<PAGE>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary proxy statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Section 240.14a-11(c) or Section
240.14a-12
THE UNION CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than Registrant)
Payment of filing fee (Check the appropriate box):
/ / No fee required.
/X/ Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
Common Stock, par value $0.50 per share, of The Union Corporation
(the "Common Stock").
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
5,893,007 shares of Common Stock
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
$31.50 per share in cash
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
$185,629,720.50
-----------------------------------------------------------------------
(5) Total fee paid:
$37,125.94 (all of which was previously paid)
-----------------------------------------------------------------------
/X/ Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount previously paid:
$41,146.49 (by wire transfer, CIK: 0001051794)
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(2) Form, Schedule or Registration Statement No.: Schedule 14D-1
-----------------------------------------------------------------------
(3) Filing Party: Sherman Acquisition Corporation and Outsourcing Solutions
Inc.
-----------------------------------------------------------------------
(4) Date Filed: December 24, 1997
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<PAGE>
THE UNION CORPORATION
211 KING STREET
SUITE 100
CHARLESTON, SOUTH CAROLINA 29401
---------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
MARCH 31, 1998
------------------
To the Stockholders:
NOTICE IS HEREBY GIVEN that a Special Meeting of the Stockholders of The
Union Corporation (the "Company") will be held on March 31, 1998 at 10:00 a.m.
Eastern Standard Time at 1120 Avenue of the Americas, 15th Floor, New York, New
York 10036, for the following purposes:
1. To consider and vote upon a proposal to approve and adopt the Share
Purchase Agreement and Plan of Merger dated as of December 22, 1997 (the "Merger
Agreement") among the Company, Outsourcing Solutions Inc., a Delaware
corporation ("Parent"), and Sherman Acquisition Corporation, a Delaware
corporation ("Purchaser"), a wholly-owned subsidiary of Parent, pursuant to
which Purchaser will be merged into the Company (the "Merger") and each holder
of the Company's issued and outstanding common stock, par value $0.50 per share
(the "Shares") (other than such capital stock of the Company owned by the
Company, Parent, Purchaser or their respective Subsidiaries and other than
Shares held by dissenting stockholders), will receive $31.50 per Share in cash,
without interest thereon. Pursuant to the Merger Agreement, Parent and Purchaser
commenced a cash tender offer on December 23, 1997 for all of the outstanding
Shares, at a price of $31.50 per Share, net to the seller in cash, without
interest thereon (the "Offer"). The Offer was consummated on January 23, 1998.
Based on information provided from ChaseMellon Shareholder Services, LLC, the
depositary for the Offer, approximately 4,614,568 Shares, or 78.31% of the
Shares, were tendered by stockholders of the Company and accepted and purchased
by Purchaser. Subsequently, Purchaser purchased an additional 306,100 Shares in
an open-market transaction, making the aggregate number of Shares held by
Purchaser and beneficially owned by Parent 4,920,668 as of the Record Date.
Parent has advised the Company that it will vote in favor of approval of the
Merger Agreement and the Merger. Approval of the Merger is therefore assured.
2. To transact such other business as may properly come before the meeting
or any adjournment thereof.
The Board of Directors has fixed February 25, 1998 as the record date for
the determination of the stockholders entitled to notice of and to vote at the
Special Meeting or any adjournment thereof, and only stockholders of record at
the close of business on that date are entitled to notice of and to vote at the
Special Meeting.
THE COMPANY'S BOARD OF DIRECTORS BELIEVES THE MERGER IS FAIR TO, AND IN THE
BEST INTEREST OF, THE COMPANY'S STOCKHOLDERS AND RECOMMENDS THAT THE COMPANY'S
STOCKHOLDERS VOTE FOR THE APPROVAL OF THE MERGER AGREEMENT AS DESCRIBED IN THE
ACCOMPANYING PROXY STATEMENT.
Under Delaware law, holders of the Shares are entitled to appraisal rights
in connection with the Merger.
By Order of the Board of Directors,
Richard Hoffman, Secretary
Dated: Charleston, South Carolina
March 3, 1998
WHETHER OR NOT YOU EXPECT TO ATTEND THE SPECIAL MEETING IN PERSON, PLEASE
COMPLETE, DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT WITHOUT DELAY IN THE
ENCLOSED ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. IF
YOU ATTEND THE SPECIAL MEETING, YOU MAY THEN WITHDRAW YOUR PROXY AND VOTE IN
PERSON.
<PAGE>
THE UNION CORPORATION
211 KING STREET
SUITE 100
CHARLESTON, SOUTH CAROLINA 29401
---------------------
PROXY STATEMENT
------------------
SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON MARCH 31, 1998
This proxy statement (the "Proxy Statement") is being furnished to the
stockholders of The Union Corporation, a Delaware corporation (the "Company"),
in connection with the solicitation of proxies by the Board of Directors of the
Company for use at a Special Meeting of Stockholders to be held at 10:00 a.m.
Eastern Standard Time on March 31, 1998 at 1120 Avenue of the Americas, 15th
Floor, New York, New York 10036, and at any adjournments or postponements
thereof (the "Special Meeting").
At the Special Meeting, the holders of common stock, par value $0.50 per
share (the "Common Stock"), of the Company will be asked to consider and vote
upon a proposal to approve and adopt the Share Purchase Agreement and Plan of
Merger dated as of December 22, 1997 (the "Merger Agreement") among the Company,
Outsourcing Solutions Inc., a Delaware corporation ("Parent"), and Sherman
Acquisition Corporation, a Delaware corporation ("Purchaser") which is a
wholly-owned subsidiary of Parent. A copy of the Merger Agreement is attached
hereto as Annex I. The summaries of the portions of the Merger Agreement set
forth in this Proxy Statement do not purport to be complete and are subject to,
and are qualified in their entirety by reference to, the text of the Merger
Agreement.
Pursuant to the Merger Agreement, Parent and Purchaser commenced a cash
tender offer on December 23, 1997 for all of the Company's issued and
outstanding shares of common stock, par value $0.50 per share (the "Shares"), at
a price of $31.50 per Share, net to the seller in cash, without interest thereon
(the "Offer"). The Offer was consummated on January 23, 1998. Based on
information provided from ChaseMellon Shareholder Services, LLC, the depositary
for the Offer, approximately 4,614,568 Shares, or 78.31% of the Shares, were
tendered by stockholders of the Company and accepted and purchased by Purchaser.
Subsequently, Purchaser purchased an additional 306,100 Shares in an open-market
transaction, making the aggregate number of Shares held by Purchaser and
beneficially owned by Parent 4,920,668 as of the Record Date. Parent has advised
the Company that it will vote in favor of approval of the Merger Agreement and
the Merger. Approval of the Merger is therefore assured.
On the terms and subject to the conditions of the Merger Agreement,
Purchaser will be merged with and into the Company (the "Merger") and the
Company will be the surviving corporation (the "Surviving Corporation"). Upon
the consummation of the Merger, each outstanding Share (other than Shares owned
by the Company, Parent, Purchaser or their respective subsidiaries and other
than Shares held by dissenting stockholders) will be converted into the right to
receive $31.50 per Share in cash, without interest thereon (the "Merger
Consideration").
This solicitation of proxies is made by and on behalf of the Board of
Directors. In addition to mailing copies of this Proxy Statement and the
accompanying Notice of Special Meeting of stockholders and proxy to all
stockholders of record on February 25, 1998 (the "Record Date"), the Company
will request brokers, custodians, nominees and other fiduciaries to forward
copies of this material to persons for whom they hold Shares in order that such
Shares may be voted. The cost of the solicitation of proxies will be borne by
the Company.
<PAGE>
The information contained in this Proxy Statement is qualified in its
entirety by the Annexes hereto and the documents referred to and incorporated by
reference herein, each of which is important and should be carefully reviewed in
its entirety.
THE COMPANY'S BOARD OF DIRECTORS BELIEVES THE MERGER IS FAIR TO, AND IN THE
BEST INTEREST OF, THE COMPANY'S STOCKHOLDERS, AND RECOMMENDS THAT THE COMPANY'S
STOCKHOLDERS VOTE FOR APPROVAL OF THE MERGER AGREEMENT.
In connection with the Merger, appraisal rights will be available to those
stockholders of the Company who meet and comply with the requirements of Section
262 of the Delaware General Corporation Law (the "DGCL"), a copy of which is
attached as Annex II hereto. For a discussion of the procedures to be followed
in asserting appraisal rights under Section 262 of the DGCL in connection with
the Merger, see "SPECIAL FACTORS-Appraisal Rights."
This Proxy Statement, the accompanying Notice of Special Meeting of
Stockholders and the accompanying proxy are first being mailed to shareholders
of the Company on about March 3, 1998.
WHETHER OR NOT YOU EXPECT TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE,
DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT WITHOUT DELAY IN THE ENCLOSED
ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
The date of this Proxy Statement is March 3, 1998.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
SUMMARY.................................................................................................... 1
INTRODUCTION............................................................................................... 10
PARTIES TO THE MERGER...................................................................................... 10
THE SPECIAL MEETING........................................................................................ 10
SPECIAL FACTORS............................................................................................ 12
Background to the Merger................................................................................... 12
Opinion of Financial Advisor............................................................................... 16
Recommendation of the Board of Directors................................................................... 19
Reasons for the Merger..................................................................................... 19
Interests of Certain Persons in the Merger................................................................. 19
Financing of the Merger.................................................................................... 22
Accounting Treatment of the Merger......................................................................... 23
Certain United States Federal Income Tax Consequences...................................................... 23
Certain Legal Matters; Regulatory Approvals................................................................ 24
Appraisal Rights........................................................................................... 26
Certain Effects of the Consummation of the Merger.......................................................... 28
MERGER AGREEMENT........................................................................................... 29
Merger Agreement....................................................................................... 29
The Offer.............................................................................................. 29
The Merger............................................................................................. 29
The Board of Directors................................................................................. 30
Shareholders' Meeting.................................................................................. 31
Interim Operations..................................................................................... 31
No Solicitation........................................................................................ 32
Directors' and Officers' Insurance and Indemnification................................................. 34
Compensation and Benefits.............................................................................. 34
Options................................................................................................ 34
Representations and Warranties......................................................................... 35
SELECTED FINANCIAL INFORMATION............................................................................. 35
PRICE RANGE OF SHARES; DIVIDENDS........................................................................... 37
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT............................................. 38
ADDITIONAL INFORMATION..................................................................................... 38
STOCKHOLDER PROPOSALS...................................................................................... 39
INDEPENDENT PUBLIC ACCOUNTANTS............................................................................. 39
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............................................................ 39
ANNEX I.................................................................................................... 1
ANNEX II................................................................................................... 1
ANNEX III.................................................................................................. 1
</TABLE>
i
<PAGE>
SUMMARY
This summary has been prepared to assist stockholders of the Company in
their review of the proposal to approve and adopt the Merger Agreement, which is
described in detail in this Proxy Statement. As a result of the Merger, (i) the
Company will be the Surviving Corporation and will become a wholly-owned
subsidiary of Parent, and (ii) each Share (other than Shares owned by the
Company, Parent, Purchaser or their respective subsidiaries and other than
Shares of such capital stock held by dissenting stockholders) will be converted
automatically into the right to receive the Merger Consideration. Pursuant to
the Merger Agreement, Parent and Purchaser commenced the Offer on December 23,
1997. The Offer was consummated on January 23, 1998. Based on information
provided from ChaseMellon Shareholder Services, LLC, the depositary for the
Offer, approximately 4,614,568 Shares, or 78.31% of the Shares, were tendered by
stockholders of the Company and accepted and purchased by Purchaser.
This summary is not intended to be a complete explanation of the matters
relating to the Merger Agreement or the proposed Merger and is qualified in all
respects by reference to the detailed explanation contained in this Proxy
Statement and the Annexes hereto. Stockholders are urged to review carefully
this entire Proxy Statement, including the Annexes hereto. Cross-references in
this summary are to captions in the Proxy Statement.
PARTIES TO THE MERGER
The Company's operations are currently comprised of five financial services
companies which furnish a broad range of credit and receivables management
outsourcing services, such as credit authorization, customer service, credit
usage management, management and collection of accounts receivable, and a
variety of related inbound and outbound call-center services, to both large and
small businesses. The Company employed approximately 2,000 persons at September
12, 1997. The principal executive offices of the Company are located at 211 King
Street, Suite 100, Charleston, South Carolina 29401.
Parent was formed in September 1995 and is a leading provider of accounts
receivable management services in the United States. Since 1995, Parent has
acquired Account Portfolios, Inc., Continental Credit Services, Inc., A.M.
Miller & Associates, Inc., Payco American Corporation, North Shore Agencies,
Inc. and Accelerated Bureau of Collections, Inc. through a combination of
investor equity, bank financing, seller financing and issuance of subordinated
notes. Parent, through its subsidiaries, provides (i) contingent fee services,
which involves collecting on delinquent consumer accounts for a fixed percentage
of realized collections or a fixed fee per account, (ii) portfolio purchasing
services, which involves acquiring portfolios of non-performing consumer
receivables from credit grantors, and service such portfolios, retaining all
amounts collected, and (iii) other related outsourcing services, including
contract management of accounts receivable, billing and teleservicing. As of
December 10, 1997, the Parent employed approximately 5,200 persons.
The Purchaser, a newly incorporated Delaware corporation, has not conducted
any business other than in connection with the Offer and the Merger Agreement.
All of the issued and outstanding shares of capital stock of the Purchaser are
owned by Parent.
The principal offices of the Parent and the Purchaser are located at 390
South Woods Mill Road, Suite 350, Chesterfield, Missouri 63017. The telephone
number of the Parent and the Purchaser at such office is (314) 576-0022.
1
<PAGE>
SPECIAL MEETING OF STOCKHOLDERS
This Proxy Statement and the accompanying notice of special meeting and form
of proxy are first being mailed on or about March 3, 1998 to stockholders
entitled to notice of and to vote at the Special Meeting of Stockholders of the
Company to be held on March 31, 1998.
<TABLE>
<S> <C>
Purpose of Special Meeting................... To vote on a proposal to approve the Merger
Agreement and the Merger. See "INTRODUCTION".
Date and Time of Special Meeting............. March 31, 1998 at 10:00 a.m., Eastern
Standard Time
Place of Meeting............................. 1120 Avenue of the Americas, 15th Floor, New
York, New York 10036
Record Date.................................. February 25, 1998
Number of Outstanding Shares of Stock
Entitled to Vote........................... 5,893,007 Shares
Approximate Number of Owners of Record of
Shares of Stock............................ 1,665
</TABLE>
REQUIRED VOTE
The affirmative vote of the holders of capital stock with two-thirds of the
voting power of all outstanding Shares is required for approval of the Merger
Agreement and the Merger. See "THE SPECIAL MEETING--Voting at the Special
Meeting." AT THE CLOSE OF BUSINESS ON THE RECORD DATE, PARENT BENEFICIALLY OWNED
4,920,668 SHARES CONSTITUTING APPROXIMATELY 83.50% OF THE OUTSTANDING SHARES
(APPROXIMATELY 83.45% OF THE OUTSTANDING SHARES ON A FULLY DILUTED BASIS).
PARENT HAS ADVISED THE COMPANY THAT IT WILL VOTE IN FAVOR OF THE APPROVAL OF THE
MERGER AGREEMENT AND THE MERGER. APPROVAL OF THE MERGER IS THEREFORE ASSURED.
