<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 26, 1996
REGISTRATION NO.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
OUTSOURCING SOLUTIONS INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 7322 58-2197161
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification No.)
incorporation or Classification Code
organization) Number)
</TABLE>
--------------------------
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
--------------------------
MR. ALLEN CAPSUTO
CHIEF FINANCIAL OFFICER
OUTSOURCING SOLUTIONS INC.
300 GALLERIA PARKWAY
SUITE 690
ATLANTA, GEORGIA 30339
(770) 988-2900
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
--------------------------
COPIES TO:
<TABLE>
<S> <C>
Mr. David E. King Frank L. Schiff, Esq.
McCown De Leeuw & Co. White & Case
101 East 52nd Street 1155 Avenue of the Americas
31st Floor New York, New York 10036-2787
New York, New York 10022 (212) 819-8752
(212) 355-5500
</TABLE>
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
--------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED
TITLE OF EACH PROPOSED AGGREGATE
NOTE OF SECURITIES AMOUNT TO BE OFFERING PRICE OFFERING AMOUNT OF
TO BE REGISTERED REGISTERED PER NOTE(1) PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
11% Series B Senior Subordinated
Notes due 2006.................. $100,000,000 100% $100,000,000 $30,303.03
Guarantees of each of the
Guarantors(2)................... (3) (3) (3) None (3)
</TABLE>
(1) In accordance with Rule 457(f)(2), the registration fee is calculated based
on the book value, which has been computed as of November 26, 1996, of the
outstanding 11% Senior Subordinated Notes due 2006 of Outsourcing Solutions
Inc. to be cancelled in the exchange transaction hereunder.
(2) The 11% Series B Senior Subordinated Notes due 2006 of Outsourcing Solutions
Inc. being registered will be guaranteed by CFC Services Corp., A.M. Miller
& Associates, Inc., The Continental Alliance, Inc., Alaska Financial
Services, Inc., Southwest Credit Services, Inc., Account Portfolios, Inc.,
Account Portfolios G.P., Inc., Account Portfolios, L.P., Perimeter Credit,
L.P., Gulf State Credit, L.P., Payco American Corporation, Payco-General
American Credits, Inc., National Account Systems, Inc., University
Accounting Service, Inc., Asset Recovery & Management Corp., Indiana Mutual
Credit Association, Inc., Furst and Furst, Inc., Jennifer Loomis &
Associates, Inc., FM Services Corporation, Qualink, Inc., Professional
Recoveries Inc. and Payco American International Corp.
(3) No additional consideration will be paid by the recipients of the 11% Series
B Senior Subordinated Notes due 2006 for the Guarantees. Pursuant to Rule
437(n) under the Securities Act of 1933, no separate fee is payable for the
Guarantees.
------------------------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrants
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
OTHER REGISTRANTS
<TABLE>
<CAPTION>
PRIMARY STANDARD IRS ADDRESS, INCLUDING ZIP CODE
JURISDICTION INDUSTRIAL EMPLOYER AND TELEPHONE NUMBER
OF CLASSIFICATION CODE IDENTIFICATION INCLUDING AREA CODE, OF
NAME OF CORPORATION INCORPORATION NUMBER NUMBER PRINCIPAL EXECUTIVE OFFICE
- -------------------------------- -------------- ------------------- ------------- ----------------------------
<S> <C> <C> <C> <C>
CFC Services Corp. Delaware 7322 13-3866487 300 Galleria Parkway,
Suite 690
Atlanta, GA 30339
(770) 988-2900
A.M. Miller & Associates, Inc. Minnesota 7322 41-1252001 3033 Excelsior Blvd.
Minneapolis, MN 55416
(612) 928-2000
The Continental Alliance, Inc. Washington 7322 91-1010031 4700 Carillon Point
(d/b/a Continental Credit Kirkland, WA 98083
Services, Inc.) (206) 822-8200
Alaska Financial Services, Inc. Alaska 7322 91-1329919 360 West Benson Blvd.
Anchorage, AK 99503
(907) 562-1600
Southwest Credit Services, Inc. Arizona 7322 86-0710975 Westwood Center
2228 West Northern Ave.,
B102
Phoenix, AZ 85021
(602) 864-0227
Account Portfolios, Inc. Delaware 7322 51-0369045 3300 Northeast Expressway
Building #1, Suite M
Atlanta, GA 30341
(770) 451-4862
Account Portfolios G.P., Inc. Delaware 7322 51-0369044 3300 Northeast Expressway
Building #1, Suite M
Atlanta, GA 30341
(770) 451-4862
Account Portfolios, L.P. Georgia 7322 58-2195793 3300 Northeast Expressway
Building #1, Suite M
Atlanta, GA 30341
(770) 451-4862
Perimeter Credit, L.P. Georgia 7322 58-2197746 3300 Northeast Expressway
Building #1, Suite M
Atlanta, GA 30341
(770) 451-4862
Gulf State Credit, L.P. Georgia 7322 58-2197743 3300 Northeast Expressway
Building #1, Suite M
Atlanta, GA 30341
(770) 451-4862
Payco American Corporation Wisconsin 7322 39-1133219 180 North Executive Drive
Brookfield, WI 53005
(414) 784-9035
Payco-General American Credits, Delaware 7322 39-1314048 180 North Executive Drive
Inc. Brookfield, WI 53005
(414) 784-9035
National Account Systems, Inc. Delaware 7322 36-3006209 180 North Executive Drive
Brookfield, WI 53005
(414) 784-9035
University Accounting Service, Wisconsin 7322 39-1357406 180 North Executive Drive
Inc. Brookfield, WI 53005
(414) 784-9035
Asset Recovery & Management Wisconsin 7322 39-1686046 180 North Executive Drive
Corp. Brookfield, WI 53005
(414) 784-9035
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PRIMARY STANDARD IRS ADDRESS, INCLUDING ZIP CODE
JURISDICTION INDUSTRIAL EMPLOYER AND TELEPHONE NUMBER
OF CLASSIFICATION CODE IDENTIFICATION INCLUDING AREA CODE, OF
NAME OF CORPORATION INCORPORATION NUMBER NUMBER PRINCIPAL EXECUTIVE OFFICE
- -------------------------------- -------------- ------------------- ------------- ----------------------------
Indiana Mutual Credit Indiana 7322 39-1924789 180 North Executive Drive
Association, Inc. Brookfield, WI 53005
(414) 784-9035
<S> <C> <C> <C> <C>
Furst and Furst, Inc. Wisconsin 7322 39-1758997 180 North Executive Drive
Brookfield, WI 53005
(414) 784-9035
Jennifer Loomis & Associates, Arizona 7322 95-3850888 180 North Executive Drive
Inc. Brookfield, WI 53005
(414) 784-9035
FM Services Corporation Arizona 7322 39-1702241 180 North Executive Drive
Brookfield, WI 53005
(414) 784-9035
Qualink, Inc. Wisconsin 7322 39-1758994 180 North Executive Drive
Brookfield, WI 53005
(414) 784-9035
Professional Recoveries Inc. Wisconsin 7322 39-1787937 180 North Executive Drive
Brookfield, WI 53005
(414) 784-9035
Payco American International Wisconsin 7322 39-1758995 180 North Executive Drive
Corp. Brookfield, WI 53005
(414) 784-9035
</TABLE>
<PAGE>
OUTSOURCING SOLUTIONS INC.
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K SHOWING
LOCATION IN PROSPECTUS OF
ITEMS OF FORM S-4
<TABLE>
<C> <S> <C>
A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of Registration Statement and Outside Front Cover Page; Cross Reference
Outside Front Cover Page of Prospectus..... Sheet; Inside Front Cover Page
2. Inside Front and Outside Back Cover Pages Inside Front Cover Page; Outside Back Cover
of Prospectus.............................. Page
3. Risk Factors, Ratio of Earnings to Fixed Prospectus Summary; Risk Factors; Unaudited
Charges and Other Information.............. Pro Forma Consolidated Financial Data;
Selected Historical Financial Data
(Outsourcing Solutions Inc.); Selected
Historical Financial Data (Payco American
Corporation)
4. Terms of the Transaction................... Prospectus Summary; The Exchange Offer;
Certain U.S. Federal Income Tax
Consequences; Description of Notes
5. Pro Forma Financial Information............ Prospectus Summary; Unaudited Pro Forma
Consolidated Financial Data
6. Material Contacts with the Company Being Not Applicable
Acquired...................................
7. Additional Information Required for Not Applicable
Reoffering by Persons and Parties Deemed to
be Underwriters............................
8. Interests of Named Experts and Counsel..... Not Applicable
9. Disclosure of Commission Position on Not Applicable
Indemnification for Securities Act
Liabilities................................
B. INFORMATION ABOUT THE
REGISTRANTS
10. Information with Respect to S-3 Not Applicable
Registrants................................
11. Incorporation of Certain Information by Not Applicable
Reference..................................
12. Information with Respect to S-2 or S-3 Not Applicable
Registrants................................
13. Incorporation of Certain Information by Not Applicable
Reference..................................
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C>
14. Information with Respect to Registrant Prospectus Summary; Capitalization;
Other Than S-2 or S-3 Registrants.......... Selected Historical Financial Data
(Outsourcing Solutions Inc.); Selected
Historical Consolidated Financial Data
(Payco American Corporation);
Management's Discussion and Analysis of
Financial Condition and Results of Opera-
tions; Business; Management; Certain
Relationships and Related Transactions;
Description of Notes; Description of New
Credit Facility; Other Indebtedness;
Financial Statements
C. INFORMATION ABOUT THE COMPANY BEING
ACQUIRED
15. Information with Respect to S-3 Not Applicable
Companies..................................
16. Information with Respect to S-2 or S-3 Not Applicable
Companies..................................
17. Information with Respect to Companies Other Not Applicable
Than S-2 or S-3 Companies..................
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents or Not Applicable
Authorizations are to be Solicited.........
19. Information if Proxies, Consents or Management; Certain Relationships and
Authorizations are not to be Solicited or Related Transactions; Security Ownership
in an Exchange Offer.......................
</TABLE>
<PAGE>
SUBJECT TO COMPLETION, DATED NOVEMBER 26, 1996
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
PROSPECTUS
OUTSOURCING SOLUTIONS INC.
OFFER TO EXCHANGE
11% SERIES B SENIOR SUBORDINATED NOTES DUE 2006
FOR ALL OUTSTANDING 11% SENIOR SUBORDINATED NOTES DUE 2006
THE EXCHANGE OFFER
WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON , 1997, UNLESS EXTENDED
---------------------
Outsourcing Solutions Inc., a Delaware corporation (the "Company" or "OSI")
hereby offers, upon the terms and subject to conditions set forth in this
Prospectus (the "Prospectus") and the accompanying Letter of Transmittal (the
"Letter of Transmittal"; together with the Prospectus, the "Exchange Offer"), to
exchange up to an aggregate principal amount of $100,000,000 of its 11% Series B
Senior Subordinated Notes Due 2006 (the "New Notes") for up to an aggregate
principal amount of $100,000,000 of its outstanding 11% Senior Subordinated
Notes Due 2006 (the "Old Notes"). The proceeds from the issuance of the Old
Notes were used to fund a portion of the purchase price for the acquisition by
OSI of Payco American Corporation on November 6, 1996 (the "Payco Acquisition").
The terms of the New Notes are identical in all material respects to those of
the Old Notes, except for certain transfer restrictions, registration rights and
Liquidation Rights relating to the Old Notes. The New Notes will be issued
pursuant to, and entitled to the benefits of, the Indenture (as defined herein)
governing the Old Notes. The New Notes and the Old Notes are sometimes referred
to collectively as the "Notes."
Interest on the New Notes will be payable in cash on May 1 and November 1 of
each year, commencing May 1, 1997. The New Notes are redeemable at the option of
the Company, in whole or in part, from time to time on or after November 1,
2001, at the redemption prices set forth herein, together with accrued and
unpaid interest, if any, to the date of redemption. In addition, at any time or
from time to time, prior to November 1, 1999, up to 35% of the aggregate
principal amount of New Notes originally offered in the Offering will be
redeemable at the option of the Company from the net proceeds of public or
private sales of common stock of the Company, at a price of 111% of the
principal amount of the New Notes, together with accrued and unpaid interest, if
any, to the date of redemption; PROVIDED that at least 65% of the aggregate
principal amount of New Notes remains outstanding immediately after each such
redemption. Upon the occurrence of a Change of Control (as defined herein), each
Holder of New Notes may require the Company to repurchase all or a portion of
such Holder's New Notes at 101% of the aggregate principal amount of the New
Notes together with accrued and unpaid interest, if any, to the date of
repurchase. See "Description of Notes."
The New Notes will be general, unsecured obligations of the Company, will be
subordinated to all Senior Debt (as defined herein) of the Company, will rank
PARI PASSU with all senior subordinated debt of the Company and will be senior
in right of payment to all existing and future subordinated debt of the Company,
if any. The New Notes will be guaranteed, on a senior subordinated basis, by
each of the Company's current and future domestic Restricted Subsidiaries (as
defined herein). The claims of the Holders of New Notes will be subordinated to
the Senior Debt, which would have been approximately $142.6 million as of
September 30, 1996 pro forma for the Transactions, $142.0 million of which would
have been fully secured borrowings under the New Bank Credit Facility (as
defined herein). See "Pro Forma Capitalization."
(continued on next page)
SEE "RISK FACTORS," COMMENCING ON PAGE 13, FOR INFORMATION THAT SHOULD BE
CONSIDERED BY PARTICIPANTS IN THE EXCHANGE OFFER.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
THE DATE OF THIS PROSPECTUS IS , 1996.
<PAGE>
(CONTINUED FROM COVER)
The Old Notes were originally issued and sold on November 6, 1996 in a
transaction not registered under the Securities Act of 1933, as amended (the
"Securities Act"), in reliance upon the exemptions provided in Rule 144A,
Regulation D and Regulation S under the Securities Act. Accordingly, the Old
Notes may not be reoffered, resold or otherwise pledged, hypothecated or
transferred in the United States unless so registered or unless an applicable
exemption from the registration requirements of the Securities Act is available.
The Company will accept for exchange any and all Old Notes which are
properly tendered in the Exchange Offer prior to 5:00 p.m., New York City time,
on , 1997, unless extended by the Company in its sole discretion (the
"Expiration Date"). The Expiration Date will not in any event be extended to a
date later than , 1997. Tenders of Old Notes may be withdrawn at any
time prior to 5:00 p.m., New York City time, on the Expiration Date. In the
event the Company terminates the Exchange Offer and does not accept for exchange
any Old Notes with respect to the Exchange Offer, the Company will promptly
return the Old Notes to the holders thereof. The Exchange Offer is not
conditioned upon any minimum principal amount of Old Notes being tendered for
exchange, but is otherwise subject to certain customary conditions. The Old
Notes may be tendered only in integral multiples of $1,000.
The New Notes are being offered hereunder in order to satisfy certain
obligations of the Company contained in the Registration Rights Agreement dated
November 6, 1996 (the "Registration Rights Agreement") by and among the Company,
CFC Services Corp., A.M. Miller & Associates, Inc. The Continental Alliance,
Inc., Alaska Financial Services, Inc., Southwest Credit Services, Inc., Account
Portfolios, Inc., Account Portfolios G.P., Inc., Account Portfolios, L.P.,
Perimeter Credit, L.P., Gulf State Credit, L.P., Payco American Corporation,
Payco-General American Credits, Inc., National Account Systems, Inc., University
Accounting Service, Inc., Asset Recovery & Management Corp., Indiana Mutual
Credit Association, Inc., Furst and Furst, Inc., Jennifer Loomis & Associates,
Inc., FM Services Corporation, Qualink, Inc., Professional Recoveries Inc.,
Payco American International Corp. (the "Guarantors") and Goldman, Sachs & Co.
and Chase Securities Inc., as the initial purchasers (the "Initial Purchasers"),
with respect to the initial sale of the Old Notes. Based on interpretations by
the staff of the Securities and Exchange Commission (the "Commission") rendered
to third parties in similar transactions, the New Notes issued pursuant to the
Exchange Offer in exchange for Old Notes may be offered for resale, resold and
otherwise transferred by respective holders thereof (other than any such holder
which is an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act, without compliance with the registration and prospectus delivery
provisions of the Securities Act), provided that the New Notes are acquired in
the ordinary course of such holder's business and such holder has no arrangement
with any person to participate in the distribution of such New Notes and is not
engaged in and does not intend to engage in a distribution of the New Notes.
Each broker-dealer that receives New Notes for its own account pursuant to the
Exchange Offer must acknowledge that it will deliver a prospectus in connection
with any resale of such New Notes. The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
This Prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with resales of the New Notes received in
exchange for Old Notes if such New Notes were acquired by such broker-dealer as
a result of market-making activities or other trading activities. The Company
has agreed that, for a period of 180 days after the Expiration Date, it will
make this Prospectus available to any broker-dealer for use in connection with
any such resale. See "Plan of Distribution."
There has not previously been any public market for the New Notes. The
Company does not intend to list the New Notes on any securities exchange or to
seek approval for quotation through any automated quotation system. There can be
no assurance that an active market for the New Notes will develop. To the extent
that an active market for the New Notes does develop, the market value of the
New
i
<PAGE>
Notes will depend on market conditions (such as yields on alternative
investments), general economic conditions, the Company's financial condition,
and other factors. Such conditions might cause the New Notes, to the extent that
they are actively traded, to trade at a significant discount from face value.
See "Risk Factors -- Absence of Public Market."
The Company will not receive any proceeds from the Exchange Offer. The
Company has agreed to pay the expenses incident to the Exchange Offer.
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THE PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY
OTHER THAN THE NEW NOTES OFFERED HEREBY, NOR DOES IT CONSTITUTE AN OFFER TO SELL
OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY
PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR
SOLICITATION TO SUCH PERSON.
------------------------
Until , 1997 (90 days after commencement of this offering), all
dealers effecting transactions in the New Notes, whether or not participating in
this offering, may be required to deliver a Prospectus.
AVAILABLE INFORMATION
The Company has filed with the Commission a registration statement on Form
S-4 (the "Registration Statement") under the Securities Act, with respect to the
New Notes. This Prospectus, which constitutes a part of the Registration
Statement, does not contain all the information set forth in the Registration
Statement, certain items of which are contained in schedules and exhibits to the
Registration Statement as permitted by the rules and regulations of the
Commission. Statements made in this Prospectus as to the contents of any
contract, agreement or other document referred to are not necessarily complete.
With respect to each such contract, agreement or other document filed as an
exhibit to the Registration Statement, reference is made to the exhibit for a
more complete description of the matter involved, and each such statement shall
be deemed qualified in its entirety by such reference. Items of information
omitted from this Prospectus but contained in the Registration Statement may be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington,
D.C. 20549 and at the following regional offices of the Commission: Northwestern
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661; and
7 World Trade Center, 13th Floor, New York, New York 10048. Copies of such
material can be obtained by mail from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549 at
prescribed rates. Electronic filings filed through the Commission Electronic
Data Gathering, Analysis and Retrieval system ("EDGAR") are publically available
through the Commission's home page on the Internet at http://www.sec.gov.
As a result of this offering, the Company will become subject to the
periodic reporting and other informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). In the event that the
Company ceases to be subject to the informational requirements of the Exchange
Act, the Company has agreed that, for so long as any of the Notes remain
outstanding, it will furnish to the holders of the Notes and, commencing after
the consummation of the Exchange Offer, file with the Commission (unless the
Commission will not accept such a filing) (i) all quarterly and annual financial
information that would be required to be contained in a filing with the
Commission on Forms 10-Q and 10-K if the Company were required to file such
forms, including a "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and, with respect to the annual information only, a
report thereon by the Company's certified independent accountants and (ii) all
reports that would be required to be filed with the Commission on Form 8-K if
the Company were required to file such reports. See "Description of Notes --
Certain Covenants -- Reports."
ii
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND FINANCIAL DATA, INCLUDING
THE FINANCIAL STATEMENTS AND NOTES THERETO, APPEARING ELSEWHERE IN THIS
PROSPECTUS. UNLESS OTHERWISE STATED IN THIS PROSPECTUS, REFERENCES TO (A) "OSI"
SHALL MEAN OUTSOURCING SOLUTIONS INC. (FORMERLY KNOWN AS OSI HOLDINGS CORP.), A
DELAWARE CORPORATION, AND ITS SUBSIDIARIES; (B) "PAYCO" SHALL MEAN THE FORMER
PAYCO AMERICAN CORPORATION, A WISCONSIN CORPORATION, AND ITS SUBSIDIARIES AND
(C) THE "COMPANY" SHALL MEAN OSI AND THE FORMER PAYCO AFTER GIVING EFFECT TO THE
PAYCO ACQUISITION.
THE COMPANY
The Company is one of the largest providers of accounts receivable
management services in the United States and has created a national organization
offering a full array of contingent fee services, portfolio purchasing services
and other related outsourcing services to its customers. The Company's strategy
is to expand its leading market position through the offering of a full array of
accounts receivable management services and by capitalizing on favorable
industry trends. On a pro forma basis after giving effect to the Transactions,
the Company's three principal businesses - contingent fee services, portfolio
purchasing services and other related outsourcing services - accounted for
approximately 66.5%, 20.3% and 13.2%, respectively, of 1995 net revenue. For the
latest twelve-month period ended September 30, 1996, the Company had, on a pro
forma basis after giving effect to the Transactions (as defined herein) net
revenues of $260.6 million and Adjusted EBITDA (as defined herein) of $73.3
million. See "Summary Unaudited Pro Forma Consolidated Financial Data."
Contingent fee services are the traditional services provided in the
accounts receivable management industry. These services involve collecting on
delinquent consumer accounts placed with the contingent fee provider for a fixed
percentage of realized collections or a fixed fee per account. In contrast,
companies offering portfolio purchasing services typically acquire portfolios of
non-performing consumer receivables from credit grantors and service such
portfolios, retaining all amounts collected. Companies in the accounts
receivable management industry have also begun to utilize their existing
infrastructure by offering other related outsourcing services, such as contract
management of accounts receivable, billing and teleservicing.
Based on current industry trends, the Company believes that opportunities
for growth exist in each of its service areas. As a result of the rapid growth
of outstanding consumer credit and the corresponding increase in delinquencies,
credit grantors have increasingly looked to third party service providers in
managing the accounts receivable process. In addition, rapid consolidation in
the largest credit granting industries, including banking, health care,
telecommunications and utilities, has forced companies to focus on core business
activities and to outsource ancillary functions, including some or all aspects
of the accounts receivable management process. With its broad service offering
and national scope, the Company believes that it is well positioned to
capitalize on these favorable industry trends.
