Corporation will use its best
efforts to duly comply, and cause each of its Subsidiaries to duly comply, in
all material respects with all laws applicable to them and their respective
properties, operations, business and employees, except where the failure to do
so is not reasonably likely to have a Material Adverse Effect on the
Corporation.
SECTION 5.6. SEC REPORTS. The Corporation will duly file all reports
required to be filed by it with the SEC pursuant to the Exchange Act and will
submit copies thereof to Parent simultaneously with the time of filing thereof.
SECTION 5.7. PROXY STATEMENT. If shareholder approval of the Merger is
required by law, as promptly as practicable following the Share Purchase, the
Corporation will prepare and file a preliminary Proxy Statement with the SEC and
will use its best efforts to respond to the comments of the SEC in connection
therewith and to furnish all information required to prepare the definitive
Proxy Statement (including, without limitation, financial statements and
supporting schedules and certificates and reports of independent public
accountants). Promptly following the Share Purchase, if required by the DGCL in
order to consummate the Merger, the Corporation will cause the definitive Proxy
Statement to be mailed to the shareholders of the Corporation and, if necessary,
after the definitive Proxy Statement shall have been so mailed, promptly
circulate amended, supplemental or supplemented proxy material and, if required
in connection therewith, resolicit proxies.
SECTION 5.8. SHAREHOLDER APPROVAL. (a) Promptly following the Share
Purchase, if required by DGCL in order to consummate the Merger, the
Corporation, acting through its Board of Directors, shall, in accordance with
applicable law, duly
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call, convene and hold a special meeting of the holders of Common Stock for the
purpose of voting upon this Agreement and the Merger and the Corporation agrees
that this Agreement and the Merger shall be submitted at such special meeting.
The Corporation shall use its reasonable best efforts to solicit from its
shareholders proxies, and shall take all other action necessary and advisable,
to secure the vote of shareholders required by applicable law to obtain the
approval for this Agreement and the Merger. Subject to Section 5.9 of this
Agreement, the Corporation agrees that it will include in the Proxy Statement
the recommendation of its Board of Directors that holders of Common Stock
approve and adopt this Agreement and approve the Merger. Parent will cause all
shares of Common Stock owned by Parent and its subsidiaries to be voted in favor
of the Merger.
(b) Notwithstanding the foregoing, in the event that Sub shall acquire at
least 90% of the outstanding Corporation Common Stock, the Corporation agrees,
subject to Article VII, to take all necessary and appropriate action to cause
the Merger to become effective as soon as reasonably practicable after such
acquisition, without a meeting of the Corporation's shareholders, in accordance
with Section 253 of the DGCL.
SECTION 5.9. NO SOLICITATION OF OTHER OFFERS. (a) The Corporation and its
affiliates and each of their respective officers, directors, employees,
representatives and agents shall immediately cease any discussions or
negotiations with any other parties that may be ongoing with respect to any
Acquisition Proposal (as defined below). Neither the Corporation nor any of its
affiliates, shall, directly or indirectly, take (and the Corporation shall not
authorize or permit its or its affiliates, officers, directors, employees,
representatives, consultants, investment bankers, attorneys, accountants or
other agents or affiliates, to so take) any action to (i) encourage, solicit or
initiate the making of any Acquisition Proposal, (ii) enter into any agreement
with respect to any Acquisition Proposal or (iii) participate in any way in
discussions or negotiations with, or furnish or disclose any information to, any
Person (other than Parent or Sub or their representatives) in connection with,
or take any other action to facilitate any inquiries or the making of any
proposal (including without limitation by taking any action (except as required
by Section 1.2) that would make the Rights Agreement, Section 203 of the DGCL or
the provisions of Article FIFTH of the Corporation's Certificate of
Incorporation inapplicable to an Acquisition Proposal) that constitutes, or may
reasonably be expected to lead to, any Acquisition Proposal, PROVIDED, HOWEVER,
that the Corporation, in response to an unsolicited Acquisition Proposal and in
compliance with its obligations under Section 5.9(b) hereof, may participate in
discussions or negotiations with or furnish information to any third party which
proposes a transaction which the Board of
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Directors of the Corporation reasonably determines will result in a Superior
Proposal if the Board of Directors believes (and has been advised in writing by
independent outside counsel) that failing to take such action would constitute a
breach of its fiduciary duties under applicable law. In addition, neither the
Board of Directors of the Corporation nor any Committee thereof shall (x)
withdraw or modify, or propose to withdraw or modify, in a manner adverse to
Parent or Sub the approval and recommendation of the Offer and this Agreement or
(y) approve or recommend, or propose to approve or recommend, any Acquisition
Proposal, provided that the Corporation may recommend to its shareholders an
Acquisition Proposal and in connection therewith withdraw or modify its approval
or recommendation of the Offer or the Merger if (i) the Board of Directors of
the Corporation has determined that the Acquisition Proposal is a Superior
Proposal, (ii) all the conditions to the Corporation's right to terminate this
Agreement in accordance with Section 8.1(e) have been satisfied (including the
expiration of the three day period described therein and the payment of all
amounts required pursuant to Section 9.1), (iii) simultaneously with such
withdrawal, modification or recommendation, this Agreement is terminated in
accordance with Section 8.1(e) and (iv) the Acquisition Proposal does not
provide for any breakup fee or other inducement to the acquiror other than
reimbursement of out of pocket expenses incurred in connection with such
Acquisition Proposal. Any actions permitted under, and taken in compliance
with, this Section 5.9 shall not be deemed a breach of any other covenant or
agreement contained in this Agreement.
"Acquisition Proposal" shall mean any inquiry, proposal or offer from any
Person relating to any direct or indirect acquisition or purchase of a
substantial amount of assets of the Corporation or any of its Subsidiaries or of
over 10% of any class of equity securities of the Corporation or any of its
Subsidiaries, any tender offer or exchange offer that if consummated would
result in any person beneficially owning 10% or more of any class of equity
securities of the Corporation or any of its Subsidiaries, any merger,
consolidation, business combination, sale of substantially all the assets,
recapitalization, liquidation, dissolution or similar transaction involving the
Corporation or any of its Subsidiaries, other than the transactions contemplated
by this Agreement, or any other transaction the consummation of which could
reasonably be expected to impede, interfere with, prevent or materially delay
the Offer or the Merger or which would reasonably be expected to dilute
materially the benefits to Parent of the transactions contemplated hereby.
"Superior Proposal" shall mean a BONA FIDE proposal made by a third party to
acquire all of the outstanding shares of the Corporation pursuant to a tender
offer, a merger or a sale of all of the assets of the Corporation (x) on terms
which a majority of the members of the Board of Directors of the Corporation
determines in its good faith reasonable judgement
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(based on the advice of independent outside financial and legal advisors) to be
more favorable to the Corporation and its shareholders than the transactions
contemplated hereby, (y) for which in the good faith reasonable judgement of the
Board of Directors adequate financing or other consideration is then available
and (z) which does not provide for any breakup fee or other inducement to the
acquiror other than reimbursement of documented out-of-pocket expenses incurred
in connection with the Superior Proposal.
(b) In addition to the obligations of the Corporation set forth in
paragraph (a), on the date of receipt thereof, the Corporation shall advise
Parent of any request for information or any Acquisition Proposal, or any
inquiry or proposal with respect to any Acquisition Proposal, and the material
terms and conditions of such request or takeover proposal.
(c) Immediately following the Share Purchase, the Corporation will request
each person who has heretofore executed a confidentiality agreement in
connection with its consideration of acquiring the Corporation or any portion
thereof (the "Confidentiality Agreements") to return all confidential
information heretofore furnished to such person by or on behalf of the
Corporation.
SECTION 5.10. NOTIFICATION OF CERTAIN MATTERS. The Corporation shall give
prompt notice to Parent of: (a) any notice of, or other communication relating
to, a default or event that, with notice or lapse of time or both, would become
a default, received by the Corporation or any of its Subsidiaries subsequent to
the date of this Agreement and prior to the Effective Time, under any Material
Contract to which the Corporation or any of its Subsidiaries is a party or is
subject; and (b) any change or occurrence in the Corporation and its
Subsidiaries taken as a whole which has had a Material Adverse Effect on the
Corporation and its Subsidiaries, taken as a whole, or the occurrence of any
event which is reasonably likely to result in such a Material Adverse Effect.
Each of the Corporation and Parent shall give prompt notice to the other party
of any notice or other communication from any third party alleging that the
consent of such third party is or may be required in connection with the
transactions contemplated by this Agreement.
SECTION 5.11. RIGHTS AGREEMENT. The Corporation shall not redeem the
Rights or amend (other than to delay the Distribution Date (as defined therein)
or to render the Rights inapplicable to the Offer and the Merger) or terminate
the Rights Agreement prior to the Effective Time without the consent of the
Parent unless required to do so by a court of competent jurisdiction.
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SECTION 5.12. PROPERTIES; MATERIAL CONTRACTS. The Corporation will use,
and will cause its Subsidiaries to use, all reasonable efforts to (a) maintain
and keep their respective properties in their current condition in all material
respects, except for ordinary wear and tear and damage due to casualty or other
extraordinary occurrence, and (b) perform in all material respects their
respective obligations under the Material Contracts.
SECTION 5.13. DIVIDENDS, ETC. Prior to the Closing, the Corporation will
not declare, pay or set aside for payment any dividend or distributions,
including a distribution of rights, in respect of its capital stock or redeem,
purchase or otherwise acquire any shares of its capital stock, except as
contemplated by this Agreement, in connection with the cancellation or exercise
of stock options, or any such dividends, distributions or payments made by or to
any Subsidiary.