A STOCKHOLDER WHO RETURNS A SIGNED PROXY BUT FAILS TO PROVIDE INSTRUCTIONS
AS TO THE MANNER IN WHICH SUCH SHARES ARE TO BE VOTED WILL BE DEEMED TO HAVE
VOTED TO APPROVE THE MERGER AGREEMENT AND THE MERGER AND THEREFORE TO HAVE
WAIVED HIS, HER OR ITS APPRAISAL RIGHTS. NEITHER A VOTE AGAINST, NOR AN
ABSTENTION, NOR A FAILURE TO VOTE WITH REGARD TO THE MERGER AGREEMENT AND THE
MERGER WILL CONSTITUTE A TIMELY WRITTEN OBJECTION TO THE MERGER. See "SPECIAL
FACTORS--Appraisal Rights" for a more complete discussion of stockholders'
appraisal rights.
SPECIAL FACTORS
BACKGROUND TO THE MERGER, REASONS FOR THE MERGER
After several previous expressions of interest in the Company, the
negotiations with the Parent which resulted in the signing of the Merger
Agreement began in August 1997, followed by a period of limited due diligence
and intense negotiations during October, November and December 1997. The Merger
Agreement was signed on December 22, 1997. Pursuant to the Merger Agreement, on
December 24, 1997 the Parent and Purchaser commenced the Offer. The Offer was
consummated on January 23, 1998 when the Purchaser accepted and purchased (the
"Share Purchase") the 4,614,568 Shares validly tendered and not withdrawn prior
to such date by stockholders of the Company. See "SPECIAL FACTORS--Background
2
<PAGE>
to the Merger." Subsequent to the consummation of the Offer, Purchaser purchased
306,100 Shares in an open-market transaction, making the aggregate number of
Shares owned by Purchaser and beneficially owned by Parent 4,920,668 as of the
Record Date.
The Board of Directors of the Company believes the Merger is fair to, and in
the best interest of, the Company's stockholders. In arriving at its
recommendation, the Board of Directors gave special consideration to a number of
factors including the fairness opinion of CIBC Oppenheimer Corp.
("Oppenheimer"), the Company's financial advisor, rendered on December 22, 1997,
the business and prospects of the Company, a review of possible alternatives to
the Merger and the terms of the Merger Agreement. See "SPECIAL FACTORS--Reasons
for the Merger."
RECOMMENDATION OF THE COMPANY'S BOARD OF DIRECTORS
The Company's Board of Directors (the "Board of Directors" or "Board")
unanimously has approved the Merger and the Merger Agreement, has determined
that the Merger is fair to, and in the best interests of, the Company's
stockholders and recommends that the stockholders vote "FOR" approval of the
Merger Agreement. See "SPECIAL FACTORS--Recommendation of the Company's Board of
Directors."
OPINION OF FINANCIAL ADVISOR
Oppenheimer delivered to the Board of Directors its written opinion dated
December 22, 1997 that, as of such date, and based upon and subject to the
various conditions set forth therein, the proposed Merger Consideration is fair
to the stockholders of the Company from a financial point of view. THE FULL TEXT
OF OPPENHEIMER'S OPINION DATED DECEMBER 22, 1997, WHICH SETS FORTH THE
ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITS ON THE REVIEW UNDERTAKEN BY
OPPENHEIMER, IS ATTACHED HERETO AS ANNEX III AND IS INCORPORATED HEREIN BY
REFERENCE. HOLDERS OF SHARES ARE URGED TO, AND SHOULD, READ SUCH OPINION IN ITS
ENTIRETY. See "SPECIAL FACTORS--Opinion of Financial Advisor."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Board of Directors of the Company
with respect to the Merger, stockholders should be aware that certain officers
and directors of the Company had interests in connection with the Merger at the
time of the Board's consideration of the Merger and the Merger Agreement. Upon
consummation of the Offer, Messrs. Cooper, Dunn and Silver each resigned from
the Board of Directors and Messrs. Cooper, Hewitt, Gill and Dunn resigned their
respective positions as officers of the Company.
TENDER AGREEMENTS
As a condition to the execution of the Merger Agreement, Parent required
that the directors and executive officers of the Company enter into an agreement
with Parent and the Purchaser (the "Tender Agreement") pursuant to which they
agreed to tender (and not to withdraw) all Shares held by each such person
(including the Rights (as defined below) associated therewith and any Shares
acquired by such person after the date of the Tender Agreement) in the Offer. As
of December 22, 1997, such individuals owned an aggregate of 238,216 Shares, or
approximately 3.6% of the outstanding Shares on a fully diluted basis on such
date. All of such Shares were tendered in the Offer and purchased by Purchaser.
See "SPECIAL FACTORS--Interests of Certain Persons in the Merger--Tender
Agreements."
3
<PAGE>
EMPLOYMENT AGREEMENTS
Upon the consummation of the Offer, the employment agreements between
Messrs. Cooper, Hewitt, Gill and Dunn and the Company (and/or certain of its
subsidiaries) terminated and each received a lump sum payment in satisfaction of
all payments due under his respective employment agreement.
In addition, the Company and certain of its subsidiaries have entered into
employment agreements with Messrs. Macaulay, Herbert Silver, Bernard Silver and
Zucker, each of which provides, under certain circumstances, for payments in the
event of a change of control of the Company or certain of its subsidiaries.
Neither the consummation of the Offer nor the Merger constitute a change of
control under these employment agreements. See "SPECIAL FACTORS--Interests of
Certain Persons in the Merger-- Employment Agreements" and "--Change in Control
Arrangements."
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") and become exercisable on the Distribution Date (as
defined in the Rights Agreement).
Consistent with the Board's approval and adoption of the Merger Agreement
and the transactions contemplated thereby, including the Offer and the Merger,
and its recommendation that all stockholders accept the Offer and tender their
Shares in response thereto, the Board approved on December 22, 1997 an amendment
to the Rights Agreement exempting the Merger Agreement, the Offer and the Merger
from the restrictions imposed on offerors generally by the Rights Agreement, so
long as the Merger Agreement has not been terminated. See "SPECIAL
FACTORS--Interests of Certain Persons in the Merger--Shareholder Rights Plan."
INDEMNIFICATION AGREEMENTS WITH DIRECTORS AND EXECUTIVE OFFICERS
The Company has entered into indemnification agreements with each of its
directors and executive officers under which 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. See "SPECIAL FACTORS--Interests of Certain Persons in the
Merger--Indemnification Agreements with Directors and Executive Officers."
FINANCING OF THE MERGER
The total amount of funds required by the Purchaser to purchase all of the
outstanding Shares pursuant to the Offer and the Merger and to pay related costs
and expenses is estimated to be approximately $206 million. On consummation of
the Offer, the Parent entered into an amended and restated credit agreement (the
"Second Amended and Restated Credit Agreement") with Goldman Sachs Credit
Partners L.P. ("GSCP"), The Chase Manhattan Bank ("Chase"), Chase Securities
Inc. ("CSI") and various lenders providing for (i) syndicated senior secured
term loan facilities aggregating approximately $412.4 million (the "Term
Facilities") and (ii) a senior secured revolving credit facility of up to $58.0
million (the "Revolving Facility," and together with the Term Facilities, the
"Senior Facilities"). In connection with such financing, GSCP and CSI acted as
Co-Arrangers, GSCP and Chase are Co-Administrative Agents and SunTrust Bank,
Atlanta is Collateral Agent. See "SPECIAL FACTORS-- Financing of the Merger."
4
<PAGE>
ACCOUNTING TREATMENT OF THE MERGER
The Merger will be accounted for under the "purchase" method of accounting
whereby the purchase price will be allocated based on the fair values of assets
acquired and liabilities assumed. See "SPECIAL FACTORS--Accounting Treatment of
the Merger."
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
In general, the receipt of cash for Shares pursuant to the Merger by a U.S.
Holder (as defined herein) will be a taxable transaction for U.S. federal income
tax purposes and may also be a taxable transaction under applicable state, local
or foreign tax laws. In general, a U.S. Holder will recognize gain or loss for
U.S. federal income tax purposes equal to the difference, if any, between the
amount of cash received by the shareholders pursuant to the Merger and such U.S.
Holder's adjusted tax basis in such Shares. Any such gain or loss will be
capital gain or loss. THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH
ABOVE IS INCLUDED FOR GENERAL INFORMATION PURPOSES ONLY AND IS BASED UPON THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED TO THE DATE HEREOF, EXISTING AND
PROPOSED U.S. TREASURY REGULATIONS PROMULGATED THEREUNDER, RULINGS AND JUDICIAL
DECISIONS NOW IN EFFECT, CHANGES TO ANY OF WHICH COULD AFFECT THE TAX
CONSEQUENCES DESCRIBED HEREIN AND COULD BE MADE ON A RETROACTIVE BASIS.
SHAREHOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE
SPECIFIC TAX CONSEQUENCES OF THE OFFER AND THE MERGER TO THEM, INCLUDING THE
APPLICATION AND EFFECT OF THE ALTERNATIVE MINIMUM TAX, STATE, LOCAL AND FOREIGN
TAX LAWS. See "SPECIAL FACTORS--Certain United States Federal Income Tax
Consequences."
CERTAIN LEGAL MATTERS; REGULATORY APPROVALS
Rule 13e-3 under the Exchange Act is applicable to certain "going-private"
transactions. The Purchaser does not believe that Rule 13e-3 will be applicable
to the Merger, unless, among other things, the Merger is completed more than one
year after termination of the Offer. If applicable, Rule 13e-3 would require,
among other things, that certain financial information regarding the Company and
certain information regarding the fairness of the Merger and the consideration
offered shareholders of the Company therein be filed with the Securities and
Exchange Commission (the "Commission") and disclosed to shareholders of the
Company prior to consummation of the Merger.
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended,
(the "HSR Act"), certain mergers and acquisitions may not be consummated unless
certain information has been furnished to the Antitrust Division and the FTC and
certain waiting period requirements have been satisfied. The transactions
contemplated by the Merger Agreement are subject to the HSR Act requirements.
Such information was furnished to the Antitrust Division and the FTC and on
January 13, 1998, the Company and Parent were each notified by the Federal Trade
Commission that early termination of the waiting period under the HSR Act was
granted effective January 13, 1998.
Two putative class action lawsuits relating to the transactions contemplated
by the Merger Agreement and captioned JERRY TODER V. WILLIAM B. HEWITT, MELVIN
L. COOPER, GORDON S. DUNN, ROBERT A. KERR, JAMES C. MILLER III, HERBERT R.
SILVER, HERBERT A. DENTON, ROBERT A. MARSHALL, JAMES M. MCCORMICK, OUTSOURCING
SOLUTIONS INC., SHERMAN ACQUISITION CORPORATION AND THE UNION CORPORATION, (C.A.
No. 16106-NC) (the "Action") and ROSENFELD FAMILY FOUNDATION V. WILLIAM B.
HEWITT, MELVIN L. COOPER, GORDON S. DUNN, ROBERT A. KERR, JAMES C. MILLER III,
HERBERT R. SILVER, HERBERT A. DENTON, ROBERT A. MARSHALL, JAMES M. MCCORMICK,
OUTSOURCING SOLUTIONS INC., SHERMAN ACQUISITION CORPORATION AND THE UNION
CORPORATION, (C.A. No. 16151-NC) (the "Second Action") have been filed in the
Delaware Chancery Court. Such lawsuits allege, among other things, that the
Merger Consideration and the terms of the Merger are inadequate and unfair. The
Action and the Second Action also assert, among other things, that the members
of the
5
<PAGE>
Company's Board of Directors named as defendants (the "Director Defendants"),
have, in violation of their fiduciary duties, failed to maximize shareholder
value, to conduct an adequate market check, to act independently and to properly
inform themselves of the Company's value. No class action has been certified in
either matter.
The Company believes each such action to be baseless and without merit and
intends to vigorously defend these matters. See "SPECIAL FACTORS--Certain Legal
Matters; Regulatory Approvals."
On February 27, 1998, the parties in the Action and the Second Action
entered into a stipulation agreeing that the claims asserted in such actions had
become moot. The Company has agreed, in that connection, to pay the fees and
expenses incurred by plaintiffs' counsel in litigating the actions in an
aggregate amount of $250,000. In the stipulation, plaintiffs release all claims,
rights, causes of action, suits, matters and issues, known or unknown, that have
been or could have been asserted by plaintiffs or their attorneys in the
actions, either directly or individually, derivatively, representatively or in
any other capacity, against defendants, or their respective present or former
officers, directors, agents, employees, attorneys, representatives, advisors,
heirs, executors, administrators, successors and assigns, and anyone else, in
connection with or that arise now or hereafter out of or relate in any way to
the litigation or any matters, transactions or occurrences referred to in the
complaints, including any claim for plaintiffs' attorneys' fees and expenses,
with prejudice as to plaintiff and his counsel.
Unless one or more shareholders of the Company objects to the dismissal of
the actions as moot or to the Company's agreement with respect to the payment of
attorneys' fees and expenses, and unless any such objections are deemed by the
Court to be of merit, the Court will, on or after April 15, 1998, enter a final
order dismissing the case on the terms provided in the parties' stipulation.
APPRAISAL RIGHTS
Stockholders are entitled to appraisal rights under Delaware law in
connection with the Merger. A Stockholder who objects to the Merger and follows
specified procedures is entitled to appraisal rights with respect to the Merger.
A copy of the full text of Section 262 of the DGCL is attached as Annex II
hereto. See "SPECIAL FACTORS--Appraisal Rights."
THE MERGER AGREEMENT
THE OFFER
Pursuant to the Merger Agreement and subject to the terms and conditions
thereof, the Purchaser commenced the Offer on December 24, 1997. The Offer
expired on January 23, 1998 at midnight, New York time, at which time the
Purchaser accepted and purchased the 4,614,568 Shares validly tendered and not
withdrawn by Stockholders of the Company. See "MERGER AGREEMENT--The Offer."
THE MERGER
On the date and time on which the Merger becomes effective (the "Effective
Time"), the Company will be merged with and into Purchaser, with the Company as
the Surviving Corporation, the Company will become a wholly-owned subsidiary of
Parent, and each Share (other than Shares of the Company owned by the Company,
Parent, Purchaser or their respective subsidiaries and other than Shares held by
dissenting stockholders) will be converted automatically into the right to
receive the Merger Consideration.
As soon as practicable after the Effective Time, ChaseMellon Shareholder
Services, LLC, the paying agent appointed by the Parent (the "Paying Agent"),
will mail to each holder of record of a certificate or certificates that
immediately prior to the Effective Time represented outstanding Shares (a
"Certificate" or "Certificates") which are being converted into the right to
receive the Merger Consideration pursuant to the Merger Agreement, a letter of
transmittal with instructions for use in effecting the surrender of the
Certificates in exchange for the Merger Consideration. After the Effective Time,
there will be no further
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registration of transfers on the stock transfer books of the Company, as the
Surviving Corporation, of Shares. CERTIFICATES SHOULD NOT BE SURRENDERED BY THE
HOLDERS OF SHARES UNTIL SUCH HOLDERS RECEIVE THE LETTER OF TRANSMITTAL. See
"MERGER AGREEMENT--The Merger."
THE BOARD OF DIRECTORS
In accordance with the provisions of the Merger Agreement, upon consummation
of the Offer, the Purchaser was entitled to designate up to such number of
directors on the Board of Directors, rounded up to the next whole number, as
will give the Purchaser, subject to compliance with Section 14(f) of the
Exchange Act, representation on the 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 so accepted for payment and paid for or otherwise acquired or owned by
the Purchaser or Parent, and the denominator of which shall be the number of
Shares then outstanding, and the Company and Board of Directors shall, at such
time, take any and all such action needed to cause the Purchaser's designees to
be appointed to the Board of Directors (including to cause directors to resign).