The Company is one of the largest providers of contingent fee services in
the United States, servicing a broad range of banks, telecommunications
companies, utilities, health care providers, educational institutions, state and
local governments and other creditors through its network of offices located
throughout the United States. The Company currently offers contingent fee
services to a client base of over 5,000 customers. Key customers include
American Express, Ameritech, AT&T, Bank One, The Chase Manhattan Bank, Citibank,
Discover Card, Sprint, US West, the Internal Revenue Service and various student
loan guaranty agencies. The Company employs sophisticated proprietary databases
and telecommunications hardware and software to effectively locate, and effect
payment from, account debtors. Although the majority of the Company's contingent
fee business involves servicing accounts that are 120 to 360 days past due,
customers are increasingly placing accounts with the Company
1
<PAGE>
earlier in the collection cycle through the Company's early-out programs in an
effort to further outsource accounts receivable management functions.
The Company offers portfolio purchasing services to a diverse group of
entities, including banks, educational institutions, government agencies and
retailers. Portfolio purchasing is a growing segment of the accounts receivable
management industry due to a number of factors, including (i) the large and
increasing volume of charged-off consumer receivables, (ii) the emergence of
reputable and well-capitalized service providers such as the Company and (iii)
the desire of credit issuers to generate stable cash flows from non-performing
assets and to reallocate resources to core business functions. Through the use
of proprietary debtor-scoring models which allow the Company to approximate the
collection rates of a particular portfolio by sampling the individual accounts
in the portfolio, the Company has become a leader in this rapidly growing,
higher margin segment of the accounts receivable management industry. In
addition to purchasing portfolios of aged non-performing receivables, the
Company has entered into a "forward flow" agreement under which the Company
contractually purchases on an ongoing basis entire non-performing debt
portfolios as they are charged-off. As of September 30, 1996, on a pro forma
basis after giving effect to the Transactions, the Company had purchased 119
portfolios with an aggregate principal balance of approximately $3.5 billion for
an aggregate purchase price of approximately $113.2 million.
The Company also offers its customers a wide range of other related
outsourcing services which include student loan billing, health care accounts
receivable billing and management, contract management of accounts receivable
and teleservicing. In offering these services, the Company is able to leverage
its investment and expertise in sophisticated call and data management
technology and allows its customers to concentrate internal resources on their
core operations.
The Company, a corporation organized under the laws of the State of
Delaware, has its principal office located at 300 Galleria Parkway, Suite 690,
Atlanta, Georgia 30339; its telephone number is (770) 988-2900.
INDUSTRY TRENDS
The Company believes the following trends are present in the accounts
receivable management industry:
INCREASE IN CONSUMER DEBT AND DELINQUENCIES. Consumer debt, a leading
indicator of current and future business for accounts receivable management
companies, has increased dramatically in recent years. Between 1990 and 1995,
total consumer debt increased 37% from $3.6 trillion in 1990 to almost $5.0
trillion. Furthermore, charged-off consumer debt has increased at an even
greater rate. The American Bankers Association has reported that credit card
delinquencies in the second quarter of 1996 reached an all-time high of 3.7% of
outstanding credit card balances. As a result of these trends, placements to
contingent fee companies have grown from approximately $60 billion in 1989 to
approximately $84 billion in 1994, a compound annual growth rate of 7.0%.
INDUSTRY CONSOLIDATION. The American Collectors Association estimates that
in 1995 there were approximately 6,000 contingent fee companies in the United
States which, according to the Nilson Report, a leading expert in payment
systems, generated approximately $5.0 billion in revenues. The industry has
undergone significant consolidation, with the top ten contingent fee companies
increasing their industry share from 15% in 1992 to 42% in 1994.
Well-capitalized companies that offer national capabilities are increasingly
displacing local and regional competitors.
CUSTOMER CONSOLIDATION. The largest credit granting industries, including
banking, utilities, telecommunications, health care and retail, are experiencing
rapid consolidation. As a result, many regional companies are becoming national
in scope and are shifting account placements to accounts receivable
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management companies that have the ability to service a large volume of
placements on a national basis.
GROWTH IN PORTFOLIO SALES. As one of the leading providers of portfolio
purchasing services, the Company has observed a rapid and consistent
industry-wide increase in the amount of non-performing consumer receivables sold
by credit grantors. The selling process offers the credit grantor many benefits,
including increased predictability of cash flow, reduction in monitoring and
administrative expenses and reallocation of assets from non-core business
functions to core business functions.
ACCELERATED TREND TOWARD OUTSOURCING. In an effort to focus on core
business activities and to take advantage of the economies of scale, better
performance and lower cost structure offered by accounts receivable management
companies, many credit grantors have chosen to outsource some or all aspects of
the accounts receivable management process. Increasingly, credit grantors are
looking to accounts receivable management providers for assistance with billing,
customer service and complete call center outsourcing.
BUSINESS STRATEGY
The Company's market position and breadth of services distinguishes it as
one of the leading providers of accounts receivable management services in the
United States. The Company's business strategy is to expand this position
through the following initiatives:
FULL SERVICE PROVIDER/CROSS-SELLING SERVICES TO EXISTING CUSTOMERS. The
Company is a full service firm which currently offers its customers a wide array
of accounts receivable management options beyond traditional contingent fee
services, including higher margin portfolio purchasing, contract management of
accounts receivable, billing and teleservicing. This range of services allows
the Company to cross-sell its offerings within its existing customer base as
well as to potential customers in specifically targeted industries.
EXPANSION OF CUSTOMER BASE. Two of the most important determinants in
selecting an accounts receivable management service provider are reputation and
experience. As the Company develops expertise and recognition with customers in
a particular industry, it markets that expertise to other credit grantors in
that industry. In addition, consolidation in the bank, retail, utility, student
loan, health care and telecommunications industries has created national
customers who are moving part or all of their accounts receivable management
business to national service providers. With the ability to offer its services
in all 50 states and experience in successfully managing a high volume of
placements, the Company is well positioned to benefit from this consolidation
trend. The Company is also focused on increasing its business with governmental
agencies at the federal, state and local levels, many of which have begun to
outsource accounts receivable functions for items such as taxes and student
loans to private companies.
COST REDUCTIONS. The Company intends to continue to improve its financial
results through the rationalization of operations. In connection with the Payco
Acquisition, the Company expects to realize approximately $10.8 million of
annualized cost savings through consolidation of back office activities, branch
system rationalization, the installation of a centralized operating system and
the realization of volume purchasing discounts. See "Unaudited Pro Forma
Consolidated Financial Data" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
LEVERAGING TECHNOLOGY. The Company has invested aggressively in
technological innovations to enhance its competitive advantages over smaller
competitors. The Company has hardware and proprietary software, including
debtor-scoring models and debtor databases, which the Company believes provide
it with a competitive advantage in pricing portfolios and collecting amounts
from debtors. In addition, the Company utilizes automated predictive dialers and
skip tracing databases in order to allow
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<PAGE>
account representatives to work accounts more efficiently. Through interface
with creditor computer systems, the Company can efficiently receive new account
placements from customers daily and provide frequent updates to customers on the
status of account collections. As the Company begins to provide more
comprehensive outsourcing services, the Company becomes more integrated with its
customers' systems, making switching vendors both costly and inefficient.
GROWTH THROUGH ACQUISITIONS. The Company has built its position as a market
leader through strategic acquisitions of leading accounts receivable service
providers in each of the markets in which it participates. Since its formation
in September 1995, the Company has acquired Account Portfolios, L.P., a company
with a superior reputation in purchasing portfolios of non-performing accounts,
Continental Credit Services, Inc., one of the largest contingent fee service
companies in the Pacific Northwest, and A.M. Miller & Associates, Inc., one of
the largest and most highly regarded companies in the student loan and bank card
contingent fee services business. With the acquisition of Payco, one of the
oldest and most established accounts receivable management companies in the
country, the Company solidified its position as one of the largest contingent
fee service providers and added to its competitive strength in other related
outsourcing services. The Company plans to selectively pursue additional
acquisitions which complement its existing services or increase its customer
base. See "Risk Factors -- Risks Associated with Acquisition Strategy."
THE INVESTORS
The controlling stockholder of OSI is McCown De Leeuw & Co. ("McCown De
Leeuw"). McCown De Leeuw is a private investment firm which was organized to
"buy and build" middle market companies in partnership with management. McCown
De Leeuw has made 28 separate investments since 1983 and has made a number of
investments in businesses and markets related to those of the Company. Related
industry investments have included DIMAC Corporation, a full service provider of
direct marketing products and services and International Data Response
Corporation, a teleservicing company. Additional investors in OSI include MLQ
Investors, L.P. (an affiliate of Goldman, Sachs & Co.), Chase Equity Associates,
L.P. (an affiliate of Chase Securities Inc. and The Chase Manhattan Bank), The
Clipper Group and Company management. See "Security Ownership."
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PREVIOUS ACQUISITIONS
The Company was formed in September 1995 to build, through a combination of
acquisitions and sustained internal growth, one of the leading providers of
accounts receivable management services in the United States. In that same
month, the Company completed its first acquisition, Account Portfolios, L.P.
("APLP"), through its wholly owned subsidiary Account Portfolios, Inc. In
January 1996, the Company acquired Continental Credit Services, Inc.
("Continental") and A.M. Miller & Associates, Inc. ("Miller") through its wholly
owned subsidiary CFC Services Corp. In May 1996, the Company acquired
participation interests in certain portfolios of delinquent accounts held by MLQ
Investors, L.P., an affiliate of Goldman, Sachs & Co. (the "MLQ Interests"). The
acquisitions of APLP, Continental, Miller and the MLQ Interests are hereinafter
referred to as the "Previous Acquisitions." With the acquisition of Payco, the
Company became one of the largest providers of accounts receivable management
services in the United States.
The Company's business lines are organized as follows:
[LOGO]
<TABLE>
<S> <C> <C> <C>
SERVICES SERVICES SERVICES SERVICES
- ------------------------ ------------------------ ------------------------ ------------------------
Portfolio Purchasing Contingent Fee Contingent Fee Contingent Fee
Portfolio Purchasing
Related Outsourcing
CUSTOMER CUSTOMER CUSTOMER CUSTOMER
CONCENTRATIONS CONCENTRATIONS CONCENTRATIONS CONCENTRATIONS
- ------------------------ ------------------------ ------------------------ ------------------------
Bank Card Bank Card Government Bank Card
Retail Student Loan Retail Commercial
Student Loan Telecommunications Government
Telecommunications Utilities Health Care
Utilities Student Loan
</TABLE>
5
<PAGE>
THE TRANSACTIONS
PAYCO ACQUISITION. Pursuant to an Agreement and Plan of Merger, dated as of
August 13, 1996 (the "Merger Agreement"), OSI acquired Payco on November 6, 1996
in a merger transaction for an aggregate cash consideration of approximately
$150.2 million.
REFINANCING. Concurrently with the offering by OSI of the Old Notes ("the
Offering") and the Payco Acquisition, the Company entered into the following
additional transactions (together with the Offering and the Payco Acquisition,
the "Transactions"): (i) the Company repaid a portion of its existing
indebtedness and terminated its existing credit agreements and (ii) the Company
executed the New Bank Credit Facility, which provides borrowing availability of
up to $200.0 million.
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THE EXCHANGE OFFER
<TABLE>
<S> <C>
The New Notes....................... The forms and terms of the New Notes are identical in
all material respects to the terms of the Old Notes
for which they may be exchanged pursuant to the
Exchange Offer, except for certain transfer
restrictions, registration rights and Liquidated
Damages provisions relating to the Old Notes
described below under "Description of Notes."
The Exchange Offer.................. The Company is offering to exchange up to
$100,000,000 aggregate principal amount of the New
Notes for up to $100,000,000 aggregate principal
amount of the Old Notes. Old Notes may be exchanged
only in integral multiples of $1,000.
Expiration Date; Withdrawal of The Exchange Offer will expire at 5:00 p.m., New York
Tender............................ City time, on , 1997, or such later date
and time to which it is extended by the Company (the
"Expiration Date"). The tender of Old Notes pursuant
to the Exchange Offer may be withdrawn at any time
prior to the Expiration Date. The Expiration Date
will not in any event be extended to a date later
than , 1997. Any Old Notes not accepted
for exchange for any reason will be returned without
expense to the tendering holder thereof as promptly
as practicable after the expiration or termination of
the Exchange Offer.
Certain Conditions to the Exchange
Offer............................. The Exchange Offer is subject to certain customary
conditions, which may be waived by the Company. See
"The Exchange Offer -- Certain Conditions to the
Exchange Offer."
Procedures for Tendering Old Each holder of Old Notes wishing to accept the
Notes............................. Exchange Offer must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, in
accordance with the instructions contained herein and
therein, and mail or otherwise deliver such Letter of
Transmittal, or such facsimile, together with such
Old Notes and any other required documentation to the
Exchange Agent (as defined) at the address set forth
herein. By executing the Letter of Transmittal, each
holder will represent to the Company that, among
other things, (i) any New Notes to be received by it
will be acquired in the ordinary course of its
business, (ii) it has no arrangement with any person
to participate in the distribution of the New Notes
and (iii) it is not an "affiliate," as defined in
Rule 405 of the Securities Act, of the Company or, if
it is an affiliate, it will comply with the
registration and prospectus delivery requirements of
the Securities Act to the extent applicable. Each
Holder whose Old Notes are held through DTC (as
defined) and wishes to participate in the Exchange
Offer may do so through DTC's Automated Tender Offer
Program
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
("ATOP") by which each tendering participant will
agree to be bound by the Letter of Transmittal.
Interest on the New Notes........... Interest on the New Notes will accrue from the date
of issuance (the "Issue Date") at the rate of 11% per
annum, and will be payable semi-annually in arrears
on each May 1 and November 1, commencing May 1, 1997.
Holders of the New Notes will also on May 1, 1997
receive an amount equal to the accrued interest on
the Old Notes. Interest on the Old Notes accepted for
exchange will cease to accrue upon issuance of the
New Notes.
Special Procedures for Beneficial
Owners............................ Any beneficial owner whose Old Notes are registered
in the name of a broker, dealer, commercial bank,
trust company or other nominee and who wishes to
tender such Old Notes in the Exchange Offer should
contact such registered holder promptly and instruct
such registered holder to tender on such beneficial
owner's behalf. If such beneficial owner wishes to
tender on such owner's own behalf, such owner must,
prior to completing and executing the Letter of
Transmittal and delivering his Old Notes, either make
appropriate arrangements to register ownership of the
Old Notes in such owner's name or obtain a properly
completed bond power from the registered holder. The
transfer of registered ownership may take
considerable time and may not be able to be completed
prior to the Expiration Date.
Guaranteed Delivery Procedure....... Holders of Notes who wish to tender their Old Notes
and whose Old Notes are not immediately available or
who cannot deliver their Old Notes, the Letter of
Transmittal or any other documents required by the
Letter of Transmittal to the Exchange Agent, prior to
the Expiration Date, must tender their Old Notes
according to the guaranteed delivery procedures set
forth in "The Exchange Offer -- Guaranteed Delivery
Procedures."
Registration Requirements........... The Company has agreed to use its best efforts to
consummate on or prior to 150 days after the date on
which the Exchange Offer Registration Statement is
filed with the Commission, the registered Exchange
Offer pursuant to which holders of the Old Notes will
be offered an opportunity to exchange their Old Notes
for the New Notes which will be issued without
legends restricting the transfer thereof. In the
event that applicable interpretations of the staff of
the Commission do not permit the Company to effect
the Exchange Offer or in certain other circumstances,
the Company has agreed to file a Shelf Registration
Statement covering resales of the Old Notes and to
use its best efforts to cause such Shelf Registration
Statement to be declared effective under the
Securities Act and, subject to certain exceptions,
keep such Shelf Registration Statement effective
until three years after the original issuance of the
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
Old Notes. If the Company fails to consummate the
Exchange Offer on or prior to 150 days after the date
on which the Exchange Offer Registration Statement is
filed with the Commission or, in the event that the
Company is not in compliance with certain obligations
under the Registration Rights Agreement, the Company
and the Guarantors shall be obligated to pay
liquidated damages to holders of the Old Notes. See
"Description of Notes -- Old Notes Registration
Rights; Liquidated Damages."
Certain Federal Income Tax
Considerations.................... For a discussion of certain federal income tax
considerations relating to the exchange of the New
Notes for the Old Notes, see "Certain U.S. Federal
Income Tax Considerations."
Use of Proceeds..................... There will be no proceeds to the Company from the
exchange of Notes pursuant to the Exchange Offer.
Exchange Agent...................... Wilmington Trust Company is the Exchange Agent. The
address and telephone number of the Exchange Agent
are set forth in "The Exchange Offer -- Exchange
Agent."
</TABLE>
TERMS OF THE NOTES
The form and terms of the New Notes are the same as the form and terms of
the Old Notes except that the New Notes are registered under the Securities Act
and, therefore, will not bear legends restricting the transfer thereof and will
not contain the registration rights and Liquidated Damages (as defined herein)
provisions relating to the Old Notes. See "Description of Notes."
RISK FACTORS
See "Risk Factors" for a discussion of certain factors that should be
considered by participants in the Exchange Offer.
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<PAGE>
SUMMARY UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
THE COMPANY
The following summary unaudited pro forma consolidated financial data set
forth below give pro forma effect in the manner described under "Unaudited Pro
Forma Consolidated Financial Data" and the notes thereto to the Transactions and
the Previous Acquisitions as if the Transactions and the Previous Acquisitions
had occurred on January 1, 1995 in the case of Statement of Operations Data and
Other Financial Data and Ratios, and, in the case of Balance Sheet Data, as if
the Transactions had occurred on September 30, 1996. The Statement of Operations
Data and Other Financial Data and Ratios do not (a) purport to represent what
the Company's results of operations actually would have been if the Transactions
and the Previous Acquisitions had actually occurred as of the date indicated or
what such results will be for any future periods, or (b) give effect to certain
non-recurring charges expected to result from the Transactions. The final
allocation of the purchase price to be paid in the Payco Acquisition and certain
of the Previous Acquisitions and the resulting amortization expense in the
Statement of Operations Data may differ somewhat from the preliminary estimates
for the reasons described in more detail in "Unaudited Pro Forma Consolidated
Financial Data." The information contained in this table should be read in
conjunction with "Selected Historical Financial Data -- OSI," "Selected
Historical Financial Data -- Payco," "Unaudited Pro Forma Consolidated Financial
Data," "Management's Discussion and Analysis of Financial Condition and Results
of Operations," the Consolidated Financial Statements of OSI and accompanying
notes thereto and the Consolidated Financial Statements of Payco and
accompanying notes thereto included elsewhere in this Prospectus.
10
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
PRO FORMA NINE MONTHS ENDED LAST TWELVE
YEAR ENDED SEPTEMBER 30, MONTHS ENDED
DECEMBER 31, ------------------------ SEPTEMBER 30,
1995 1995 1996 1996
-------------- ----------- ----------- --------------
<S> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
STATEMENT OF OPERATIONS DATA:
Operating revenue.................................... $ 243,720 $ 180,847 $ 197,709 $ 260,582
Salaries and benefits................................ 115,385 84,486 92,774 123,673
Other operating expenses(a).......................... 130,132 95,590 104,668 139,210
-------------- ----------- ----------- --------------
Operating (loss) income.............................. (1,797) 771 267 (2,301)
Interest expense, net................................ 25,234 18,904 18,891 25,221
Other income......................................... (129) (149) (106) (86)
-------------- ----------- ----------- --------------
Loss before taxes.................................... (26,902) (17,984) (18,518) (27,436)
Income tax benefit................................... (8,917) (5,714) (5,797) (9,000)
-------------- ----------- ----------- --------------
Net loss(b).......................................... $ (17,985) $ (12,270) $ (12,721) $ (18,436)
-------------- ----------- ----------- --------------
-------------- ----------- ----------- --------------
Ratio of earnings to fixed charges(c)................ -- -- -- --
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital...................................... $ 45,917
Total assets......................................... 360,798
Total debt........................................... 247,892
Stockholders' equity................................. 61,999
OTHER FINANCIAL DATA AND RATIOS:
Amortization of purchased portfolios................. $ 35,623 $ 26,649 $ 35,031 $ 44,005
Other depreciation and amortization.................. 31,506 23,734 20,654 28,426
Data processing capital expenditures(d).............. 10,076 7,676 9,012 11,412
Other cash capital expenditures...................... 5,101 4,357 5,214 5,958
Portfolio purchases.................................. 16,130 11,393 7,716 12,453
Cash interest expense(e)............................. 24,251 18,278 17,670 23,643
Total interest expense............................... 25,943 19,548 18,921 25,316
EBITDA(f)............................................ 65,332 51,154 55,952 70,130
Adjusted EBITDA(f)................................... 67,304 52,411 58,377 73,270
Adjusted EBITDA to cash interest expense............. 2.8x 2.9x 3.3x 3.1x
Adjusted EBITDA to total interest expense............ 2.6x 2.7x 3.1x 2.9x
</TABLE>
- ------------------------
(a) Other operating expenses include telephone, postage, supplies, occupancy
costs, data processing costs, depreciation, amortization, and miscellaneous
operating expenses.
(b) Pro forma statement of operations data do not reflect the estimated
extraordinary charge of $967, net of tax, resulting from the write-off of
existing deferred financing costs in connection with the Transactions, the
non-recurring write-off of acquired technology in process in connection with
the Payco Acquisition (estimated at $1,000), or estimated expenses of $900
(net of tax) incurred by Payco in connection with the Payco Acquisition.
(c) The ratio of earnings to fixed charges is computed by adding fixed charges
(excluding preferred stock dividends) to loss before taxes and dividing that
sum by the sum of fixed charges. Fixed charges consist of interest
(including amortization of debt issuance costs), a portion of rent expense
that management considers to be interest, and preferred stock dividends,
increased to reflect the pretax amounts which would be required to meet
dividend payments. Pro forma earnings for the year ended December 31, 1995,
the nine months ended September 30, 1995 and 1996 and the twelve months
ended September 30, 1996 were insufficient to cover fixed charges by
$28,262, $18,997, $19,615 and $28,880, respectively.
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<PAGE>
(d) Represents capital expenditures related to the new accounts receivable
management and student loan billing systems at Payco.
(e) Represents total interest expense less amortization of debt issuance costs.
(f) EBITDA is defined as income from continuing operations before interest,
other income, taxes, depreciation and amortization.
Adjusted EBITDA reflects EBITDA as defined above adjusted for the following:
<TABLE>
<CAPTION>
NINE MONTHS ENDED LAST TWELVE
YEAR ENDED SEPTEMBER 30, MONTHS ENDED
DECEMBER 31, -------------------- SEPTEMBER 30,
1995 1995 1996 1996
-------------- --------- --------- ---------------
<S> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Non-recurring relocation expenses incurred by
Continental (1)..................................... $ -- $ -- $ 200 $ 200
Duplicative and implementation systems
costs (2)........................................... 1,972 1,257 2,225 2,940
------- --------- --------- -------
$ 1,972 $ 1,257 $ 2,425 $ 3,140
------- --------- --------- -------
------- --------- --------- -------
</TABLE>
- ------------------------
(1) Comprises moving costs, consulting fees, additional salaries and other
expenses relating to the relocation of Continental's main office in
Kirkland, WA.