SECTION 5.14. FULL ACCESS. The Corporation will, until the Closing afford
to Parent, its counsel, accountants and other authorized representatives, full
and complete access, upon reasonable notice and in a reasonable manner, to the
offices, properties, books and records of the Corporation and each of its
Subsidiaries in order that Parent may have full opportunity to make such
reasonable investigations as it shall desire as to the business and affairs of
the Corporation and its Subsidiaries. The Corporation will also cause its
officers, accountants and attorneys to furnish, upon reasonable notice and in a
reasonable manner, such additional financial and operating data and other
information as Parent shall from time to time reasonably request. Parent shall,
and shall cause its directors, officers, employees, partners, agents, counsel,
accountants and other authorized representatives and any proposed lender,
placement agent or underwriter to, keep confidential any and all information
(whether in writing or otherwise) obtained or developed pursuant to this
Agreement in accordance with the provisions of Section 6.1 hereof.
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ARTICLE VI - COVENANTS OF PARTIES
The Corporation hereby covenants and agrees with Parent and Sub, and Parent
and Sub hereby covenant and agree with the Corporation, that:
SECTION 6.1. CONFIDENTIALITY. (a) Until the Closing Time, or, in the
event of the termination of this Agreement pursuant to Article VIII, for a
period of three years from the date of such termination, the Corporation, Parent
and Sub and their respective affiliates, consultants, advisors, officers,
employees, directors and agents ("Representatives") shall hold in strictest
confidence and not divulge, use or make available to any other person any
information of the other obtained from any investigation of the other in
connection with the transactions contemplated hereby (including all data,
reports, interpretations, electronic images, computer software, forecasts and
records), or given to them by the other or by others performing services for
them or the other or in a confidential relationship with the other (herein
collectively referred to as "Information"), except to the extent (i) such party
is compelled to disclose such Information by judicial or administrative process
or, in the opinion of its counsel, by other requirements of law (provided such
disclosing party provides the other parties hereto with prompt notice of such
proposed disclosure so that such other parties may seek a protective order or
other appropriate remedy), (ii) such Information becomes generally available to
the public other than as a result of a breach of this Section or is otherwise
available from third parties not under a duty to keep such Information
confidential, (iii) such Information was at the time of its disclosure to such
person previously known to it, (iv) such disclosure is permitted by Section 6.4
(relating to public announcements) or otherwise pursuant to this Agreement, or
(v) such Information is divulged to such party's Representatives (provided that
each such person agrees to be bound by the provisions of this Section). Neither
Parent, Sub nor the Corporation, nor any of their respective Representatives,
will misuse to the detriment of the other, any Information obtained from the
other. If the Share Purchase does not occur, upon the request of the
Corporation or Parent and Sub, the party to whom such request is made shall as
directed by the requesting party destroy or return to the requesting party any
and all copies of written Information covered by this Section furnished to such
non-requesting party or its representatives by, or on behalf of, the requesting
party or otherwise obtained, prepared or developed by or on behalf of the
non-requesting party, and such destruction shall be certified in writing to the
requesting party.
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(b) For a period of three years from the date of the termination of this
Agreement, if the Share Purchase does not occur, Parent (and any affiliate
thereof) will not (i) solicit for hire or employ any person who on the date
hereof or on the date of such termination was an employee of the Corporation or
any of its Subsidiaries or (ii) cause any individual engaged as an independent
contractor by the Corporation or any of its Subsidiaries to breach or void such
individual's independent contractor agreement with the Corporation.
(c) Contemporaneous with the Share Purchase, Parent shall make or cause
the Corporation and each of its Subsidiaries to make, by certified or bank check
or other means acceptable to the payee thereof, all payments which are required
to be made on or after such time under any agreement in effect on the date
hereof between the Corporation or any of such Subsidiaries and (i) any officer
or other employee thereof as a result of a "change of control" (as defined in
any such agreement) having occurred or as a result of the termination of such
officer's or employee's employment, whether voluntary or otherwise, and (ii) all
non-employee directors of the Company with respect to deferred compensation,
including, without limitation the severance, bonus and other payments listed in
DL 6.1, which amounts have been reviewed and approved by Parent and Sub.
SECTION 6.2. COOPERATION. The Corporation and Parent will cooperate with
each other and each such party shall take all reasonable actions that may be
necessary or desirable to consummate the transactions contemplated pursuant to
this Agreement, including, but not limited to, furnishing to each other, or
reviewing, the information relating to each of them required by applicable
statutes, rules and regulations for the purpose of preparing the Offer
Documents, any federal and state securities law filings and any filings under
the HSR Act. Prior to the execution of this Agreement, Parent will provide the
Corporation with a copy in draft form of the Offer Documents and will make
available a final copy of the Offer Documents prior to filing with the SEC.
Each party covenants that all such information furnished to the other or
reviewed by it will be true and correct in all material respects to the
knowledge of such party. Parent and the Corporation will promptly notify the
other party hereto of any comments or requests for additional information from
the SEC or state securities law administrators or relating to any filing under
the HSR Act relating to the Offer, and will upon request supply the other
parties hereto with copies of all correspondence between them or their
representatives and the SEC or members of its staff or state securities law
administrators with respect to the transaction contemplated hereby or relating
to any filing under the HSR Act relating thereto.
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SECTION 6.3. FILINGS; CONSENTS; REMOVAL OF OBJECTIONS. Each party hereto
agrees to exert all reasonable efforts to consummate the Offer and the Merger at
the earliest practicable time, including, without limitation, (i) preparing and
filing all requisite applications, documents and notifications (including filing
with the FTC and the DOJ the Notification and Report Forms under the HSR Act and
cooperating with each other with respect to the filing of any additional
information with respect thereto) in connection with the transaction
contemplated herein required by applicable law, (ii) responding as promptly as
practicable to all inquiries in connection therewith, (iii) removing or
satisfying, if reasonably practicable, any objections to the validity or
legality of the Share Purchase, and (iv) satisfying the conditions to the
consummation of the Share Purchase set forth herein.
SECTION 6.4. PUBLIC ANNOUNCEMENTS. Parent, Sub and the Corporation will
consult with each other before issuing any press release or making any public
statement with respect to the Offer or this Agreement and, except as may be
required by applicable law or the NYSE Rules, will not issue any such press
release or make any such public statement without the prior consent of the other
party hereto, which consent will not be unreasonably withheld or delayed.
SECTION 6.5. EMPLOYEE BENEFITS. (a) Until the first anniversary of the
Effective Time, Parent shall ensure that all employees and officers of the
Corporation and Subsidiaries receive compensation and benefits in the aggregate
substantially comparable to the compensation and benefits received by such
individuals immediately prior to the date hereof. Notwithstanding the
foregoing, following the Effective Time, the Parent may terminate the employment
of any employee (subject to the payment of severance benefits payable to the
employee in connection with such termination).
(b) Until the first anniversary of the Effective Time, Parent shall keep in
effect all severance policies that are applicable to employees and officers of
the Corporation and its Subsidiaries immediately prior to the date hereof.
(c) Following the Effective Time, (i) Parent shall ensure that no employee
welfare benefit plan adopted by the Corporation or the Subsidiaries shall have
any preexisting condition limitations and (ii) Parent shall honor all premiums
and deductibles paid by the employees, officers and directors of the Corporation
and Subsidiaries under all Employee Benefit Plans up to (and including) the
Effective Time.
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(d) Following the Effective Time, for purposes of eligibility and vesting,
Parent shall honor all service credit accrued by the employees, officers and
directors of the Corporation and Subsidiaries under all Employee Benefit Plans
up to (and including) the Effective Time.
SECTION 6.6. INDEMNIFICATION AND INSURANCE. (a) From and after the Share
Purchase, Parent shall cause the Corporation to (i) maintain in effect in the
Certificate of Incorporation of the Corporation the provisions with respect to
the indemnification set forth in Article VII of the Certificate of Incorporation
of the Corporation as in effect at the Share Purchase, which provisions shall
not be amended, repealed or otherwise modified for a period of six (6) years
from the Effective Time in any manner that would adversely affect the rights
thereunder of individuals (or their estates) who at the date of this Agreement
and/or as of the closing of the Share Purchase are or were directors, officers,
employees or agents of the Corporation or its Subsidiaries, unless such
modification is required by law and (ii) maintain in effect for a period of six
(6) years from the Share Purchase each Indemnification Agreement in effect (as
of such date) between the Corporation or any of its Subsidiaries and officers
and directors of the Corporation and its Subsidiaries, which Indemnification
Agreement shall not be amended or modified during such period in any manner that
would adversely affect the rights of the individual who is a party thereto.
(b) Prior to the Share Purchase, the Corporation shall purchase a six year
"tail" insurance policy with its current carrier substantially identical in all
respects to the Corporation's current directors' and officers' liability
insurance coverage (and providing coverage for an amount not less than
$30,000,000 and providing for two reinstatement options, exercisable at any time
during such six year tail period of $30,000,000) covering those persons who are
currently covered on the date of this Agreement by the Corporation's directors'
and officers' liability insurance policy (a copy of which has been heretofore
delivered to Parent) (the "Indemnified Parties").