On January 26, 1998, Messrs. Cooper, Denton, Dunn, Kerr, McCormick, Miller and
Silver each resigned from the Board of Directors of the Company and Messrs.
Timothy G. Beffa, Daniel J. Dolan, David E. King and Tyler T. Zachem were
elected to the Board of Directors of the Company. In addition, promptly upon the
Share Purchase, the Company and the Board of Directors agreed to 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. ("Allied Bond")). See "MERGER AGREEMENT--The Board of Directors."
STOCKHOLDERS' MEETING
Pursuant to the Merger Agreement, as required by the DGCL in order to
consummate the Merger, the Company has agreed that it shall, in accordance with
applicable law, duly call, convene and hold a special meeting of its
stockholders for the purpose of voting upon the Merger Agreement and the Merger
and that the Merger Agreement and the Merger shall be submitted at such special
meeting. PARENT HAS INFORMED THE COMPANY THAT IT WILL VOTE IN FAVOR OF THE
APPROVAL OF THE MERGER AND THE MERGER AGREEMENT. THE PURCHASER ACQUIRED MORE
THAN TWO-THIRDS OF THE OUTSTANDING SHARES IN THE OFFER AND, THEREFORE, HAS
SUFFICIENT VOTING POWER TO APPROVE THE MERGER, EVEN IF NO OTHER SHAREHOLDER
VOTES IN FAVOR OF THE MERGER. See "MERGER AGREEMENT--Shareholders' Meeting."
ADDITIONAL AGREEMENTS BETWEEN THE COMPANY AND PARENT
The Merger Agreement provides that, among other things, except as otherwise
consented to or approved in writing by Parent, during the period commencing on
the date of the Merger Agreement until the Closing (as defined in the Merger
Agreement) or the Merger Agreement shall have been terminated pursuant to the
terms thereof, the Company and each of its subsidiaries will conduct their
respective businesses substantially in the same manner as heretofore conducted
and neither the Company nor any of its subsidiaries will engage in any
transaction or activity, enter into any agreement or make any commitment (or
materially amend certain material contracts).
DIRECTORS' AND OFFICERS' INSURANCE AND INDEMNIFICATION
Parent has agreed in the Merger Agreement that from and after the Share
Purchase, Parent shall cause the Company to (i) maintain in effect in the
Certificate of Incorporation of the Company the provisions with respect to the
indemnification set forth in Article SEVENTH of the Certificate of
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Incorporation of the Company as in effect on the date of 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 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 date of 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 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. In addition, prior to the Consummation of the Offer, the
Company purchased a six year "tail" insurance policy substantially identical to
the Company's current directors' and officers' liability insurance with
specified coverage amounts and reinstatement options covering those persons who
are covered on the date of the Merger Agreement by the Company's directors' and
officers' liability insurance policy. See "MERGER AGREEMENT--Directors' and
Officers' Insurance and Indemnification."
OPTIONS
The Board of Directors adopted appropriate resolutions and caused the
Company to take all actions necessary to obtain the consent of each holder of an
outstanding option to purchase Shares (an "Option") 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. As of
the Share Purchase, consents had been received with respect to all but 3,500 of
the then outstanding Options. Holders of all Options for which consents were
obtained received a cash payment for such Option immediately after the Share
Purchase. Pursuant to the Merger Agreement, all stock option plans of the
Company ("Stock Plans") with respect to which appropriate consents have been
received 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. See "MERGER
AGREEMENT--Options."
SELECTED FINANCIAL INFORMATION
Certain selected historical financial data of the Company is set forth under
"SELECTED FINANCIAL INFORMATION." The data should be read in conjunction with
the consolidated financial statements and related notes incorporated by
reference in this Proxy Statement. See "INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE."
PRICE RANGE OF SHARES
The Shares are traded on the NYSE under the symbol "UCO". On December 22,
1997, the last full trading day prior to the public announcement of the Offer
and Merger, the closing sale price of the Shares on the NYSE was $27.50 per
Share. SHAREHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE
SHARES. See "PRICE RANGE OF SHARES; DIVIDENDS."
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of the Record Date, the directors and executive officers of the Company,
as a group, beneficially owned 4,920,688 Shares, or approximately 83.50% of the
Shares outstanding on such date. Each officer and director of the Company
disclaims beneficial ownership of any such Shares. The only person known by the
Company to beneficially own five percent or more of the Shares as of the Record
Date was Parent. See "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT."
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THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
THE MERGER PROPOSAL. Stockholders are urged to read and consider carefully the
information contained in this Proxy Statement and to consult with their personal
financial and tax advisors.
This Proxy Statement and the accompanying form of proxy are first being
mailed to stockholders on or about March 3, 1998.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, WHETHER OR NOT
YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE, DATE, SIGN AND RETURN
THE PROXY CARD IN THE ENCLOSED POSTAGE PAID ENVELOPE.
NO PERSON IS AUTHORIZED BY THE COMPANY TO GIVE ANY INFORMATION OR TO MAKE
ANY REPRESENTATION NOT CONTAINED IN THIS PROXY STATEMENT, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATION SHOULD NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THE DELIVERY OF THIS PROXY STATEMENT SHALL NOT IMPLY THAT THERE HAS
BEEN NO CHANGE IN THE INFORMATION SET FORTH HEREIN OR IN THE AFFAIRS OF THE
COMPANY, PURCHASER OR PARENT SINCE THE DATE HEREOF.
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INTRODUCTION
This Proxy Statement is being furnished to the Stockholders of the Company
in connection with the solicitation of proxies on behalf of the Board of
Directors for use at the Special Meeting.
This Proxy Statement and accompanying Notice of Special Meeting of
Stockholders and form of proxy are first being mailed on or about March 3, 1998
to stockholders entitled to notice of, or to vote at, the Special Meeting. At
the Special Meeting, the stockholders are being asked to consider and vote upon
a proposal to approve and adopt the Merger Agreement and the Merger. Under the
terms of the Merger Agreement, at the Effective Time, (i) Purchaser will be
merged with and into the Company, (ii) the Company will be the Surviving
Corporation, (iii) the separate existence of Purchaser will cease, (iv) the
Company will become a wholly-owned subsidiary of Parent, and (v) each Share
(other than such capital stock of the Company owned by the Company, Parent,
Purchaser, or their respective subsidiaries and other Shares of such capital
stock held by dissenting stockholders) will be converted automatically into the
right to receive the Merger Consideration.
THE COMPANY'S BOARD OF DIRECTORS BELIEVES THAT THE MERGER IS FAIR TO, AND IN
THE BEST INTEREST OF, THE COMPANY'S STOCKHOLDERS AND RECOMMENDS THAT THE
COMPANY'S STOCKHOLDERS VOTE FOR APPROVAL OF THE MERGER AGREEMENT.
PARTIES TO THE MERGER
THE COMPANY. The Company's operations are currently comprised of five
financial services companies, which furnish a broad range of credit and
receivables management outsourcing services, such as credit authorization,
customer service, credit usage management, management and collection of accounts
receivable, and a variety of related inbound and outbound call-center services,
to both large and small businesses. The Company employed approximately 2,000
persons at September 12, 1997. The principal executive offices of the Company
are located at 211 King Street, Suite 100, Charleston, South Carolina 29401.
THE PARENT. Parent was formed in September 1995 and is a leading provider
of accounts receivable management services in the United States. Since 1995,
Parent has acquired Account Portfolios, Inc., Continental Credit Services, Inc.,
A.M. Miller & Associates, Inc., Payco American Corporation, North Shore
Agencies, Inc. and Accelerated Bureau of Collections, Inc. through a combination
of investor equity, bank financing, seller financing and issuance of
subordinated notes. Parent, through its subsidiaries, provides (i) contingent
fee services, which involves collecting on delinquent consumer accounts for a
fixed percentage of realized collections or a fixed fee per account, (ii)
portfolio purchasing services, which involves acquiring portfolios of
non-performing consumer receivables from credit grantors, and service such
portfolios, retaining all amounts collected, and (iii) other related outsourcing
services, including contract management of accounts receivable, billing and
teleservicing. As of December 10, 1997, the Parent employed approximately 5,200
persons.
THE PURCHASER. The Purchaser, a newly incorporated Delaware corporation,
has not conducted any business other than in connection with the Offer and the
Merger Agreement. All of the issued and outstanding shares of capital stock of
the Purchaser are owned by Parent.
The principal offices of the Parent and the Purchaser are located at 390
South Woods Mill Road, Suite 350, Chesterfield, Missouri 63017. The telephone
number of the Parent and the Purchaser at such office is (314) 576-0022.
THE SPECIAL MEETING
DATE, TIME AND PLACE OF SPECIAL MEETING
The Special Meeting is scheduled to be held at 10:00 a.m. Eastern Standard
Time on March 31, 1998, at 1120 Avenue of the Americas, 15th Floor, New York,
New York 10036.
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VOTING AT THE SPECIAL MEETING
The Board of Directors has fixed the close of business on February 25, 1998
as the Record Date for the determination of stockholders entitled to notice of,
and to vote at, the Special Meeting. Accordingly, only holders of record of
Shares at the close of business on the Record Date will be entitled to vote at
the Special Meeting. At the close of business on the Record Date, there were
5,893,007 Shares outstanding and entitled to vote, held by approximately 1,665
stockholders of record.
The affirmative vote of the holders of capital stock with two-thirds of the
voting power of all outstanding Shares is required under the Company's
Certificate of Incorporation for approval of the Merger. AT THE CLOSE OF
BUSINESS ON THE RECORD DATE, PARENT BENEFICIALLY OWNED 4,920,668 SHARES,
CONSTITUTING APPROXIMATELY 83.50% OF THE OUTSTANDING SHARES (APPROXIMATELY
83.45% OF THE OUTSTANDING SHARES ON A FULLY DILUTED BASIS). PARENT HAS ADVISED
THE COMPANY THAT IT WILL VOTE IN FAVOR OF APPROVAL OF THE MERGER AGREEMENT AND
THE MERGER. APPROVAL OF THE MERGER IS THEREFORE ASSURED.
Any Shares not voted (whether by abstention, broker non-vote or otherwise)
will have the effect of votes "AGAINST" the Merger.
PROXIES
This solicitation of proxies is made by and on behalf of the Board of
Directors. In addition to mailing copies of this Proxy Statement and the
accompanying Notice of Special Meeting of Stockholders and proxy to all
shareholders of record on the Record Date, the Company will request brokers,
custodians, nominees and other fiduciaries to forward copies of this material to
persons for whom they hold Shares in order that such shares may be voted. The
cost of the solicitation of proxies will be borne by the Company.
Stockholders are requested to complete, date, sign and promptly return the
accompanying form of proxy in the enclosed envelope. Shares represented by
properly executed proxies received by the Company and not revoked as described
in the following paragraph will be voted at the Special Meeting in accordance
with the instructions contained therein. IF INSTRUCTIONS ARE NOT CONTAINED
THEREIN, PROXIES WILL BE VOTED FOR APPROVAL OF THE MERGER AGREEMENT AND THE
MERGER.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted (a) by filing with the Secretary of the
Company written notice of such revocation bearing a later date than the proxy,
(b) by duly executing a subsequent proxy relating to the same Shares and
delivering it to the Secretary of the Company, or (c) by attending the Special
Meeting and voting in person. Attendance at the Special Meeting will not in and
of itself constitute revocation of a proxy. Any written notice revoking a proxy
should be sent to the attention of Richard Hoffman, Secretary, The Union
Corporation, 211 King Street, Suite 100, Charleston, South Carolina 29401.
PROXY SOLICITATION
All expenses of this solicitation, including the cost of preparing and
mailing this Proxy Statement, will be borne by the Company. No solicitation in
addition to this solicitation by use of the mails will be made in connection
with this Proxy Statement. Brokers, nominees, fiduciaries and other custodians
have been requested to forward soliciting material to beneficial owners of
Shares held of record by them, and such custodians will be reimbursed for their
expenses in connection therewith.
All information in this Proxy Statement concerning Parent and Purchaser has
been supplied by Parent. All other information herein has been supplied by the
Company.
OTHER MATTERS TO BE CONSIDERED
It is not anticipated that any matter other than approval of the Merger will
be brought before the Special Meeting. The By-Laws of the Company provide that
no business may be transacted at a special meeting of stockholders unless it is
included in the notice of the meeting or otherwise allowable under the DGCL, the
Certificate of Incorporation or the By-Laws. However, if any other matter should
properly come before the meeting, proxies will be voted in the discretion of the
persons named in the enclosed proxy.
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SPECIAL FACTORS
BACKGROUND TO THE MERGER
On June 4, 1996, the Company announced publicly that Oppenheimer & Co., Inc.
(now Oppenheimer) had been retained as financial advisor to explore strategic
alternatives to maximize shareholder value. Oppenheimer advised the directors
that a sale of the Company appeared to be the most effective means to maximize
shareholder value. 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
April 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. The Company understands that the reduction of the
proposed offering price was the result of concerns developed by the bidder
following its environmental due diligence review. Thereafter, all marketing
efforts relating to a sale of the Company were terminated.
On April 21, 1997, NCO Group, Inc. ("NCO"), an accounts receivable
management company, wrote to the Company expressing an interest in opening a
dialogue with the Company relative to a potential business combination. NCO
completed an initial public offering of its common stock in November 1996. NCO's
April 21 letter did not set forth any specific proposals but suggested two
scenarios, an all stock transaction at a price range of $24-$27 per Share
payable in NCO stock or a cash transaction at a price range of $22-$25 per
Share. On April 23, 1997, the Company responded to NCO's letter and declined
further discussions with NCO, stating that, among other things, the price range
for the Company set forth by NCO was insufficient. From time to time during the
summer of 1997, NCO contacted the Company to explore a possible acquisition of
the Company by NCO, but NCO did not then make any specific acquisition proposal.
On August 5, 1997, Parent, one of the original 12 bidders that had
previously indicated an interest in the Company, sent the Company an unsolicited
letter expressing interest in acquiring the Company through a merger transaction
at a cash price of $28.50 per Share. On August 18, 1997, the Company entered
into a confidentiality agreement with Parent in order to allow Parent to
commence limited due diligence and review certain non-public Company
information. The Company informed Parent that it considered the $28.50 per Share
cash price to be an unacceptable price, but agreed to continue discussions with
Parent. The Company requested that Parent conduct only environmental and legal
due diligence and respond with an acceptable cash price before conducting
full-scale due diligence with respect to the Company.
On September 2, 1997, NCO contacted the Company indicating an interest in
acquiring or merging with the Company. On September 3, 1997, the Company
informed NCO that the Company would consider its inquiry and would respond in
due course. On September 9, 1997, NCO expressed its interest in discussing with
the Company a stock-for-stock acquisition of the Company, accounted for as a
pooling of interests, in which the Company's shareholders would receive NCO
stock valued by NCO in excess of $35 per Share, and potentially in the high
$30's depending upon its due diligence review.
At a regular meeting of the Board on September 10, 1997, the Board
discussed, among other things, the unsolicited all cash proposal from Parent and
the unsolicited stock-for-stock proposal from NCO. The Board considered the
proposals and concluded that the Company should continue discussions with both
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Parent and NCO. It was the consensus of the Board that if the Company were to
receive an offer to purchase the Company at a per Share price that the Board
considered to be favorable to the Company's shareholders, it would be preferable
to receive an all cash payment rather than stock. However, the Board also agreed
that it would consider a stock-for-stock transaction if such a transaction were
more advantageous to and in the best interests of the Company's shareholders.