(2) The adjustment reflects the additional costs of implementing new
computer systems at Payco and the duplicative costs of operating the old
systems concurrently. The duplicative costs eliminated include the cost
of the maintenance contract, software licenses and support staff relating
to the old systems. The implementation costs relate primarily to costs
which were incurred in rolling out the new accounts receivable management
system to Payco's branch offices.
EBITDA and adjusted EBITDA are generally accepted as providing useful
information regarding a company's ability to service and/or incur debt.
EBITDA and adjusted EBITDA should not be considered in isolation or as
substitutes for net income, cash flows from continuing operations, or other
consolidated income or cash flow data prepared in accordance with generally
accepted accounting principles or as a measures of a company's profitability
or liquidity.
12
<PAGE>
RISK FACTORS
PROSPECTIVE PARTICIPANTS SHOULD CAREFULLY CONSIDER THE FOLLOWING FACTORS IN
ADDITION TO THE OTHER INFORMATION SET FORTH IN THIS PROSPECTUS BEFORE
PARTICIPATING IN THE EXCHANGE OFFER. THIS PROSPECTUS CONTAINS CERTAIN FORWARD
LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT.
ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE PROJECTED IN THE FORWARD
LOOKING STATEMENTS AS A RESULT OF CERTAIN FACTORS AND UNCERTAINTIES SET FORTH
BELOW AND ELSEWHERE IN THIS PROSPECTUS.
SUBSTANTIAL LEVERAGE AND ABILITY TO SERVICE INDEBTEDNESS
In connection with the Transactions, the Company incurred a significant
amount of indebtedness. As of September 30, 1996, after giving pro forma effect
to the Transactions, the Company's indebtedness would have been approximately
$247.9 million and its stockholders' equity would have been $62.0 million. After
giving pro forma effect to the Transactions as if the same had occurred on
January 1, 1995, the Company's pro forma fixed charges for the twelve months
ended December 31, 1995, the nine months ended September 30, 1996 and the twelve
months ended September 30, 1996 would have exceeded its pro forma earnings for
those periods by $28.3 million, $19.6 million and $28.9 million, respectively.
In addition, subject to the restrictions in the New Bank Credit Facility and the
Indenture, the Company may incur additional indebtedness from time to time.
The level of the Company's indebtedness could have important consequences to
Holders of the Notes, including: (i) a substantial portion of the Company's cash
flow from operations must be dedicated to debt service and will not be available
for other purposes; (ii) the Company's ability to obtain additional debt
financing in the future for working capital, capital expenditures or
acquisitions may be limited; (iii) the Company's level of indebtedness could
limit its flexibility in reacting to changes in the industry and economic
conditions generally; and (iv) certain of the Company's borrowings may be at
variable rates of interest, which could result in higher interest expense in the
event of increases in interest rates.
The Company's ability to make scheduled payments of principal of, to pay
interest on or to refinance its indebtedness (including the Notes) and to
satisfy its other debt obligations will depend upon its future operating
performance, which will be affected by general economic, financial, competitive,
legislative, regulatory, business and other factors beyond its control. The
Company anticipates that its operating cash flow, together with borrowings under
the New Bank Credit Facility, will be sufficient to meet its anticipated future
operating expenses and to service its debt requirements as they become due.
However, if the Company is unable to service its indebtedness it will be forced
to adopt an alternative strategy that may include actions such as reducing or
delaying capital expenditures, selling assets, restructuring or refinancing its
indebtedness, or seeking additional equity capital. There can be no assurance
that any of these strategies could be effected on satisfactory terms, if at all.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
RESTRICTIONS IMPOSED BY TERMS OF THE COMPANY'S INDEBTEDNESS
The Indenture restricts, among other things, the Company's ability to incur
additional indebtedness, incur liens, pay dividends or make certain other
restricted payments, enter into certain transactions with affiliates, impose
restrictions on the ability of a subsidiary to pay dividends or make certain
payments to the Company, merge or consolidate with any other person or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially all
of the assets of the Company. In addition, the New Bank Credit Facility contains
other and more restrictive covenants and prohibits the Company from prepaying
its other indebtedness (including the Notes). See "Description of Notes --
Certain Covenants" and "Description of New Bank Credit Facility; Other
Indebtedness." The New Bank Credit Facility requires the Company to maintain
specified financial ratios and satisfy certain financial condition tests. The
Company's ability to meet those financial ratios and tests can be affected by
events beyond its control,
13
<PAGE>
and there can be no assurance that the Company will meet those tests. A breach
of any of these covenants could result in a default under the New Bank Credit
Facility and/or the Indenture. Upon the occurrence of an event of default under
the New Bank Credit Facility, the lenders could elect to declare all amounts
outstanding under the New Bank Credit Facility, together with accrued interest,
to be immediately due and payable. If the Company were unable to repay those
amounts, the lenders could proceed against the collateral granted to them to
secure that indebtedness. If the lenders under the New Bank Credit Facility
accelerate the payment of the indebtedness, there can be no assurance that the
assets of the Company would be sufficient to repay in full such indebtedness and
the other indebtedness of the Company, including the Notes. Substantially all of
the Company's assets are pledged as security under the New Bank Credit Facility.
See "Description of New Bank Credit Facility; Other Indebtedness."
SUBORDINATION; ASSET ENCUMBRANCES.
The Notes are subordinated in right of payment to all existing and future
Senior Debt, including the principal of (and premium, if any) and interest on
and all other amounts due on or payable in connection with Senior Debt. As of
September 30, 1996, on a pro forma basis after giving effect to the
Transactions, there would have been outstanding approximately $142.6 million of
Senior Debt, $142.0 million of which would have been fully secured borrowings
under the New Bank Credit Facility. By reason of such subordination, in the
event of the insolvency, liquidation, reorganization, dissolution or other
winding-up of the Company or upon a default in payment with respect to, or the
acceleration of, any Senior Debt, the holders of such Senior Debt and any other
creditors who are holders of Senior Debt and creditors of subsidiaries that are
not Guarantors must be paid in full before the Holders of the Notes may be paid.
If the Company incurs any additional PARI PASSU debt, the holders of such debt
would be entitled to share ratably with the Holders of the Notes in any proceeds
distributed in connection with any insolvency, liquidation, reorganization,
dissolution or other winding-up of the Company. This may have the effect of
reducing the amount of proceeds paid to Holders of the Notes. In addition, no
cash payments may be made with respect to the principal of (and premium, if any)
or interest on the Notes if a payment default exists with respect to Senior Debt
and, under certain circumstances, no payments may be made with respect to the
principal of (and premium, if any) or interest on the Notes for a period of up
to 179 days if a non-payment default exists with respect to Senior Debt. In
addition, the Indenture permits subsidiaries of the Company to incur debt under
certain circumstances. Any debt incurred by a subsidiary of the Company that is
not a Guarantor will be structurally senior to the Notes. See "Description of
Notes."
The Company has granted to the lenders under the New Bank Credit Facility
security interests in substantially all of the current and future assets of the
Company, including a pledge of all of the issued and outstanding shares of
capital stock of all of the Company's subsidiaries owned by the Company and its
domestic subsidiaries. In addition, the Guarantors have granted to such lenders
security interests in all of the current and future assets of the Guarantors. In
the event of a default on secured indebtedness, including the guarantees of the
Guarantors under the New Bank Credit Facility (whether as a result of the
failure to comply with a payment or other covenant, a cross-default, or
otherwise), the parties granted such security interests will have a prior
secured claim on the capital stock of the Company and the assets of the Company
and the Guarantors. If such parties should attempt to foreclose on their
collateral, the Company's financial condition and the value of the Notes would
be materially adversely affected. See "Description of New Bank Credit Facility;
Other Indebtedness."
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<PAGE>
HOLDING COMPANY STRUCTURE
The Company will conduct substantially all of its business through
subsidiaries and will have few operations of its own. The Company will be
dependent on the cash flow of its subsidiaries and distributions thereof from
its subsidiaries to the Company in order to meet its debt service obligations.
It is not expected that the Company will have any significant assets other than
the common stock of its subsidiaries.
COMPETITION
The Company is engaged in a highly fragmented and competitive industry. The
Company competes with many local, regional and national accounts receivable
management companies in the markets which it serves. Some of the Company's
principal competitors are less highly-leveraged than the Company and may have
greater financial and operating flexibility. See "Business--Competition."
RISKS ASSOCIATED WITH RATIONALIZATION OF OPERATIONS
The Company intends to improve its financial results through the
rationalization of operations. In connection with the Payco Acquisition, the
Company expects to reduce operating expenses through the consolidation of back
office activities, branch system rationalization, the installation of a
centralized operating system and the realization of volume purchasing discounts.
Although the Company believes that its strategies are reasonable, there can be
no assurance that it will be able to implement its plans without delay or that
it will not encounter unanticipated problems in connection with the
rationalization of operations or that, when implemented, its efforts will result
in the reduction of operating expenses that is currently anticipated. The
Company's plans will require substantial attention from members of the Company's
management, which will limit the amount of time such members have available to
devote to the Company's day-to-day operations.
RISKS ASSOCIATED WITH ACQUISITION STRATEGY
The Company plans to continue to pursue additional acquisitions which
complement its existing services or increase its customer base. There can be no
assurance, however, that the Company will be able to identify additional
acquisitions or that, if identified, any anticipated benefits will be realized
from such acquisitions. The availability of additional acquisition financing
cannot be assured and, depending on the terms of such additional acquisitions,
could be restricted by the terms of the New Bank Credit Facility and/or the
Indenture. The process of integrating acquired operations into the Company's
existing operations may result in unforeseen operating difficulties, may require
substantial attention from members of the Company's senior management and may
require significant financial resources that would otherwise be available for
the ongoing development or expansion of the Company's existing operations. In
addition, successful completion of an acquisition may depend on consents from
third parties, including regulatory authorities and private parties, which
consents are beyond the control of the Company. Possible future acquisitions by
the Company could result in the incurrence of additional debt, contingent
liabilities and amortization expenses related to goodwill and other intangible
assets, all of which could materially adversely affect the Company's financial
condition and operating results.
PAYMENT UPON A CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each Holder of Notes may require
the Company to repurchase all or a portion of such Holder's Notes at 101% of the
principal amount of the Notes together with accrued and unpaid interest to the
date of repurchase. In addition, a Change of Control may constitute a default
under the New Bank Credit Facility. Unless waived or cured, any such default
could create a default under the Notes. If a Change of Control were to occur,
the Company may not have the financial resources to repay all of its obligations
under the New Bank Credit Facility, the Indenture and
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<PAGE>
the other indebtedness that would become payable upon the occurrence of such
Change of Control. See "Description of Notes -- Repurchase at the Option of
Holders -- Change of Control."
IMPACT OF GOVERNMENTAL REGULATION
Certain of the Company's operations are subject to compliance with the
federal Fair Debt Collection Practices Act (the "FDCPA") and comparable statutes
in many states. Under the FDCPA, a third-party collection company is restricted
in the methods it uses in contacting consumer debtors and eliciting payments
with respect to placed accounts. Requirements under state collection agency
statutes vary, with most requiring compliance similar to that required under the
FDCPA. In addition, most states and certain municipalities require collection
agencies to be licensed with the appropriate regulatory body before operating in
such jurisdictions. The Company believes that it is in substantial compliance
with the FDCPA and comparable state statutes and that it maintains licenses in
all jurisdictions in which its operations require it to be licensed. There can
be no assurance, however, that additional federal or state legislation will not
be enacted that would further restrict the methods used in collecting placed
accounts or require additional regulatory compliance.
LITIGATION
Due to the nature of certain of its operations, the Company is regularly a
defendant in various legal proceedings involving claims for damages. The Company
believes that such proceedings constitute ordinary and routine litigation
incidental to its business. The costs associated with defending such lawsuits
(including payments made in connection with settlements and judgments) have not
historically had a material adverse effect on the Company's financial condition.
Payco and its wholly owned subsidiary Payco-General American Credits, Inc. are
party to a class-action lawsuit filed in July 1995 in the Circuit Court of
Etowah County, Alabama in which it is alleged that Payco-General American
Credits, Inc. violated certain provisions of the FDCPA and Alabama state law.
There can be no assurance that the costs associated with existing or future
claims against the Company will not have a material adverse effect on the
Company's financial condition. See "Business -- Legal Proceedings."
DEPENDENCE ON KEY MANAGEMENT
The Company's success will continue to depend to a significant extent on its
executive and other key management personnel. Although the Company has entered
into employment agreements with certain of its executive officers, there can be
no assurance that the Company will be able to retain its executive officers and
key personnel or attract additional qualified management in the future. In
addition, the success of certain of the Company's acquisitions may depend, in
part, on the Company's ability to retain management personnel of the acquired
companies.
CONTROLLING STOCKHOLDER
Certain affiliates of McCown De Leeuw & Co. (the "MDC Entities") own a
majority of the outstanding voting stock of the Company. By virtue of such stock
ownership, the MDC Entities have the power to control all matters submitted to
stockholders of the Company and to elect all directors of the Company and its
subsidiaries. See "Security Ownership."
FRAUDULENT TRANSFER STATUTES
Under applicable provisions of federal bankruptcy law and comparable
provisions of state and federal fraudulent conveyance laws, if it were found
that any Guarantor (a) had incurred such indebtedness represented by its
Guarantee or granted liens on its assets with an intent to hinder, delay or
defraud creditors or (b) had received less than reasonably equivalent value or
fair consideration for incurring such indebtedness or pledges and (i) was
insolvent or was rendered insolvent by reason of such
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<PAGE>
transactions, (ii) was engaged or about to engage in a business or transaction
for which its remaining assets constituted unreasonably small capital to carry
on its business or (iii) intended to incur, or believed that it would incur,
debts beyond its ability to pay such debts as they matured, the obligations of
such Guarantor under its Guarantee and liens on collateral granted by such
Guarantor could be avoided or claims in respect of such Guarantee and collateral
could be subordinated to all other debts of such Guarantor. A legal challenge of
a Guarantee or a lien on fraudulent conveyance grounds could, among other
things, focus on the benefits, if any, realized by a Guarantor as a result of
the issuance by the Company of the Notes. To the extent that a Guarantee or a
lien were held to be unenforceable as a fraudulent conveyance for any reason,
the holders of the Notes would cease to have any direct claim in respect of a
Guarantor and would be solely creditors of the Company, and would lose the
benefits of the collateral pledged by such Guarantor. In the event a Guarantee
and related liens were held to be subordinated, the claims of the holders of the
Notes would be subordinated to claims of other creditors of such Guarantor and
other creditors secured by the applicable collateral with respect thereto.
The measure of insolvency for purposes of determining whether a transfer is
avoidable as a fraudulent transfer varies depending upon the law of the
jurisdiction which is being applied. Generally, however, a debtor would be
considered insolvent if the sum of all its liabilities, including contingent
liabilities, were greater than the fair saleable value of its assets at a fair
valuation, or if the present fair saleable value of the debtor's assets were
less than the amount required to repay its probable liabilities on its existing
debts, including contingent liabilities, as they become absolute and matured.
There can be no assurance as to what standard a court would apply in order to
make such determination. In addition, the Company believes that none of the
Guarantors (i) is or will be insolvent, (ii) is or will be engaged in a business
or transaction for which its remaining assets constitute unreasonably small
capital, or (iii) intends or will intend to incur debt beyond its ability to
repay such debts as they mature.
Each of the Company and the Guarantors believes that it received equivalent
value at the time the indebtedness under the Notes and the Guarantees was
incurred. In addition, neither the Company nor any of the Guarantors believes
that it, after giving effect to the Transactions, (i) was or will be insolvent
or rendered insolvent, (ii) was or will be engaged in a business or transaction
for which its remaining assets constituted unreasonably small capital or (iii)
intends or intended to incur, or believes or believed that it will or would
incur, debts beyond its ability to pay such debts as they mature. These beliefs
are based on the Company's operating history and analysis of internal cash flow
projections and estimated values of assets and liabilities of the Company and
the Guarantors at the time of the offering of the Notes. Since each of the
components of the question of whether a Guarantee is a fraudulent conveyance is
inherently fact-based and fact-specific, there can be no assurance that a court
passing on such questions would agree with the Company. Neither counsel for the
Company nor counsel for the Initial Purchasers will express any opinion as to
federal or state laws relating to fraudulent transfers.
ABSENCE OF PUBLIC MARKET
There has not previously been any public market for the New Notes. There can
be no assurance as to the liquidity of any markets that may develop for the New
Notes, the ability of holders to sell the New Notes, or the price at which
holders would be able to sell the New Notes. Future trading prices of the New
Notes will depend on many factors, including among other things, prevailing
interest rates, the Company's operating results and the market for similar
securities. Historically, the market for securities similar to the New Notes,
including non-investment grade debt, has been subject to disruptions that have
caused substantial volatility in the prices of such securities. There can be no
assurance that any market for the New Notes, if such market develops, will not
be subject to similar disruptions.
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<PAGE>
USE OF PROCEEDS OF THE NEW NOTES
This Exchange Offer is intended to satisfy certain obligations of the
Company under the Registration Rights Agreement. The Company will not receive
any proceeds from the issuance of the New Notes offered hereby. In consideration
for issuing the New Notes as contemplated in this Prospectus, the Company will
receive, in exchange, Old Notes in like principal amount. The form and terms of
the New Notes are identical in all material respects to the form and terms of
the Old Notes, except as otherwise described herein under "The Exchange Offer --
Terms of the Exchange Offer." The Old Notes surrendered in exchange for the New
Notes will be retired and cancelled and cannot be reissued. Accordingly,
issuance of the New Notes will not result in any increase in the outstanding
debt of the Company.
PRO FORMA CAPITALIZATION
(UNAUDITED)
The following table sets forth the capitalization of OSI at September 30,
1996 (i) on a historical basis and (ii) on a pro forma basis giving effect to
the Transactions as if they had occurred on September 30, 1996. This table
should be read in conjunction with "Selected Historical Financial Data -- OSI,"
and "Unaudited Pro Forma Consolidated Financial Data" included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
ACTUAL PRO FORMA
SEPTEMBER 30, 1996 SEPTEMBER 30, 1996
------------------------ ------------------------
<S> <C> <C>
(DOLLARS IN THOUSANDS)
Cash and Cash Equivalents(a)............. $ 4,637 $ 14,568
---------- ----------
---------- ----------
New Bank Credit Facility(b).............. $ -- $ 142,000
Notes.................................... -- 100,000
Existing Debt............................ 69,138 5,892
---------- ----------
Total Debt............................... 69,138 247,892
Stockholders' Equity(c).................. 64,866 61,999
---------- ----------
Total Capitalization..................... $ 134,004 $ 309,891
---------- ----------
---------- ----------
</TABLE>
- ------------------------
(a) The increase in cash on hand on a pro forma basis is a result of the cash on
hand at Payco, net of the use of $1.9 million to finance the Transactions.
(b) The New Bank Credit Facility provides for senior secured term loans of
$142.0 million and a senior secured revolving credit facility of up to $58.0
million. No borrowings under the revolving credit facility were drawn as of
the closing of this Offering. For further details, see "Description of New
Bank Credit Facility; Other Indebtedness" included elsewhere in this
Prospectus.
(c) The decrease in stockholders' equity reflects the write-off of technology in
process and deferred financing fees, and the estimated merger expenses
incurred by Payco. See Notes to the Unaudited Pro Forma Consolidated Balance
Sheet.
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<PAGE>
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
Pursuant to the Registration Rights Agreement by and among the Company, the
Guarantors and the Initial Purchasers, the Company has agreed (i) to file a
registration statement with respect to an offer to exchange the Old Notes for
senior debt securities of the Company with terms substantially identical to the
Old Notes (except that the New Notes will not contain terms with respect to
transfer restrictions, registration rights and Liquidated Damages) within 45
days after the date of original issuance of the Old Notes and (ii) to use best
efforts to cause such registration statement to become effective under the
Securities Act within 150 days after such filing date. In the event that
applicable law or interpretations of the staff of the Commission do not permit
the Company to effect the Exchange Offer, or if certain holders of the Old Notes
notify the Company that they are not permitted to participate in, or would not
receive freely tradeable New Notes pursuant to, the Exchange Offer, the Company
will use its best efforts to cause to become effective a shelf registration
statement (the "Shelf Registration Statement") with respect to the resale of the
Old Notes and to keep the Shelf Registration Statement effective until three
years after the original issuance of the Old Notes. In the event that the
Company is not in compliance with certain obligations under the Registration
Rights Agreement, the Company and the Guarantors shall be obligated to pay
Liquidated Damages to holders of the Old Notes. See "Description of Notes--Old
Notes Registration Rights; Liquidated Damages."
Each holder of the Old Notes who wishes to exchange such Old Notes for New
Notes in the Exchange Offer will be required to make certain representations,
including representations that (i) it is not an affiliate of the Company, (ii)
it is not engaged in, and does not intend to engage in, and has no arrangement
or understanding with any person to participate in, a distribution of the New
Notes to be issued in the Exchange Offer, and (iii) it is acquiring the New
Notes in its ordinary course of business.
RESALE OF NEW NOTES
Based on interpretations by the staff of the Commission set forth in
no-action letters issued to third-parties, the Company believes that, except as
described below, New Notes issued pursuant to the Exchange Offer in exchange for
Old Notes may be offered for resale, resold and otherwise transferred by any
holder thereof (other than a holder which is an "affiliate" of the Company
within the meaning of Rule 405 under the Securities Act) without compliance with
the registration and prospectus delivery provisions of the Securities Act,
provided that such New Notes are acquired in the ordinary course of such
holder's business and such holder does not intend to participate and has no
arrangement or understanding with any person to participate in the distribution
of such New Notes. Any holder who tenders in the Exchange Offer with the
intention or for the purpose of participating in a distribution of the New Notes
cannot rely on such interpretation by the staff of the Commission and must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with a secondary resale transaction. Unless an
exemption from registration is otherwise available, any such resale transaction
should be covered by an effective registration statement containing the selling
security holder's information required by Item 507 of Regulation S-K under the
Securities Act. This Prospectus may be used for an offer to resell, resale or
other retransfer of New Notes only as specifically set forth herein. Each
broker-dealer that receives New Notes for its own account in exchange for Old
Notes, where such Old Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale of such New Notes. See
"Plan of Distribution."
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept for exchange any and
all Old Notes properly tendered and not
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<PAGE>
withdrawn prior to 5:00 p.m., New York City time, on the Expiration Date. The
Company will issue $1,000 principal amount of New Notes in exchange for each
$1,000 principal amount of outstanding Old Notes surrendered pursuant to the
Exchange Offer. Old Notes may be tendered only in integral multiples of $1,000.
The form and terms of the New Notes will be the same as the form and terms
of the Old Notes except the New Notes will be registered under the Securities
Act and hence will not bear legends restricting the transfer thereof. The New
Notes will evidence the same debt as the Old Notes. The New Notes will be issued
under and entitled to the benefits of the Indenture, which also authorized the
issuance of the Old Notes, such that both series will be treated as a single
class of debt securities under the Indenture.