(c) In the event the Corporation or Parent or any of their respective
successors or assigns (i) consolidates with or merges into any other person and
shall not be the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any person, then and in each such case, proper
provisions shall be made so that the successors and assigns of the Corporation
or Parent, as the case may be, shall assume the obligations set forth in this
Section.
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(d) Notwithstanding the foregoing, nothing herein shall be construed to
relieve Parent or the Corporation of their respective obligations to any
Indemnified Party pursuant to this Section, and each of the Indemnified Parties
shall be entitled to enforce such obligations (including the right to
indemnification) directly against the Parent or the Corporation without first
making any claim with respect thereto against any applicable successor or
assign.
(e) This Section 6.6 shall survive the consummation of the Share Purchase
and the Merger, if necessary, is intended to benefit the Corporation and the
Indemnified Parties, and shall be binding on all successors and assigns of the
Corporation and the Parent. Parent shall cause the Corporation to honor its
obligations pursuant to this Section 6.6 from and after the Share Purchase.
SECTION 6.7. RESIGNATION OF DIRECTORS. The Corporation shall cause each
of the persons who are members of the Board of Directors of the Corporation or
of the Board of Directors of the Subsidiaries (other than Allied Bond &
Collection Agency, Inc.) immediately prior to the Closing to deliver their
resignations as directors of the Corporation and such Subsidiaries, which
resignations shall be effective as of the Closing.
SECTION 6.8. CONFIDENTIALITY AGREEMENT. Purchaser and the Corporation
hereby agree that as of the date hereof the Confidentiality Agreement dated
August 18, 1997 between Purchaser and the Corporation shall in all respects be
terminated.
SECTION 6.9. CERTAIN ACTIONS OF PARENT AND SUB. Parent and Sub will not
take any action, or omit to take any reasonable action, which in all likelihood
would (i) have a Material Adverse Effect on the ability of Parent or Sub to
consummate the transactions contemplated hereby, or (ii) cause any of the
representations and warranties contained in Article IV which are qualified as to
materiality to fail to be true and correct in any respect or any such
representation or warranty which is not so qualified to fail to be true and
correct in all material respects, as if such representations and warranties were
made at and as of the Closing, except to the extent any such representation or
warranty was expressly made only as of a different date.
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ARTICLE VII - CONDITIONS TO CONSUMMATION OF THE MERGER
SECTION 7.1. CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT, SUB AND THE
CORPORATION. The respective obligations of Parent and Sub, on the one hand, and
the Corporation, on the other hand, to effect the Merger are subject to the
satisfaction or waiver (subject to applicable law) at or prior to the Effective
Time of each of the following conditions:
(a) APPROVAL OF CORPORATION'S SHAREHOLDERS. To the extent required
by applicable law, this Agreement and the Merger shall have been approved
and adopted by holders of the requisite number of outstanding shares of the
Common Stock of the Corporation entitled to vote in accordance with
applicable law (if required by applicable law) and the Corporation's
Certificate of Incorporation and By-Laws;
(b) HSR ACT. Any waiting period (and any extension thereof) under
the HSR Act applicable to the Merger shall have expired or been terminated;
(c) INJUNCTION. No preliminary or permanent injunction or other
order shall have been issued by any court or by any governmental or
regulatory agency, body or authority which prohibits the consummation of
the Merger and the transactions contemplated by this Agreement and which is
in effect at the Effective Time, PROVIDED, HOWEVER, that, in the case of a
decree, injunction or other order, each of the parties shall have used
reasonable efforts to prevent the entry of any such injunction or other
order and to appeal as promptly as possible any decree, injunction or other
order that may be entered; and
(d) STATUTES. No statute, rule, regulation, executive order, decree
or order of any kind shall have been enacted, entered, promulgated or
enforced by any court or governmental authority which prohibits the
consummation of the Merger or has the effect of making the purchase of the
Common Stock illegal.
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ARTICLE VIII - TERMINATION AND ABANDONMENT
SECTION 8.1. TERMINATION. This Agreement may be terminated prior to the
Share Purchase and the Merger may be abandoned after the Share Purchase:
(a) by mutual written consent of the Corporation, on the one hand,
and of Parent and Sub, on the other hand;
(b) by either Parent, on the one hand, or the Corporation, on the
other hand, if any governmental or regulatory agency shall have issued an
order, decree or ruling or taken any other action permanently enjoining,
restraining or otherwise prohibiting the acceptance for payment of, or
payment for shares of Common Stock pursuant to the Offer and such order,
decree or ruling or other action shall have become final and nonappealable;
(c) by Parent, on the one hand, or the Corporation, on the other
hand, if the Share Purchase shall not have occurred within 120 days after
commencement of the Offer, unless the Share Purchase shall not have
occurred because of a material breach of any representation, warranty,
obligation, covenant, agreement or condition set forth in this Agreement on
the part of the party seeking to terminate this Agreement;
(d) by the Parent, in the event of a breach by the Corporation of any
representation, warranty, covenant or agreement contained in this Agreement
which (A) would give rise to the failure of a condition set forth in
paragraph (d) or (f) of Annex I to this Agreement, and (B) cannot or has
not been cured prior to the earlier of (i) 15 days after the giving of
written notice of such breach to the Corporation and (ii) two business days
prior to the date on which the Offer expires;
(e) by either Parent, on the one hand, or the Corporation, on the
other hand, if the Board of Directors of the Corporation determines that an
Acquisition Proposal constitutes a Superior Proposal and the Board believes
(and has been advised by independent outside counsel) that a failure to
terminate this Agreement and enter into an agreement to effect the Superior
Proposal would constitute a breach of its fiduciary duties; PROVIDED,
HOWEVER, the Corporation may not terminate this Agreement pursuant
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to this Section 8.1(e) unless and until three days have elapsed following
delivery to Parent of a written notice of such determination by the Board
of Directors and during such three day period the Corporation has fully
cooperated with the Parent, including, without limitation, informing the
Parent of the terms and conditions of such Superior Proposal with the
intent of enabling both parties to agree to a modification of the terms and
conditions of this Agreement so that the transactions contemplated hereby
may be effected; and PROVIDED FURTHER that at the end of such three day
period the Board of Directors of the Corporation determines that the
Acquisition Proposal constitutes a Superior Proposal and the Board
continues to believe (and has again been advised by independent outside
counsel) that a failure to terminate this Agreement and enter into an
agreement to effect the Superior Proposal would constitute a breach of its
fiduciary duties; PROVIDED FURTHER that this Agreement shall not terminate
pursuant to this Section 8.1(e) unless (i) prior to such termination Parent
has received all fees and expenses set forth in Section 9.1 by wire
transfer in same day funds and (ii) simultaneously with such termination
the Corporation enters into a definitive acquisition, merger or similar
agreement to effect the Superior Proposal which acquisition agreement (x)
permits the Corporation to terminate the acquisition agreement in the event
the Board of Directors of the Corporation determines to effect a
transaction with Parent and (y) does not provide for breakup fee or other
inducement to the acquiror other than reimbursement of documented out of
pocket expenses incurred in connection with such Superior Proposal;
(f) by the Corporation, in the event of a breach by the Parent or Sub
of any representation, warranty, covenant or agreement contained in this
Agreement which cannot or has not been cured within 15 days after the
giving of written notice of such breach to the Parent and Sub, except, in
any case where such failure is not reasonably likely to affect adversely
Parent's or Sub's ability to complete the Offer and/or Merger.
SECTION 8.2. EFFECT OF TERMINATION. In the event of the termination of
this Agreement pursuant to Section 8.1 hereof by Parent or Sub, on the one hand,
or the Corporation, on the other hand, written notice thereof shall forthwith be
given to the other party or parties specifying the provision hereof pursuant to
which such termination is made, and this Agreement shall become void and have no
effect, and there shall be no liability hereunder on the part of Parent, Sub or
the Corporation, except that Sections 6.1, 6.4, 9.1 and this Section
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8.2 hereof shall survive any termination of this Agreement. Nothing in this
Section 8.2 shall relieve any party to this Agreement of liability for breach of
this Agreement.
ARTICLE IX - MISCELLANEOUS
SECTION 9.1. FEES AND EXPENSES. (a) Except as provided in paragraph (b)
below, all costs and expenses incurred in connection with this Agreement and the
consummation of the transactions contemplated hereby shall be paid by the party
incurring such costs and expenses.
(b) If this Agreement is terminated:
(i) by Parent because of an event set forth in clause (iv)(e) of
Annex I of this Agreement; or
(ii) by Parent or the Corporation in accordance with the terms of
Section 8.1(e) of this Agreement; or
(iii) by the Corporation pursuant to Section 8.1(c), if, prior to such
termination, the Corporation shall have directly or indirectly notified any of
its stockholders that a third party has made an Acquisition Proposal or a third
party shall have announced an Acquisition Proposal, and within twelve months
after such termination, the Corporation or any of its Subsidiaries enters into
an agreement with respect to any merger or any other business combination, sale
or other disposition of any material amount of assets, sale of shares of capital
stock which would give the acquirors not less than 10% of the issued Shares, a
tender offer or exchange offer or similar transaction involving the Corporation
or one or more of its Subsidiaries accounting for more than 10% of the
Corporation's consolidated income in its prior fiscal year (a "Third Party
Acquisition"), or a Third Party Acquisition occurs within twelve months after
the Corporation's termination of this Agreement pursuant to Section 8.1(c),
involving any such party (or any affiliate or associate thereof) (x) with whom
the Corporation or any Subsidiary (or their respective representatives) during
the term of this Agreement had any discussions with respect to a Third Party
Acquisition, (y) to whom the Corporation or any Subsidiary (or any of their
respective representatives) during the term of this Agreement furnished
information with respect to or with a view toward a Third Party Acquisition, or
(z) who during the term of this Agreement had submitted a proposal or expressed
any interest publicly or to the Corporation or any Subsidiary (or their
respective representatives) in a Third Party Acquisition, which Third Party
Acquisition contemplates a direct or indirect consideration for shares of Common
Stock in excess of the Merger
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Consideration, in the case of each of clauses (x), (y) and (z) prior to such
termination;
then the Corporation shall (except as required to be earlier paid in accordance
with Section 8.1(e)) pay to Parent in same day funds Seven Million Seven Hundred
Thousand Dollars ($7,700,000.00), which shall be deemed to include reimbursement
for all out-of-pocket fees and expenses incurred by Parent or on its behalf in
connection with the transactions contemplated hereby.