Thereafter, on September 15, 1997, representatives of the Company met with
representatives of NCO to discuss NCO's proposal, and prior to such discussions,
NCO and the Company entered into a confidentiality agreement. At that meeting,
the Company's management advised NCO that a cash transaction was preferable to a
stock transaction, and suggested that any stock-for-stock transaction should
include, in addition to a collar on the NCO stock price, a mechanism that would
allow the Company's stockholders to receive a guaranteed price in cash.
Management requested that NCO respond to this suggestion. NCO did not respond to
this suggestion.
On September 23, 1997, after negotiations with the Company's management
regarding the price, Parent advised the Company in a letter that, subject to the
finalization of due diligence, it was prepared to offer to acquire the Company
in a merger in which the Company's shareholders would receive $31.50 per Share
in cash. Parent's proposal also requested that, in consideration for the
expenses to be incurred by Parent in conducting due diligence and negotiating a
definitive merger agreement, the Company and its agents agree that for a 30 day
period, they would not encourage, solicit, participate in or initiate
discussions or negotiations with or provide any information to any person other
than Parent concerning any stock or asset purchase, merger or similar
transaction. Based upon the increase in Parent's cash offer, the Company agreed
to that requirement.
On September 30, 1997, NCO sent a letter to the Company expressing an
interest in discussing with the Company a merger transaction under one of three
options: (1) an all cash transaction at $30 per Share; (2) a 50% cash and 50%
stock deal valued by NCO at $34 per Share; or (3) an all stock transaction,
accounted for as a pooling of interests, in which the Company's shareholders
would receive a number of shares of NCO stock amounting to $39 per Share. This
expression of interest was made prior to NCO conducting any due diligence,
including environmental due diligence--an event that previously had caused other
possible suitors to decline to bid for the Company or to discount the value of
the Company's stock and, as stated above, a bidder to decrease its bid for the
Company after conducting substantial due diligence. NCO's letter stated that the
cash alternative was not a viable alternative and that an all stock transaction
was the best alternative from NCO's perspective. NCO also mentioned, without
elaboration, the possibility of providing an appropriate collar around NCO's
stock, but did not respond to management's suggestion concerning a mechanism
that would allow the Company's stockholders to receive a guaranteed price in
cash. The Company informed NCO that it would consider NCO's proposals. On
November 14, 1997, when Parent agreed after conducting substantial due diligence
to maintain its offer of $31.50 per Share in cash, despite its reservations
concerning environmental issues and certain litigation matters, the Company
extended the exclusivity provisions contained in the September 23, 1997 letter
agreement with Parent until December 31, 1997.
At a regular meeting of the Board, on November 19, 1997, the Board
considered the proposals submitted by NCO in its letter of September 30, 1997.
Oppenheimer representatives made a presentation reviewing the NCO proposals.
Oppenheimer concluded that the September 30, 1997 NCO letter did not make any
proposals which were as favorable to the Company's shareholders as Parent's
$31.50 per Share cash proposal. Oppenheimer concluded, based upon its analysis,
that the two stock proposals in the NCO letter were not likely to result in the
consummation of a transaction at the stated consideration. Among the reasons for
Oppenheimer's conclusions relating to the stock proposals were the estimated
value of the NCO stock, taking into account, among other things, its high
price/earnings multiple, the illiquidity of NCO's stock, the apparently highly
dilutive effect of the proposals on NCO's stock and the absence of any due
diligence on the part of NCO. After discussing Oppenheimer's analysis of NCO's
proposals and considering the possible risk to the on-going negotiations with
Parent in the event the Company were to
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pursue the NCO proposals, the Board unanimously resolved that Parent's offer of
$31.50 per Share in cash was in the best interests of the Company's shareholders
and superior to the proposals outlined by NCO. The Board also approved the
extension of the exclusivity arrangement with Parent, and authorized the
Company's management and agents to continue negotiations with Parent and to
report to the Board before concluding such negotiations.
On December 17, 1997, the Company's Board of Directors met to review the
status of negotiations with Parent. At that meeting, Oppenheimer provided the
Board with its written analysis of Parent's offer and provided the Board with
its views concerning the fairness of Parent's offer. After discussion, the Board
authorized management to proceed with negotiations and the finalization of the
definitive transaction documents, subject to final approval by the Board.
Thereafter, on December 22, 1997, the Company's Board met to consider the final
terms of Parent's offer. At that meeting Oppenheimer rendered its written
opinion that Parent's $31.50 cash per Share offer is fair to the Company's
shareholders from a financial point of view, as described below. The Board
approved the terms of the final agreement with Parent and authorized management
to execute such agreement on behalf of the Company, and to prepare and file all
necessary documents with the appropriate regulatory agencies. The Company,
Parent and Purchaser executed the Merger Agreement on December 22, 1997.
On December 23, 1997, after the transaction with Parent was publicly
announced, NCO contacted the Company regarding the Merger.
On December 24, 1997, pursuant to the Merger Agreement, Parent and Purchaser
commenced the Offer for all of the issued and outstanding Shares of the Company.
On December 29, 1997, the Action was filed in the Court of Chancery in the
State of Delaware, New Castle County on behalf of the public shareholders of the
Company. The Action alleged, among other things, that the Merger Consideration
and the terms of the Merger are inadequate and unfair. The Action also asserted,
among other things, that the Director Defendants, in violation of their
fiduciary duties, failed to maximize shareholder value, to conduct an adequate
market check, to act independently and to properly inform themselves of the
Company's value. No class action has been certified in this matter.
Subsequent to the commencement of the Offer, in a letter to Melvin Cooper,
Chairman of the Board of the Company, dated January 16, 1998, NCO referred to
its September 30, 1997 proposal to acquire the Company for $39 in NCO stock,
"subject to due diligence and negotiation of an appropriate collar," and
reaffirmed its interest in acquiring the Company at the prices quoted in its
September 30, 1997 letter, and stated that after discussion with the Company
regarding the Company's Share count and its 1998 and 1999 financial outlook, NCO
"may be willing and able" to increase the prices quoted in that letter. In a
further letter to Mr. Cooper dated January 19, 1998, NCO requested a meeting
with management of the Company and the Company's Board of Directors to discuss
its proposal to acquire the Company for $39 per Share in NCO stock. NCO stated
that its January 19 letter was "to formally request a meeting with you, and the
Board of Directors of The Union Corporation, to discuss an offer to acquire The
Union Corporation. We believe you and the Board will determine our offer to be a
superior offer to that of Outsourcing Solutions Inc. and Sherman Acquisition
Corporation." NCO further stated that "As the offer was proposed, we believe
that $39 per Share, paid in the Common Stock of NCO Group, Inc., to be a
superior offer to that of Outsourcing Solutions, Inc. and Sherman Acquisition
Corporation."
At the regularly scheduled January 20, 1998 meeting of the Board,
representatives of Oppenheimer reiterated their view, expressed on November 19,
1997, that the $30 per Share proposal by NCO was not as favorable to the
Company's stockholders as the Offer and the Merger. The Board also reviewed
NCO's statement in its September 30, 1997 letter that a cash offer was not a
viable option because amortization and interest expense would bring the purchase
price below a level that the Company would accept.
With respect to the stock proposals, Oppenheimer expressed its views that an
offer of NCO stock, as outlined in NCO's September 30, 1997 letter (reaffirmed
and proposed in the January 16 and 19, 1998 letters), would expose the Company's
stockholders to substantial risk that the price of NCO stock would
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not be maintained, that the Company's stockholders would face a significant
problem with liquidity in NCO stock, and that there was a significant risk that
a stock transaction with NCO would not be completed as proposed. Oppenheimer's
conclusions regarding the stock proposals were based upon, among other things,
the high price/earnings multiple at which NCO's stock had been trading as
compared to comparable companies, the preliminary nature of NCO's proposals, the
length of time which would be required to close a stock transaction with NCO and
Oppenheimer's assessment, based on public information concerning NCO, of the
discounted present value of NCO's cash flow after giving effect to the proposed
transaction with the Company (taking into account various assumptions which
Oppenheimer, in its judgement, deemed reasonable).
The directors considered, among other things, the matters addressed in
Oppenheimer's report, the uncertainties involved in consummating a transaction
with NCO (including the Company's obligation to pay Parent a $7.7 million
termination fee under certain circumstances), the length of time which would be
required to close a stock transaction with NCO, and the financial market and
business risks which would be faced by the Company during such period. The
directors also considered the prospect of the Company's stockholders receiving
promptly $31.50 per Share in cash if the Offer were consummated and the
possibility of jeopardizing that transaction if the Company pursued the NCO
proposals. Further, the directors were advised by Oppenheimer that it was aware
of no developments which would cause it to withdraw its December 22, 1997
opinion that the aggregate consideration to be paid to the stockholders of the
Company in the Offer and the Merger is fair, from a financial point of view, to
such stockholders. Based on all of the foregoing, the Board unanimously
determined that it was not in the best interest of the Company's stockholders to
pursue the NCO proposals and that the NCO proposals were unlikely to result in a
Superior Proposal (as defined in the Merger Agreement). Accordingly, the Board
unanimously agreed to repeat and maintain its recommendation that all holders of
Shares accept the Offer and tender their Shares pursuant to the Offer.
On January 21, 1998, a Second Amended Complaint (the "Second Amended
Complaint") in the Action was filed in the Court of Chancery in the State of
Delaware, New Castle County. In addition, on the same date, the Second Action
was filed in the Court of Chancery in the State of Delaware, New Castle County
on behalf of the public shareholders of the Company.
In addition to the allegations previously asserted, the Second Amended
Complaint also alleged that the directors of the Company failed to adequately
consider and pursue an offer to acquire the Company by NCO and to adequately
disclose information relating to such expression of interest by NCO on a timely
basis. The Second Amended Complaint also alleged that the Director Defendants
breached their fiduciary duties to maximize shareholder value, to act
independently to protect the interests of the Company's public shareholders and
to respond reasonably and on an informed basis to all BONA FIDE offers for the
Company. The Second Amended Complaint further alleged that the Director
Defendants were wrongly refusing to use the Company's shareholder rights plan to
maximize shareholder value. In addition to the relief previously requested, the
plaintiffs requested that the defendants be ordered to make full, corrective
disclosure of all material information not yet disclosed and be enjoined and
restrained from closing the Offer for a reasonable period of time to permit the
information in Amendment No. 2 to the 14D-9 filed by the Company to be
disseminated to and digested by the Company's shareholders. The allegations
asserted and relief sought in the Second Action were substantially similar to
those contained or sought, as the case may be, in the Second Amended Complaint.
In a January 22, 1998 hearing, the Delaware Chancery Court denied the motion
of the plaintiffs in the Action and the Second Action for a temporary
restraining order enjoining consummation of the Offer.
The Offer was consummated on January 23, 1998 when the Purchaser accepted
and purchased the 4,614,568 Shares validly tendered and not withdrawn prior to
such date by stockholders of the Company.
On January 27, 1998, Messrs. Cooper, Denton, Dunn, Kerr, McCormick, Miller
and Silver resigned as directors of the Company and Messrs. Cooper, Hewitt and
Gill resigned as officers of the Company.
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Messrs. Timothy G. Beffa, Daniel J. Dolan, David E. King and Tyler T. Zachem
were appointed to fill the resultant vacancies on the Board of Directors of the
Company. Mr. Beffa was also elected Chairman of the Board, President and Chief
Executive Officer of the Company. Mr. Dolan was also elected Vice President,
Chief Financial Officer and Treasurer of the Company. Mr. King was also elected
Vice President of the Company. Mr. Hoffman was elected Secretary of the Company.
Mr. Zachem was also elected Assistant Secretary of the Company.
On February 10, 1997, Purchaser acquired an additional 306,100 Shares in an
open-market transaction for $9,642,150 in cash.
On February 27, 1998, the parties in the Action and the Second Action
entered into a stipulation agreeing that the claims asserted in such actions had
become moot. The Company has agreed, in that connection, to pay the fees and
expenses incurred by plaintiffs' counsel in litigating the actions in an
aggregate amount of $250,000. In the stipulation, plaintiffs release all claims,
rights, causes of action, suits, matters and issues, known or unknown, that have
been or could have been asserted by plaintiffs or their attorneys in the
actions, either directly or individually, derivatively, representatively or in
any other capacity, against defendants, or their respective present or former
officers, directors, agents, employees, attorneys, representatives, advisors,
heirs, executors, administrators, successors and assigns, and anyone else, in
connection with or that arise now or hereafter out of or relate in any way to
the litigation or any matters, transactions or occurrences referred to in the
complaints, including any claim for plaintiffs' attorneys' fees and expenses,
with prejudice as to plaintiff and his counsel.
Unless one or more shareholders of the Company objects to the dismissal of
the actions as moot or to the Company's agreement with respect to the payment of
attorneys' fees and expenses, and unless any such objections are deemed by the
Court to be of merit, the Court will, on or after April 15, 1998, enter a final
order dismissing the case on the terms provided in the parties' stipulation.
OPINION OF FINANCIAL ADVISOR
Pursuant to an engagement letter dated September 15, 1997, the Company
retained Oppenheimer as its financial adviser in connection with the Merger.
Oppenheimer issued its written opinion dated December 22, 1997, that as of such
date, and based upon and subject to the various considerations set forth
therein, the proposed consideration to be received by the stockholders of the
Company in the Offer and the Merger 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 ANNEX III. HOLDERS OF SHARES ARE URGED TO,
AND SHOULD, READ SUCH OPINION IN ITS ENTIRETY. OPPENHEIMER'S OPINION IS
ADDRESSED TO THE COMPANY'S BOARD, IS DIRECTED ONLY TO THE FAIRNESS TO
SHAREHOLDERS (OTHER THAN PURCHASER) FROM A FINANCIAL POINT OF VIEW OF THE
CONSIDERATION TO BE PAID IN THE OFFER AND THE MERGER, DOES NOT ADDRESS ANY OTHER
ASPECT OF THE OFFER OR THE MERGER OR ANY RELATED TRANSACTION AND DOES NOT
CONSTITUTE A RECOMMENDATION AS TO HOW SHAREHOLDERS SHOULD VOTE AT THE SPECIAL
MEETING.
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,
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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 in the receivables
management industry. However, no company is exactly comparable. Oppenheimer
noted that of the group of selected companies, two companies are pure play
collection companies: FCA International ("FCA") and 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 multiple 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.
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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 Offer and the Merger.
The seven recent acquisitions involving companies providing accounts
receivable management services included the following: Allied Bond & Collection
Agency/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 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
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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 paid 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.
is entitled to 10% of the net fee paid by the Company to Oppenheimer.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE COMPANY'S BOARD OF DIRECTORS BELIEVES THAT THE MERGER IS FAIR TO, AND IN
THE BEST INTEREST OF, THE COMPANY'S STOCKHOLDERS AND RECOMMENDS THAT THE
COMPANY'S STOCKHOLDERS VOTE FOR APPROVAL OF THE MERGER AGREEMENT.
REASONS FOR THE MERGER
In reaching its conclusions set forth above, the Board of Directors
considered a number of factors, including, without limitation, the following:
(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;
(v) the extensive efforts to locate a suitable purchaser for the Company
at an appropriate price, the certainty of the transaction with Parent and
the availability to Parent of committed financing; and
(vi) 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.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Board of Directors of the Company
with respect to the Merger, stockholders should be aware that certain officers
and directors of the Company had interests in connection with the Merger
Agreement and the Merger.