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Old Notes being tendered for exchange.
As of the date of this Prospectus, $100 million aggregate principal amount
of the Old Notes are outstanding. This Prospectus, together with the Letter of
Transmittal, is being sent to all registered holders of Old Notes. There will be
no fixed record date for determining registered holders of Old Notes entitled to
participate in the Exchange Offer.
The Company intends to conduct the Exchange Offer in accordance with the
provisions of the Registration Rights Agreement and the applicable requirements
of the Exchange Act, and the rules and regulations of the Commission thereunder.
Old Notes which are not tendered for exchange in the Exchange Offer will remain
outstanding and continue to accrue interest and will be entitled to the rights
and benefits such holders have under the Indenture and the Registration Rights
Agreement.
The Company shall be deemed to have accepted for exchange properly tendered
Notes when, as and if the Company shall have given oral or written notice
thereof to the Exchange Agent and complied with the provisions of Section 3 of
the Registration Rights Agreement. The Exchange Agent will act as agent for the
tendering holders for the purposes of receiving the New Notes from the Company.
The Company expressly reserves the right to amend or terminate the Exchange
Offer, and not to accept for exchange any Old Notes not theretofore accepted for
exchange, upon the occurrence of any of the conditions specified below under "--
Certain Conditions to the Exchange Offer."
Holders who tender Old Notes in the Exchange Offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the Letter
of Transmittal, transfer taxes with respect to the exchange of Old Notes
pursuant to the Exchange Offer. The Company will pay all charges and expenses,
other than certain applicable taxes described below, in connection with the
Exchange Offer. "See -- Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time on
, 1997, unless the Company, in its sole discretion, extends the
Exchange Offer, in which case the term "Expiration Date" shall mean the latest
date and time to which the Exchange Offer is extended.
In order to extend the Exchange Offer, the Company will notify the Exchange
Agent of any extension by oral or written notice and will mail to the registered
holders of Old Notes an announcement thereof, each prior to 9:00 a.m., New York
City time, on the next business day after the then Expiration Date.
The Company reserves the right, in its sole discretion, (i) to delay
accepting for exchange any Old Notes, to extend the Exchange Offer or to
terminate the Exchange Offer if any of the conditions set forth below under "--
Certain Conditions to the Exchange Offer" shall not have been satisfied, by
giving oral or written notice of such delay, extension or termination to the
Exchange Agent or (ii) to amend the terms of the Exchange Offer in any manner.
Any such delay in acceptance, extension, termination or amendment will be
followed as promptly as practicable by oral or written notice thereof to the
registered holders
20
<PAGE>
of Old Notes. If the Exchange Offer is amended in a manner determined by the
Company to constitute a material change, the Company will promptly disclose such
amendment by means of a prospectus supplement that will be distributed to the
registered holders, and the Company will extend the Exchange Offer, depending
upon the significance of the amendment and the manner of disclosure to the
registered holders, if the Exchange Offer would otherwise expire during such
period.
INTEREST ON THE NEW NOTES
The New Notes will bear interest at a rate of 11% per annum, payable
semi-annually, on May 1 and November 1 of each year, commencing May 1, 1997.
Holders of New Notes will receive interest on May 1, 1997 from the date of
initial issuance of the New Notes, plus an amount equal to the accrued interest
on the Old Notes. Interest on the Old Notes accepted for exchange will cease to
accrue upon issuance of the New Notes.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other term of the Exchange Offer, the Company will not
be required to accept for exchange, or exchange any New Notes for, any Old
Notes, and may terminate the Exchange Offer as provided herein before the
acceptance of any Old Notes for exchange, if:
(a) any action or proceeding is instituted or threatened in any court or
by or before any governmental agency with respect to the Exchange Offer
which, in the Company's reasonable judgment, might materially impair the
ability of the Company to proceed with the Exchange Offer; or
(b) any law, statute, rule or regulation is proposed, adopted or
enacted, or any existing law, statute, rule or regulation is interpreted by
the staff of the Commission, which, in the Company's reasonable judgment,
might materially impair the ability of the Company to proceed with the
Exchange Offer; or
(c) any governmental approval has not been obtained, which approval the
Company shall, in its reasonable discretion, deem necessary for the
consummation of the Exchange Offer as contemplated hereby.
The Company expressly reserves the right, at any time or from time to time,
to extend the period of time during which the Exchange Offer is open, and
thereby delay acceptance for exchange of any Old Notes, by giving oral or
written notice of such extension to the holders thereof. During any such
extensions, all Old Notes previously tendered will remain subject to the
Exchange Offer and may be accepted for exchange by the Company. Any Old Notes
not accepted for exchange for any reason will be returned without expense to the
tendering holder thereof as promptly as practicable after the expiration or
termination of the Exchange Offer.
The Company expressly reserves the right to amend or terminate the Exchange
Offer, and not to accept for exchange any Old Notes not theretofore accepted for
exchange, upon the occurrence of any of the conditions of the Exchange Offer
specified above under "-- Certain Conditions to the Exchange Offer." The Company
will give oral or written notice of any extension, amendment, non-acceptance or
termination to the holders of the Old Notes as promptly as practicable, such
notice in the case of any extension to be issued no later than 9:00 a.m., New
York City time, on the next business day after the previously scheduled
Expiration Date.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to any such
condition or may be waived by the Company in whole or in part at any time and
from time to time in its sole discretion. The failure by the Company 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.
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<PAGE>
In addition, the Company will not accept for exchange any Old Notes
tendered, and no New Notes will be issued in exchange for any such Old Notes, if
at such time any stop order shall be threatened or in effect with respect to the
Registration Statement of which this Prospectus constitutes a part or the
qualification of the Indenture under the Trust Indenture Act of 1939 (the
"TIA").
PROCEDURES FOR TENDERING
Only a holder of Old Notes may tender such Old Notes in the Exchange Offer.
To tender in the Exchange Offer, a holder must complete, sign and date the
Letter of Transmittal, or facsimile thereof, have the signature thereon
guaranteed if required by the Letter of Transmittal, and mail or otherwise
deliver such Letter of Transmittal or such facsimile to the Exchange Agent prior
to 5:00 p.m., New York City time, on the Expiration Date or, in the alternative,
comply with DTC's ATOP procedures described below. In addition, either (i) Old
Notes must be received by the Exchange Agent along with the Letter of
Transmittal, or (ii) a timely confirmation of book-entry transfer (a "Book-Entry
Confirmation") of such Old Notes, if such procedure is available, into the
Exchange Agent's account at the Depository Trust Company (the "Book-Entry
Transfer Facility" or "DTC") pursuant to the procedure for book-entry transfer
described below or properly transmitted Agent's Message (as defined below) must
be received by the Exchange Agent prior to the Expiration Date, or (iii) the
holder must comply with the guaranteed delivery procedures described below. To
be tendered effectively, the Letter of Transmittal and other required documents
must be received by the Exchange Agent at the address set forth below under "The
Exchange Offer -- Exchange Agent" prior to 5:00 p.m., New York City time, on the
Expiration Date.
The tender by a holder which is not withdrawn prior to the Expiration Date
will constitute an agreement between such holder and the Company in accordance
with the terms and subject to the conditions set forth herein and in the Letter
of Transmittal.
THE METHOD OF DELIVERY OF OLD NOTES, THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF THE
HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN
OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO
LETTER OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO THE COMPANY. HOLDERS MAY
REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR
OTHER NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS.
Any beneficial owner whose Old Notes are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee and who wishes to tender
should contact the registered holder promptly and instruct such registered
holder of Old Notes to tender on such beneficial owner's behalf. If such
beneficial owner wishes to tender on such owner's own behalf, such owner must,
prior to completing and executing the Letter of Transmittal and delivering such
owner's Old Notes, either make appropriate arrangements to register ownership of
the Old Notes in such owner's name or obtain a properly completed bond power
from the registered holder of Old Notes. The transfer of registered ownership
may take considerable time and may not be able to be completed prior to the
Expiration Date.
Signatures on a Letter of Transmittal or a notice of withdrawal described
below, as the case be, must be guaranteed by an Eligible Institution (as defined
below) unless the Old Notes tendered pursuant thereto are tendered (i) by a
registered holder who has not completed the box entitled "Special Issuance
Instructions" or "Special Delivery Instructions" on the Letter of Transmittal or
(ii) for the account of an Eligible Institution. In the event that signatures on
a Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, such guarantor must be a member firm of a registered
national securities exchange or of the National Association of Securities
Dealers, Inc., a commercial bank or trust company having an office or
correspondent in the United States or an "eligible guarantor
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<PAGE>
institution" within the meaning of Rule 17Ad-15 under the Exchange Act which is
a member of one of the recognized signature guarantee programs identified in the
Letter of Transmittal (an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the registered
holder of any Old Notes listed therein, such Old Notes must be endorsed or
accompanied by a properly completed bond power, signed by such registered holder
as such registered holder's name appears on such Old Notes with the signature
thereon guaranteed by an Eligible Institution.
If the Letter of Transmittal or any Old Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and unless waived by the Company,
provide evidence satisfactory to the Company of their authority to so act must
be submitted with the Letter of Transmittal.
The Exchange Agent and DTC have confirmed that any financial institution
that is a participant in DTC's system may utilize DTC's ATOP to tender.
Accordingly, participants in DTC's ATOP may, in lieu of physically completing
and signing the Letter of Transmittal and delivering it to the Exchange Agent,
electronically transmit their acceptance of the Exchange Offer by causing the
Depositary to transfer the Old Notes to the Exchange Agent in accordance with
the Depositary's ATOP procedures for transfer. The Depositary will then send an
Agent's Message to the Exchange Agent.
The term "Agent's Message" means a message transmitted by DTC received by
the Exchange Agent and forming part of the Book-Entry Confirmation, which states
that the Depositary has received an express acknowledgement from a participant
in DTC's ATOP that is tendering Old Notes which are the subject of such book
entry confirmation, that such participant has received and agrees to be bound by
the terms of the Letter of Transmittal (or, in the case of an Agent's Message
relating to guaranteed delivery, that such participant has received and agrees
to be bound by the applicable Notice of Guaranteed Delivery), and that the
agreement may be enforced against such participant.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Old Notes and withdrawal of tendered Old Notes
will be determined by the Company in its sole discretion, which determination
will be final and binding. The Company reserves the absolute right to reject any
and all Old Notes not properly tendered or any Old Notes the Company's
acceptance of which would, in the opinion of counsel for the Company, be
unlawful. The Company also reserves the right to waive any defects,
irregularities or conditions of tender as to particular Old Notes. The Company's
interpretation of the terms and conditions of the Exchange Offer (including the
instructions in the Letter of Transmittal) will be final and binding on all
parties. Unless waived, any defects or irregularities in connection with tenders
of Old Notes must be cured within such time as the Company shall determine.
Although the Company intends to notify holders of defects or irregularities with
respect to tenders of Old Notes, neither the Company, the Exchange Agent nor any
other person shall incur any liability for failure to give such notification.
Tenders of Old Notes will not be deemed to have been made until such defects or
irregularities have been cured or waived. Any Old Notes received by the Exchange
Agent that are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned by the Exchange
Agent to the tendering holder, unless otherwise provided in the Letter of
Transmittal, as soon as practicable following the Expiration Date.
In all cases, issuance of New Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of Old Notes or a timely Book-Entry Confirmation of such
Old Notes into the Exchange Agent's account at the Book-Entry Transfer Facility,
a properly completed and duly executed Letter of Transmittal and all other
required documents. If any tendered Old Notes are not accepted for exchange for
any reason set forth in the terms and conditions of the Exchange Offer or if Old
Notes are submitted for a greater principal amount than the holder desires to
exchange, such unaccepted or non-exchanged Old Notes will be returned without
expense to the tendering holder thereof (or, in the case of Old Notes tendered
by book-entry
23
<PAGE>
transfer into the Exchange Agent's account at the Book-Entry Transfer Facility
pursuant to the book-entry transfer procedures described below, such
non-exchanged Notes will be credited to an account maintained with such
Book-Entry Transfer Facility) as promptly as practicable after the expiration or
termination of the Exchange Offer.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Old Notes at the Book-Entry Transfer Facility for purposes of the
Exchange Offer within two business days after the date of this Prospectus, and
any financial institution that is a participant in the Book-Entry Transfer
Facility's system may make book-entry delivery of Old Notes by causing the
Book-Entry Transfer Facility to transfer such Old Notes into the Exchange
Agent's account at the Book-Entry Transfer Facility in accordance with such
Book-Entry Transfer Facility's procedures for transfer. However, although
delivery of Notes may be effected through book-entry transfer at the Book-Entry
Transfer Facility, the Letter of Transmittal or facsimile thereof, with any
required signature guarantees and any other required documents, must, in any
case, be transmitted to and received by the Exchange Agent at the address set
forth below under "-- Exchange Agent" on or prior to the Expiration Date or, if
the guaranteed delivery procedures described below are to be complied with,
within the time period provided under such procedures. Delivery of documents to
the Book-Entry Transfer Facility does not constitute delivery to the Exchange
Agent.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available or (ii) who cannot deliver their Old Notes, the Letter of
Transmittal or any other required documents to the Exchange Agent prior to the
Expiration Date, may effect a tender if:
(a) The tender is made through an Eligible Institution;
(b) Prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder, the registered number(s)
of such Old Notes and the principal amount of Old Notes tendered, stating
that the tender is being made thereby and guaranteeing that, within three
(3) New York Stock Exchange trading days after the Expiration Date, the
Letter of Transmittal (or facsimile thereof) together with the Old Notes or
a Book-Entry Confirmation, as the case may be, and any other documents
required by the Letter of Transmittal will be deposited by the Eligible
Institution with the Exchange Agent; and
(c) Such properly completed and executed Letter of Transmittal (or
facsimile thereof), or properly transmitted Agent's Message as well as all
tendered Notes in proper form for transfer or a Book-Entry Confirmation, as
the case may be, and all other documents required by the Letter of
Transmittal, are received by the Exchange Agent within three (3) New York
Stock Exchange trading days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Old Notes according to the guaranteed
delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the Expiration Date.
For a withdrawal to be effective, (i) a written notice of withdrawal must be
received by the Exchange Agent at one of the addresses set forth below under "--
Exchange Agent" or (ii) holders must comply with the appropriate procedures of
DTC's ATOP system. Any such notice of withdrawal must specify the
24
<PAGE>
name of the person having tendered the Old Notes to be withdrawn, identify the
Old Notes to be withdrawn (including the principal amount of such Old Notes),
and (where certificates for Old Notes have been transmitted) specify the name in
which such Old Notes were registered, if different from that of the withdrawing
holder. If certificates for Old Notes have been delivered or otherwise
identified to the Exchange Agent, then, prior to the release of such
certificates the withdrawing holder must also submit the serial numbers of the
particular certificates to be withdrawn and a signed notice of withdrawal with
signatures guaranteed by an Eligible Institution unless such holder is an
Eligible Institution. If Old Notes have been tendered pursuant to the procedure
for book-entry transfer described above, any notice of withdrawal must specify
the name and number of the account at the Book-Entry Transfer Facility to be
credited with the withdrawn Old Notes and otherwise comply with the procedures
of such facility. All questions as to the validity, form and eligibility
(including time of receipt) of such notices will be determined by the Company,
whose determination shall be final and binding on all parties. Any Old Notes so
withdrawn will be deemed not to have been validly tendered for exchange for
purposes of the Exchange Offer. Any Old Notes which have been tendered for
exchange but which are not exchanged for any reason will be returned to the
holder thereof without cost to such holder (or, in the case of Old Notes
tendered by book-entry transfer into the Exchange Agent's account at the
Book-Entry Transfer Facility pursuant to the book-entry transfer procedures
described above, such Old Notes will be credited to an account maintained with
such Book-Entry Transfer Facility for the Old Notes) as soon as practicable
after withdrawal, rejection of tender or termination of the Exchange Offer.
Properly withdrawn Old Notes may be retendered by following one of the
procedures described under "-- Procedures for Tendering" above at any time on or
prior to the Expiration Date.
EXCHANGE AGENT
Wilmington Trust Company has been appointed as Exchange Agent of the
Exchange Offer. Questions and requests for assistance, requests for additional
copies of this Prospectus or of the Letter of Transmittal and requests for
Notice of Guaranteed Delivery should be directed to the Exchange Agent addressed
as follows:
<TABLE>
<S> <C>
BY REGISTERED OR CERTIFIED MAIL OR BY BY HAND:
OVERNIGHT COURIER:
Wilmington Trust Company Wilmington Trust Company
Corporate Trust Administration c/o Harris Trust Company of New York,
1100 North Market Street as Agent
Rodney Square North 75 Water Street
Wilmington, Delaware 19890-0001 New York, New York 10004
BY FACSIMILE:
Wilmington Trust Company
Corporate Trust Administration
Facsimile: (302) 651-1079
Confirm by Telephone: (302) 651-8864
</TABLE>
25
<PAGE>
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telephone or in person by officers and regular
employees of the Company and its affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to broker-dealers or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Company and are estimated in the aggregate to be approximately
$200,000. Such expenses include registration fees, fees and expenses of the
Exchange Agent and Trustee, accounting and legal fees and printing costs, and
related fees and expenses.
The Company will pay all transfer taxes, if any, applicable to the exchange
of Notes pursuant to the Exchange Offer. If, however, certificates representing
Old Notes for principal amounts not tendered or accepted for exchange are to be
delivered to, or are to be issued in the name of, any person other than the
registered holder of Notes tendered, or if tendered Notes are registered in the
name of any person other than the person signing the Letter of Transmittal, or
if a transfer tax is imposed for any reason other than the exchange of Notes
pursuant to the Exchange Offer, then the amount of any such transfer taxes
(whether imposed on the registered holder or any other persons) will be payable
by the tendering holder. If satisfactory evidence of payment of such taxes or
exemption therefrom is not submitted with the Letter of Transmittal, the amount
of such transfer taxes will be billed directly to such tendering holder.
TRANSFER TAXES
Holders who tender their Old Notes for exchange will not be obligated to pay
any transfer taxes in connection therewith, except that holders who instruct the
Company to register New Notes in the name of, or request that Old Notes not
tendered or not accepted in the Exchange Offer be returned to, a person other
than the registered tendering holder will be responsible for the payment of any
applicable transfer tax thereon.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes, as set forth (i) in the legend thereon as a
consequence of the issuance of the Old Notes pursuant to the exemptions from, or
in transactions not subject to, the registration requirements of the Securities
Act and applicable state securities laws and (ii) otherwise set forth under
"Notice To Investors" in the Offering Circular dated October 31, 1996
distributed in connection with the Initial Offering. In general, the Old Notes
may not be offered or sold, unless registered under the Securities Act, except
pursuant to an exemption from, or in a transaction not subject to, the
Securities Act and applicable state securities laws. The Company does not
currently anticipate that it will register the Old Notes under the Securities
Act. Based on interpretations by the staff of the Commission, New Notes issued
pursuant to the Exchange Offer may be offered for resale, resold or otherwise
transferred by holders thereof (other than any such holder which is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act) without compliance with the registration and prospectus delivery provisions
of the Securities Act, provided that such New Notes are acquired in the ordinary
course of such holders' business and such holders have no arrangement or
understanding with respect to the distribution of the New Notes to be acquired
pursuant to the Exchange Offer. Any holder who tenders in the Exchange Offer for
the purpose of participating in a distribution of the New Notes (i) could not
rely on the applicable interpretations of the staff of the Commission and (ii)
must comply with the registration and prospectus delivery requirements of the
26
<PAGE>
Securities Act in connection with a secondary resale transaction. In addition,
to comply with the securities laws of certain jurisdictions, if applicable, the
New Notes may not be offered or sold unless they have been registered or such
securities laws have been complied with. The Company has agreed, pursuant to the
Registration Rights Agreement and subject to certain specified limitations
therein, to register or qualify the New Notes for offer or sale under the
securities or blue sky laws of such jurisdictions as any holder of the New Notes
may request in writing.
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
The following Unaudited Pro Forma Consolidated Balance Sheet as of September
30, 1996 was prepared as if the Transactions had occurred on such date. The
Unaudited Pro Forma Consolidated Balance Sheet reflects the preliminary
allocation of the purchase price for the Payco Acquisition and certain of the
Previous Acquisitions to the companies' tangible and intangible assets and
liabilities. The final allocation of such purchase price, and the resulting
amortization expense in the accompanying Unaudited Pro Forma Consolidated
Statements of Operations, may differ somewhat from the preliminary estimates due
to the final allocation being based on: (a) actual closing date amounts of
assets and liabilities and (b) actual values of property, plant and equipment
and any identifiable intangible assets.
The following Unaudited Pro Forma Consolidated Statements of Operations give
effect to the Transactions and the Previous Acquisitions as if they had occurred
on January 1, 1995. The unaudited pro forma financial data are based on the
historical financial statements of OSI, APLP, Miller, Continental, the MLQ
Interests and Payco and the assumptions and adjustments described in the
accompanying notes. The Unaudited Pro Forma Consolidated Statements of
Operations do not (a) purport to represent what the Company's results of
operations actually would have been if the Transactions and the Previous
Acquisitions had occurred as of the date indicated or what such results will be
for any future periods or (b) give effect to certain non-recurring charges
expected to result from the Transactions.
The unaudited pro forma consolidated financial data are based upon
assumptions that the Company believes are reasonable and should be read in
conjunction with the Consolidated Financial Statements of OSI and the
accompanying notes thereto and the Consolidated Financial Statements of Payco
and the accompanying notes thereto included elsewhere in this Prospectus.