SECTION 9.2. NOTICES. All notices, requests and other communications to
any party hereunder shall be in writing and shall be given by personal delivery,
reputable overnight courier service, certified mail (postage prepaid, return
receipt requested), facsimile (with a copy sent via prepaid first class mail) or
first class mail, as follows:
If to the Corporation, to:
The Union Corporation
211 King Street
Suite 100
Charleston, South Carolina 29401
Attention: William B. Hewitt, President
and Chief Executive Officer
Fax: (803) 958-3850
with a copy to:
Zimet, Haines, Friedman & Kaplan
460 Park Avenue
New York, New York 10022
Attention: Robert H. Haines, Esq.
Fax: (212) 223-1151
If to Parent and Sub, to:
c/o Outsourcing Solutions Inc.
390 South Woods Mill Road
Suite 150
Chesterfield, MO 63017
Attention: Timothy G. Beffa, President
and Chief Executive Officer
Fax: (314) 576-1867
with a copy to:
White & Case
1155 Avenue of the Americas
New York, New York 10036
Attention: Frank L. Schiff, Esq.
Fax: (212) 819-7817
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or to such other address as such party may hereafter specify by notice to the
other party hereto delivered in accordance with this Section. Each such notice,
request or other communication shall be effective (a) if personally delivered,
when presented, (b) if by reputable overnight courier, the next business day
following the delivery thereof to such courier (or such later date as is
demonstrated by a BONA FIDE receipt therefor), (c) if given by certified mail
(postage prepaid, return receipt requested), three business days after deposit
in the mails, (d) if given by facsimile, when the appropriate answerback or
other confirmation of receipt is received, or (e) if given by any other means,
when received.
SECTION 9.3. TERMINATION OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties contained herein shall terminate at the Share
Purchase and neither the Corporation nor any officer, director, employee,
stockholder, fiduciary or agent of the Corporation shall be under any liability
or obligation whatsoever with respect to any such representation or warranty
after such time. This Section shall not limit any covenant or agreement of the
parties hereto which by its terms contemplates performance after the Share
Purchase.
SECTION 9.4. AMENDMENTS. Subject to applicable law, this Agreement may be
amended, modified or supplemented only by the mutual written agreement of the
parties hereto at any time prior to the Effective Time with respect to any of
the terms contained herein; except that Sections 6.1(c), 6.5 and 6.6 above may
not be amended or supplemented to the detriment of any intended third party
beneficiary thereof without the express written consent of such beneficiary.
SECTION 9.5. WAIVERS. At any time prior to the Closing, Parent, on the
one hand, and the Corporation, on the other hand, may (a) extend the time for
the performance of any agreement of the other party hereto, (b) waive any
inaccuracy in the representations and warranties of the other party contained
herein or in any document delivered pursuant hereto or (c) waive compliance with
any agreement of the other party or any condition contained herein (unless
pursuant hereto such condition may not be waived) to be satisfied by such other
party. Any agreement on the part of any party to any such extension, and any
such waiver, shall be effective only if set forth in a writing signed on behalf
of such party and delivered to the other party hereto.
SECTION 9.6. SUCCESSORS AND ASSIGNS. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; PROVIDED, that no party may assign or
otherwise transfer any of its rights or obligations under this Agreement without
the prior written consent of the other party hereto and any attempt to so assign
such right or obligation shall be void AB INITIO.
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This Agreement shall be binding upon and is solely for the benefit of the
parties hereto and their respective permitted successors and assigns, and
nothing in this Agreement is intended to confer upon any other person any rights
or remedies of any nature whatsoever under or by reason of this Agreement,
except that (i) in the event that the Share Purchase shall be consummated, then
from and after the Share Purchase the provisions of Sections 6.1(c), 6.5 and 6.6
shall inure to the benefit of the employees, option holders and other persons
specified therein, who, as the intended beneficiaries of such Sections, shall
each be entitled to enforce his or her rights under such Sections and (ii) the
provisions of Section 6.6 shall inure to the benefit of the Indemnified Parties,
who, as the intended beneficiaries of such Section 6.6, shall each be entitled
to enforce his or her rights under such Section.
SECTION 9.7. GOVERNING LAW AND FORUM. This Agreement shall be construed
in accordance with the laws of the State of New York applicable to contracts
made and to be performed entirely therein, except that, with respect to matters
of corporate law, Delaware law shall apply.
SECTION 9.8. COUNTERPARTS; EFFECTIVENESS. This Agreement may be signed in
any number of counterparts, each of which shall be an original, with the same
force and effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement shall become effective when each party hereto shall
have received counterparts hereof signed by the other parties hereto.
SECTION 9.9. ENTIRE AGREEMENT; SCHEDULES AND EXHIBITS. This Agreement,
including the Schedules and Annex I hereto (which are hereby made a part of this
Agreement), contains all of the terms, conditions and representations and
warranties agreed upon by the parties relating to the subject matter of this
Agreement and supersedes all prior and contemporaneous agreements, negotiations,
correspondence, undertakings and communications of the parties, oral or written,
respecting such subject matter.
SECTION 9.10. HEADINGS AND TABLE OF CONTENTS. The headings in this
Agreement and the Table of Contents are included herein for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement.
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ARTICLE X - DEFINITIONS
For purposes of this Agreement, the following terms shall have the
respective meanings ascribed to such terms in this Article.
(a) "Balance Sheet Date" shall have the meaning ascribed to such term in
Section 3.9.
(b) "Cash Payment" shall have the meaning ascribed to such term in Section
1.4.
(c) "Certificate of Merger" shall have the meaning ascribed to such term
in Section 2.1.
(d) "Certificates" shall have the meaning ascribed to such term in Section
2.4.
(e) "Closing" shall have the meaning ascribed to such term in Section
2.10.
(f) "Closing Date" shall have the meaning ascribed to such term in Section
2.10.
(g) "Code" shall mean the Internal Revenue Code of 1986, as amended, and
the rules and regulations promulgated thereunder.
(h) "Corporation Filings" shall have the meaning ascribed to such term in
Section 3.7.
(i) "Corporation Financial Statements" shall have the meaning ascribed to
such term in Section 3.8.
(j) "Corporation Stock" shall have the meaning ascribed to such term in
the preamble to this Agreement.
(k) "Corporation 10-Ks" shall have the meaning ascribed to such term in
Section 3.7.
(l) "Credit Agreement" shall have the meaning ascribed to such term in
Section 3.10.
(m) "DGCL" shall have the meaning ascribed to such term in Section 1.2.
(n) "DL" is the Disclosure Letter.
(o) "DOJ" shall mean the United States Department of Justice.
(p) "Dissenting Shareholders" shall have the meaning ascribed to such term
in Section 2.3.
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(q) "Effective Time" shall have the meaning ascribed to such term in
Section 2.1.
(r) "ERISA" shall have the meaning ascribed to such term in Section 3.14.
(s) "Exchange Act" shall have the meaning ascribed to such term in Section
1.1.
(t) "FTC" shall mean the Federal Trade Commission.
(u) "GAAP" shall have the meaning ascribed to such term in Section 3.8.
(v) "HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.
(w) "Material Adverse Effect" shall mean any change in or effect on the
applicable corporation that either is, or in all reasonable likelihood will be,
materially adverse to the business, operations, financial condition, results of
operations, assets, liabilities or reserves of such corporation and its
subsidiaries, taken as a whole.
(x) "Material Contracts" shall have the meaning ascribed to such term in
Section 3.18.
(y) "Merger" shall have the meaning ascribed to such term in the preamble
of this Agreement.
(z) "Merger Consideration" shall have the meaning ascribed to such term in
Section 2.2.
(aa) "NYSE Rules" shall mean the rules and regulations promulgated by the
New York Stock Exchange, Inc.
(bb) "Offer" shall have the meaning ascribed to such term in the preamble
of this Agreement.
(cc) "Offer Documents" shall have the meaning ascribed to such term in
Section 1.1(b).
(dd) "Options" shall have the meaning ascribed to such term in Section 1.4.
(ee) "Parent Audited Financial Statements" shall have the meaning ascribed
to such term in Section 4.5.
(ff) "Paying Agent" shall have the meaning ascribed to such term in Section
2.4.
(gg) "Person" shall mean and include an individual, a partnership, a joint
venture, a corporation, a limited liability company, a trust, an unincorporated
organization, a group and a government or other department or agency thereof.
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(hh) "Per Share Amount" shall have the meaning ascribed to such term in the
preamble to this Agreement.
(ii) "Proxy Statement" shall have the meaning ascribed to such term in
Section 2.11.