TENDER AGREEMENTS. As a condition to the execution of the Merger Agreement,
Parent required that the directors and executive officers of the Company enter
into the Tender Agreement pursuant to which they agreed to tender (and not to
withdraw) all Shares held by each such person (including the Rights (as defined
in the Rights Agreement) associated therewith and any Shares acquired by such
person after the date of the Tender Agreement) in the Offer. As of December 22,
1997, such individuals owned an aggregate of 238,216 Shares, or approximately
3.6% of the outstanding Shares on a fully diluted basis on
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such date. Each such officer and director tendered all Shares (including the
corresponding Rights) held by such person in the Offer which was completed on
January 23, 1998.
EMPLOYMENT AGREEMENTS
Each of Messrs. Cooper, Hewitt, Gill and Dunn had employment agreements with
the Company providing for payments in the event of a change in control of the
Company (as described in the respective agreements). Upon consummation of the
Offer, such employment agreements terminated and each of Messrs. Cooper, Hewitt,
Gill and Dunn resigned from their respective positions as officers of the
Company and received a lump sum payment in the amounts of $8,970,324,
$2,522,206, $1,178,105 and $1,641,096, respectively, in satisfaction of all
payments due under his respective employment agreement. Additionally, Messrs.
Cooper, Hewitt, Gill and Dunn each held $50,000, 34,986, 20,000 and 100,000
Options, respectively, which were exercisable at a weighted average exercise
price of $22.50, $25.54, $21.84 and $13.63 per Share, respectively. Pursuant to
the Merger Agreement, upon consummation of the Share Purchase, Messrs. Cooper,
Hewitt, Gill and Dunn received lump sum cash payments of $450,000, $208,470,
$193,125 and $1,787,500, respectively, and the related Options were cancelled.
Finally, Messrs. Cooper, Hewitt, Gill and Dunn each held 115,276, 103,366,
31,500 and 10,000 Shares, respectively, which were tendered pursuant to the
Offer amounting to the receipt of $3,631,194, $3,256,029, $992,250 and $315,000,
respectively, upon the acceptance of such Shares for payment in the Share
Purchase.
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.
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. Neither
consummation of the Offer nor the Merger will constitute a change of control
thereunder.
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 therein) 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.
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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. Neither consummation of the Offer nor the
Merger will constitute a change of control thereunder. 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 agreements provide 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 agreements also provide that Allied Bond is required 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. Neither consummation of the Offer
nor the Merger will constitute a change of control thereunder.
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. 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). Such payments are only required to be made if such
change in control occurs without the approval of the Board of Directors. Neither
consummation of the Offer nor the Merger constitute a change of control under
these employment agreements. 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 Internal Revenue Code of
1986, as amended (the
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"Code")) within a specified period following such termination. 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".
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") and become exercisable on the Distribution Date (as
defined in the Rights Agreement).
Consistent with the Board's approval and adoption of the Merger Agreement
and the transactions contemplated thereby, including the Offer and the Merger,
and its recommendation that all stockholders accept the Offer and tender their
Shares in response thereto, the Board approved on December 22, 1997 an amendment
to the Rights Agreement exempting the Merger Agreement, the Offer and the Merger
from the restrictions imposed on offerors generally by the Rights Agreement, so
long as the Merger Agreement has not been terminated.
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. The
Merger Agreement provides, among other things, that the Parent shall cause the
Company to maintain and/or provide certain indemnification and insurance
arrangement for certain directors, officers and employees of the Company for a
period of six (6) years from the date of the consummation of the Offer. See
"MERGER AGREEMENT--Interests of Certain Persons in the Merger--Directors' and
Officers' Insurance and Indemnification."
FINANCING OF THE MERGER
The total amount of funds required by the Purchaser to purchase all of the
outstanding Shares pursuant to the Offer and the Merger and to pay related costs
and expenses is estimated to be approximately $206 million.
Upon consummation of the Offer, Parent entered into the Second Amended and
Restated Credit Agreement with GSCP, Chase, CSI and various lenders
(collectively, the "Banks") providing for (i) the Term Facilities and (ii) the
Revolving Facility. In connection with such financing, GSCP and CSI act as Co-
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Arrangers, GSCP and Chase acts as Co-Administrative Agents and SunTrust Bank,
Atlanta acts as Collateral Agent.
The Term Facilities consist of (i) a Tranche A Term Loan of $62.5 million
and, (ii) a Tranche B Term Loan of $124.9 million and (iii) a Tranche C Term
Loan of $225.0 million. The Term Facilities provide for quarterly amortization
until final maturity. The Tranche A Term Loan matures on October 15, 2001, the
Tranche B Term Loan matures on October 15, 2003, and the Tranche C Loan matures
on October 15, 2004.
Subject to reduction in the event Parent meets leverage and interest
coverage tests, the Tranche A Term Loan will bear interest, at the Parent's
option, (a) at a base rate equal to the greater of (i) the federal funds rate
plus 0.5% or (ii) Chase's customary base rate, plus 1.5% or (b) at the reserve
adjusted Eurodollar rate plus 2.5%. Subject to reduction in the event the Parent
meets leverage and interest coverage tests, the Tranche B Term Loan and Tranche
C Term Loan will each bear interest, at the Parent's option, (a) at a base rate
equal to the greater of (i) the federal funds rate plus 0.5% or (ii) Chase's
customary base rate, plus 2.0% or (b) at the reserve adjusted Eurodollar rate
plus 3.0%.
Subject to certain conditions, Parent has the ability to borrow an
additional $58.0 million for working capital, general corporate purposes and
acquisitions under the Revolving Facility.
The Revolving Facility terminates on October 15, 2001 and is fully revolving
until final maturity. Subject to reduction in the event Parent meets certain
leverage and interest coverage tests, the Revolving Facility bears interest, at
the Parent's option, (a) at a base rate equal to the greater of (i) the federal
funds rate plus 0.5% or (ii) Chase's customary base rate, plus 1.5% or (b) at
the reserve adjusted Eurodollar rate plus 2.5%.
The margin regulations promulgated by the Board of Governors of the Federal
Reserve System (the "Federal Reserve Board") place restrictions on the amount of
credit that may be extended for the purposes of purchasing margin stock
(including the Shares) if such credit is secured directly or indirectly by
margin stock. The Purchaser believes that the financing of the acquisition of
the Shares will be in full compliance with the margin regulations.
Parent currently has not made any plans or arrangements to either refinance
or repay the loans under Parent's Second Amended and Restated Bank Facility.
ACCOUNTING TREATMENT OF THE MERGER
The Merger will be accounted for under the "purchase" method of accounting
whereby the purchase price will be allocated based on the fair value of assets
acquired and liabilities assumed.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of certain U.S. federal income tax
consequences of the receipt of cash by a holder of Shares pursuant to the
Merger. Except as specifically noted, this discussion applies only to a U.S.
Holder (as defined herein). This summary does not address any tax consequences
of the Merger to U.S. Holders who exercise appraisal rights under Delaware law.
It applies only to U.S. Holders that hold Shares as capital assets and does not
address aspects of U.S. federal income tax law that may be applicable to
shareholders that are subject to special tax rules, including, without
limitation, insurance companies, tax-exempt organizations, financial
institutions, dealers in securities or currencies, persons who acquired Shares
pursuant to an exercise of employee stock options or rights which were or are
subject to forfeiture restrictions or otherwise as compensation, persons who
hold Shares as a position in a "straddle" or as part of a "hedging" or
"conversion" transaction for U.S. federal income tax purposes and persons that
have a "functional currency" other than the U.S. dollar. Also, this summary does
not address state, local or foreign tax consequences of the Merger.
Consequently, each holder should consult such holder's own tax advisor as to the
specific tax consequences of the Merger to such holder.
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For purposes of this discussion, a "U.S. Holder" means a holder of Shares
that for U.S. federal income tax purposes is (i) a citizen or resident of the
United States, (ii) a partnership or corporation created in or under the laws of
the United States or any political subdivision thereof or therein, (iii) an
estate the income of which is subject to United States federal income taxation
regardless of its source, or (iv) a trust if (x) a court within the United
States is able to exercise primary supervision over the administration of the
trust and (y) one or more United States persons have the authority to control
all substantial decisions of the trust. Notwithstanding the preceding sentence,
to the extent provided in U.S. Treasury Regulations, certain trusts in existence
on August 20, 1996, and treated as U.S. persons prior to such date, that elect
to continue to be treated as U.S. persons will also be treated as U.S. Holders.
A Non-U.S. Holder is a holder of Shares that is not a U.S. Holder.
The receipt of cash for Shares pursuant to the Merger by a U.S. Holder will
be a taxable transaction for U.S. federal income tax purposes and may also be a
taxable transaction under applicable state, local or foreign tax laws. In
general, a U.S. Holder will recognize gain or loss for U.S. federal income tax
purposes equal to the difference, if any, between the amount of cash received by
the shareholders pursuant to the Merger and such U.S. Holder's adjusted tax
basis in such Shares. Any such gain or loss will be capital gain or loss. The
maximum marginal U.S. federal income tax rate applicable to such gain will be
lower than the maximum marginal U.S. federal income tax rate applicable to
ordinary income if such U.S. Holder's holding period for such Shares exceeds one
(1) year and will be further reduced if such Shares were held for more than
eighteen (18) months. There are limitations on the deductibility of capital
losses.
INFORMATION REPORTING AND BACKUP WITHHOLDING TAX. United States information
reporting will apply to proceeds from the sale of Shares paid by a United States
payor to a U.S. Holder (other than an "exempt recipient," including a
corporation, a payee that is a Non-U.S. Holder that provides an appropriate
certification and certain other persons). As noted in Section 3, a United States
payor will be required to withhold 31% of any such payment within the United
States to a holder (other than an "exempt recipient") if such holder fails to
furnish its correct taxpayer identification number and to certify under
penalties of perjury that such holder is not subject to backup withholding tax
by submitting a completed Substitute Form W-9 to the Depositary or otherwise
fails to comply with such backup withholding requirements. Accordingly, each
shareholder should complete, sign and submit the Substitute Form W-9 included as
part of the Letter of Transmittal in order to avoid the imposition of such
backup withholding tax.
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED
FOR GENERAL INFORMATION PURPOSES ONLY AND IS BASED UPON THE INTERNAL REVENUE
CODE OF 1986, AS AMENDED TO THE DATE HEREOF, EXISTING AND PROPOSED U.S. TREASURY
REGULATIONS PROMULGATED THEREUNDER, RULINGS AND JUDICIAL DECISIONS NOW IN
EFFECT, CHANGES TO ANY OF WHICH COULD AFFECT THE TAX CONSEQUENCES DESCRIBED
HEREIN AND COULD BE MADE ON A RETROACTIVE BASIS. SHAREHOLDERS ARE URGED TO
CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF THE
OFFER AND THE MERGER TO THEM, INCLUDING THE APPLICATION AND EFFECT OF THE
ALTERNATIVE MINIMUM TAX, STATE, LOCAL AND FOREIGN TAX LAWS.
CERTAIN LEGAL MATTERS; REGULATORY APPROVALS
GOING PRIVATE TRANSACTIONS. Rule 13e-3 under the Exchange Act is applicable
to certain "going-private" transactions. The Purchaser does not believe that
Rule 13e-3 will be applicable to the Merger, unless, among other things, the
Merger is completed more than one year after termination of the Offer. If
applicable, Rule 13e-3 would require, among other things, that certain financial
information regarding the Company and certain information regarding the fairness
of the Merger and the consideration offered shareholders of the Company therein
be filed with the Commission and disclosed to shareholders of the Company prior
to consummation of the Merger.
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ANTITRUST. Under the HSR Act, certain mergers and acquisitions may not be
consummated unless certain information has been furnished to the United States
Department of Justice (the "DOJ") and the Federal Trade Commission (the "FTC")
and certain waiting period requirements have been satisfied. The transactions
contemplated by the Merger Agreement are subject to the HSR Act requirements.
Such information was furnished to the DOJ and FTC, and on January 13, 1998, the
Company and Parent were each notified by the FTC that early termination of the
waiting period under the HSR Act was granted effective January 13, 1998.
SHAREHOLDER LITIGATION. On December 29, 1997, the Action was filed in the
Court of Chancery in the State of Delaware, New Castle County on behalf of the
public shareholders of the Company. The Action alleges, among other things, that
the Merger Consideration and the terms of the Merger are inadequate and unfair.
The Action also asserts, among other things, that the Director Defendants, have,
in violation of their fiduciary duties, failed to maximize shareholder value, to
conduct an adequate market check, to act independently and to properly inform
themselves of the Company's value. No class action has been certified in this
matter.
The complaint seeks a declaration that: (i) the action is properly
maintainable as a class action and certifying plaintiff as the representative of
the class; (ii) defendants have breached and are breaching their fiduciary and
other duties to plaintiff and other members of the potential class and (iii) the
proposed transaction is a legal nullity. The complaint also seeks to enjoin
defendants and their agents from proceeding with, consummating or closing the
proposed transaction or, alternatively, to rescind the transaction in the event
that the transaction is consummated. The complaint also seeks compensatory
damages, in an amount to be determined at trial, together with pre-judgment and
post-judgment interest, attorney's fees and costs.
The Company believes the Action to be baseless and without merit and it
intends to vigorously defend this matter.
On January 21, 1998, the Second Amended Complaint in the Action was filed in
the Court of Chancery in the State of Delaware, New Castle County. In addition,
on the same date, the Second Action was filed in the Court of Chancery in the
State of Delaware, New Castle County on behalf of the public shareholders of the
Company.
In addition to the allegations previously asserted, the Second Amended
Complaint also alleges that the directors of the Company failed to adequately
consider and pursue an offer to acquire the Company by NCO and to adequately
disclose information relating to such expression of interest by NCO on a timely
basis. The Second Amended Complaint also alleges that the Director Defendants
breached their fiduciary duties to maximize shareholder value, to act
independently to protect the interests of the Company's public shareholders and
to respond reasonably and on an informed basis to all BONA FIDE offers for the
Company. The Second Amended Complaint further alleges that the Director
Defendants are wrongly refusing to use the Company's shareholder rights plan to
maximize shareholder value. In addition to the relief previously requested, the
plaintiffs requested that the defendants be ordered to make full, corrective
disclosure of all material information not yet disclosed and be enjoined and
restrained from closing the Offer for a reasonable period of time to permit the
information in Amendment No. 2 to the 14D-9 filed by the Company to be
disseminated to and digested by the Company's shareholders.
The allegations asserted and relief sought in the Second Action are
substantially similar to those contained or sought, as the case may be, in the
Second Amended Complaint. The Company believes that each of the Second Amended
Complaint and the Second Action and the characterizations contained in each such
complaint are without foundation and contrary to fact and it intends to
vigorously defend these matters.
In a January 22, 1998 hearing, the Delaware Chancery Court denied the motion
of the plaintiffs in the Action and the Second Action requesting a temporary
restraining order enjoining consummation of the Offer.