27
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL
---------------------- ACQUISITION FINANCING COMPANY
OSI PAYCO ADJUSTMENTS ADJUSTMENTS PRO FORMA
---------- ---------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................. $ 4,637 $ 11,834 $ -- $ (1,903)(c) $ 14,568
Cash held for clients...................... 1,925 20,983 -- -- 22,908
Accounts receivable--trade................. 2,617 18,617 -- -- 21,234
Accounts receivable--purchased............. 37,011 3,614 -- -- 40,625
Prepaid expenses and other................. 1,183 2,866 -- -- 4,049
---------- ---------- ------------ ------------ -----------
Total current assets................... 47,373 57,914 -- (1,903) 103,384
Accounts receivable--purchased............. 27,298 1,738 -- -- 29,036
Property and equipment, net................ 4,567 29,414 2,000(a) -- 35,981
Goodwill, net.............................. 56,143 13,579 86,843(a) -- 156,565
Intangible assets, net..................... 4,187 781 18,800(b) -- 23,768
Other...................................... 1,666 710 -- 9,688(d) 12,064
---------- ---------- ------------ ------------ -----------
Total assets........................... $ 141,234 $ 104,136 $ 107,643 $ 7,785 $ 360,798
---------- ---------- ------------ ------------ -----------
---------- ---------- ------------ ------------ -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable--trade.................... $ 705 $ 5,916 $ -- $ -- $ 6,621
Accounts payable--clients.................. 1,925 20,983 -- -- 22,908
Current portion of long-term debt.......... 13,143 -- -- (3,513)(e) 9,630
Short-term debt............................ -- 11,633 -- (11,633)(c) --
Accrued expenses........................... 3,576 7,921 5,000(a) -- 16,497
Other current liabilities.................. 1,509 302 -- -- 1,811
---------- ---------- ------------ ------------ -----------
Total current liabilities.............. 20,858 46,755 5,000 (15,146) 57,467
Deferred income tax liabilities.............. (552) -- 4,200(f) (645)(g) 3,003
Long-term debt:
Bank term loans............................ 44,067 -- -- 88,433(e) 132,500
Senior subordinated notes.................. -- -- -- 100,000(c) 100,000
Other long-term debt....................... 11,928 334 -- (6,500)(c) 5,762
Other long-term liabilities.................. 67 850 (850)(a) -- 67
---------- ---------- ------------ ------------ -----------
Total liabilities...................... 76,368 47,939 8,350 166,142 298,799
Stockholders' equity:
Preferred stock............................ 10,816 -- -- -- 10,816
Common stock............................... 53 1,016 (1,016)(h) -- 53
Additional paid-in capital................. 65,658 2,020 (2,020)(h) -- 65,658
Cumulative translation adjustments......... -- (24) 24(h) -- --
Stock options issuable..................... -- 148 (148)(h) -- --
(Accumulated deficit) retained earnings.... (11,661) 53,037 (54,937)(i) (967)(g) (14,528)
---------- ---------- ------------ ------------ -----------
Total stockholders' equity............. 64,866 56,197 (58,097) (967) 61,999
---------- ---------- ------------ ------------ -----------
Total liabilities and stockholders'
equity............................... $ 141,234 $ 104,136 $ (49,747) $ 165,175 $ 360,798
---------- ---------- ------------ ------------ -----------
---------- ---------- ------------ ------------ -----------
</TABLE>
See accompanying notes.
28
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
The Unaudited Pro Forma Consolidated Balance Sheet reflects the Transactions
as if they had occurred as of September 30, 1996 as follows:
(a) The Payco Acquisition has been accounted for as a purchase in accordance
with Accounting Principles Board Opinion No. 16, "Business Combinations."
The purchase price has been allocated first to the tangible and identifiable
intangible assets and liabilities of Payco based upon preliminary estimates
of their fair market values, with the remainder allocated to goodwill. The
allocation of the purchase price is preliminary. The final allocation of the
purchase price may differ from the preliminary estimates due to the final
allocation being based on: (i) actual closing date amounts of assets and
liabilities and (ii) actual values of property, plant and equipment and any
identifiable intangible assets. The total purchase price is as follows:
<TABLE>
<S> <C>
Purchase price................................................... $ 150,190
Acquisition costs................................................ 5,700
Liability for acquisition related liabilities (1)................ 5,000
Deferred tax liabilities (2)..................................... 4,800
Book value of net assets acquired................................ (56,197)
---------
Increase in basis................................................ $ 109,493
---------
---------
Allocation of increase in basis:
Increase in fair value of property and equipment (3)........... $ 2,000
Technology in process (4)...................................... 1,000
Covenants not to compete (5)................................... 3,800
Account inventory (6).......................................... 15,000
Decrease in other long-term liabilities (7).................... 850
Increase in goodwill (8)....................................... 86,843
---------
$ 109,493
---------
---------
</TABLE>
(1) Includes estimated costs associated with closing certain Payco offices,
severance payments to employees to be terminated and fees to be incurred
in connection with the termination of certain contracts.
(2) Relates to differences between the book and tax bases of acquired assets
and assumed liabilities.
(3) Represents the increase in fair value of acquired software and computer
systems, which is being amortized over a period of three years.
(4) Technology in process is written off against retained earnings on the
pro forma balance sheet.
(5) Represents payments made to the Payco Chairman and other senior
management for covenants not to compete, which are being amortized over
periods of one to three years.
(6) Represents the value of the expected future revenues from existing
placements at the date of the acquisition of Payco less the direct costs
of collection, which is being amortized over the 18-month average life of
the placements.
(7) Represents the elimination of the existing liability under Payco's
common stock equivalent plan.
29
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET (CONTINUED)
(DOLLARS IN THOUSANDS)
(8) Goodwill represents the excess of the purchase price for Payco over the
fair value of the net assets acquired, which is being amortized over 30
years.
(b) Reflects the allocation of the increase in basis to covenants not to compete
of $3,800 and account inventory of $15,000.
(c) Reflects the issuance of the Old Notes, execution of the New Bank Credit
Facility, and application of proceeds therefrom as follows:
<TABLE>
<S> <C>
Issuance of Notes................................................ $ 100,000
Term Loan Borrowings under New Bank Credit Facility.............. 142,000
Purchase price................................................... (150,190)
Acquisition costs................................................ (5,700)
Payco merger expenses............................................ (1,500)
Debt issuance costs.............................................. (11,300)
Retirement of Payco short-term debt.............................. (11,633)
Retirement of OSI term loans..................................... (57,080)
Retirement of OSI notes payable.................................. (6,500)
---------
$ (1,903)
---------
---------
</TABLE>
(d) Reflects deferred debt issuance costs relating to the issuance of the Old
Notes and the New Bank Credit Facility of $11,300, net of the write-off of
existing deferred financing costs of $1,612.
(e) Reflects term loan borrowings and the repayment of existing debt, as
follows:
<TABLE>
<S> <C>
Current portion of term loan borrowings under New Bank Credit
Facility based on scheduled repayments......................... $ 9,500
Retirement of OSI term loans..................................... (13,013)
---------
Net adjustment................................................... $ (3,513)
---------
---------
Long-term portion of term loan borrowings under New Bank Credit
Facility based on scheduled repayments......................... $ 132,500
Retirement of OSI term loans..................................... (44,067)
---------
Net adjustment................................................... $ 88,433
---------
---------
</TABLE>
(f) Reflects deferred tax liabilities of $4,800 related to differences between
the book and tax bases of acquired assets and assumed liabilities, less the
tax benefit of $600 (calculated using a 40% tax rate) related to the
estimated merger expenses incurred by Payco.
(g) Reflects the write-off of existing deferred financing costs upon retirement
of debt of $1,612, net of a tax benefit (calculated using a 40% tax rate) of
$645.
(h) Reflects the elimination of Payco's historical equity balances.
(i) Reflects the elimination of Payco's retained earnings balance of $53,037,
the write-off of purchased technology in process of $1,000 and the estimated
merger expenses of $1,500 incurred by Payco, net of a tax benefit
(calculated using a 40% tax rate) of $600.
30
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
APLP(A) OSI(A) PREVIOUS
HISTORICAL HISTORICAL MILLER(A) CONTINENTAL(A) MLQ(A) ACQUISITION
1/1-9/20 9/21-12/31 HISTORICAL HISTORICAL(B) INTERESTS ADJUSTMENTS
----------- ----------- ----------- -------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Operating revenue............................. $ 21,293 $ 8,311 $ 19,634 $ 14,871 $ 4,051 $ --
Salaries and benefits......................... 4,471 2,552 8,750 7,781 -- 28(e)
Other operating expenses (c).................. 7,343 8,480 6,888 4,854 -- 23,907(f)
----------- ----------- ----------- -------------- -----------
Operating income (loss)....................... 9,479 (2,721) 3,996 2,236 4,051
----------- ----------- ----------- -------------- -----------
Interest expense (income), net................ 495 1,361 60 (80) -- 450(i)
Other expense (income)........................ -- -- 118 (13) --
----------- ----------- ----------- -------------- -----------
Income (loss) before taxes.................... 8,984 (4,082) 3,818 2,329 4,051
Income tax (benefit) expense.................. -- (1,605) 6 1 -- (1,744)(k)
----------- ----------- ----------- -------------- -----------
Net income (loss) (d)......................... $ 8,984 $ (2,477) $ 3,812 $ 2,328 $ 4,051
----------- ----------- ----------- -------------- -----------
----------- ----------- ----------- -------------- -----------
OTHER FINANCIAL DATA AND RATIOS:
Amortization of purchased portfolios.......... $ 2,308 $ 5,390 $ -- $ -- $ -- $ 15,560
Other depreciation and amortization........... 167 331 362 527 -- 7,247
Data processing capital expenditures (l)...... -- -- -- -- -- --
Other cash capital expenditures............... 574 97 515 544 -- --
Portfolio purchases........................... 5,502 903 -- -- -- --
Cash interest expense (m)..................... 955 1,365 60 165 -- 450
Total interest expense........................ 955 1,365 60 165 -- 450
EBITDA (n).................................... 11,954 3,000 4,358 2,763 4,051 (1,128)
Adjusted EBITDA (n)........................... 11,954 3,000 4,358 2,763 4,051 (1,128)
Adjusted EBITDA to cash interest expense......
Adjusted EBITDA to total interest expense.....
<CAPTION>
PAYCO TRANSACTION COMPANY
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ------------ -----------
<S> <C> <C> <C>
Operating revenue............................. $ 175,560 $ -- $ 243,720
Salaries and benefits......................... 100,108 (8,305)(g) 115,385
Other operating expenses (c).................. 65,536 13,124(h) 130,132
---------- ------------ -----------
Operating income (loss)....................... 9,916 (4,819) (1,797)
---------- ------------ -----------
Interest expense (income), net................ 770 22,178(j) 25,234
Other expense (income)........................ (234) -- (129)
---------- ------------ -----------
Income (loss) before taxes.................... 9,380 (26,997) (26,902)
Income tax (benefit) expense.................. 4,130 (9,705)(k) (8,917)
---------- ------------ -----------
Net income (loss) (d)......................... $ 5,250 $ (17,292) $ (17,985)
---------- ------------ -----------
---------- ------------ -----------
OTHER FINANCIAL DATA AND RATIOS:
Amortization of purchased portfolios.......... $ 12,365 $ -- $ 35,623
Other depreciation and amortization........... 7,805 15,067 31,506
Data processing capital expenditures (l)...... 10,076 -- 10,076
Other cash capital expenditures............... 3,371 -- 5,101
Portfolio purchases........................... 9,725 -- 16,130
Cash interest expense (m)..................... 770 20,486 24,251
Total interest expense........................ 770 22,178 25,943
EBITDA (n).................................... 30,086 10,248 65,332
Adjusted EBITDA (n)........................... 32,058 10,248 67,304
Adjusted EBITDA to cash interest expense...... 2.8x
Adjusted EBITDA to total interest expense..... 2.6x
</TABLE>
See accompanying notes.
31
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
APLP(A) OSI(A) PREVIOUS
HISTORICAL HISTORICAL MILLER(A) CONTINENTAL(A) MLQ(A) ACQUISITION
1/1-9/20 9/21-9/30 HISTORICAL HISTORICAL INTERESTS ADJUSTMENTS
----------- ------------- ----------- --------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Operating revenue......................... $ 21,293 $ 869 $ 13,559 $ 11,525 $ 3,042 $ --
Salaries and benefits..................... 4,471 42 5,881 5,800 -- 825(e)
Other operating expenses(c)............... 7,343 698 4,320 3,965 -- 20,879(f)
----------- ----- ----------- --------------- -----------
Operating income (loss)................... 9,479 129 3,358 1,760 3,042
----------- ----- ----------- --------------- -----------
Interest expense (income), net............ 495 5 41 (60) -- 338(i)
Other expense (income).................... -- -- 19 -- --
----------- ----- ----------- --------------- -----------
Income (loss) before taxes................ 8,984 124 3,298 1,820 3,042
Income tax expense (benefit).............. -- -- 5 -- -- (1,592)(k)
----------- ----- ----------- --------------- -----------
Net income (loss)(d)...................... $ 8,984 $ 124 $ 3,293 $ 1,820 $ 3,042
----------- ----- ----------- --------------- -----------
----------- ----- ----------- --------------- -----------
OTHER FINANCIAL DATA AND RATIOS:
Amortization of purchased portfolios...... $ 2,308 $ 572 $ -- $ -- $ -- $ 14,180
Other depreciation and amortization....... 167 33 265 395 -- 5,597
Data processing capital expenditures(l)... -- -- -- -- -- --
Other cash capital expenditures........... 574 -- 383 400 -- --
Portfolio purchases....................... 5,502 -- -- -- -- --
Cash interest expense(m).................. 955 5 41 124 -- 338
Total interest expense.................... 955 5 41 124 -- 338
EBITDA(n)................................. 11,954 734 3,623 2,155 3,042 (1,927)
Adjusted EBITDA(n)........................ 11,954 734 3,623 2,155 3,042 (1,927)
Adjusted EBITDA to cash interest
expense.................................
Adjusted EBITDA to total interest
expense.................................
<CAPTION>
PAYCO TRANSACTION COMPANY
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ------------ -----------
<S> <C> <C> <C>
Operating revenue......................... $ 130,559 $ -- $ 180,847
Salaries and benefits..................... 73,696 (6,229)(g) 84,486
Other operating expenses(c)............... 48,518 9,867(h) 95,590
---------- ------------ -----------
Operating income (loss)................... 8,345 (3,638) 771
---------- ------------ -----------
Interest expense (income), net............ 531 17,554(j) 18,904
Other expense (income).................... (168) -- (149)
---------- ------------ -----------
Income (loss) before taxes................ 7,982 (21,192) (17,984)
Income tax expense (benefit).............. 3,520 (7,647)(k) (5,714)
---------- ------------ -----------
Net income (loss)(d)...................... $ 4,462 $ (13,545) $ (12,270)
---------- ------------ -----------
---------- ------------ -----------
OTHER FINANCIAL DATA AND RATIOS:
Amortization of purchased portfolios...... $ 9,589 $ -- $ 26,649
Other depreciation and amortization....... 5,952 11,325 23,734
Data processing capital expenditures(l)... 7,676 -- 7,676
Other cash capital expenditures........... 3,000 -- 4,357
Portfolio purchases....................... 5,891 -- 11,393
Cash interest expense(m).................. 531 16,284 18,278
Total interest expense.................... 531 17,554 19,548
EBITDA(n)................................. 23,886 7,687 51,154
Adjusted EBITDA(n)........................ 25,143 7,687 52,411
Adjusted EBITDA to cash interest
expense................................. 2.9x
Adjusted EBITDA to total interest
expense................................. 2.7x
</TABLE>
See accompanying notes.
32
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
MLQ PREVIOUS
OSI INTERESTS ACQUISITION PAYCO TRANSACTION COMPANY
HISTORICAL 1/1-5/10 ADJUSTMENTS HISTORICAL ADJUSTMENTS PRO FORMA
----------- ----------- ------------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Operating revenue................. $ 60,443 $ 2,119 $ -- $ 135,147 $ -- $ 197,709
Salaries and benefits............. 23,742 -- -- 75,664 (6,632)(g) 92,774
Other operating expenses(c)....... 43,826 -- 424(f) 53,628 6,790(h) 104,668
----------- ----------- ---------- ------------ -----------
Operating (loss) income........... (7,125) 2,119 5,855 (158) 267
----------- ----------- ---------- ------------ -----------
Interest expense, net............. 5,603 -- 694 12,594(j) 18,891
Other expense (income)............ 42 -- (148) -- (106)
----------- ----------- ---------- ------------ -----------
(Loss) income before taxes........ (12,770) 2,119 5,309 (12,752) (18,518)
Income tax (benefit) expense...... (4,424) -- 678(k) 2,262 (4,313)(k) (5,797)
----------- ----------- ---------- ------------ -----------
Net (loss) income(d).............. $ (8,346) $ 2,119 $ 3,047 $ (8,439) $ (12,721)
----------- ----------- ---------- ------------ -----------
----------- ----------- ---------- ------------ -----------
OTHER FINANCIAL DATA AND RATIOS:
Amortization of purchased
portfolios...................... $ 20,586 $ -- $ 1,757 $ 12,688 $ -- $ 35,031
Other amortization and
depreciation.................... 6,569 -- (1,333) 7,148 8,270 20,654
Data processing capital
expenditures(l)................. -- -- -- 9,012 -- 9,012
Other cash capital expenditures... 1,902 -- -- 3,312 -- 5,214
Portfolio purchases............... 5,027(o) -- -- 2,689 -- 7,716
Cash interest expense(m).......... 5,280 -- -- 694 11,696 17,670
Total interest expense............ 5,633 -- -- 694 12,594 18,921
EBITDA(n)......................... 20,030 2,119 -- 25,691 8,112 55,952
Adjusted EBITDA(n)................ 20,230 2,119 -- 27,916 8,112 58,377
Adjusted EBITDA to cash interest
expense......................... 3.3x
Adjusted EBITDA to total interest
expense......................... 3.1x
</TABLE>
See accompanying notes.
33
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED
STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
The Unaudited Pro Forma Consolidated Statements of Operations for the year
ended December 31, 1995 and the nine months ended September 30, 1995 and 1996
reflect the Transactions and the Previous Acquisitions as if they had occurred
on January 1, 1995.
(a) OSI was formed in September 1995 to pursue an acquisition strategy aimed at
creating the leading provider of accounts receivable management services in
the United States. In September 1995, OSI acquired APLP, one of the largest
purchasers and managers of non-performing accounts receivable portfolios in
the United States. The historical results of OSI include APLP from the date
of its acquisition in September 1995 and the results of the subsequent
acquisitions of Miller, Continental and the MLQ Interests from their
respective dates of acquisition.
Miller was acquired in January 1996. Miller is a leading provider of student
loan and bank card contingent fee services.
Continental was acquired in January 1996. Continental is one of the leading
providers of contingent fee services in the Pacific Northwest.
In May 1996, OSI acquired the MLQ Interests.
The Previous Acquisitions have been accounted for as purchases in accordance
with Accounting Principles Board Opinion No. 16, "Business Combinations."
The purchase prices have been allocated first to the tangible and
identifiable intangible assets and liabilities of the companies based upon
estimates of their fair market values, with the remainder allocated to
goodwill. The allocations of purchase price for Miller and Continental are
preliminary. The final allocation of the purchase price may differ from the
preliminary estimates due to the final allocation being based on actual
values of certain identifiable intangible assets. The allocations of
purchase price for the Previous Acquisitions are as follows:
<TABLE>
<CAPTION>
MLQ
APLP MILLER CONTINENTAL INTERESTS
---------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Initial purchase price..................................... $ 80,000 $ 29,736 $ 18,000 $ 14,772
Working capital adjustment................................. -- (39) 1,198 --
Acquisition costs.......................................... 3,100 2,030 1,558 --
Deferred tax liabilities(1)................................ 5,497 -- -- --
Book value of net assets acquired.......................... (10,559) (2,141) (2,783) --
---------- --------- ----------- ---------
Increase in basis.......................................... $ 78,038 $ 29,586 $ 17,973 $ 14,772
---------- --------- ----------- ---------
---------- --------- ----------- ---------
Allocated to:
Property and equipment..................................... $ -- $ (282) $ -- $ --
Purchased portfolios....................................... 60,095 -- -- 14,772
Account inventory.......................................... -- 5,000 3,000 --
Other assets and liabilities, net.......................... (21) (264) -- --
Goodwill................................................... 17,964 25,132 14,973 --
---------- --------- ----------- ---------
$ 78,038 $ 29,586 $ 17,973 $ 14,772
---------- --------- ----------- ---------
---------- --------- ----------- ---------
</TABLE>
(1) The deferred tax liabilities relates to differences between the book and
tax bases of acquired assets and assumed liabilities.
34
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED
STATEMENTS OF OPERATIONS (CONTINUED)
(DOLLARS IN THOUSANDS)
(b) Represents the results of operations of Continental for the fiscal year
ended September 30, 1995. Operating revenue and net income for the three
months ended December 31, 1995, which have been excluded from the
accompanying presentations, were approximately $2,689 and $227,
respectively.
(c) Other operating expenses include telephone, postage, supplies, occupancy
costs, data processing costs, depreciation, amortization, and miscellaneous
operating expenses.
(d) Pro forma statement of operations data do not reflect the estimated
extraordinary charge of $967, net of tax, resulting from the write-off of
existing deferred financing costs in connection with the Transactions, the
non-recurring write-off of acquired technology in process in connection with
the Payco Acquisition (estimated at $1,000), or estimated expenses of $900
(net of tax) incurred by Payco in connection with the Payco Acquisition.
(e) Reflects the following adjustments:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED SEPTEMBER 30,
DECEMBER 31, --------------------
1995 1995 1996
-------------- --------- ---------
<S> <C> <C> <C>
OSI overhead costs (1)................................................ $ 1,204 $ 995 $ --
Elimination of salaries and benefits (2).............................. (1,176) (170) --
------- --------- ---------
$ 28 $ 825 $ --
------- --------- ---------
------- --------- ---------
</TABLE>
(1) Represents the salaries and related costs of the existing OSI corporate
offices.
(2) Reflects the reduction in compensation of the former owners of Miller
and Continental from the amounts actually paid to the amounts payable
under new contracts entered into with OSI.
(f) Reflects the following adjustments:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED SEPTEMBER 30,
DECEMBER 31, --------------------
1995 1995 1996
-------------- --------- ---------
<S> <C> <C> <C>
Reduction in Miller operating expenses (1)............................. $ (110) $ -- $ --
OSI overhead costs (2)................................................. 952 881 --
McCown De Leeuw management fees........................................ 258 221 --
-------------- --------- ---------
1,100 1,102 --
-------------- --------- ---------
Depreciation and amortization:
Reduction in depreciation at Miller (3).............................. (71) (53) --
Amortization of account inventory (4)................................ 5,333 4,000 (1,333)
Amortization of acquired portfolios--APLP (5)........................ 10,039 10,039 --
Amortization of acquired portfolios--MLQ Interests (5)............... 5,521 4,141 1,757
Goodwill amortization--APLP (6)...................................... 648 648 --
Goodwill amortization--Miller (6).................................... 838 628 --
Goodwill amortization--Continental (6)............................... 499 374 --
-------------- --------- ---------
22,807 19,777 424
-------------- --------- ---------
Net adjustment......................................................... $ 23,907 $ 20,879 $ 424
-------------- --------- ---------
-------------- --------- ---------
</TABLE>
35
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED
STATEMENTS OF OPERATIONS (CONTINUED)
(DOLLARS IN THOUSANDS)
(1) Reflects the elimination of certain former owner expenses at Miller.
(2) Represents the operating costs of the existing OSI corporate offices.
(3) Reflects a reduction in depreciation expense relating to assets at
Miller which were not acquired.
(4) Account inventory represents the value of the expected future revenues
from existing placements at the date of the acquisitions of Miller and
Continental less the direct costs of collection and is being amortized
over the 18-month average life of the placements.
(5) Amortization of the increase in fair value of acquired portfolios is
based on collections over a maximum of three years.
(6) Goodwill represents the excess of purchase price over the fair value of
net assets acquired. Goodwill is being amortized over 20 years for APLP
and 30 years for Miller and Continental.