(jj) "Rights Agreement" shall have the meaning ascribed to such term in
Section 1.2.
(kk) "Schedule 14D-1" shall have the meaning ascribed to such term in
Section 1.1(b).
(ll) "Schedule 14D-9" shall have the meaning ascribed to such term in
Section 1.2(b).
(mm) "SEC" shall mean the United States Securities and Exchange Commission.
(nn) "Securities Act" shall mean the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
(oo) "Share Purchase" shall have the meaning ascribed to such term in
Section 1.1.
(pp) "Shares" shall have the meaning ascribed to such term in the preamble
to this Agreement.
(qq) "Subsidiaries" shall have the meaning ascribed to such term in Section
3.6.
(rr) "Surviving Corporation" shall have the meaning ascribed to such term
in Section 2.1(b).
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their respective authorized officers as of the day and year first
above written.
ATTEST: THE UNION CORPORATION
By: /s/ MELVIN S. COOPER
- ----------------------------- ----------------------------------
Name: Name: Melvin S. Cooper
Title: Title: Chairman of the Board
ATTEST: OUTSOURCING SOLUTIONS INC.
By: /s/ TYLER T. ZACHEM
- ----------------------------- ----------------------------------
Name: Name: Tyler T. Zachem
Title: Title: Vice President
ATTEST: SHERMAN ACQUISITION CORPORATION
By: /s/ TYLER T. ZACHEM
- ----------------------------- ----------------------------------
Name: Name: Tyler T. Zachem
Title: Title: Vice President and Treasurer
<PAGE>
ANNEX I
TO SHARE PURCHASE AGREEMENT AND PLAN OF MERGER
CONDITIONS TO THE SHARE PURCHASE
The capitalized terms used in this Annex I shall have the meanings set
forth in the Agreement to which it is annexed.
Notwithstanding any other provision of the Offer or the Agreement, Sub
shall not be required to accept for payment or, subject to any applicable rules
and regulations of the SEC, including Rule 14e-1c under the Exchange Act, pay
for any shares of Common Stock tendered pursuant to the Offer and may terminate
the Offer or amend the Offer as and to the extent provided in Section 1.1 of the
Agreement and may postpone the acceptance of, and payment for, shares of Common
Stock, if (i) there shall not have been validly tendered and not withdrawn prior
to the expiration of the Offer a number of shares of Common Stock which
represent two-thirds of the total voting power of all shares of capital stock of
the Corporation outstanding on a fully-diluted basis, (ii) any applicable
waiting period under the HSR Act shall not have expired or been terminated,
(iii) Parent shall not have received financing necessary for it and Sub to
consummate the Offer and the other transactions contemplated by the Agreement in
accordance with the terms of the bank commitment letter dated December 22, 1997,
to Parent from The Chase Manhattan Bank, Chase Securities Inc. and Goldman Sachs
Credit Partners L.P. or (iv) if, at any time on or after the date of the
Agreement and at or before the Share Purchase any of the following shall occur:
A-I
<PAGE>
(a) there shall be instituted or pending any action or proceeding by
any government or governmental authority or agency, domestic or foreign, or
by any other Person, domestic or foreign, before any court or governmental
authority or agency, domestic or foreign, (i) challenging or seeking to, or
which could reasonably be expected to make illegal, impede, delay or
otherwise directly or indirectly materially restrain, prohibit or make more
costly the Offer or the Merger or seeking to obtain material damages, (ii)
seeking to prohibit or materially limit the ownership or operation by
Parent or Sub of all or any material portion of the business or assets of
the Corporation or any of its Subsidiaries taken as a whole or to compel
Parent or Sub to dispose of or hold separately all or any material portion
of the business or assets of Parent or Sub or the Corporation or any of its
Subsidiaries taken as a whole or seeking to impose any material limitation
by reason of the transactions contemplated by the Agreement on the ability
of Parent or Sub to conduct its business or own such assets, (iii) seeking
to impose limitations on the ability of Parent or Sub effectively to
exercise full rights of ownership of the shares of Common Stock, including,
without limitation, the right to vote any shares of Common Stock acquired
or owned by Sub or Parent on all matters properly presented to the
Corporation's shareholders, (iv) seeking to require divestiture by Parent
or Sub of any shares of Common Stock, (v) otherwise directly or indirectly
relating to the Offer or the Merger and which, could reasonably be expected
to materially adversely affect the Corporation or any of its Subsidiaries
or Sub or Parent, or (vi) otherwise having a Material Adverse Effect on the
Corporation and its Subsidiaries taken as a whole;
(b) there shall be any action taken, or any statute, rule,
regulation, legislation, interpretation, judgment, order or injunction
proposed, enacted, enforced, promulgated, amended, issued or deemed
applicable to (i) Parent, Sub, the Corporation or any Subsidiary of the
Corporation or (ii) the Offer or the Merger, by any legislative body,
court, government or governmental, administrative or regulatory authority
or agency, domestic or foreign, other than the routine application of the
waiting period provisions of the HSR Act to the Offer or to the Merger,
which could reasonably be expected to directly or indirectly, result in any
of the consequences referred to in clauses (i) through (vi) of paragraph
(a) above;
A-II
<PAGE>
(c) any change (other than as a result of general economic
conditions) shall have occurred, or Parent shall have become aware of any
fact, that is reasonably likely to have a Material Adverse Effect on the
Corporation and its Subsidiaries taken as a whole;
(d) any of the representations or warranties made by the Corporation
in the Agreement that are qualified as to materiality shall be untrue or
incorrect in any respect or any of such representations and warranties that
are not so qualified shall be untrue or incorrect in any material respect
as of the date of this Agreement or immediately prior to the Share
Purchase;
(e) the Corporation's Board of Directors shall have withdrawn,
modified or amended in any respect adverse to Parent or Sub its
recommendation of the Offer or the Merger, or shall have resolved to do so;
(f) the Corporation shall have failed to perform in any material
respect any material obligation or to comply in any material respect with
any material agreement or material covenant of the Corporation to be
performed or complied with by it under this Agreement; or
(g) the Agreement shall have been terminated in accordance with its
terms;
which, in the reasonable judgment of Sub, makes it inadvisable to proceed with
such acceptance for payment or payment.
The foregoing conditions (including those set forth in clauses (i)-(iv)
above) are for the sole benefit of the Parent and Sub and may be asserted by any
of them, or may be waived by the Parent or Sub, in whole or in part at any time
and from time to time in its sole discretion. The failure by the Parent or Sub
at any time to exercise any of the foregoing rights shall not be deemed a waiver
of any such right and each such right shall be deemed an ongoing right which may
be asserted at any time and from time to time.
A-III
<PAGE>
Exhibit 99.(b)
AGREEMENT
AGREEMENT dated as of December 22, 1997, among OUTSOURCING SOLUTIONS
INC., a Delaware corporation ("Parent"), SHERMAN ACQUISITION CORPORATION, a
Delaware corporation and a wholly owned subsidiary of Parent ("Sub"), and the
other parties signatory hereto (each a "Stockholder" and collectively, the
"Stockholders").
W I T N E S S E T H :
WHEREAS, contemporaneously herewith, Parent, Sub and The Union
Corporation, a Delaware corporation (the "Company"), have entered into a Share
Purchase Agreement and Plan of Merger (as such agreement may hereafter be
amended from time to time, the "Merger Agreement"; capitalized terms used and
not defined herein have the respective meanings ascribed to them in the Merger
Agreement), pursuant to which Parent shall cause Sub to make an offer to
purchase all of the issued and outstanding shares of Company Common Stock (the
"Offer") and Sub will be merged with and into the Company (the "Merger");
WHEREAS, in furtherance thereof, as soon as practicable (and not later
than five business days) after the execution and delivery of the Merger
Agreement, Sub shall commence the Offer; and
WHEREAS, as an inducement and a condition to entering into the Merger
Agreement, Parent has required that the Stockholders agree, and the Stockholders
have each agreed, to enter into this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual
premises, representations, warranties, covenants and agreements contained
herein, the parties hereto, intending to be legally bound, hereby agree as
follows:
1. Definitions. For purposes of this Agreement:
(a) "Company Common Stock" shall mean at any time the common stock,
$0.50 par value, of the Company.
(b) "Person" shall mean an individual, corporation, partnership,
joint venture, association, trust, unincorporated organization or other entity.
<PAGE>
2. Tender of Shares.
(a) Each Stockholder hereby agrees to validly tender (and not to
withdraw) pursuant to and in accordance with the terms of the Offer (provided
that the Offer is not amended in a manner prohibited by the Merger Agreement),
in a timely manner for acceptance by Sub in the Offer, the number of shares of
Company Common Stock set forth opposite such Stockholder's name on Schedule I
hereto and the Rights (as defined in the Rights Agreement) associated with such
shares (the "Existing Shares" and, together with any shares of Company Common
Stock acquired by such Stockholder after the date hereof and prior to the
termination of this Agreement (and any Rights associated therewith) whether upon
the exercise of options, warrants or rights, the conversion or exchange of
convertible or exchangeable securities, or by means of purchase, dividend,
distribution or otherwise and acquired by such Stockholder solely in its
capacity as a stockholder, the "Shares"), owned by such Stockholder. Each
Stockholder hereby acknowledges and agrees that Parent's obligation to accept
for payment and pay for Company Common Stock in the Offer, including the Shares,
is subject to the terms and conditions of the Offer. Each Stockholder shall be
entitled to receive the highest price paid by Sub pursuant to the Offer.