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On February 27, 1998, the parties in the Action and the Second Action
entered into a stipulation agreeing that the claims asserted in such actions had
become moot. The Company has agreed, in that connection, to pay the fees and
expenses incurred by plaintiffs' counsel in litigating the actions in an
aggregate amount of $250,000. In the stipulation, plaintiffs release all claims,
rights, causes of action, suits, matters and issues, known or unknown, that have
been or could have been asserted by plaintiffs or their attorneys in the
actions, either directly or individually, derivatively, representatively or in
any other capacity, against defendants, or their respective present or former
officers, directors, agents, employees, attorneys, representatives, advisors,
heirs, executors, administrators, successors and assigns, and anyone else, in
connection with or that arise now or hereafter out of or relate in any way to
the litigation or any matters, transactions or occurrences referred to in the
complaints, including any claim for plaintiffs' attorneys' fees and expenses,
with prejudice as to plaintiff and his counsel.
Unless one or more shareholders of the Company objects to the dismissal of
the actions as moot or to the Company's agreement with respect to the payment of
attorneys' fees and expenses, and unless any such objections are deemed by the
Court to be of merit, the Court will, on or after April 15, 1998, enter a final
order dismissing the case on the terms provided in the parties' stipulation.
APPRAISAL RIGHTS
Under the DGCL, any stockholder that does not wish to accept the Merger
Consideration for his, her or its Shares as provided in the Merger Agreement has
the right to dissent from the Merger and to seek an appraisal of, and to be paid
the fair value (exclusive of any element of value arising from the
accomplishment or expectation of the Merger) for the Shares, provided that such
stockholder complies with the provisions of Section 262 of the DGCL. All
references in Section 262 and in this summary to a "stockholder" are to the
record holder of the Shares of the Company as to which appraisal rights are
asserted. A person having a beneficial interest in Shares of the Company that
are held of record in the name of another person, such as a broker or nominee,
must act promptly to cause the record holder to follow the steps summarized
below properly and in a timely manner to perfect whatever appraisal rights the
beneficial owner may have.
The following discussion is not a complete statement of the law relating to
appraisal rights and is qualified in its entirety by the full text of Section
262 of the DGCL that is reprinted in its entirety as Annex II. THIS DISCUSSION
SHOULD BE REVIEWED CAREFULLY BY ANY HOLDER WHO WISHES TO EXERCISE STATUTORY
APPRAISAL RIGHTS OR WHO WISHES TO PRESERVE THE RIGHT TO DO SO BECAUSE FAILURE
STRICTLY TO COMPLY WITH THE PROCEDURES SET FORTH HEREIN AND THEREIN WILL RESULT
IN THE LOSS OF APPRAISAL RIGHTS.
Under Section 262 of the DGCL, holders of Common Stock who follow the
procedures set forth in Section 262 of the DGCL will be entitled to have their
Shares appraised by the Delaware Chancery Court and to receive payment in cash
of the "fair value" of such Shares, exclusive of any element of value arising
from the accomplishment or expectation of the Merger, together with a fair rate
of interest, if any, as determined by such court. Additionally, where a proposed
merger is to be submitted for approval at a meeting of stockholders, the
corporation, not less than 20 days prior to the meeting, must notify each of its
stockholders who was a stockholder on the record date for such meeting with
respect to Shares for which appraisal rights are available, that appraisal
rights are so available, and must include in such notice a copy of Section 262
of the DGCL.
This Proxy Statement constitutes such notice to the holders of Shares, and
the applicable statutory provisions of the DGCL are attached to this Proxy
Statement as Annex II. Any stockholder who wishes to exercise such appraisal
rights or who wishes to preserve his, her or its right to do so should review
the following discussion and Annex II carefully, because failure to timely and
properly comply with the procedures therein specified will result in the loss of
appraisal rights under the DGCL.
Each stockholder of the Company electing to demand appraisal of his or her
Shares shall deliver to the Company, before voting on the Merger at the Special
Meeting, a written demand for appraisal of his or
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her Shares of the Company. Such demand must reasonably inform the Company of the
identity of the stockholder and that such stockholder intends thereby to demand
the appraisal of his, her or its Shares of the Company. This written demand for
appraisal of the Shares of the Company must be in addition to and separate from
any proxy or vote against the Merger. Voting against, abstaining from voting or
failing to vote on the Merger will not constitute a demand for appraisal within
the meaning of Section 262. Any stockholder electing to demand his appraisal
rights will not be granted appraisal rights under Section 262 if such
stockholder has either voted in favor of the Merger or consented thereto in
writing (including by granting a proxy or by returning a signed proxy without
specifying a vote against the Merger or a direction to abstain from such vote).
Additionally, appraisal rights will not be available under Section 262 if the
stockholder does not continuously hold through the Effective Time his, her or
its Shares of the Company with respect to which he, she or it demands appraisal.
A demand for appraisal must be executed by or for the stockholder of record,
fully and correctly, as such stockholder's name appears on the certificate or
certificates representing Shares of the Company. If the Shares of the Company
are owned of record in a fiduciary capacity, such as by a trustee, guardian or
custodian, such demand must be executed by the fiduciary. If the Shares of the
Company are owned of record by more than one person, as in a joint tenancy or
tenancy in common, such demand must be executed by all joint owners. An
authorized agent, including an agent for two or more joint owners, may execute
the demand for appraisal for a stockholder of record; however, the agent must
identify the record owner and expressly disclose the fact that, in exercising
the demand, such person is acting as agent for the record owner.
A record owner, such as a broker, who holds Shares of the Company as a
nominee for others, may exercise appraisal rights with respect to the Shares of
the Company held for all or less than all beneficial owners of Shares of the
Company as to which such person is the record owner. In such case the written
demand must set forth the number of Shares of the Company covered by such
demand. Where the number of Shares of the Company is not expressly stated, the
demand will be presumed to cover all Shares of the Company outstanding in the
name of such record owner. Beneficial owners who are not record owners and who
intend to exercise appraisal rights should instruct the record owner to comply
strictly with the statutory requirements with respect to the exercise of
appraisal rights.
A stockholder who elects to exercise appraisal rights must mail or deliver
his or her written demand to the Secretary of the Company at 211 King Street,
Suite 100, Charleston, South Carolina 29401. The written demand for appraisal
must specify the stockholder's name and mailing address, the number of Shares of
the Company owned, and that the stockholder is thereby demanding appraisal of
his, her or its Shares of the Company. Within ten days after the Effective Time,
the Company must provide notice to all stockholders who have complied with
Section 262 and have not voted in favor of or consented to the adoption of the
Merger Agreement and the Merger.
Within 120 days after the Effective Time, either the Company or any
stockholder who has complied with the required conditions of Section 262 may
file a petition in the Delaware Chancery Court demanding a determination of the
value of the Shares of the Company of the dissenting stockholders. If a petition
for an appraisal is timely filed, after a hearing on such petition, the Delaware
Chancery Court will determine which stockholders are entitled to appraisal
rights and will appraise the Shares of the Company owned by such stockholders,
determining the fair value of such Shares of the Company, exclusive of any
element of value arising from the accomplishment or expectation of the Merger,
together with a fair rate of interest to be paid, if any, upon the amount
determined to be the fair value. In determining such fair value, the Delaware
Chancery Court is to take into account all relevant factors.
Stockholders considering seeking appraisal should have in mind that the
"fair value" of their Shares of the Company determined under Section 262 could
be more than, the same as or less than the Merger Consideration, and that
opinions of investment banking firms as to fairness, from a financial point of
view, are not opinions as to fair value under Section 262. The cost of the
appraisal proceeding may be determined by the Delaware Chancery Court and taxed
against the parties as the Delaware Chancery
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Court deems equitable in the circumstances. Upon application of a dissenting
stockholder, the Delaware Chancery Court may order that all or a portion of the
expenses incurred by any dissenting stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorneys' fees and the
fees and expenses of experts, be charged pro rata against the value of all
Shares of the Company entitled to appraisal.
Any stockholder who has duly demanded appraisal in compliance with Section
262 will not, from and after the Effective Time, be entitled to vote for any
purpose the Shares of the Company subject to such demand or to receive payment
of dividends or other distributions on such Shares of the Company, except for
dividends or distributions payable to stockholders of record at a date prior to
the Effective Time.
At any time within 60 days after the Effective Time, any stockholder shall
have the right to withdraw his, her or its demand for appraisal and to accept
the terms offered in the Merger; after this period, the stockholder may withdraw
his, her or its demand for appraisal only with the consent of the Company. If no
petition for appraisal is filed with the Delaware Chancery Court within 120 days
after the Effective Time, stockholders' rights to appraisal shall cease, and all
holders of Shares of the Company shall be entitled to receive the Merger
Consideration. Inasmuch as the Company has no obligation to file such a
petition, and has no present intention to do so, any stockholder who desires
such a petition to be filed is advised to file it on a timely basis. However, no
petition timely filed in the Delaware Chancery Court demanding appraisal shall
be dismissed as to any stockholder without the approval of the Delaware Chancery
Court, and such approval may be conditioned upon such terms as the Delaware
Chancery Court deems just.
THE FOREGOING SUMMARY OF THE RIGHTS OF OBJECTING SHAREHOLDERS DOES NOT
PURPORT TO BE A COMPLETE STATEMENT OF THE PROCEDURES TO BE FOLLOWED BY
SHAREHOLDERS DESIRING TO EXERCISE ANY AVAILABLE DISSENTERS' RIGHTS. The
preservation and exercise of dissenters' rights require strict adherence to the
applicable provisions of the DGCL.
THE PROVISIONS OF SECTION 262 ARE COMPLEX AND TECHNICAL IN NATURE.
SHAREHOLDERS DESIRING TO EXERCISE DISSENTERS' RIGHTS MAY WISH TO CONSULT
COUNSEL, SINCE THE FAILURE TO COMPLY STRICTLY WITH THESE PROVISIONS WILL RESULT
IN THE LOSS OF THEIR DISSENTERS' RIGHTS.
CERTAIN EFFECTS OF THE CONSUMMATION OF THE MERGER
Upon consummation of the Merger, the Company intends to delist the Shares,
to terminate the registration of Shares under the Exchange Act and to terminate
the duty of the Company to file reports under the Exchange Act. In addition, if
the Shares are not listed on the New York Stock Exchange or any other national
exchange, the Shares will no longer constitute "margin securities" under the
rules of the Federal Reserve Board, with the result, among others, that lenders
may no longer extend credit on collateral of the Shares.
In addition, at the Effective Time, each outstanding Share of Common Stock
will be converted into the right to receive the Merger Consideration and the
holders of Shares immediately before the consummation of the Merger will possess
no further interest in, or rights as stockholders of, the Company.
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MERGER AGREEMENT
MERGER AGREEMENT. THE FOLLOWING IS A SUMMARY OF THE MATERIAL TERMS OF THE
MERGER AGREEMENT. THE SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
MERGER AGREEMENT WHICH IS INCORPORATED HEREIN BY REFERENCE AND A COPY OF WHICH
IS ATTACHED AS ANNEX I HERETO.
THE OFFER. Pursuant to the Merger Agreement and subject to the terms and
conditions thereof, the Purchaser commenced the Offer on December 24, 1997. The
Offer expired on January 23, 1998 at midnight, New York time at which time the
Purchaser accepted and purchased the 4,614,568 Shares validly tendered and not
withdrawn by Stockholders of the Company.
In the Merger Agreement, the Company consented to the Offer and the Merger
and represented that (a) the Board of Directors has by unanimous vote (i)
determined that each of the Offer and the Merger is fair to and in the best
interests of the holders of Shares, (ii) approved the Offer and the Merger and
adopted the Merger Agreement in accordance with the provisions of the DGCL,
(iii) recommended acceptance of the Offer and approval and adoption of the
Merger Agreement by the shareholders of the Company and (iv) taken all other
action necessary to render (x) Section 203 of the DGCL and other state takeover
statutes, (y) Article FIFTH of the Company'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
inapplicable to the Offer and Merger, and (b) Oppenheimer delivered to the Board
of Directors its opinion that the consideration to be received by the holders of
Shares pursuant to the Offer and the Merger is fair, from a financial point of
view, to holders of such Shares.
THE MERGER. The Merger Agreement provides that, subject to the terms and
conditions thereof, and in accordance with the DGCL, the Purchaser shall be
merged with and into the Company as soon as practicable following the
fulfillment or waiver of the conditions set forth in the Merger Agreement which
are described below. Following the Merger, the separate corporate existence of
the Purchaser will cease and the Company will continue as the Surviving
Corporation.
At the Effective Time, each Share then issued and outstanding (other than
(i) any Shares that are held by any subsidiary of the Company or in the treasury
of the Company, or which are held, directly or indirectly, by Parent, or any
direct or indirect subsidiary of Parent (including the Purchaser), 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 DGCL) will by virtue of the Merger and without any
action on the part of Parent, the Purchaser, the Company or the holder thereof,
be cancelled and converted into and represent the right to receive an amount in
cash, without interest, equal to the Merger Consideration.
As soon as practicable after the Effective Time, the Paying Agent will mail
to each holder of record a Certificate or Certificates which represent the right
to receive the Merger Consideration pursuant to the Merger Agreement and a
letter of transmittal with instructions for use in effecting the surrender of
the Certificates in exchange for the Merger Consideration. After the Effective
Time, there will be no further registration of transfers on the stock transfer
books of the Company, as the Surviving Corporation. CERTIFICATES SHOULD NOT BE
SURRENDERED BY THE HOLDERS OF SHARES UNTIL SUCH HOLDERS RECEIVE THE LETTER OF
TRANSMITTAL.
Upon the surrender of a Certificate to the Paying Agent, together with a
duly executed letter of transmittal, the holder of such Certificate will be
entitled to receive in exchange therefor an amount of cash equal to the Merger
Consideration multiplied by the number of Shares represented by such
Certificate, less any applicable withholding taxes. In the event of a transfer
of ownership of Shares which is not registered on the transfer records of the
Company, the appropriate amount of the Merger Consideration may be delivered to
a transferee if the Certificate representing such Common Stock is presented to
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the Paying Agent, together with the related letter of transmittal, and
accompanied by all documents required to evidence and effect such transfer and
to evidence that any applicable stock transfer taxes have been paid.
Until a Certificate representing Shares has been surrendered to the Paying
Agent, each such Certificate will be deemed at any time after the Effective Time
to represent only the right to receive upon such surrender the Merger
Consideration to which the shareholder is entitled under the Merger Agreement.
At the Effective Time, each share of common stock, par value $0.01 per
share, of Purchaser 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.
The Merger Agreement provides that the respective obligations of Parent and
the 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:
(i) 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 of the Company entitled to vote in accordance
with applicable law and the Company's Certificate of Incorporation and
By-Laws;
(ii) any waiting period (and any extension thereof) under the HSR Act
applicable to the Merger shall have expired or been terminated;
(iii) 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 thereby 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
(iv) 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.
THE BOARD OF DIRECTORS. In accordance with the provisions of the Merger
Agreement, upon consummation of the Offer, the Purchaser was entitled to
designate up to such number of directors on the Board of Directors, rounded up
to the next whole number, as will give the Purchaser, subject to compliance with
Section 14(f) of the Exchange Act, representation on the 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 so accepted for payment and paid for or
otherwise acquired or owned by the Purchaser or Parent and the denominator of
which shall be the number of Shares then outstanding, and the Company and Board
of Directors shall, at such time, take any and all such action needed to cause
the Purchaser's designees to be appointed to the Board of Directors (including
to cause directors to resign). On January 26, 1998, in accordance with the terms
of the Merger Agreement, Messrs. Cooper, Denton, Dunn, Kerr, McCormick, Miller
and Silver each resigned from the Board of Directors of the Company and Messrs.
Beffa, Dolan, King and Zachem were appointed to the Board of Directors of the
Company as the Purchaser's designees. In addition, promptly upon consummation of
the Offer, the Company and the Board of Directors agreed to 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).