(g) Represents cost savings resulting from the elimination of specific and
identified job positions and functions at the corporate and branch levels,
including branch locations to be closed, as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED SEPTEMBER 30,
DECEMBER 31, --------------------
1995 1995 1996
-------------- --------- ---------
<S> <C> <C> <C>
Corporate management.................................................. $ (4,712) $ (3,534) $ (3,824)
Branch locations...................................................... (3,593) (2,695) (2,808)
------- --------- ---------
$ (8,305) $ (6,229) $ (6,632)
------- --------- ---------
------- --------- ---------
</TABLE>
(h) Reflects the following adjustments:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED SEPTEMBER 30,
DECEMBER 31, --------------------
1995 1995 1996
-------------- --------- ---------
<S> <C> <C> <C>
Cost savings:
Facility closure (1)................................................ $ (1,195) $ (896) $ (896)
Other (2)........................................................... (748) (562) (584)
-------------- --------- ---------
(1,943) (1,458) (1,480)
-------------- --------- ---------
Depreciation and amortization:
Additional depreciation (3)......................................... 667 500 500
Amortization of covenants not to compete (4)........................ 1,667 1,250 800
Amortization of increase in account inventory (5)................... 10,000 7,500 5,000
Additional goodwill amortization--Payco (6)......................... 2,733 2,075 1,970
-------------- --------- ---------
15,067 11,325 8,270
-------------- --------- ---------
Net adjustment........................................................ $ 13,124 $ 9,867 $ 6,790
-------------- --------- ---------
-------------- --------- ---------
</TABLE>
(1) Represents net reductions in occupancy expenses resulting from the
planned closure of certain branch offices and the integration of their
business with existing locations.
36
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED
STATEMENTS OF OPERATIONS (CONTINUED)
(DOLLARS IN THOUSANDS)
(2) Represents business expenses of certain members of management whose
positions are being eliminated, the reduction in consulting fees paid to
current outside directors and other corporate charges being eliminated as
a result of the Payco Acquisition.
(3) Additional depreciation represents depreciation of the increase in fair
value of software and computer systems over three years.
(4) Represents amortization of covenants not to compete with the Payco
Chairman and other senior management over periods of one to three years.
(5) Account inventory represents the value of the expected future revenues
from existing placements at the date of the acquisition of Payco less the
direct costs of collection and is being amortized over the 18-month
average life of the placements.
(6) Goodwill represents the excess of purchase price for Payco over the fair
value of net assets acquired. Goodwill is being amortized over 30 years.
(i) Represents interest expense on the $5.0 million 9% note payable issued in
connection with the acquisition of Miller.
(j) Adjustments to interest expense based on the pro forma capitalization of
the Company are summarized in the table below:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED SEPTEMBER 30,
DECEMBER 31, --------------------
1995 1995 1996
-------------- --------- ---------
<S> <C> <C> <C>
Interest expense on Notes............................................ $ 11,000 $ 8,250 $ 8,250
Interest expense on term loans under New Bank Credit Facility (1).... 11,255 8,512 7,877
Commitment fee for revolving credit facility under New Bank Credit
Facility (2)....................................................... 290 218 218
Amortization of debt issuance costs related to the Notes and the New
Bank Credit Facility (3)........................................... 1,692 1,270 1,251
Elimination of historical interest expense (including amortization of
debt issuance costs)............................................... (2,059) (696) (5,002)
-------------- --------- ---------
$ 22,178 $ 17,554 $ 12,594
-------------- --------- ---------
-------------- --------- ---------
</TABLE>
(1) The New Bank Credit Facility is comprised of (a) two $71.0 million term
loans which provide for quarterly amortization until final maturity in
five and seven years, respectively, and (b) a secured revolving credit
facility of up to $58.0 million, which is fully revolving until final
maturity in five years. One term loan bears interest, at the Company's
option, at (a) a base rate equal to the greater of the federal funds rate
plus 0.5% or the lender's customary base rate, plus 1.5% or (b) the
reserve adjusted Eurodollar rate plus 2.5%. The second term loan bears
interest, at the Company's option, at (a) a base rate equal to the
greater of the federal funds rate plus 0.5% or the lender's customary
base rate, plus 2.0% or (b) the reserve adjusted Eurodollar rate plus
3.0%. The interest for each of the pro forma periods has been calculated
based on a Eurodollar rate of 5.375% and average drawn down balances
based on scheduled repayments.
(2) The commitment fee on the unused portion of the revolving credit
facility is 0.5% per annum.
(3) Deferred financing costs are amortized over the life of the related
debt, five years and seven years for the first and second term loans,
respectively, and ten years for the Notes, using the effective interest
method.
37
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED
STATEMENTS OF OPERATIONS (CONTINUED)
(DOLLARS IN THOUSANDS)
A 0.125% change in each of the assumed interest rates applicable to the New
Bank Credit Facility would change aggregate pro forma interest expense by
$170, $129 and $121 for the year ended December 31, 1995 and nine months
ended September 30, 1995 and 1996, respectively.
(k) Certain of the Previous Acquisitions involved the acquisitions of equity
interests in Subchapter S corporations and limited partnerships. Generally,
for federal and state income tax purposes, such entities are treated as
pass-through entities taxable at the shareholder or partner level, rather
than at the entity level. Due to certain ownership restrictions, the
pass-through status of the former S corporations terminated upon their
acquisition by the Company. The pro forma adjustments reflect (i) a net
increase in the provision for income taxes as a consequence of treating the
acquired entities as if they were taxable C corporations during the pro
forma period and (ii) the additional income tax provision (benefit) as a
result of the pro forma adjustments described in these footnotes, except for
certain goodwill amortization adjustments, at an effective statutory tax
rate of 40%.
(l) Represents capital expenditures related to the new accounts receivable
management and student loan billing systems at Payco.
(m) Represents total interest expense less amortization of debt issuance costs.
(n) EBITDA is defined as income from continuing operations before interest,
other expense (income), taxes, depreciation and amortization.
Adjusted EBITDA reflects EBITDA as defined above adjusted for the following:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED SEPTEMBER 30,
DECEMBER 31, --------------------
1995 1995 1996
-------------- --------- ---------
<S> <C> <C> <C>
Non-recurring relocation expenses incurred by Continental(1)......... $ -- $ -- $ 200
Duplicative and implementation systems costs (2)..................... 1,972 1,257 2,225
------- --------- ---------
$ 1,972 $ 1,257 $ 2,425
------- --------- ---------
------- --------- ---------
</TABLE>
(1) Comprises moving costs, consulting fees, additional salaries and other
expenses relating to the relocation of Continental's main office in
Kirkland, WA.
(2) The adjustment reflects the additional costs of implementing new
computer systems at Payco and the duplicative costs of operating the old
systems concurrently. The duplicative costs eliminated include the cost
of the maintenance contract, software licenses and support staff relating
to the old systems. The implementation costs relate primarily to costs
which were incurred in rolling out the new accounts receivable management
system to Payco's branch offices.
EBITDA and adjusted EBITDA are generally accepted as providing useful
information regarding a company's ability to service and/or incur debt.
EBITDA and adjusted EBITDA should not be considered in isolation or as
substitutes for net income, cash flows from continuing operations, or other
consolidated income or cash flow data prepared in accordance with generally
accepted accounting principles or as measures of a company's profitability
or liquidity.
(o) Excludes the acquisition in May 1996 of the MLQ Interests for $14,772.
38
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA--OSI
The following selected historical financial data set forth below have been
derived from, and are qualified by reference to (i) the audited Consolidated
Financial Statements of OSI for the period from September 21, 1995 to December
31, 1995 and (ii) the audited consolidated financial statements of APLP (as
predecessor) for the two years ended December 31, 1993 and 1994 and the period
January 1, 1995 to September 20, 1995. The audited financial statements of OSI
and APLP referred to above are included elsewhere in this Prospectus. The
selected historical financial data set forth below as of December 31, 1993 and
for the years ended December 31, 1991 and 1992 have been derived from the
audited financial statements of APLP not included in this Prospectus. The
selected historical unaudited financial data for the nine months ended September
30, 1995 and 1996 have been derived from, and are incorporated by reference to,
APLP's and OSI's unaudited financial statements included elsewhere herein and
include all adjustments, consisting of normal recurring adjustments, which
management considers necessary for a fair presentation of the results of APLP
and OSI, as the case may be, for such periods. Results for the interim periods
are not necessarily indicative of results for the full year. The selected
financial data set forth below should be read in conjunction with, and are
qualified by reference to, "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Consolidated Financial Statements
and accompanying notes thereto of APLP and OSI included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
APLP (AS PREDECESSOR) OSI (AS SUCCESSOR)
----------------------------------------------------------- --------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
FROM FROM FROM
JANUARY 1 SEPTEMBER 21 SEPTEMBER 21
YEAR ENDED DECEMBER 31, TO TO TO
------------------------------------------ SEPTEMBER 20, DECEMBER 31, SEPTEMBER 30,
1991 1992 1993 1994 1995 1995 1995
--------- --------- --------- --------- --------------- --------------- ---------------
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Operating revenue (a)........ $ 1,463 $ 13,241 $ 23,696 $ 39,282 $ 21,293 $ 8,311 $ 869
Salaries and benefits........ -- 418 1,596 2,636 4,471 2,552 42
Other operating expenses
(b)........................ 696 11,138 10,692 8,790 7,343 8,480 698
--------- --------- --------- --------- --------------- --------------- ---------------
Operating income (loss)...... 767 1,685 11,408 27,856 9,479 (2,721) 129
Interest expense, net........ 194 1,229 1,301 2,599 495 1,361 5
Other expense................ -- -- -- 166 -- -- --
--------- --------- --------- --------- --------------- --------------- ---------------
Income (loss) before taxes... 573 456 10,107 25,091 8,984 (4,082) 124
Income tax benefit........... -- -- -- -- -- (1,605) --
--------- --------- --------- --------- --------------- --------------- ---------------
Net income (loss)............ $ 573 $ 456 $ 10,107 $ 25,091 $ 8,984 $ (2,477) $ 124
--------- --------- --------- --------- --------------- --------------- ---------------
--------- --------- --------- --------- --------------- --------------- ---------------
Ratio of earnings to fixed
charges (c)................ 4.0x 1.4x 8.1x 9.4x 9.8x -- 11.3x
BALANCE SHEET DATA (AT END OF
PERIOD):
Working capital.............. $ 262 $ 1,146 $ 5,622 $ 16,897 $ 3,809 $ 22,663 $ 20,610
Total assets................. 736 7,656 8,945 22,941 11,272 85,652 89,070
Total debt................... 143 2,053 3,544 -- -- 36,462 36,350
Partners' capital/
Stockholders' equity....... 179 (258) 4,582 22,162 10,559 42,448 45,274
OTHER FINANCIAL DATA:
Amortization of purchased
portfolios................. $ 454 $ 8,182 $ 6,013 $ 2,667 $ 2,308 $ 5,390 $ 572
Other depreciation and
amortization............... -- 14 57 102 167 331 33
Cash capital expenditures.... -- 143 222 463 574 97 --
Portfolio purchases.......... 655 9,084 7,088 6,800 5,502 903 --
EBITDA (d)................... 1,221 9,881 17,478 30,625 11,954 3,000 734
Adjusted EBITDA (d).......... 1,221 9,881 15,609 18,465 11,954 3,000 734
<CAPTION>
<S> <C>
NINE MONTHS
ENDED
SEPTEMBER 30,
1996
---------------
<S> <C>
INCOME STATEMENT DATA:
Operating revenue (a)........ $ 60,443
Salaries and benefits........ 23,742
Other operating expenses
(b)........................ 43,826
---------------
Operating income (loss)...... (7,125)
Interest expense, net........ 5,603
Other expense................ 42
---------------
Income (loss) before taxes... (12,770)
Income tax benefit........... (4,424)
---------------
Net income (loss)............ $ (8,346)
---------------
---------------
Ratio of earnings to fixed
charges (c)................ --
BALANCE SHEET DATA (AT END OF
PERIOD):
Working capital.............. $ 26,515
Total assets................. 141,786
Total debt................... 69,138
Partners' capital/
Stockholders' equity....... 64,866
OTHER FINANCIAL DATA:
Amortization of purchased
portfolios................. $ 20,586
Other depreciation and
amortization............... 6,569
Cash capital expenditures.... 1,902
Portfolio purchases.......... 5,027(e)
EBITDA (d)................... 20,030
Adjusted EBITDA (d).......... 20,230
</TABLE>
- ------------------------------
(a) 1993 and 1994 operating revenues include proceeds on sales of purchased
portfolios of $1,869 and $13,325, respectively. The related amortization on
the portfolios sold included in other operating expenses was $54 and $1,155,
respectively. In addition, transaction costs of $1,165 were incurred in
connection with the 1994 sale and are included in other operating expenses.
(b) Other operating expenses include telephone, postage, supplies, occupancy
costs, data processing costs, depreciation, amortization, and miscellaneous
operating expenses.
39
<PAGE>
(c) The ratio of earnings to fixed charges is computed by adding fixed charges
(excluding preferred stock dividends) to income (loss) before taxes and
dividing that sum by the sum of fixed charges. Fixed charges consist of
interest (including amortization of debt issuance costs), a portion of rent
expense that management considers to be interest and preferred stock
dividends, increased to reflect the pretax amounts which would be required
to meet dividend payments. Historical OSI earnings for the period from
September 21, 1995 to December 31, 1995 and the nine months ended September
30, 1996 were insufficient to cover fixed charges by $4,455 and $13,792,
respectively.
(d) EBITDA is defined as income from continuing operations before interest,
other expense, taxes, depreciation and amortization. Adjusted EBITDA
reflects EBITDA as defined above adjusted for proceeds from portfolio sales,
net of transaction costs, of $1,869 and $12,160 in 1993 and 1994,
respectively, and non-recurring relocation expenses incurred by Continental
of $200 in the nine months ended September 30, 1996. EBITDA and adjusted
EBITDA are generally accepted as providing useful information regarding a
company's ability to service and/or incur debt. EBITDA and adjusted EBITDA
should not be considered in isolation or as substitutes for net income, cash
flows from continuing operations, or other consolidated income or cash flow
data prepared in accordance with generally accepted accounting principles or
as measures of a company's profitability or liquidity.
(e) Excludes the acquisition of the MLQ Interests for $14,772.
40
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA -- PAYCO
The following selected historical financial data for each of the years in
the three-year period ended December 31, 1995 have been derived from, and are
qualified by reference to, the audited financial statements of Payco included
elsewhere in this Prospectus. The selected historical financial data set forth
below for the years ended December 31, 1991 and 1992 have been derived from the
audited financial statements of Payco not included in this Prospectus. The
selected historical unaudited financial data for the nine months ended September
30, 1995 and 1996 have been derived from, and are incorporated by reference to,
Payco's unaudited financial statements included elsewhere herein and include all
adjustments, consisting of normal recurring adjustments, which management
considers necessary for a fair presentation of the results of Payco for such
periods. Results for the interim periods are not necessarily indicative of
results for the full year. The selected financial data set forth below should be
read in conjunction with, and are qualified by reference to, "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Consolidated Financial Statements of Payco and accompanying notes thereto
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
NINE
MONTHS
ENDED
SEPTEMBER
YEAR ENDED DECEMBER 31, 30,
---------------------------------------------------------- ----------
<S> <C> <C> <C> <C> <C> <C>
1991 1992 1993 1994 1995 1995
---------- ---------- ---------- ---------- ---------- ----------
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Operating revenue.................................. $ 112,452 $ 123,585 $ 150,795 $ 150,696 $ 175,560 $ 130,559
Salaries and benefits.............................. 62,994 66,715 82,007 82,786 100,108 73,696
Other operating expenses(a)........................ 41,455 51,059 61,281 59,445 65,536 48,518
---------- ---------- ---------- ---------- ---------- ----------
Operating income................................... 8,003 5,811 7,507 8,465 9,916 8,345
Interest expense, net.............................. 55 94 268 148 770 531
Other income....................................... (281) (65) (28) (68) (234) (168)
---------- ---------- ---------- ---------- ---------- ----------
Income before taxes................................ 8,229 5,782 7,267 8,385 9,380 7,982
Income tax expense................................. 3,297 2,494 3,266 3,826 4,130 3,520
---------- ---------- ---------- ---------- ---------- ----------
Net income......................................... $ 4,932 $ 3,288 $ 4,001 $ 4,559 $ 5,250 $ 4,462
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
Ratio of earnings to fixed charges (b)............. 5.8x 4.2x 4.2x 5.3x 4.5x 5.1x
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital.................................... $ 15,850 $ 15,037 $ 22,077 $ 21,730 $ 13,267 $ 17,118
Total assets....................................... 63,590 73,232 79,081 87,498 103,675 104,786
Total debt......................................... 95 4,102 2,566 6,672 14,428 14,302
Stockholders' equity............................... 36,200 39,583 43,584 48,043 53,150 52,541
OTHER FINANCIAL DATA:
Amortization of purchased portfolios............... $ 2,527 $ 8,882 $ 11,832 $ 10,319 $ 12,365 $ 9,589
Other depreciation and amortization................ 5,848 6,371 6,819 6,905 7,805 5,952
Data processing capital expenditures (c)........... -- -- -- 990 10,076 7,676
Other capital expenditures......................... 3,628 4,762 2,598 3,765 3,371 3,000
Portfolio purchases................................ 7,504 10,671 15,152 17,309 9,725 5,891
EBITDA (d)......................................... 16,378 21,064 26,158 25,689 30,086 23,886
Adjusted EBITDA (d)................................ 16,378 21,064 26,158 25,689 32,058 25,143
<CAPTION>
<S> <C>
1996
----------
<S> <C>
INCOME STATEMENT DATA:
Operating revenue.................................. $ 135,147
Salaries and benefits.............................. 75,664
Other operating expenses(a)........................ 53,628
----------
Operating income................................... 5,855
Interest expense, net.............................. 694
Other income....................................... (148)
----------
Income before taxes................................ 5,309
Income tax expense................................. 2,262
----------
Net income......................................... $ 3,047
----------
----------
Ratio of earnings to fixed charges (b)............. 3.5x
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital.................................... $ 11,159
Total assets....................................... 103,857
Total debt......................................... 11,983
Stockholders' equity............................... 56,197
OTHER FINANCIAL DATA:
Amortization of purchased portfolios............... $ 12,688
Other depreciation and amortization................ 7,148
Data processing capital expenditures (c)........... 9,012
Other capital expenditures......................... 3,312
Portfolio purchases................................ 2,689
EBITDA (d)......................................... 25,691
Adjusted EBITDA (d)................................ 27,916
</TABLE>
- ------------------------
(a) Other operating expenses include telephone, postage, supplies, occupancy
costs, data processing costs, depreciation, amortization, and miscellaneous
operating expenses.
(b) The ratio of earnings to fixed charges is computed by adding fixed charges
to income before taxes and dividing that sum by the sum of fixed charges.
Fixed charges consist of interest and a portion of rent expense that
management considers to be interest.
(c) Represents capital expenditures related to the new collection and student
loan billing systems at Payco.
(d) EBITDA is defined as income from continuing operations before interest,
other income, taxes, depreciation and amortization. Adjusted EBITDA reflects
EBITDA as defined above adjusted for duplicative costs and implementation
associated with new computer systems of $1,972, $1,257 and $2,225 in the
year ended December 31, 1995 and the nine months ended September 30, 1995
and 1996, respectively. EBITDA and adjusted EBITDA are generally accepted as
providing useful information regarding a company's ability to service and/or
incur debt. EBITDA and adjusted EBITDA should not be considered in isolation
or as substitutes for net income, cash flows from continuing operations, or
other consolidated income or cash flow data prepared in accordance with
generally accepted accounting principles or as measures of a company's
profitability or liquidity.
41
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company is one of the largest providers of accounts receivable
management services in the United States. Pursuant to the Merger Agreement, OSI
has acquired Payco in a merger transaction. In connection with the Payco
Acquisition, the Company expects to realize approximately $10.8 million of
initial annualized cost savings through facility consolidations, reductions in
headcount, reductions in operating expenses and purchasing efficiencies. In
addition, the Company has initiated a review of its combined operations and
expects to realize further cost savings as a result of that review. The Company
will accrue restructuring charges aggregating approximately $5.0 million in
connection with the Transactions, representing costs associated with closing
certain Payco offices, severance payments to employees to be terminated and fees
to be incurred in connection with the termination of certain contracts. The
Company believes that its future operating results may not be directly
comparable to historical operating results of either OSI or Payco due to the
Company's increased size, integration of the two businesses and related cost
savings. The Company records significant non-cash expenses as a result of
amortization of goodwill, acquired portfolios and account inventory recorded in
connection with the Company's acquisitions and the amortization of newly
purchased portfolios. For the year ended December 31, 1995 and the last twelve
months ended September 30, 1996, non-cash charges, on a pro forma basis, were
$67.1 million and $72.4 million, respectively. For the same periods, EBITDA, on
a pro forma basis, was $65.3 million and $70.1 million, respectively. Certain
factors which have affected the operating results of the Company are discussed
below.
PREVIOUS ACQUISITIONS AND ACCOUNTING TREATMENT. OSI was formed in September
1995 in connection with the acquisition of APLP for a total purchase price of
approximately $80.0 million. The APLP acquisition was accounted for by the
purchase method and resulted in goodwill of approximately $18.0 million and a
step-up in the basis of purchased portfolios of approximately $60.1 million.
Goodwill is being amortized over 20 years. Purchased portfolios are amortized to
match the receipt of collections, however, in no circumstance does the
amortization period exceed three years. In January 1996, OSI acquired
Continental and Miller for a total purchase price of approximately $48.9
million. These acquisitions were accounted for by the purchase method and
resulted in goodwill of approximately $40.1 million, which is being amortized
over 30 years. Part of the purchase price was allocated to account inventory
which represents the value of expected future revenues from existing placements
at the date of acquisition by OSI less the direct costs of collection. The
amount allocated to account inventory was $3.0 million at Continental and $5.0
million at Miller and is being amortized over a period of 18 months, which
represents the average life of the placements. In May 1996, OSI acquired the MLQ
Interests for a purchase price of $14.8 million (including a $3.5 million note
payable). The acquisition of the MLQ Interests was treated as an acquisition of
portfolios and accounted for as set forth below.
PAYCO ACQUISITION. Like the Previous Acquisitions, the Payco Acquisition
will be accounted for as a purchase of Payco by OSI for $150.2 million. As a
result, the assets and liabilities of Payco will be recorded at their estimated
fair market value and an amount equal to the excess of the purchase price over
the fair value of assumed liabilities will be allocated to property and
equipment, identifiable tangible and intangible assets and goodwill. Goodwill
will be amortized over 30 years. The pro forma financial information assumes
that $21.8 million of the excess is allocated to property and equipment,
identifiable tangible and intangible assets, including $15.0 million to account
inventory, and $86.8 million to goodwill. Consequently, the post-Payco
Acquisition statements of operations will be affected by the amortization of
such excess purchase price. See "Unaudited Pro Forma Consolidated Financial
Data."