(b) Each Stockholder hereby agrees to permit Parent and Sub to
publish and disclose in the Offer Documents and, if approval of the stockholders
of the Company is required under applicable law, the Proxy Statement (including
all documents and schedules filed with the SEC) its identity and ownership of
Company Common Stock and the nature of its commitments, arrangements and
understandings under this Agreement.
3. Provisions Concerning Company Common Stock. Each Stockholder
hereby agrees that during the period commencing on the date hereof and
continuing until the first to occur of (i) the Effective Time and (ii) the
termination of this Agreement pursuant to Section 8, at any meeting of the
holders of Company Common Stock, however called, or in connection with any
written consent of the holders of Company Common Stock, such Stockholder shall
vote (or cause to be voted) the Shares owned by such Stockholder whether issued,
heretofore owned or hereafter acquired, (i) in favor of the Merger and each of
the other actions contemplated by the Merger Agreement and this Agreement and
any actions required in furtherance thereof and hereof; (ii) against any action
or agreement that would result in a breach in any respect of any
2
<PAGE>
covenant, representation or warranty or any other obligation or agreement of
the Company under the Merger Agreement or this Agreement; and (iii) except as
otherwise agreed to in writing in advance by Parent, against the following
actions (other than the Merger and the transactions contemplated by the
Merger Agreement): (A) any extraordinary corporate transaction, such as a
merger, consolidation or other business combination involving the Company or
its subsidiaries; (B) a sale, lease or transfer of a material amount of
assets of the Company or its subsidiaries, or a reorganization,
recapitalization, dissolution or liquidation of the Company or its
subsidiaries; (C) (1) any change in a majority of the persons who constitute
the board of directors of the Company; (2) any change in the present
capitalization of the Company or any amendment of Company's Certificate of
Incorporation or By-laws; (3) any other material change in the Company's
corporate structure or business; or (4) any other action involving the
Company or its subsidiaries which is intended, or could reasonably be
expected, to impede, interfere with, delay, postpone, or materially adversely
affect the Share Purchase, the Merger and the transactions contemplated by
this Agreement and the Merger Agreement. No Stockholder shall enter into any
agreement or understanding with any Person or entity the effect of which
would be to violate the provisions and agreements contained in this Section 3.
4. Representations and Warranties of the Stockholders. Each
Stockholder, as to itself, hereby severally represents and warrants to Parent as
follows:
(a) Ownership of Shares. Such Stockholder is the record and
beneficial owner of the number of Shares set forth opposite such
Stockholder's name on Schedule I hereto. On the date hereof, the Existing
Shares set forth opposite such Stockholder's name on Schedule I hereto
constitute all of the Shares owned by such Stockholder on the date hereof.
Except as set forth on Schedule I, such Stockholder has sole voting power and
sole power to issue instructions with respect to the matters set forth in
Sections 2 and 3 hereof, sole power of disposition, sole power of conversion,
sole power to demand appraisal rights and sole power to agree to all of the
matters set forth in this Agreement, in each case with respect to all of the
Existing Shares set forth opposite such Stockholder's name on Schedule I
hereto, with no limitations, qualifications or restrictions on such rights,
subject to applicable securities laws and the terms of this Agreement. Other
than this Agreement and the Merger Agreement, there is no option, warrant,
right, call, proxy, agreement, commitment
3
<PAGE>
or understanding of any nature whatsoever, fixed or contingent, that directly
or indirectly (i) calls for the sale, pledge or other transfer or disposition
of any of the Existing Shares, any interest therein or any rights with
respect thereto, or related to the voting, disposition or control of the
Existing Shares, or (ii) obligates such Shareholder to grant, offer or enter
into any of the foregoing.
(b) Power; Binding Agreement. Except as set forth on Schedule I,
such Stockholder has the legal capacity, power and authority to enter into and
perform all of such Stockholder's obligations under this Agreement. The
execution, delivery and performance of this Agreement by such Stockholder will
not violate any other agreement to which such Stockholder is a party including,
without limitation, any voting agreement, stockholders agreement or voting
trust. This Agreement has been duly and validly executed and delivered by such
Stockholder and constitutes a valid and binding agreement of such Stockholder,
enforceable against such Stockholder in accordance with its terms, except as
such enforcement may be limited by bankruptcy, insolvency and other similar laws
affecting creditors' rights generally or by general principles of equity. There
is no beneficiary or holder of a voting trust certificate or other interest of
any trust of which such Stockholder is trustee whose consent is required for the
execution and delivery of this Agreement or the consummation by such Stockholder
of the transactions contemplated hereby.
(c) No Conflicts. Except for (i) filings and approvals under the
HSR Act or the Antitrust Laws, if applicable, (A) no filing with, and no
permit, authorization, consent or approval of, any state or federal public
body or authority is necessary for the execution of this Agreement by such
Stockholder and the consummation by such Stockholder of the transactions
contemplated hereby and (B) none of the execution and delivery of this
Agreement by such Stockholder, the consummation by such Stockholder of the
transactions contemplated hereby or compliance by such Stockholder with any
of the provisions hereof shall (1) result in a violation or breach of, or
constitute (with or without notice or lapse of time or both) a default (or
give rise to any third party right of termination, cancellation, material
modification or acceleration) under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, contract,
commitment, arrangement, understanding, agreement or other instrument or
obligation of any kind to which such Stockholder is a party or by which such
Stockholder may be
4
<PAGE>
bound, or (2) violate any order, writ, injunction, decree, judgment, order,
statute, rule or regulation applicable to such Stockholder.
(d) No Encumbrances. Such Stockholder's Shares and the certificates
representing such Shares are now, and at all times during the term hereof will
be, held by such Stockholder, or by a nominee or custodian for the benefit of
such Stockholder, free and clear of all liens, claims, security interests,
proxies, voting trusts or agreements, understandings or arrangements or any
other encumbrances whatsoever, except for any such encumbrances or proxies
arising hereunder. The transfer by such Stockholder of its Shares to Sub in the
Offer shall pass to and unconditionally vest in Sub good and valid title to all
Shares, free and clear of all claims, liens, restrictions, security interests,
pledges, limitations and encumbrances whatsoever.
(e) Reliance by Parent. Such Stockholder understands and
acknowledges that Parent is entering into, and causing Sub to enter into, the
Merger Agreement in reliance upon such Stockholder's execution and delivery of
this Agreement.
5. Covenants of the Stockholders. Each Stockholder covenants and
agrees as follows:
(a) Restriction on Transfer, Proxies and Non-Interference. Beginning
on the date hereof and ending on the date this Agreement shall terminate
pursuant to Section 8 hereof, such Stockholder shall not (i) except as
contemplated by the Offer, directly or indirectly, offer for sale, sell,
transfer, tender, pledge, encumber, assign or otherwise dispose of, or enter
into any contract, option or other arrangement or understanding with respect to
or consent to the offer for sale, transfer, tender, pledge, encumbrance,
assignment or other disposition of, any or all of such Stockholder's Shares or
any interest therein; (ii) except as contemplated by this Agreement, grant any
proxies or powers of attorney, deposit any Shares into a voting trust or enter
into a voting agreement with respect to any Shares; or (iii) take any action
that would make any representation or warranty of such Stockholder contained
herein untrue or incorrect or have the effect of preventing or disabling such
Stockholder from performing such Stockholder's obligations under this Agreement.
5
<PAGE>
(b) Waiver of Appraisal Rights. Such Stockholder hereby irrevocably
waives any rights of appraisal or rights to dissent from the Merger that such
Stockholder may have.
(c) Stop Transfer; Changes in Shares. Such Stockholder agrees with,
and covenants to, Parent that such Stockholder shall not request that the
Company register the transfer (book-entry or otherwise) of any certificate or
uncertificated interest representing any of such Stockholder's Shares, unless
such transfer is made in compliance with the Offer and this Agreement. In the
event of a stock dividend or distribution, or any change in the Company Common
Stock by reason of any stock dividend, split-up, recapitalization, combination,
exchange of shares or the like, the term "Shares" shall be deemed to refer to
and include the Shares as well as all such stock dividends and distributions and
any shares into which or for which any or all of the Shares may be changed or
exchanged and the Purchase Price shall be approximately adjusted. Such
Stockholder shall be entitled to receive any cash dividend paid by the Company
during the term of this Agreement until its Shares are purchased in the Offer.
6. Fiduciary Duties. Notwithstanding anything in this Agreement to
the contrary, the covenants and agreements set forth herein shall not prevent
any Stockholder from taking any action, subject to the applicable provisions of
the Merger Agreement, while acting in his capacity as a director of the Company.
7. Miscellaneous.
(a) Further Assurances. From time to time, at the other party's
request and without further consideration, each of the parties hereto shall
execute and deliver such additional documents and take all such further lawful
action as may be necessary or desirable to consummate and make effective, in the
most expeditious manner practicable, the transactions contemplated by this
Agreement.
(b) Entire Agreement. This Agreement and the Merger Agreement
constitute the entire agreement between the parties with respect to the subject
matter hereof and supersedes all other prior agreements and understanding, both
written and oral, between the parties with respect to the subject matter hereof.
(c) Certain Events. Each Stockholder agrees that this Agreement and
the obligations hereunder shall attach to
6
<PAGE>
such Stockholder's Shares and shall be binding upon any person or entity to
which legal or beneficial ownership of such Shares shall pass, whether by
operation of law or otherwise, including, without limitation, such
Stockholder's heirs, guardians, administrators or successors. Notwithstanding
any transfer of Shares, the transferor shall remain liable for the
performance of all obligations under this Agreement of the transferor.