30
<PAGE>
SHAREHOLDERS' MEETING. Pursuant to the Merger Agreement, as required by the
DGCL in order to consummate the Merger, the Company has agreed that it shall, in
accordance with applicable law, duly call, convene and hold a special meeting of
its shareholders for the purpose of voting upon the Merger Agreement and the
Merger and that the Merger Agreement and the Merger shall be submitted at such
special meeting. If necessary, after this Proxy Statement shall have been
mailed, the Company has agreed to promptly circulate amended, supplemental or
supplemented proxy material and, if required in connection therewith, resolicit
proxies. The Company has agreed in the Merger Agreement to 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 the Merger Agreement and the Merger.
THE PARENT BENEFICIALLY OWNS MORE THAN TWO-THIRDS OF THE OUTSTANDING SHARES ON
THE RECORD DATE. PARENT HAS ADVISED THE COMPANY THAT IT WILL VOTE IN FAVOR OF
THE APPROVAL OF THE MERGER. APPROVAL OF THE MERGER IS THEREFORE ASSURED.
INTERIM OPERATIONS. The Merger Agreement provides that, except as otherwise
consented to or approved in writing by Parent (which consent or approval shall
not be unreasonably withheld), during the period commencing on the date of the
Merger Agreement until the Closing (as defined in the Merger Agreement) or the
Merger Agreement shall have been terminated pursuant to the terms thereof, (a)
the Company and each of its subsidiaries will conduct their respective
businesses substantially in the same manner as heretofore conducted and neither
the Company nor any of its subsidiaries will engage in any transaction or
activity, enter into any agreement or make any commitment (or materially amend
certain material contracts), except (i) as previously disclosed to the Parent
and Purchaser in the Merger Agreement, (ii) in the ordinary course of business
and consistent with past practices or pursuant to an agreement to which the
Company or any of such subsidiaries is a party (including transactions in the
call center outsourcing business), (iii) as contemplated by the Merger
Agreement, or (iv) which would not be reasonably likely to have a material
adverse effect on the Company and its subsidiaries, taken as a whole, (b) except
as otherwise permitted by the Merger Agreement, neither the Company nor its
subsidiaries will 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 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
any such representation or warranty was expressly made only as of a different
date), (c) neither the Company nor any of its subsidiaries shall, except as
provided in the Merger Agreement or as disclosed in the Merger Agreement (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 Company 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 Company 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 Commission
regulations, in which event, the Company 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 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
31
<PAGE>
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; (vii) 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 the Company of obligations of
subsidiaries or guarantees by subsidiaries of the Company of obligations of
other subsidiaries of the Company, 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 Company and subsidiaries and between subsidiaries; (viii)
agree to the settlement of any material claim or litigation including, but not
limited to, claims or litigation in respect of, related to or arising out of any
environmental laws or matters; (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 Company or any subsidiary of which such
cancellation neither the Company nor any subsidiary has notice; (xi) 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 (xii) agree, in writing or otherwise, to take any of the foregoing
actions, (d) 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), 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 (iii) make any other material changes in its capital
structure, other than dividends and other intercompany transfers in the ordinary
course of business between any wholly-owned subsidiary and the Company or
between wholly-owned subsidiaries, (e) except as previously disclosed, the
Company will use all reasonable efforts to preserve the business, business
organization and goodwill 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, (f) the
Company will use all commercially reasonable efforts to maintain, and will cause
each of its subsidiaries to maintain, insurance substantially at current levels
on all property, real, personal and mixed, owned or leased by them, (g) the
Company will duly file all reports required to be filed by it with the
Commission pursuant to the Exchange Act and submit copies thereof to Parent
simultaneously with the following thereof, (h) the Company 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 Parent
unless required to do so by a court of competent jurisdiction, and (i) prior to
the Closing, 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. The Merger Agreement provides that the Company and its
affiliates and each of their respective officers, directors, employees,
representatives and agents shall immediately upon the execution of the Merger
Agreement cease any discussions or negotiations with any other parties that may
32
<PAGE>
be ongoing with respect to any Acquisition Proposal (as defined below). Neither
the Company nor any of its affiliates shall, directly 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 or entity (other than Parent or the
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 allowed therein) that would make the
Rights Agreement, Section 203 of the DGCL 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 contained in the Merger Agreement, as more fully described in the
next succeeding paragraph, may participate in discussions or negotiations with
or furnish information to any third party which proposes a transaction which the
Board of Directors reasonably determines will result in a Superior Proposal (as
defined below) 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 nor any committee thereof shall (x) withdraw or
modify, or propose to withdraw or modify, in a manner adverse to Parent or the
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 of Directors has
determined that the Acquisition Proposal is a Superior Proposal, (ii) all the
conditions to the Company's right to terminate the Merger Agreement in
accordance with the terms thereof have been satisfied (including the expiration
of the three business day period described therein and the payment of the
Termination Fee (as defined therein) and all other amounts required to be paid
pursuant thereto), (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.
In addition to the obligations of the Company set forth in the preceding
paragraph, on the date of receipt thereof, the Company has agreed, pursuant to
the Merger Agreement, to advise Parent of any request for information or
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.
"Acquisition Proposal", as used herein, 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 by the Merger Agreement. As
used herein, "Superior Proposal" shall mean a bona fide proposal made by a third
party to acquire all of the outstanding Shares of the Company 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 of Directors determines in
its good faith reasonable judgment (based on the advice of independent outside
financial and legal advisors) to be more favorable to the Company and its
33
<PAGE>
shareholders than the transactions contemplated by the Merger Agreement, (y) for
which in the good faith reasonable judgment 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. Any actions permitted under, and taken in compliance
with, this provision of the Merger Agreement shall not be deemed a breach of any
other covenant or agreement of such party contained in the Merger Agreement.
DIRECTORS' AND OFFICERS' INSURANCE AND INDEMNIFICATION. Parent has agreed
in the Merger Agreement that from and after the Consummation of the Offer,
Parent shall cause the Company to (i) maintain in effect in the Certificate of
Incorporation of the Company the provisions with respect to the indemnification
set forth in Article SEVENTH of the Certificate of Incorporation of the Company
as in effect on the date of the Consummation of the Offer, which provisions
shall not be amended, repealed or otherwise modified for a period of six 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 the date of the Consummation of the Offer 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 years from the date of the Consummation of the Offer 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 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. In addition, prior to the Consummation of the
Offer, the Company will purchase a six year "tail" insurance policy
substantially identical to the Company's current directors' and officers'
liability insurance with specified coverage amounts and reinstatement options
covering those persons who are covered on the date of the Merger Agreement by
the Company's directors' and officers' liability insurance policy.
COMPENSATION AND BENEFITS. Parent has agreed that, until the first
anniversary of the Effective Time, (a) 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, it being understood that, notwithstanding the foregoing,
following the Effective Time, 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 (b) Parent shall keep in effect all
severance policies that are applicable to employees and officers of the Company
immediately prior to the date of the Merger Agreement. In addition, Parent has
agreed pursuant to the Merger Agreement that, following the Effective Time, (x)
Parent will ensure that no employee welfare benefit plan adopted by the Company
or its subsidiaries shall have any preexisting condition limitations, (y) Parent
shall honor all premiums and deductibles paid by the employees, officers and
directors of the Company and subsidiaries under all Employee Benefit Plans (as
defined in the Merger Agreement) up to (and including) the Effective Time, and
(z) for purposes of eligibility and vesting, Parent shall honor all 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.
OPTIONS. Pursuant to the terms of the Merger Agreement, the Board of
Directors adopted appropriate resolutions and caused the Company to take all
actions necessary to obtain the consent of each holder of an outstanding Option
to the effect that, upon the Consummation of the Offer, each Option, whether or
not then vested or exercisable, was no longer exercisable for the purchase of
Shares but entitled 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 the Offer Price 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
consummation of
34
<PAGE>
the Offer. As of the Share Purchase, consents had been received with respect to
all but 3,500 of the then outstanding Options. Holders of all Options for which
consents were obtained received a cash payment for such Options on the Share
Purchase.
Pursuant to the Merger Agreement, all 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. 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.
REPRESENTATIONS AND WARRANTIES. In the Merger Agreement, the Company has
made customary representations and warranties to Parent and the Purchaser with
respect to, among other things, its organization, corporate authority,
capitalization, the Rights Agreement, financial statements, public filings,
conduct of business, compliance with laws, consent and approvals, opinions of
financial advisors, vote required, undisclosed liabilities, litigation,
environmental matters and the absence of any material adverse changes in the
Company since June 30, 1997.
SELECTED FINANCIAL INFORMATION
Set forth below is certain selected consolidated financial information
relating to the Company and its subsidiaries, which has been excerpted or
derived from the financial statements contained in the Company's Annual Report
on Form 10-K for the fiscal year ended June 30, 1997 and its Quarterly Report on
Form 10-Q for the quarter ended December 31, 1997. More comprehensive financial
information is included in these reports and other documents filed by the
Company with the Commission. The financial information that follows is qualified
in its entirety by reference to these reports and other documents, including the
financial statements and related notes contained therein and should be read in
conjunction with the financial information and accompanying notes set forth in
the Company's 1997 Annual Report to Shareholders, which is incorporated by
reference in the Company's Annual Report on Form 10-K for the fiscal year ended
June 30, 1997, and the Company's Quarterly Reports on Form 10-Q for the quarters
ended September 30, 1997 and December 31, 1997, which are incorporated herein by
reference. These reports and other documents may be inspected at, and copies may
be obtained from, the same places and in the manner set forth under "ADDITIONAL
INFORMATION."
35
<PAGE>
<TABLE>
<CAPTION>
SIX
MONTHS ENDED
FISCAL YEAR ENDED JUNE 30, DECEMBER 31,
----------------------------------------------------- --------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1993 1994 1995 1996 1997 1996 1997
--------- --------- --------- --------- --------- --------- ---------
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
Operating revenues................................. $ 80,499 $ 92,109 $ 97,649 $ 103,732 $ 121,709 $ 57,718 $ 64,740
Total operating costs and expense.................. 72,871 84,167 87,342 92,125 107,508 52,415 58,334
--------- --------- --------- --------- --------- --------- ---------
Operating income................................... 7,628 7,942 10,307 11,607 14,201 5,303 6,406
Interest expense................................... (687) (1,048) (1,450) (1,475) (1,417) (696) (731)
Interest income.................................... 1,074 723 1,242 1,509 1,673 746 1,256
--------- --------- --------- --------- --------- --------- ---------
Income from continuing operations before income
taxes............................................ 8,015 7,617 10,099 11,641 14,457 5,353 6,931
Provision for income taxes......................... 3,345 3,138 4,392 5,122 6,361 2,355 3,050
--------- --------- --------- --------- --------- --------- ---------
Income from continuing operations.................. 4,670 4,479 5,707 6,519 8,096 2,998 3,881
Discontinued operations loss provision (net of tax
benefits of $935, $2,800 and $4,420)............. -- -- (5,200) (2,065) -- -- (8,580)
--------- --------- --------- --------- --------- --------- ---------
Income before cumulative effect of change in
accounting for income taxes...................... 4,670 4,479 507 4,454 8,096 2,998 (4,699)
Cumulative effect of change in accounting for
income taxes .............................. -- 1,068 -- -- -- -- --
--------- --------- --------- --------- --------- --------- ---------
Net income......................................... $ 4,670 $ 5,547 $ 507 $ 4,454 $ 8,096 $ 2,998 $ (4,699)
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Per Share:
Income from continuing operations.................. $ .71 $ .72 $ 1.01 $ 1.13 $ 1.37 $ 0.53 $ 0.67
Discontinued operations loss provision............. -- -- (.92) (.36) -- -- (1.48)
Cumulative effect of change in accounting for
income taxes..................................... -- .17 -- -- -- -- --
Net income (loss) (primary)........................ $ .71 $ .89 $ .09 $ .77 $ 1.37 $ 0.53 $ (0.81)
At Period End:
Total assets....................................... $ 110,085 $ 110,195 $ 113,163 $ 122,986 $ 126,019 $ 117,944 $ 137,731
Long-term debt (excluding current portion)......... $ 21,036 $ 20,973 $ 20,763 $ 20,634 $ 20,379 $ 20,495 $ 283
</TABLE>
- ------------------------
Note: The fiscal 1993 amounts include the results of Allied Bond following its
acquisition in December 1992.
No pro forma financial information is included in this Proxy Statement. Due
to the nature of the Merger which is proposed, such information is not deemed to
be material to a stockholder's decision regarding approval of the Merger
Agreement.
During the course of discussions between Parent and the Company that led to
the execution of the Merger Agreement (see "SPECIAL FACTORS--Background to the
Merger"), the Company provided Parent with certain non-public business and
financial information about the Company. The Company does not as a matter of
course make public any forecasts as to future performance or earnings, and the
information set forth below is included in this Proxy Statement only because
such information was provided to Parent prior to the commencement of the Offer.
The forecasted financial information set forth below was not prepared with a
view to public disclosure or compliance with published guidelines of the
Commission or the guidelines established by the American Institute of Certified
Public Accountants regarding forecasts. None of the Company, the Parent or the
Purchaser, nor any of their respective officers, directors or financial
advisors, assumes any responsibility for the accuracy of this information. This
information is based upon a variety of assumptions relating to the business of
the Company, which may not be realized and is subject to significant
uncertainties and contingencies, all of which are difficult to predict and many
of which are beyond the control of the Company. There can be no assurance that
the forecasted results will be realized, and actual results may vary materially
and adversely from those shown.
The Company provided Parent with the Company's forecasted results for Fiscal
Year 1998 (based on actual Company results for the four months ended October 31,
1997 and the forecasted results for the period from November 1, 1997 through
June 30, 1998), which forecasted operating revenue of $143,883,000, operating
expense of $95,326,000, total selling, general and administrative expenses of
36
<PAGE>
$30,325,000 and operating income $18,232,000. The Company forecasted net
interest income of $1,210,000 and net income of $10,888,000 or $1.85 per Share
on a fully diluted basis.
PRICE RANGE OF SHARES; DIVIDENDS
The Shares are traded on the NYSE under the symbol "UCO". The following
table sets forth, for fiscal years 1996 and 1997, the high and low sales prices
per Share on the NYSE as reported in the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1997 and for the specified periods in fiscal
year 1998, the high and low sales prices per Share on the NYSE as reported by
the Dow Jones News Service.
<TABLE>
<CAPTION>
FISCAL YEAR 1996 QUARTER ENDING: HIGH LOW DIVIDENDS
- -------------------------------------------------------------------------------------- --------- --------- -----------
<S> <C> <C> <C>
September 30, 1995.................................................................... 16.50 14.38 --
December 30, 1995..................................................................... 18.75 15.25 --
March 31, 1996........................................................................ 21.25 16.25 --
June 30, 1996......................................................................... 22.13 17.63 --
FISCAL YEAR 1997 QUARTER ENDING:
- --------------------------------------------------------------------------------------
September 30, 1996.................................................................... 25.38 19.88 --
December 31, 1996..................................................................... 23.75 20.50 --
March 31, 1997........................................................................ 24.75 20.88 --
June 30, 1997......................................................................... 26.44 18.75 --
FISCAL YEAR 1998 QUARTER ENDING:
- --------------------------------------------------------------------------------------
September 30, 1997.................................................................... 26.75 22.13 --
December 31, 1997..................................................................... 31.50 22.75 --
January 1, 1998 through February 27, 1998............................................. 32.38 30.63 --
</TABLE>
Under the terms of the Company's existing credit agreement, the Company is
precluded from paying cash dividends on its common stock.