AMORTIZATION OF PORTFOLIOS. The costs of purchased portfolios are generally
amortized on an accelerated basis over a 36-month period. The amortization of
these costs, calculated on an individual portfolio basis, is based upon current
year revenue in proportion to the expected future revenue
42
<PAGE>
generated by the portfolio over a maximum period of three years. The Company
calculates the amortization of purchased portfolios on a quarterly basis.
Concurrently with this calculation, the Company evaluates the recoverability of
the costs of purchased portfolios and, based on expected future revenue,
assesses whether a change to the amortization schedule is warranted.
CLASSIFICATION OF CERTAIN REVENUES. Payco has historically classified
revenues from certain non-traditional accounts receivable management projects
and other outsourcing activities as contingent fee revenues. In the future, OSI
will classify revenues from comparable services as outsourcing revenues.
Revenues from these services included in Payco contingent fee revenues were
$11.0 million, $13.6 million and $19.8 million for the years ended December 31,
1993, 1994 and 1995, respectively and $14.1 million and $17.2 million for the
nine months ended September 30, 1995 and 1996, respectively.
RESULTS OF OPERATIONS
OSI HISTORICAL FINANCIAL DATA
NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1995
REVENUES for the nine months ended September 30, 1996 were $60.4 million,
compared to $22.2 million in the comparable period in 1995. Revenues from
contingent fee services were $27.9 million for the nine months ended September
30, 1996 compared to $0 in the comparable period in 1995. The increase in
contingent fee revenues was a result of the acquisitions of Miller and
Continental. OSI is experiencing competitive pressure on prices of contingent
fee services. Revenues from purchased portfolios increased to $32.5 million for
the nine months ended September 30, 1996 compared to $22.2 million for the
comparable period in 1995. Purchased portfolio revenues increased as a result of
the hiring of additional account representatives at API, facilitating the
servicing of a higher volume of accounts, as well as from the acquisition of the
MLQ Interests.
OPERATING EXPENSES for the nine months ended September 30, 1996 were $67.5
million compared to $12.6 million for the comparable period in 1995, an increase
of $54.9 million. Cash operating expenses were $40.4 million for the nine months
ended September 30, 1996 and $9.5 million for the comparable period in 1995.
Cash expenses increased as a result of the Miller and Continental acquisitions,
the hiring of additional account representatives at API, the opening of an API
collection facility in St. Louis, Missouri, one-time costs associated with the
relocation of Continental's headquarters, and the addition of corporate overhead
of OSI. Of the $67.5 million in expenses for the nine months ended September 30,
1996, $20.6 million was attributable to amortization of the purchase price of
purchased portfolios (compared to $2.9 million in 1995), $4.0 million was
attributable to amortization of account inventory (compared to $0 in 1995), $1.7
million was attributable to amortization of goodwill associated with the
acquisitions of APLP, Miller and Continental (compared to $0 in 1995) and $0.9
million was attributable to depreciation (compared to $0.2 million in 1995). The
increase in amortization expenses was the result of additional goodwill recorded
in connection with the Miller and Continental acquisitions and the step-up in
basis of purchased portfolios at API.
OPERATING INCOME (LOSS) for the nine months ended September 30, 1996 was
$(7.1) million compared to $9.6 million for the comparable period in 1995. The
operating loss was a result of increased amortization related to the step-up in
basis of purchased portfolios, amortization of goodwill and account inventory
related to the acquisitions of Miller and Continental and the increase in the
number of account representatives at API.
EBITDA for the nine months ended September 30, 1996 was $20.0 million
compared to $12.7 million for the comparable period in 1995. The increase of
$7.3 million in EBITDA reflects additional revenues associated with the
acquisitions of Miller, Continental and the MLQ Interests but was partially
offset by the costs associated with hiring additional account representatives at
API. EBITDA is defined as income
43
<PAGE>
from continuing operations before interest, other expense, taxes, depreciation
and amortization. EBITDA is generally accepted as providing useful information
regarding a company's ability to service and/or incur debt. EBITDA should not be
considered in isolation or as a substitute for net income, cash flows from
continuing operations, or other consolidated income or cash flow data prepared
in accordance with generally accepted accounting principles or as a measure of a
company's profitability or liquidity.
INTEREST EXPENSE, NET for the nine months ended September 30, 1996 was $5.6
million compared to $0.5 million for the comparable period in 1995. This
increase was primarily due to indebtedness incurred to finance the acquisitions
APLP, Miller, Continental and the MLQ Interests.
NET INCOME (LOSS) for the nine months ended September 30, 1996 was ($8.3)
million compared to $9.1 million for the comparable period in 1995. The decrease
in net income resulted primarily from increased amortization expense from the
step-up in the basis of acquired portfolios, goodwill and account inventory
recorded in connection with the acquisitions of APLP, Miller and Continental,
and the interest expense increase associated with the APLP, Miller and
Continental acquisitions.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
REVENUES for the year ended December 31, 1995 were $29.6 million compared to
$39.3 million in the comparable period in 1994. In 1994, revenue of $13.3
million was recorded from a non-recurring sale of a previously-purchased
portfolio. Excluding the revenue from this sale, 1994 revenues were $26.0
million. Excluding the portfolio sale in 1994, revenues increased $3.6 million
from 1994 to 1995, an increase of 14%, reflecting the hiring of additional
account representatives and additional portfolio purchases.
OPERATING EXPENSES for the year ended December 31, 1995 were $22.8 million
compared to $11.4 million for the comparable period in 1994. Excluding expenses
related to the 1994 portfolio sale, 1994 expenses were $9.1 million. Excluding
the portfolio sale in 1994, operating expenses increased $13.7 million from 1994
to 1995. Cash operating expenses were $14.7 million in 1995 (compared to $8.7
million in 1994). The increase in cash operating expenses was the result of the
hiring of 192 additional account representatives, which increased the total
number of account representatives by 144%, and the opening of new API collection
facilities in San Antonio, Texas and Phoenix, Arizona. Of the $22.8 million in
expenses in 1995, $7.7 million was attributable to amortization of purchased
portfolios (compared to $2.7 million in 1994) and $0.5 million was attributable
to amortization of goodwill and depreciation (compared to $0.1 million in 1994).
These increases were due to amortization expense from the step-up in the basis
of purchased portfolios and the goodwill recorded in connection with the
acquisition of APLP.
OPERATING INCOME for the year ended December 31, 1995 was $6.8 million
compared to $27.9 million for the comparable period in 1994. Excluding amounts
relating to the 1994 portfolio sale, 1994 operating income was $16.9 million.
Excluding the portfolio sale in 1994, operating income decreased $10.1 million
from 1994 to 1995. This decrease reflects higher amortization of purchased
portfolios and goodwill from the acquisition of APLP of $5.3 million.
EBITDA for the year ended December 31, 1995 was $15.0 million compared to
$30.6 million for the comparable period in 1994. Excluding the 1994 portfolio
sale, EBITDA was $18.5 million. EBITDA decreased by $3.5 million, excluding the
1994 portfolio sale, due to the increase in the total number of account
representatives, the opening of new collections facilities in San Antonio and
Phoenix, costs associated with the acquisition of APLP and a shift in business
mix from portfolios wholly-owned by APLP in 1994 to portfolios purchased in
partnership with other entities in 1995.
INTEREST EXPENSE, NET for the year ended 1995 was $1.9 million, $0.7 million
lower than the comparable period in 1994, reflecting the reduction in contingent
interest paid in connection with a loan agreement. See "Financial
Statements--Outsourcing Solutions Inc. and Subsidiaries."
44
<PAGE>
NET INCOME for the year ended December 31, 1995 was $6.5 million compared to
$25.1 million for the comparable period in 1994. Excluding amounts relating to
the 1994 portfolio sale, 1994 net income was $14.1 million. Excluding the 1994
portfolio sale, net income decreased by $7.6 million from 1994 to 1995. This
decline was primarily related to the increase in amortization of purchased
portfolios and goodwill recorded in connection with the acquisition of APLP, the
opening of the two new facilities and the hiring of additional account
representatives.
YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993
REVENUES for the year ended December 31, 1994 were $39.3 million compared to
$23.7 million in the comparable period in 1993. Revenue of $13.3 million and
$1.9 million was recorded from the sales of purchased portfolios in 1994 and
1993, respectively. Excluding revenues from these sales, 1994 revenues were
$26.0 million, an increase of $4.2 million, or 19%, over 1993 revenues of $21.8
million. This increase in revenues was primarily a result of an increase in the
number of account representatives and additional portfolio purchases.
OPERATING EXPENSES for the year ended December 31, 1994 were $11.4 million
compared to $12.3 million for the comparable period in 1993. Excluding the 1994
and 1993 portfolio sales, expenses for the year ended December 31, 1994 were
$9.1 million compared to 1993 expenses of $12.2 million, a decrease of $3.1
million. Cash operating expenses were $8.7 million in 1994 compared to $6.2
million in 1993. The increase in cash operating expenses was primarily a result
of the hiring of additional account representatives and costs associated with
the acquisition of additional portfolios. Of the $11.4 million in expenses in
1994, $2.7 million was attributable to amortization of purchased portfolios
compared to $6.0 million in 1993. This decrease was primarily due to the use of
the cost recovery method of amortization through December 31, 1993 and the
effect in 1994 of a change in the method of calculating amortization.
OPERATING INCOME for the year ended December 31, 1994 of $27.9 million
increased $16.4 million over the comparable period in 1993. Excluding the gain
realized from portfolio sales in 1993 and 1994, operating income for the year
ended December 31, 1994 was $16.9 million compared to $9.6 million for the
comparable period in 1993, an increase of $7.3 million. This increase was driven
by the lower amortization expense in 1994 as discussed above.
EBITDA for the year ended December 31, 1994 was $30.6 million compared to
$17.5 million in the comparable period in 1993. Excluding the portfolio sales in
1994 and 1993, EBITDA was $18.5 million and $15.6 million, respectively. EBITDA
increased as a result of the increase in the number of account representatives
and the purchase of additional portfolios.
INTEREST EXPENSE, NET for the year ended 1994 was $2.6 million, compared to
$1.3 million in the comparable period in 1993. The increase was primarily a
result of additional contingent interest paid in connection with a loan
agreement. See "Financial Statements--Outsourcing Solutions Inc. and
Subsidiaries."
NET INCOME for the year ended December 31, 1994 was $25.1 million compared
to $10.1 million in 1993. Excluding amounts relating to the 1994 and 1993
portfolio sales, 1994 net income was $14.1 million and 1993 net income was $8.3
million. The increase of $5.8 million was primarily related to the reduction in
amortization resulting from the change in the amortization method and the
purchase of additional portfolios.
45
<PAGE>
PAYCO HISTORICAL FINANCIAL DATA
NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1995
TOTAL OPERATING REVENUE for the nine month period ended September 30, 1996
was $135.1 million or a 3.5% increase over the first nine months of 1995.
Operating revenue for the nine month period ended September 30, 1996 and
1995 is summarized below.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
------------------------
<S> <C> <C>
1996 1995
----------- -----------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C>
Revenue:
Retail Collection................................................... $ 83,395 $ 85,315
Health Care Outsourcing............................................. 15,493 11,709
Commercial Collection............................................... 11,077 9,052
Accounts Receivable--Purchased...................................... 15,114 12,055
Billing............................................................. 6,542 6,620
Teleservicing....................................................... 3,526 5,808
----------- -----------
Total Operating Revenue........................................... $ 135,147 $ 130,559
----------- -----------
----------- -----------
</TABLE>
The decrease in retail collection revenue for the first nine months of 1996
compared to the same period in 1995 is primarily attributable to changes in
regulations that affect certain collection procedures in the student loan
industry, reduced revenue in the credit card industry and Payco's effort to
curtail the level of business with less profitable clients. Effective
contingency rates in certain industries continue to be under pressure.
Health care outsourcing revenue increased $3.8 million for the nine months
ended September 30, 1996 as compared to the same period in 1995. Revenue from
Payco's contract with HBO & Company, which it commenced on September 1, 1995 as
primary subcontractor in performing business office management for Maricopa
County Health Care Systems, accounted for $3.2 million of the increase in health
care outsourcing revenue for the nine-month period ended September 30, 1996.
Commercial collection revenue increased $2.0 million during the first nine
months of 1996 compared to the first nine months of 1995, primarily as a result
of the revenue contributed by Grable, Greiner & Wolff, the commercial collection
agency acquired by Payco on May 1, 1995.
Accounts receivable-purchased revenue increased $3.1 million during the
first nine months of 1996 as compared to the first nine months of 1995. Payco
recognized revenue of $6.5 million as a result of the sale on July 18, 1996 of
approximately one-half the book value of its purchased receivable portfolio.
Corresponding amortization expense of $6.3 million was also recognized.
TOTAL OPERATING EXPENSES, which is the total of salaries and benefits and
other operating expenses, increased $7.1 million or 5.8% during the first nine
months of 1996 compared to the first nine months of 1995. The 1996 cost of
Payco's data processing functions (equipment, software and personnel) increased
by $2.3 million for the nine-month period ended September 30, 1996. This
increase is primarily attributable to the WIN receivable management system.
Acquisitions which occurred in 1995 accounted for $1.2 million of the overall
increase between years.
SALARIES AND BENEFITS, Payco's largest expense, was $75.7 million for the
nine-month period ended September 30, 1996 compared to $73.7 million for the
same period in 1995, an increase of 2.7%. Approximately $0.6 million of the
increase in salaries and benefits was a result of the 1995 business
46
<PAGE>
acquisitions. Exclusive of the effect of the 1995 business acquisitions,
salaries and benefits increased 1.9%.
OTHER OPERATING EXPENSES increased 10.5% to $53.6 million for the first nine
months of 1996 compared to the same period in 1995. The significant items in
other operating expenses are telephone, postage and supplies, occupancy, data
processing equipment, and amortization of acquisition costs. These items are
explained in detail as follows.
Telephone expense increased 2.0% to $8.0 million for the nine months ended
September 30, 1996 compared to the same period in 1995. Telephone expense
exclusive of 1995 acquisitions increased 1.3%. Included in telephone expense are
costs associated with dedicated communication datalines, local and long distance
service, and depreciation and maintenance on telephone equipment. Decreased
telephone usage as a result of lower teleservicing business was offset by
increased collection-related telephone usage. Increased dataline, maintenance
and depreciation costs also contributed to the overall increase in telephone
expense.
Postage and supplies expense was flat at $8.0 million for the nine month
period ended September 30, 1996 as compared to the same period in 1995.
Exclusive of 1995 business acquisitions, postage and supplies expense decreased
1.0%.
Occupancy costs, which includes leased office space, depreciation of
furniture and fixtures, amortization of leasehold improvements and rental and
repair of office equipment decreased 2.1% to $6.7 million. Occupancy costs
exclusive of 1995 acquisitions decreased 3.8% for the first nine months of 1996
compared to the first nine months of 1995, primarily as a result of the
relocation of certain offices.
Data processing equipment costs increased $2.5 million to $8.5 million for
the period ended September 30, 1996 when compared to the same period in 1995, or
40.8%. Exclusive of the 1995 business acquisitions, data processing equipment
costs increased $2.3 million, or 39.7%, during the first nine months of 1996,
primarily as a result of Payco's investment in WIN. Installation of the WIN
system continued during the third quarter of 1996 bringing the number of offices
operating on WIN to 18 as of September 30, 1996. WIN will cost approximately
$19-21 million when installed in all Payco collection offices. As of September
30, 1996, approximately 59.7% of Payco's retail collection revenue was being
collected on the WIN system. WIN installation is expected to be completed by
mid-1998. Payco expects to begin the test phase of the student loan billing
system in early 1997. The total cost of the student loan billing system will be
approximately $4.0 million. As of September 30, 1996 total investments in the
WIN and student loan system were $17.3 million and $2.8 million, respectively.
Amortization of acquisition costs was $14.1 million for the first nine
months of 1996 compared to $11.5 million for the same period in 1995. This
expense category includes the amortization of non-compete agreements, debtor
account inventory, goodwill and purchased accounts receivable portfolios.
Amortization expense associated with purchased accounts receivable portfolios
increased by $3.1 million between years to $12.7 million. On July 18, 1996 Payco
sold approximately one half of the book value of its portfolio of purchased
accounts receivables to an unrelated third party. As a result of this sale,
amortization of $6.3 million was recorded.
Remaining other operating costs increased $0.1 million to $8.4 million in
the first nine months of 1996 compared to the first nine months of 1995,
primarily as a result of increased legal costs and reserves and 1995 business
acquisitions. Other operating costs include, among other costs, legal, business
insurance, skip tracing costs and travel and entertainment costs.
EBITDA increased for the nine-month period ended September 30, 1996 compared
to the same period in 1995 by 7.6% to $25.7 million. Exclusive of the sale of
accounts receivable portfolios, EBITDA decreased 19.7% primarily as a result of
decreased operating income, which is partially attributable to duplicate costs
associated with the development and implementation of the new computer systems.
47
<PAGE>
INTEREST EXPENSE increased primarily due to the increase in average
borrowings under Payco's line of credit, which was used primarily to finance WIN
related purchases.
INCOME TAXES. The effective tax rate decreased between years from 44.0% to
42.6%. The effective tax rate fluctuates as a result of changes in pre-tax
income, nondeductible expenses and changes in the mix of state income tax rates.
NET INCOME for the first nine months of 1996 was $3.0 million compared to
$4.5 million for the same period in 1995. Payco estimates that the 1996
nine-month results include approximately $2.0 million of nonrecurring costs
attributable to the need to operate both the PACS-Registered Trademark- and WIN
collection systems concurrently. These nonrecurring costs are expected to
continue through 1996 and into 1997.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
TOTAL OPERATING REVENUE for the year ended December 31, 1995 was $175.6
million, a 16.5% increase over the comparable period of 1994. Total operating
revenue exclusive of the effect of 1995 business acquisitions increased 9.6% for
the year ended December 31, 1995 compared to the year ended December 31, 1994.
The following table shows the components of revenue for the years ended December
31, 1994 and 1995.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------------
<S> <C> <C>
1994 1995
----------- -----------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C>
Revenue:
Retail Collection................................................... $ 103,876 $ 114,233
Heath Care Outsourcing.............................................. 11,393 16,923
Commercial Collection............................................... 4,104 12,260
Accounts Receivable Purchases....................................... 13,128 15,798
Billing............................................................. 9,488 8,804
Teleservicing....................................................... 8,707 7,542
----------- -----------
Total Operating Revenue........................................... $ 150,696 $ 175,560
----------- -----------
----------- -----------
</TABLE>
Retail collection revenue increased 10.0% to $114.2 million during 1995,
compared to $103.9 million in 1994. Excluding revenue from the acquisition of
Continental Credit Adjustors ("CCA") made February 1, 1995, retail collection
revenue increased $7.5 million, or 7.2%. The primary factors leading to the
increase in retail collection revenue were new client sales, including services
to state governments, expanded services to utility customers and expanded
business with current clients in the student loan and credit card industry.
Health care outsourcing revenue increased 43.0% in 1995 to $16.3 million
compared to 1994 primarily as the result of increased revenue as a result of
Payco's prime sub-contractor role for Maricopa County Health Care Systems which
began September 1, 1995. Medicaid billing revenue, a component of health care
outsourcing, increased 17.9% to $6.7 million, primarily as a result of new
client business.
Commercial collection revenue increased 198.7% to $12.3 million during the
year ended December 31, 1995 compared to 1994. This increase is primarily
attributable to the acquisition of Furst & Furst ("F&F") and GGW. Excluding
these acquisitions, commercial collection revenue increased 16.9%.
Revenue from purchased accounts receivable portfolios increased 20.3% to
$15.8 million in 1995, compared to $13.1 million in 1994. During 1995, Payco
purchased twelve accounts receivable portfolios at a cost of $9.7 million.
Billing revenue decreased 7.2% from $9.5 million in 1994 to $8.8 million in
1995. This decrease was due primarily to the loss of business from a major
client that declared bankruptcy. This client generated
48
<PAGE>
approximately $0.3 million of revenue in this category in 1995, compared to $1.3
million in 1994. Billing revenue increased in the student loan area due to
contract pricing increases which were a result of new postal rates which became
effective January 1, 1995.
Teleservicing revenue decreased 13.4%, from $8.7 million in 1994 to $7.5
million in 1995. This decrease is the result of planned termination of outbound
telemarketing service to clients that were not profitable. While telemarketing
revenue decreased during 1995, profit margins increased. Payco restructured its
outbound telemarketing operations at the end of 1995 by closing its Herndon,
Virginia site, expanding its Phoenix, Arizona operations and opening a new site
in Pittsburgh, Pennsylvania which handles primarily inbound teleservicing.
TOTAL OPERATING EXPENSES increased $23.4 million or 16.5%, to $165.6 million
in 1995, compared to $142.2 million in 1994. Business acquisitions which
occurred in 1995 accounted for $10.3 million of the increase between years.
Other factors that contributed to the overall increase in total operating
expense are the following:
SALARIES AND BENEFITS, Payco's largest expense, increased by 20.9% between
years to $100.1 million. During 1995, salaries and benefits expense included
$6.6 million due to the acquisitions of F&F, CCA, and GGW. Exclusive of the
effect of the 1995 business acquisitions, salaries and benefits increased 13.0%,
primarily as a result of increased staff required to support new business,
higher incentive compensation to the sales staff a result of the revenue
increases, and additional compensation costs for development, installation and
training associated with the WIN system.
OTHER OPERATING EXPENSES increased 10.2% in 1995 to $65.5 million compared
to $59.4 million in 1994. The significant items in other operating expenses are
telephone, postage and supplies, occupancy, data processing equipment, and
amortization of acquisition costs. These items are explained in detail as
follows.
Telephone expense decreased 2.1% to $10.6 million in 1995. Telephone expense
exclusive of 1995 business acquisitions decreased 6.3%. During the first half of
1994, Payco upgraded its telephone systems in certain locations through the
purchase of technologically advanced equipment at a cost of approximately $1.2
million. During the third quarter of 1994, Payco renegotiated its contracts for
long distance service and benefited from lower long distance rates beginning in
the fourth quarter of 1994. The decline in outbound telemarketing business also
decreased telephone costs during 1995.
Postage and supplies expense increased 20.8% between years to $10.8 million.
Postage and supplies expense, exclusive of the 1995 business acquisitions,
increased 12.2%. Postage alone increased 11.0% exclusive of 1995 business
acquisitions, primarily as a result of the January 1, 1995 postal rate increase.
Occupancy costs, which include expense for leased office space, depreciation
of furniture and fixtures, amortization of leasehold improvements, and rental
and repair of office equipment, increased 8.0% between 1995 and 1994 to $9.1
million. Exclusive of the 1995 business acquisitions, occupancy costs decreased
2.5%, primarily as a result of planned office space reduction and renegotiated
leases at certain locations.
Data processing equipment costs increased 14.4% to $8.4 million in 1995.