(d) Assignment. This Agreement shall not be assigned by operation of
law or otherwise without the prior written consent of the other party provided
that Parent may assign, at its sole discretion, its rights and obligations
hereunder to any direct or indirect wholly-owned subsidiary of Parent, although
no such assignment shall relieve Parent of its obligations hereunder if such
assignee does not perform such obligations and provided further that, in the
event of a Stockholder's death or incapacity, such Stockholder's rights
hereunder shall inure to his heirs, guardians, administrators or successors.
(e) Amendments, Waivers, Etc. This Agreement may not be amended,
changed, supplemented, waived or otherwise modified or terminated, except upon
the execution and delivery of a written agreement executed by the parties.
(f) Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if so given) by hand delivery, telegram, telex
or telecopy, or by mail (registered or certified mail, postage prepaid, return
receipt requested) or by any courier service, such as Federal Express, providing
proof of delivery. All communications hereunder shall be delivered to the
respective parties at the following addresses:
If to a Stockholder: At the address set forth on Schedule I hereto
copy to: Zimet, Haines, Friedman & Kaplan
460 Park Avenue
New York, New York 10022
Attention: Robert H. Haines, Esq.
7
<PAGE>
If to Parent or Sub:
Outsourcing Solutions Inc.
390 South Woods Mill Road
Suite 150
Chesterfield, Missouri 63017
Attention: Timothy G. Beffa
copy to: White & Case
1155 Avenue of the Americas
New York, New York 10036
Attention: Frank L. Schiff, Esq.
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
(g) Severability. Whenever possible, each provision or portion of
any provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein.
(h) Specific Performance. Each of the parties hereto recognizes and
acknowledges that a breach by it of any covenants or agreements contained in
this Agreement will cause the other party to sustain damages for which it would
not have an adequate remedy at law for money damages, and therefore each of the
parties hereto agrees that in the event of any such breach the aggrieved party
shall be entitled to the remedy of specific performance of such covenants and
agreements and injunctive and other equitable relief in addition to any other
remedy to which it may be entitled, at law or in equity.
(i) Remedies Cumulative. All rights, powers and remedies provided
under this Agreement or otherwise available in respect hereof at law or in
equity shall be cumulative and not alternative, and the exercise of any
thereof by any party
8
<PAGE>
shall not preclude the simultaneous or later exercise of any other such
right, power or remedy by such party.
(j) No Waiver. The failure of any party hereto to exercise any
right, power or remedy provided under this Agreement or otherwise available in
respect hereof at law or in equity, or to insist upon compliance by any other
party hereto with its obligations hereunder, and any custom or practice of the
parties at variance with the terms hereof shall not constitute a waiver by such
party of its right to exercise any such or other right, power or remedy or to
demand such compliance.
(k) No Third Party Beneficiaries. This Agreement is not intended to
be for the benefit of, and shall not be enforceable by, any person or entity who
or which is not a party hereto.
(l) Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware, without giving effect to the
principles of conflicts of law thereof.
(m) Jurisdiction. Each party hereby irrevocably submits to the
exclusive jurisdiction of the United States District Court for the Southern
District of New York or any court of the State of New York located in the City
of New York in any action, suit or proceeding arising in connection with this
Agreement, and agrees that any such action, suit or proceeding shall be brought
only in such court (and waives any objection based on forum non conveniens or
any other objection to venue therein); provided, however, that such consent to
jurisdiction is solely for the purpose referred to in this paragraph (m) and
shall not be deemed to be a general submission to the jurisdiction of said
Courts or in the States of Delaware or New York other than for such purposes.
EACH PARTY HERETO HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN CONNECTION WITH
ANY SUCH ACTION, SUIT OR PROCEEDING.
(n) Descriptive Headings. The descriptive headings used herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
(o) Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original, but all of which, taken
together, shall constitute one and the same Agreement.
9
<PAGE>
8. Termination. This Agreement shall terminate upon the termination
of the Merger Agreement pursuant to Section 8.1 and no party shall have any
rights or obligations hereunder and this Agreement shall become null and void
and have no effect.
10
<PAGE>
IN WITNESS WHEREOF, Parent, Sub and the Stock-holders have caused this
Agreement to be duly executed as of the day and year first above written.
OUTSOURCING SOLUTIONS INC.
By /s/ TYLER T. ZACHEM
-------------------------------
Name: Tyler T. Zachem
Title: Vice President
SHERMAN ACQUISITION CORPORATION
By /s/ TYLER T. ZACHEM
-------------------------------
Name: Tyler T. Zachem
Title: Vice President and Treasurer
<PAGE>
STOCKHOLDERS:
/s/ MELVIN L. COOPER
-----------------------------------
MELVIN L. COOPER
IRA MLC TRUST
By /s/ MELVIN L. COOPER
--------------------------------
Name: Melvin L. Cooper
Title: Trustee
MELVIN L. COOPER AND HARRY R.
HAUSER, TRUSTEE, THE MLC
TRUST U/A 10/20/92
By /s/ MELVIN L. COOPER
--------------------------------
Name: Melvin L. Cooper
Title: Trustee
/s/ GORDON S. DUNN
------------------------------------
GORDON S. DUNN
/s/ WILLIAM B. HEWITT
------------------------------------
WILLIAM B. HEWITT
/s/ ROBERT A. KERR
------------------------------------
ROBERT A. KERR
<PAGE>
BEAUFORT IRREVOCABLE TRUST
NUMBER ONE
By /s/ ROBERT A. KERR
--------------------------------
Name: Robert A. Kerr
Title: Co-Trustee
/s/ TWYLIAH H. KERR
------------------------------------
TWYLIAH H. KERR
ROBERT A. KERR KEOGH PLAN
By /s/ ROBERT A. KERR
--------------------------------
Name: Robert A. Kerr
/s/ GEORGE M. MACAULAY
------------------------------------
GEORGE M. MACAULAY
MR. AND MRS. GEORGE MACAULAY, JT
By /s/ GEORGE M. MACAULAY JANET S. MACAULAY
----------------------------------------
Name: George M. Macaulay, Janet S. Macaulay
Title: Trustees
TSI MONEY PURCHASE PENSION
PLAN FBO GEORGE MACAULAY
By /s/ GEORGE M. MACAULAY
--------------------------------
Name: George M. Macaulay
<PAGE>
/s/ JAMES C. MILLER III
------------------------------------
JAMES C. MILLER III
/s/ MR. AND MRS. JAMES MILLER III
------------------------------------
MR. AND MRS. JAMES MILLER III
/s/ HERBERT R. SILVER
------------------------------------
HERBERT R. SILVER
/s/ MRS. H. SILVER
------------------------------------
MRS. H. SILVER
/s/ NICHOLAS P. GILL
------------------------------------
NICHOLAS P. GILL
/s/ SHELDON ZUCKER
------------------------------------
SHELDON ZUCKER
/s/ BERNARD SILVER
------------------------------------
BERNARD SILVER
/s/ HERBERT A. DENTON
------------------------------------
HERBERT A. DENTON
/s/ ROBERT A. MARSHALL
------------------------------------
ROBERT A. MARSHALL
<PAGE>
/s/ JAMES M. McCORMICK
------------------------------------
JAMES M. McCORMICK
<PAGE>
SCHEDULE I
Table of stock Ownership of Executive Officers and Directors
Name Shares
- ---- ------
- --------------------------------------------------------------------------------
Melvin L. Coop -0-
- --------------------------------------------------------------------------------
IRA MLC Trust 5,800
- --------------------------------------------------------------------------------
Melvin L. Cooper and Harry R. Hauser,
Trustee, The MLC Trust U/A 10/20/92 109,476
- --------------------------------------------------------------------------------
Gordon S. Dunn 10,000
- --------------------------------------------------------------------------------
William B. Hewitt 60,000
- --------------------------------------------------------------------------------
Robert A. Kerr 12,790
- --------------------------------------------------------------------------------
Beaufort Irrevocable Trust 900
Number One
- --------------------------------------------------------------------------------
Twyliah H. Kerr 2,000
- --------------------------------------------------------------------------------
Robert A. Kerr Keogh Plan 1,000
- --------------------------------------------------------------------------------
George M. Macaulay -0-
- --------------------------------------------------------------------------------
Mr. and Mrs. George Macaulay, JT 2,400
- --------------------------------------------------------------------------------
TSI Money Purchase Pension Plan 1,650
FBO George Macaulay
- --------------------------------------------------------------------------------
James C. Miller III -0-
- --------------------------------------------------------------------------------
Mr. and Mrs. James Miller III 5,700
- --------------------------------------------------------------------------------
Herbert R. Silver 13,000
- --------------------------------------------------------------------------------
Mrs. H. Silver 1,000
- --------------------------------------------------------------------------------
Nicholas P. Gill 4,500
- --------------------------------------------------------------------------------
Sheldon Zucker 1,000
- --------------------------------------------------------------------------------
Bernard Silver 7,000
- --------------------------------------------------------------------------------
Herbert A. Denton -0-
- --------------------------------------------------------------------------------
Robert A. Marshall -0-
- --------------------------------------------------------------------------------
James M. McCormick -0-
- --------------------------------------------------------------------------------
<PAGE>
[LETTERHEAD OF CIBC OPPENHEIMER]
December 22, 1997
Board of Directors
The Union Corporation
211 King Street
Charleston, SC 29401
Directors:
You have requested our opinion as to the fairness, from a financial point
of view, to The Union Corporation (the "Company") of the consideration to be
paid to the stockholders of The Union Corporation by Sherman Acquisition Corp.