On December 22, 1997, the last full trading day prior to the public
announcement of the Offer and Merger, the closing sale price of the Shares on
the NYSE was $27.50 per Share.
37
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of February 25, 1998
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, (ii) each director and executive officer of the Company, and (iii) all
executive officers and directors of the Company as a group:
<TABLE>
<CAPTION>
NUMBER AND PERCENTAGE
OF
SHARES BENEFICIALLY
OWNED
----------------------
NUMBER OF PERCENT OF
BENEFICIAL OWNER SHARES(1) CLASS(2)
- --------------------------------------------------------------------- --------- -----------
<S> <C> <C>
5% STOCKHOLDERS
Outsourcing Solutions Inc............................................ 4,920,668(3) 83.50%
390 South Woods Mill Road, Suite 150
Chesterfield, Missouri 63017
DIRECTORS AND EXECUTIVE OFFICERS
Timothy G. Beffa..................................................... 4,920,668(3) 83.50%
Daniel J. Dolan...................................................... 4,920,668(3) 83.50%
William B. Hewitt.................................................... 0 *
David E. King........................................................ 4,920,668(3) 83.50%
George M. Macaulay................................................... 0 *
Robert A. Marshall................................................... 0 *
Tyler T. Zachem...................................................... 4,920,668(3) 83.50%
ALL DIRECTORS AND EXECUTIVE OFFICERS, AS A GROUP (13 PERSONS)........ 4,920,668 83.50%
</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 set forth opposite their names.
(2) Based on 5,893,007 Shares issued and outstanding and entitled to vote on the
Record Date.
(3) Outsourcing Solutions Inc. is the sole shareholder of Sherman Acquisition
Corporation which has sole voting and sole dispositive power over 4,920,668
Shares. Messrs. Beffa, King and Zachem are each directors and executive
officers of Sherman Acquisition Corporation and Outsourcing Solutions Inc.
Mr. Dolan is an executive officer of Outsourcing Solutions Inc.
ADDITIONAL INFORMATION
The Company is subject to the informational requirements of the Exchange
Act, and in accordance therewith files reports, proxy statements and other
information with the Commission. All such reports, proxy statements and other
information can be inspected and copied at the public reference facilities of
the Commission at 450 Fifth Street, N.W., Room 1024, Washington D.C. 20549, and
at the Commission's regional offices at 7 World Trade Center, Suite 1300, New
York, NY 10048 and 500 West Madison Street, Suite 1300, Chicago, IL 60661.
Copies of such material can also be obtained from the Public Reference Section
of the Commission at 450 Fifth Street, N.W., Room 3190, Washington, D.C. 20549
at prescribed rates. Electronic filings filed through the Commission's
Electronic Data Gathering, Analysis and Retrieval system are publicly available
on-line through the Commission's World Wide Web site on the Internet at
http://www.sec.gov. Such material can also be obtained at the office of The
National Association of Securities Dealers, Inc., 1735 K Street, N.W.,
Washington, D.C. 20006-1506
38
<PAGE>
STOCKHOLDER PROPOSALS
If the Merger is not consummated, the Company will hold an annual meeting of
Stockholders in 1998. Stockholder proposals for such annual meeting must be
received by the Company no later than June 12, 1998.
INDEPENDENT PUBLIC ACCOUNTANTS
The financial statements of the Company at and for the three years ended
June 30, 1997, incorporated in this Proxy Statement by reference to the
Company's Annual Report of Form 10-K for such period, have been incorporated in
reliance on the report of Ernst & Young LLP, independent certified public
accountants, also incorporated by reference herein. A representative of Ernst &
Young LLP will not be at the Special Meeting.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission pursuant to
the Exchange Act are incorporated herein by reference:
1. The Annual Report of the Company on Form 10-K for its fiscal year ended
June 30, 1997;
2. The Quarterly Reports of the Company on Form 10-Q for the periods ended
September 30, 1997 and December 31, 1997;
3. The Company's Proxy Statement dated October 10, 1997; and
4. All other reports filed by the Company since the end of the fiscal year
covered by the Annual Report referred to above.
All documents filed by the Company with the Commission pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to date hereof and
prior to the Special Meeting shall be deemed to be incorporated herein by
reference. Any statement contained herein or in a document all or a portion of
which is incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Proxy Statement to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Proxy Statement.
By Order of the Board of Directors,
Richard Hoffman
SECRETARY
March 3, 1998
PLEASE MARK, SIGN AND DATE THE ACCOMPANYING PROXY AND MAIL IT PROMPTLY IN
THE ENCLOSED POSTAGE-PAID ENVELOPE.
39
<PAGE>
ANNEX I
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>
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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
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
</TABLE>
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<TABLE>
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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
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>
A-ii
<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 h) 0*0*0*-Registered Trademark-
- -Registered Trademark- Section(5) 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:
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
<PAGE>
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.
(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,CFN. (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.
(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
2
<PAGE>
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.
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 (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
3
<PAGE>
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
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
4
<PAGE>
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 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 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
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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
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 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
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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
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.
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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, 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, 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
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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
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 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
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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 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;
(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
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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 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
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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 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 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.
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(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 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
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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 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.
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";
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(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 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.
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
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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 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
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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 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) 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.
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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).
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.
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,
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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 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
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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; (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 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
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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 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 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
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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 (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.
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,
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prepared or developed by or on behalf of the non-requesting party, and such
destruction shall be certified in writing to the requesting party.
(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.
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
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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.
(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.
(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
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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.
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 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
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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 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 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.
28
<PAGE>
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
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.
29
<PAGE>
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.
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.
30
<PAGE>
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.
(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.
31
<PAGE>
(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.
(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).
32
<PAGE>
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.
<TABLE>
<S> <C> <C>
ATTEST: THE UNION CORPORATION
By: /s/ MELVIN S. COOPER
/s/ NICHOLAS P. GILL ----------------------------------------
- ------------------------------ Name: Melvin S. Cooper
Name: Nicholas P. Gill Title: Chairman of the Board
ATTEST:
OUTSOURCING SOLUTIONS INC.
By: /s/ TYLER T. ZACHEM
/s/ S. WARD ATTERBURY ----------------------------------------
- ------------------------------ Name: Tyler T. Zachem
Name: S. Ward Atterbury Title: Vice President
ATTEST:
SHERMAN ACQUISITION CORPORATION
By: /s/ TYLER T. ZACHEM
/s/ S. WARD ATTERBURY ----------------------------------------
- ------------------------------ Name: Tyler T. Zachem
Name: S. Ward Atterbury Title: Vice President and Treasurer
</TABLE>
33
<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) 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-I
<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-II
<PAGE>
ANNEX II
TEXT OF SECTION 262 OF THE GENERAL CORPORATION LAW
OF THE STATE OF DELAWARE SECTION 262 APPRAISAL RIGHTS.
(a) Any stockholder of a corporation of this State who holds shares of stock
on the date of the making of a demand pursuant to subsection (d) of this section
with respect to such shares, who continuously holds such shares through the
effective date of the merger or consolidation, who has otherwise complied with
subsection (d) of this section and who has neither voted in favor of the merger
or consolidation nor consented thereto in writing pursuant to Section 228 of
this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of the stockholder's shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock corporation
and also a member of record of a nonstock corporation; the words "stock" and
"share" mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a nonstock corporation; and the
words "depository receipt" mean a receipt or other instrument issued by a
depository representing an interest in one or more shares, or fractions thereof,
solely of stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to Section 251 (other than a merger effected pursuant to
Section 251(g) of this title), Section 252, Section 254, Section 257, Section
258, Section 263 or Section 264 of this title:
(1) Provided, however, that no appraisal rights under this section shall
be available for the shares of any class or series of stock, which stock, or
depository receipts in respect thereof, at the record date fixed to
determine the stockholders entitled to receive notice of and to vote at the
meeting of to act upon the agreement of merger or consolidation, were either
(i) listed on a national securities exchange or designed as a national
market system security on an interdealer quotation system by the National
Association of Securities Dealers, Inc. or (ii) held of record by more than
2,000 holders; and further provided that no appraisal rights shall be
available for any shares of stock of the constituent corporation surviving a
merger if the merger did not require for its approval the vote of the
stockholders of the surviving corporation as provided in subsection (f) of
Section 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required by
the terms of an agreement of merger or consolidation pursuant to Sections
251, 252, 254, 257, 258, 263 and 264 of this title to accept for such stock
anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock (or depository receipts in
respect thereof) or depository receipts at the effective date of the
merger or consolidation will be either listed on a national securities
exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under Section 253 of this title is not owned by
Outsourcing Solutions Inc. immediately prior to the merger, appraisal rights
shall be available for the shares of the subsidiary Delaware corporation.
<PAGE>
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows: (1) If a proposed merger
or consolidation for which appraisal rights are provided under this section is
to be submitted for approval at a meeting of stockholders, the corporation, not
less than 20 days prior to the meeting, shall notify each of its stockholders
who was such on the record date for such meeting with respect to shares for
which appraisal rights are available pursuant to subsections (b) or (c) hereof
that appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
section. Each stockholder electing to demand the appraisal of his shares shall
deliver to the corporation, before the taking of the vote on the merger or
consolidation, a written demand for appraisal of his shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the appraisal of
his shares. A proxy or vote against the merger or consolidation shall not
constitute such a demand. A stockholder electing to take such action must do so
by a separate written demand as herein provided. Within 10 days after the
effective date of such merger or consolidation, the surviving or resulting
corporation shall notify each stockholder of each constituent corporation who
has complied with this subsection and has not voted in favor of or consented to
the merger or consolidation of the date that the merger or consolidation has
become effective; or (2) If the merger or consolidation was approved pursuant to
Section 228 or Section 253 of this title, each constituent corporation, either
before the effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of stock of
such constituent corporation who are entitled to appraisal rights of the
approval of the merger or consolidation and that appraisal rights are available
for any or all shares of such class or series of stock of such constituent
corporation, and shall include in such notice a copy of this section; provided
that, if the notice is given on or after the effective date of the merger or
consolidation, such notice shall be given by the surviving or resulting
corporation to all such holders of any class or series of stock of a constituent
corporation that are entitled to appraisal rights. Such notice may, and, if
given on or after the effective date of the merger or consolidation, shall, also
notify such stockholders of the effective date of the merger or consolidation.
Any stockholder entitled to appraisal rights may, within 20 days after the date
of mailing of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the appraisal of
such holder's shares. If such notice did not notify stockholders of the
effective date of the merger or consolidation, either (i) each such constituent
corporation shall send a second notice before the effective date of the merger
or consolidation notifying each of the holders of any class or series of stock
of such constituent corporation that are entitled to appraisal rights of the
effective date of the merger or consolidation or (ii) the surviving or resulting
corporation shall send such a second notice to all such holders on or within 10
days after such effective date; provided, however, that if such second notice is
sent more than 20 days following the sending of the first notice, such second
notice need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with this
subsection. An affidavit of the secretary or assistant secretary or of the
transfer agent of the corporation that is required to give either notice that
such notice has been given shall, in the absence of fraud, be prima facie
evidence of the facts stated therein. For purposes of determining the
stockholders entitled to receive either notice, each constituent corporation may
fix, in advance, a record date that shall be not more than 10 days prior to the
date the notice is given, provided, that if the notice is given on or after the
effective date of the merger or consolidation, the record date shall be such
effective date. If no record date is fixed and the notice is given prior to the
effective date, the record date shall be the close of business on the day next
preceding the day on which the notice is given.
(e) Within 120 days after the effective date of the merger or consolidation,
the surviving or resulting corporation or any stockholder who has complied with
subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a determination
of the
<PAGE>
value of the stock of all such stockholders. Notwithstanding the foregoing, at
any time within 60 days after the effective date of the merger or consolidation,
any stockholder shall have the right to withdraw his demand for appraisal and to
accept the terms offered upon the merger or consolidation. Within 120 days after
the effective date of the merger or consolidation, any stockholder who has
complied with the requirements of subsections (a) and (d) hereof, upon written
request, shall be entitled to receive from the corporation surviving the merger
or resulting from the consolidation a statement setting forth the aggregate
number of shares not voted in favor of the merger or consolidation and with
respect to which demands for appraisal have been received and the aggregate
number of holders of such shares. Such written statement shall be mailed to the
stockholder within 10 days after his written request for such a statement is
received by the surviving or resulting corporation or within 10 days after
expiration of the period for delivery of demands for appraisal under subsection
(d) hereof, whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which shall
within 20 days after such service file in the office of the Register in Chancery
in which the petition was filed a duly verified list containing the names and
addresses of all stockholders who have demanded payment for their shares and
with whom agreements as to the value of their shares have not been reached by
the surviving or resulting corporation. If the petition shall be filed by the
surviving or resulting corporation, the petition shall be accompanied by such a
duly verified list. The Register in Chancery, if so ordered by the Court, shall
give notice of the time and place fixed for the hearing of such petition by
registered or certified mail to the surviving or resulting corporation and to
the stockholders shown on the list at the addresses therein stated. Such notice
shall also be given by 1 or more publications at least 1 week before the day of
the hearing, in a newspaper of general circulation published in the City of
Wilmington, Delaware or such publication as the Court deems advisable. The forms
of the notices by mail and by publication shall be approved by the Court, and
the costs thereof shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted his
certificates of stock to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally determined that he is
not entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
<PAGE>
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of his demand for
an appraisal and an acceptance of the merger or consolidation, either within 60
days after the effective date of the merger or consolidation as provided in
subsection (e) of this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery
shall be dismissed as to any stockholder without the approval of the Court, and
such approval may be conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the shares
of such objecting stockholders would have been converted had they assented to
the merger or consolidation shall have the status of authorized and unissued
shares of the surviving or resulting corporation.
<PAGE>
ANNEX III
[CIBC Oppenheimer Corp. Letterhead]
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 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 appropriates 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 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 advisors 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,
CIBC Oppenheimer Corp.
<PAGE>
PROXY
THE UNION CORPORATION
PROXY SOLICITED BY
THE BOARD OF DIRECTORS OF THE UNION CORPORATION
FOR THE SPECIAL MEETING OF STOCKHOLDERS -- MARCH 31, 1998
The undersigned hereby appoints Timothy G. Beffa and Daniel J. Dolan, and
each of them, with power of substitution to each, as the proxies and attorneys
of the undersigned to vote, as designated below, all shares of common stock of
The Union Corporation which the undersigned would be entitled to vote if
personally present at the Special Meeting of Stockholders of The Union
Corporation to be held at 1120 Avenue of the Americas, 15th Floor, New York, New
York 10036 at 10:00 a.m. Eastern Standard Time on March 31, 1998.
If no direction is given, this proxy will be voted FOR approval of the Merger,
the Merger Agreement and the transactions contemplated thereby.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 1.
- --------------------------------------------------------------------------------
1. Approval of the Merger, the Merger Agreement and the transactions
contemplated thereby.
/ / FOR / / AGAINST / / ABSTAIN
2. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournment thereof.
<PAGE>
Mark Here For Address / /
Change and Note at Left
Please mark, date and sign as your name appears above and return in the
enclosed envelope. If acting as executor, administrator, trustee, guardian,
etc. you should so indicate when signing. If the signer is a corporation,
please sign the full corporate name, by a duly authorized officer. If shares
are held jointly, each stockholder named should sign.
Date: ______________________________________________________________________
Signature: _________________________________________________________________
Signature: _________________________________________________________________