("Sherman"), a subsidiary of Outsourcing Solutions Inc. ("OSI") pursuant to the
Agreement and Plan of Reorganization to be dated as of December 22, 1997 by and
between Sherman, OSI, and the Company (the "Agreement"). Pursuant to the
Agreement, Sherman will commence a tender offer (the "Tender Offer") to purchase
any and all of the outstanding shares of common stock of The Union Corporation
for a purchase price of $31.50 per share, net, in cash (the "Consideration").
The Agreement further provides that following the completion of the Tender Offer
OSI will cause the Company to be merged with Sherman (the "Merger") the Company
to be the surviving Corporation, in which transaction each remaining share of
Company common stock, other than shares owned by Sherman or OSI, will be
converted into the right to receive the consideration.
In connection with rendering our opinion , we reviewed among other things:
(a) the Agreement; (b) audited consolidated financial statements and
management's discussion and analysis of the financial condition and results of
operations for the Company for the three fiscal years ended June 30, 1997; (c)
certain other publicly available business and financial information relating to
the Company; (d) certain internal financial analyses, budgets, projections and
forecasts for the Company, prepared by and reviewed with the management of the
Company; (e) the views of senior management of the Company of the Company's
past and current business operations, results thereof, financial condition and
future prospects; (g) a comparison of certain financial information for the
Company with similar information for certain other companies considered
comparable to the Company; (f) the financial terms of certain recent business
combinations in the accounts receivable industry; (h) the current market
environment generally and the accounts receivable environment in particular; and
(i) such other information, financial studies, analyses and investigations and
financial, economic and market criteria as we considered appropriate in the
circumstances.
We have relied, without independent verification or investigation, on all
of the financial information, analyses, forecasts and other information
furnished to us for purposes of this opinion, including information
<PAGE>
Board of Directors Page 2
The Union Corporation
December 22, 1997
relating to assets and liabilities, contingent or otherwise, as being complete
and accurate. We have also relied upon the management of the Company as to the
reasonableness and achievability of the financial and operating forecasts and
projections. We have not made an independent evaluation or appraisal of the
assets and liabilities of the Company and we have not been furnished with any
such evaluation or appraisal. Furthermore, this opinion shall not constitute
any such evaluation or appraisal.
We have acted as financial advisor to the Company in connection with the
Merger and will receive a fee for our services. In the ordinary course of our
business, we and our affiliates may actively trade the equity securities of the
Company for our own account and for the accounts of customers, and accordingly,
may at any time hold a long or short position in such securities.
It is understood that this opinion is for the information of the Board of
Directors in connection with its consideration of the Merger and may not be
quoted or referred to, in whole or in part, in any registration statement,
prospectus, or proxy statement, or in any other document used in connection with
the offering or sale of securities, nor shall this letter be used for any other
purposes, without our prior written consent.
Based upon and subject to the foregoing and based upon such other matters
as we consider relevant, it is our opinion that, as of the date hereof, the
Consideration to be paid to the stockholders of the Company in the Tender Offer
and the Merger is fair, from a financial point of view, to such stockholders.
Very truly yours,
/s/ Nathan Gantcher
------------------------------
CIBC Oppenheimer Corp.
By: Nathan Gantcher
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[LETTERHEAD OF THE UNION CORPORATION]
December 24, 1997
Dear Stockholder:
I am pleased to inform you that on December 22, 1997, The Union Corporation
("Union") entered into a Share Purchase Agreement and Plan of Merger (the
"Merger Agreement") with Outsourcing Solutions Inc., a Delaware corporation
("OSI"), and Sherman Acquisition Corporation, a Delaware corporation and a
wholly-owned subsidiary of OSI ("Purchaser"), pursuant to which Purchaser has
today commenced a tender offer (the "Offer") to purchase all issued and
outstanding shares of common stock, par value $.50 per share, of Union (the
"Shares") at a cash price of $31.50 per Share. The Merger Agreement provides
that, subject to fulfillment of certain conditions, following completion of the
Offer, Purchaser will merge into Union, and Union, as the surviving corporation
in the merger, will become a wholly-owned subsidiary of OSI. Pursuant to the
Merger Agreement and subject to certain conditions therein, any Shares that are
not acquired through the Offer will be converted into the right to receive in
cash the same per share price paid in the Offer. As a result, Union will no
longer be a public company and there will be no public market for shares of its
stock.
YOUR BOARD OF DIRECTORS BELIEVES THE OFFER IS FAIR TO, AND IN THE BEST
INTEREST OF, UNION'S STOCKHOLDERS AND RECOMMENDS THAT UNION'S STOCKHOLDERS
TENDER THEIR SHARES PURSUANT TO THE OFFER.
In arriving at its recommendation, the Board of Directors gave careful
consideration to a number of factors described in the enclosed Schedule 14D-9,
including the opinion of CIBC Oppenheimer Corp., financial advisor to Union.
Additional information with respect to these transactions is contained in
the enclosed Schedule 14D-9. Also enclosed herewith is the Offer to
Purchase and related materials, including a Letter of Transmittal to be used
for tendering Shares. These documents set forth in detail the terms and
conditions of the Offer and provide instructions on how to tender Shares.
We urge you to read these materials carefully in making your decision with
respect to tendering your Shares.
Sincerely yours,
MELVIN L. COOPER
Chairman of the Board
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Exhibit 99(e)
OUTSOURCING SOLUTIONS INC. AGREES TO ACQUIRE
THE UNION CORPORATION FOR APPROXIMATELY $190 MILLION,
CREATING ONE OF THE LARGEST RECEIVABLES MANAGEMENT
COMPANIES IN THE COUNTRY
ST. LOUIS, Mo. (December 23, 1997)--Outsourcing Solutions Inc. and The
Union Corporation (NYSE:UCO), Charleston, S.C., announced today that they
have entered into a definitive Merger Agreement whereby OSI will tender for
all of the outstanding capital stock of Union for $31.50 per share, or
approximately $190 million. The Board of Directors of Union has unanimously
approved the tender offer and the merger, and has recommended that all
shareholders of Union accept the offer. The transaction is subject to certain
conditions, including Hart-Scott-Rodino clearance and the completion of
committed financing.
With this acquisition, OSI, a McCown De Leeuw & Co. portfolio company,
will become one of the largest receivables management company in the United
States with pro forma 1997 revenue of approximately $450 million. The
combination of OSI and Union will create a receivables management company that
is capable of offering services across the entire spectrum of the receivables
management market, from credit usage and management, to outsourcing of
pre-charge-off receivables, to contingent collection of delinquent debts, to
purchasing portfolios of charged-off debt.
Union, which posted $121.7 million in revenue in the year ended June 30,
1997, operates in three primary market segments through its Transworld
Systems division, the largest collection agency serving small businesses;
Allied Bond & Collection Agency and Capital Credit Corporation, both
contingent collection agencies; and Interactive Performance and High
Performance Services, units which provide leading-edge credit usage and
receivables management outsourcing services to major corporations.
Timothy G. Beffa, OSI's president and chief executive officer, noted the
excellent strategic fit of the acquisition. "This transaction is a significant
step in OSI's strategy toward creating the leading full-service receivables
management firm," he said. "The addition of Union will expand our ability to
provide superior service to clients in all the major credit-granting
industries."
Union chairman Melvin L. Cooper and president and chief executive
officer William B. Hewitt echoed Beffa's comments. "The combination of OSI
and Union creates an entity with the broadest capabilities to serve the needs
of credit grantors nationwide, given the depth and breadth of our human,
financial and information resources," they said.
OSI was formed in September 1995 by McCown De Leeuw & Co., a private
equity firm with offices in New York City and Menlo Park, California, to
become one of the leading companies is the highly fragmented and rapidly
consolidating collections industry. OSI serves credit grantors in a wide
range of industries including banking, retailing, health care, government and
education, direct marketing, telecommunications and utilities.
The Union transaction represents OSI's seventh acquisition since its
formation and its third in the last months. In November, OSI acquired
Accelerated Bureau of Collections, Englewood, Colorado, an agency that
specializes in contingent collections, primarily for bank card issuers. In
October, OSI acquired North Shore Agency, Inc., Great Neck, N.Y., one of the
largest providers of letter series collection and billing services to direct
marketers, utilities and cable companies. Earlier acquisitions include
Account Portfolios Inc., Atlanta, a portfolio purchasing firm; The
Continental Alliance, Seattle, a contingent collection agency; A.M. Miller,
Minneapolis, a contingent collection agency, and Payco American Corp.,
Milwaukee, a multi-line firm providing contingent collections and outsourcing
services to credit grantors in a wide range of industries.
###
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For more information, contact:
Timothy G. Beffa, President and CEO, OSI
314-514-2600
Daniel J. Dolan, Executive Vice President and Chief Financial Officer, OSI
314-514-2614
Peter D. Waldstein, Senior Vice President, Corporate Development, OSI
314-514-2603
Melvin L. Cooper, Chairman of the Board, Union
212-751-6422
William B. Hewitt, President and CEO, Union
803-958-3801
Nicholas P. Gill, Executive Vice President, Treasurer, Secretary and Chief
Financial Officer, Union
203-629-0505