Exclusive of the effect of 1995 business acquisitions, these costs increased
10.5%. This increase is attributable primarily to increased depreciation and
maintenance charges as a result of Payco's investment in WIN which began during
the last half of 1994. During 1995, Payco installed WIN in eight office
locations, bringing total installation to ten. The conversion of additional
offices is scheduled to continue throughout 1996 and into 1997. In 1994, Payco
began to upgrade its automated student loan billing system.
Amortization of acquisition costs was $14.8 million in 1995, compared to
$12.5 million in 1994. This expense category includes the amortization of
non-compete agreements, debtor account inventory,
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goodwill and purchased accounts receivable portfolios. Amortization expense
associated with purchased accounts receivable portfolios increased by $2.1
million between years to $12.4 million. This increase is due to increased
collections on new and existing portfolios.
Remaining other operating costs increased 4.1% between years to $11.8
million. Remaining other operating costs, exclusive of the 1995 business
acquisitions, decreased 1.3%. Remaining other operating costs include, among
other categories, business insurance, legal expenses, skip tracing costs and
travel and entertainment costs. In December of 1995, Payco established a $0.5
million reserve for its remaining investment in Pay Tech, Inc., Payco's joint
venture in Japan.
EBITDA increased for the year ended December 31, 1995 compared to the
comparable period of the prior year by $4.4 million primarily as a result of
1995 business acquisitions and increased collections on purchased account
portfolios.
INTEREST EXPENSE increased by $0.6 million primarily due to the increase in
average borrowings under Payco's line of credit, which were used primarily to
finance accounts receivable purchases, acquisition of new businesses and WIN
related purchases.
INCOME TAXES. The effective tax rate decreased between years from 45.6% to
44.0%. The effective tax rate fluctuates as a result of changes in pre-tax
income, nondeductible expense and changes in the mix of state income tax rates.
NET INCOME in 1995 was $5.3 million, including a charge of $0.3 million
after tax for the reserve against Payco's investment in Japan, compared to $4.6
million in 1994. The increase in net income is primarily attributable to
increased revenue during 1995, offset by the impact of increased interest
expense and income taxes.
YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993
TOTAL OPERATING REVENUE for the year ended December 31, 1994 was $150.7
million compared to $150.8 million for the comparable period of 1993. The
acquisition of Indiana Mutual Collection Association ("IMC") on February 1, 1994
accounted for $2.5 million of revenue in 1994. The following table shows the
components of revenue for the years ended December 31, 1993 and 1994.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------------
<S> <C> <C>
1993 1994
----------- -----------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C>
Revenue:
Retail Collection................................................... $ 104,549 $ 103,876
Health Care Outsourcing............................................. 11,029 11,393
Commercial Collection............................................... 3,790 4,104
Accounts Receivable Purchased....................................... 14,272 13,128
Billing............................................................. 8,932 9,488
Teleservicing....................................................... 8,223 8,707
----------- -----------
Total Operating Revenue........................................... $ 150,795 $ 150,696
----------- -----------
----------- -----------
</TABLE>
Retail collection revenue decreased to $0.7 million during 1994 compared to
1993. The decline in retail collection revenue was primarily due to declining
contingency rates brought on by competition and a decrease in collection revenue
from a student loan client which ceased operations in 1993. However, retail
collection revenue benefited as a result of the IMC acquisition, foreign
operations and expanded services to new and existing clients.
Health care outsourcing revenue increased 3.3% to $11.4 million in 1994
compared to 1993 primarily as the result of increased revenue in the Medicaid
billing division.
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Commercial collection revenue increased 8.3% to $4.1 million during the 1994
compared to 1993, primarily as a result of new client sales.
Revenue from purchased accounts receivable portfolios decreased 8.0% to
$13.1 million in 1994, compared to $14.3 million in 1993. During 1994, Payco
purchased eleven accounts receivable portfolios at a cost of $17.3 million, of
which $6.1 million were purchased during the fourth quarter of 1994.
Billing revenue, increased 6.2% from $8.9 million in 1993 to $9.5 million in
1994, primarily as the result of the sale of a specialized billing program to a
single client.
Teleservicing revenue increased 5.9% from $8.2 million in 1993 to $8.7
million in 1994, primarily as a result of sales to new clients and increased
business volume from existing clients.
The Federal Government approved a direct student loan program, the four year
implementation of which began in July, 1994. The initial phase-in of this
program had little impact on Payco.
TOTAL OPERATING EXPENSES decreased $1.1 million, to $142.2 million in 1994,
compared to $143.3 million in 1993. Factors which have impacted the overall
decrease in total operating expenses are the following. Total operating expenses
of IMC in 1994 were $2.5 million. Excluding expenses at IMC, operating expenses
declined 2.5%.
SALARIES AND BENEFITS, Payco's largest expense, increased by 0.9% between
years to $82.8 million. During 1994, compensation expense included $2.3 million
due to the acquisition of IMC and foreign operations. Exclusive of the effect of
the IMC acquisition and foreign operations, salaries and benefits decreased 1.8%
primarily as a result of staff reductions which occurred during the second half
of 1993.
OTHER OPERATING EXPENSES decreased 3.0% in 1994 compared to 1993. The
significant items in other operating expenses are telephone, postage and
supplies, occupancy, data processing equipment, and amortization of acquisition
costs. These items are explained as follows.
Telephone expense increased 6.8% to $10.8 million in 1994. Telephone expense
includes expense associated with dedicated communication datalines, local and
long distance service and maintenance on telephone equipment. Local and long
distance service expense increased by $0.8 million, primarily because of
acquisitions, increased telemarketing business, and a change in the long
distance calling patterns. During the first half of 1994, Payco upgraded its
telephone systems in certain locations through the purchase of technologically
advanced equipment at a cost of approximately $1.2 million. During the third
quarter of 1994, Payco renegotiated its contracts for long distance service and
benefited from lower long distance rates beginning in the fourth quarter.
Postage and supplies expense decreased 2.7% between years to $9.0 million.
Postage and supplies expense historically fluctuates with the number of accounts
received for collection and with the U.S. postal rate.
Occupancy costs, which include expense for leased office space, depreciation
of furniture and fixtures, amortization of leasehold improvements and rental and
repair of office equipment, decreased 4.1% between 1994 and 1993 to $8.4
million. Expense related to leased office space declined to $0.5 million between
years as a result of planned office space reduction and renegotiated leases at
certain locations. Increased space rental due to the acquisition of IMC, to
foreign operations and to expansion in other locations resulted in additional
rental costs of $0.2 million during 1994.
Data processing equipment costs decreased 7.4% to $7.4 million in 1994. The
decrease in data processing equipment costs is attributable primarily to savings
realized under the renegotiated maintenance contract with Payco's major computer
vendor which took effect in January 1994. Depreciation expense on computer
equipment decreased $0.3 million during 1994 when compared to 1993. During the
last half of 1994, Payco began investment in hardware and software to support
Payco's WIN system. During the third quarter of 1994, Payco installed WIN in its
Lakeland, Florida location. Payco also began to upgrade its automated student
loan billing system.
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Amortization of acquisition costs was $12.5 million in 1994, compared to
$13.9 million in 1993. This expense category includes the amortization of
non-compete agreements, debtor account inventory, goodwill and purchased
accounts receivable portfolios. Amortization expense associated with purchased
accounts receivable portfolios decreased by $1.5 million between years to $10.3
million. This decrease is due to the decreased collection activity on the
portfolios.
Remaining other operating costs were level between years at $11.4 million.
Remaining other operating costs include, among other categories, business
insurance, legal expenses, skip tracing costs and travel and entertainment
costs.
In August 1993, Payco invested in joint ventures with operations in Mexico
and Japan. In July 1994, Payco initiated operations in Puerto Rico. The
investment in these entities provides Payco with the opportunities to extend
accounts receivable management services and technology to these areas. The
Consolidated Statements of Income include Payco's interest in the operating
results of these new entities. These investments did not have a significant
impact on overall earnings in 1994.
EBITDA decreased for the year ended December 31, 1994 compared to the
comparable period of the prior year by $0.5 million primarily as a result of a
decrease in collections on purchased account portfolios.
INTEREST EXPENSE decreased by $0.1 million when compared to the year ended
December 31, 1993. The decrease in interest expense is due primarily to the
decrease in average borrowings under Payco's line of credit, which were used
primarily to finance accounts receivable purchases.
INCOME TAXES. The effective tax rate increased between years from 44.9% to
45.6%. The effective tax rate fluctuates as a result of levels of pre-tax
income, nondeductible expense and changes in the mix of state income tax rates.
NET INCOME in 1994 was $4.6 million compared to $4.0 million in 1993. The
increase in net income is primarily attributable to improved operating margin in
1994 as a result of cost control measures taken by Payco.
LIQUIDITY AND CAPITAL RESOURCES
If the Transactions had been completed as of September 30, 1996, the Company
would have had, on a pro forma basis after giving effect to the Transactions, an
estimated balance of cash and cash equivalents of $14.6 million. The Company
derives substantially all of its cash flow from the operations of its
subsidiaries. Capital expenditures on a pro forma basis after giving effect to
the Transactions, were $15.2 million for the year ended December 31, 1995 and
$14.2 million and $12.0 million for the nine months ended September 30, 1996 and
1995, respectively. Portfolio purchases, on a pro forma basis after giving
effect to the Transactions, were $16.1 million for the year ended December 31,
1995 and $7.7 million and $11.4 million for the nine months ended September 30,
1996 and 1995, respectively. On a pro forma basis after giving effect to the
Transactions, the Company had working capital of $45.9 million on September 30,
1996.
The Company expects that capital expenditures will be approximately $16.3
million in 1996, of which $9.8 million is for data processing capital
expenditures (which are expenditures for the new accounts receivable management
and student loan billing systems at Payco) and $6.5 million is for other capital
expenditures, which include telecommunications equipment, leasehold
improvements, other computer equipment and office furniture and equipment. On a
pro forma basis, after giving effect to the Transactions, capital expenditures
were $14.2 million through September 30, 1996, of which $9.0 million was for
data processing capital expenditures and $5.2 million was for other capital
expenditures. The Company expects that data processing capital expenditures will
be $2.8 million in 1997 and $1.0 million in each of 1998 and 1999.
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As a result of the Transactions the Company's total indebtedness increased
substantially. See "Risk Factors -- Substantial Leverage and Ability to Service
Indebtedness." The Company's debt structure consists of senior debt under the
New Bank Credit Facility of $142.0 million, indebtedness represented by the
Notes of $100.0 million and other indebtedness of $5.9 million. The Company is
capitalized with equity of $62.0 million. Under the New Bank Credit Facility,
the Company has the ability to borrow an additional $58.0 million for working
capital, general corporate purposes and acquisitions, subject to certain
conditions. See "Description of New Bank Credit Facility; Other Indebtedness."
The Indenture and the New Bank Credit Facility contain financial and
operating covenants and restrictions on the ability of the Company to incur
indebtedness, make investments and take certain other corporate actions. See
"Description of Notes" and "Description of New Bank Credit Facility; Other
Indebtedness."
The debt service costs associated with the borrowings under the New Bank
Credit Facility and the Notes will significantly increase liquidity
requirements. The Company anticipates that its operating cash flow together with
borrowings under the New Bank Credit Facility, will be sufficient to meet its
anticipated future operating expenses and to service its debt requirements as
they become due. Additionally, future purchases of account portfolios may
require significant investment. However, actual capital requirements may change,
particularly as a result of acquisitions the Company may make. The ability of
the Company to meet its debt service obligations and reduce its total debt will
be dependent, however, upon the future performance of the Company and its
subsidiaries which, in turn, will be subject to general economic conditions and
to financial, business and other factors including factors beyond the Company's
control. See "Risk Factors -- Substantial Leverage and Ability to Service
Indebtedness."
INFLATION
The Company believes that inflation has not had a material impact on its
results of operations for the three years ended December 31, 1995 or the nine
months ended September 30, 1995 and 1996.
NEW ACCOUNTING STANDARDS
Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," which requires
that long-lived assets and certain identifiable intangibles to be held and used
by an entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying value of an asset may not be
recoverable. SFAS No. 121 also requires that long- lived assets and certain
identifiable intangibles to be disposed of be reported at the lower of carrying
amount or fair value less cost to sell. The adoption of SFAS No. 121 did not
have a material affect on the Company's financial condition or results of
operations.
Effective January 1, 1996, the Company adopted SFAS No. 123, "Accounting for
Stock-Based Compensation." The adoption of the new recognition provisions for
stock-based compensation expense included in SFAS No. 123 was optional; however,
the pro forma effects on net income and earnings per share had the new
recognition provisions been elected is required to be disclosed in the financial
statements. The Company will follow the requirements of APB No. 25, "Accounting
for Stock Issued to Employees," in its accounting for employee stock options;
therefore, there was no impact on the Company's financial position and results
of operations from the adoption of this Statement.
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BUSINESS
INDUSTRY OVERVIEW
As a result of the rapid growth of outstanding consumer credit and the
corresponding increase in delinquencies, credit grantors have increasingly
looked to third party service providers in managing the accounts receivable
process. In addition, rapid consolidation in the largest credit granting
industries, including banking, health care, telecommunications and utilities,
has forced companies to focus on core business activities and to outsource
ancillary functions, including some or all aspects of the accounts receivable
management process. Contingent fee companies dominate the accounts receivable
management industry, with the American Collectors Association estimating that in
1995 there were approximately 6,000 contingent fee agencies. The industry is
currently characterized by a high degree of fragmentation and a corresponding
trend toward consolidation. Over the past twenty years the number of contingent
fee providers has decreased by approximately twenty percent and, between 1992
and 1995, the ten largest contingent fee providers increased their market share
from 15% to over 42%.
The accounts receivable management industry has undergone rapid growth over
the past fifteen years. According to the industry research firm of M. Kaulkin &
Associates, account placements to servicers increased at a compounded annual
growth rate of 13.1% from 1980 to 1994 and are projected to grow at 8.5% from
1994 to 2000. New placements in 1994, the last year for which data is available,
totaled $84.2 billion and are expected to grow to $137 billion in 2000.
According to the Nilson Report, a leading expert in payment systems, the total
amount of revenues generated by all contingent fee companies was approximately
$5.0 billion in 1995. Two significant trends in the consumer credit industry are
primarily responsible for this industry growth. First, consumer debt (a leading
indicator of current and future business for accounts receivable management
companies) has increased dramatically in recent years. Between 1990 and 1995,
total consumer debt increased 37% from $3.6 trillion to almost $5 trillion.
Second, in an effort to focus on core business activities and to take advantage
of the economies of scale, better performance and lower cost structure offered
by accounts receivable management companies, many credit grantors have chosen to
outsource some or all aspects of the accounts receivable management process.
The customer base for the accounts receivable management industry is
dominated by credit issuers in four end-markets: banks, health care, utilities
and telecommunications. According to the American Collectors Association, these
four industries accounted for $66.7 billion in account placements in 1994, or
nearly 80% of the total placement volume. Other significant sources of account
placements for the industry include retail, student loan agencies and oil
companies. The Company believes that the ongoing consolidation in the banking,
utilities, telecommunications and health care industries will create larger
national customers seeking to place accounts with accounts receivable management
companies that offer national rather than local and regional coverage.
Contingent fee services are the traditional services provided in the
accounts receivable management industry. Creditors typically place
non-performing accounts after they have been deemed non-collectible, usually
when 90 to 120 days past due. The commission rate is generally based on the
collectability of the asset in terms of the costs which the contingent fee
servicer must incur to effect repayment. The earlier the placement (i.e., the
less elapsed time between the past due date of the receivable and the date on
which the debt is placed with the contingent fee servicer), the higher the
probability of recovering the debt, and therefore the lower the cost to collect
and the lower the commission rate. Creditors typically assign their charged-off
receivables to contingent fee servicers for a six to twelve month cycle, and
then reassign the receivables to other servicers as the accounts become further
past due. There are three main types of placements in the contingent fee
business, each representing a different stage in the cycle of account
collection. Primary placements are accounts, typically 120 to 270 days past due,
that are being placed with agencies for the first time and usually receive the
lowest commission. Secondary placements, accounts 270 to 360 days past due, have
already been placed with
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a contingent fee servicer and usually require a process including obtaining
judgments, assets searches, and other more rigorous legal remedies to ensure
repayment and, therefore, receive a higher commission. Tertiary placements,
accounts usually over 360 days past due, involve legal judgments, and a
successful collection receives the highest commission. Customers are
increasingly placing accounts with accounts receivable management companies
earlier in the collection cycle, often prior to the 120 days past due typical in
primary placements, either under a contingent fee or fixed fee arrangement.
While contingent fee servicing remains the most widely-used method by
creditors in recovering non-performing accounts, portfolio purchasing has
increasingly become a popular alternative. Beginning in the 1980's, the
Resolution Trust Company and the Federal Deposit Insurance Company, under
government mandate to do so, began to sell portfolios of non-performing loans.
Spurred on by the success of these organizations in selling charged-off debt,
other creditors likewise began to sell portfolios of non-performing debt.
Management estimates the total principal value of purchased portfolios at
between $2.5 and $5.5 billion per year, and based on the Company's experience,
the annual growth rate of the portfolio purchasing market segment for the period
1990 to 1995 was between 50% and 80% . The largest percentage of purchased
portfolios originate in the bank card receivable and retail markets and are
typically purchased at a deep discount from the aggregate principal value of the
accounts, with an inverse correlation between purchase price and age of the
delinquent accounts. Once purchased, traditional collection techniques are
employed to obtain payment of non-performing accounts.
Accounts receivable management companies have responded to the increasing
need of credit granting companies to outsource other related services as well.
Due to the rapid growth in consumer credit, credit grantors need assistance in
managing increasingly large and complex call centers and accounts receivable
management companies have stepped in to provide a variety of services. These
services include, among others, third-party billing services and teleservicing.
Accounts receivable management companies have found that their traditional
experience in managing a large staff in a telephone-based environment provides a
solid base for entering into these relatively new and rapidly growing market
segments.
The accounts receivable management industry has progressed in technological
sophistication over the past several years with the advancement of new
technology. Today, leading companies in this industry use proprietary databases,
automated predictive dialers, automatic call distributors and computerized
skiptracing capabilities to significantly increase the number of quality
interactions with debtors. This technological advancement is helping to
accelerate industry consolidation and facilitates providing related accounts
receivable management outsourcing services. The firms which have the most
efficient operating systems and can best use credit information typically
collect more funds per account dollar and thus are awarded disproportionately
more new accounts.
COMPANY HISTORY
OSI was formed in 1995 by McCown De Leeuw & Co., a private investment firm
specializing in buying and building middle market businesses. Since its
inception, OSI has pursued an acquisition strategy aimed at creating the leading
provider of accounts receivable management services in the United States. In
September 1995, OSI initiated this investment strategy with the acquisition of
APLP, one of the largest purchasers and managers of non-performing accounts
receivable portfolios. In January 1996, OSI acquired Continental and Miller, two
industry leaders in the contingent fee business. Continental, which is
headquartered in Seattle and operates in eight western states, provides
contingent fee services to a wide range of end markets, with particular emphasis
on public utilities and regional telecommunications. Miller, based in
Minneapolis, provides contingent fee services to the student loan and bank
credit card end markets.
Pursuant to the Merger Agreement, OSI acquired Payco for an aggregate cash
consideration of approximately $150.2 million. Originally founded as a
contingent fee service company in 1959, Payco
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has diversified into other outsourcing services such as student loan billing,
health care accounts receivable billing and management, contract management of
accounts receivable and teleservicing. Upon completion of the Payco Acquisition,
the Company became one of the largest providers of accounts receivable
management services in the United States. For the latest twelve-month period
ended September 30, 1996, the Company had pro forma net revenues of $260.6
million and pro forma Adjusted EBITDA of $73.3 million. See "Unaudited Pro Forma
Consolidated Financial Data."
BUSINESS STRATEGY
The Company's market position and breadth of services distinguishes it as
one of the leading providers of accounts receivable management services in the
United States. The Company's business strategy is to expand this position
through the following initiatives:
FULL SERVICE PROVIDER/CROSS-SELLING SERVICES TO EXISTING CUSTOMERS. The
Company is a full service firm which currently offers its customers a wide array
of accounts receivable management options beyond traditional contingent fee
services, including higher margin portfolio purchasing, contract management of
accounts receivable, billing and teleservicing. This range of services allows
the Company to cross-sell its offerings within its existing customer base, as
well as to potential customers in specifically targeted industries.
EXPANSION OF CUSTOMER BASE. Two of the most important determinants in
selecting an accounts receivable management service provider are reputation and
experience. As the Company develops expertise and recognition with customers in
a particular industry, it markets that expertise to other credit grantors in
that industry. In addition, consolidation in the bank, retail, utility, student
loan, health care and telecommunications industries has created national
customers who are moving part or all of their accounts receivable collection
management business to national service providers. With the ability to offer its
services in all 50 states and experience in successfully managing a high volume
of placements on a national basis, the Company is well positioned to benefit
from this consolidation trend. The Company is also focused on increasing its
business with governmental agencies at the federal, state and local levels, many
of which have begun to outsource accounts receivable functions for items such as
taxes and student loans to private companies.
COST REDUCTIONS. The Company intends to continue to improve its financial
results through the rationalization of operations. In connection with the Payco
Acquisition, the Company expects to realize approximately $10.8 million of
annualized cost savings through consolidation of back office activities, branch
system rationalization, the installation of a centralized operating system and
the realization of volume purchasing discounts. See "Unaudited Pro Forma
Consolidated Financial Data" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
LEVERAGING TECHNOLOGY. The Company has invested aggressively in
technological innovations to enhance its competitive advantages over smaller
competitors. The Company has hardware and proprietary software, including
debtor-scoring models and debtor databases, which the Company believes provides
it with a competitive advantage in pricing portfolios and collecting amounts
from debtors. In addition, the Company utilizes automated predictive dialers and
skip tracing databases in order to allow account representatives to work
accounts more efficiently. Through interface with creditor computer systems, the
Company can efficiently receive new account placements from customers daily and
provide frequent updates to customers on the status of account collections. As
the Company begins to provide more comprehensive outsourcing services, the
Company becomes more integrated with its customers' systems, making switching
vendors both costly and inefficient.
GROWTH THROUGH ACQUISITIONS. The Company has built its position as a market
leader through strategic acquisitions of leading accounts receivable service
providers in each of the markets in which it participates. Since its formation
in September 1995, the Company has acquired APLP, a company with a
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superior reputation in purchasing portfolios of non-performing accounts,
Continental, one of the largest contingent fee service companies in the Pacific
Northwest and Miller, one of the largest and most highly regarded companies in
the student loan and bank card contingent fee services business. With the
acquisition of Payco, one of the oldest and most established accounts receivable
management companies in the country, the Company has solidified its position as
one of the largest contingent fee service providers and added to its competitive
strength in other related outsourcing services. The Company plans to selectively
pursue additional acquisitions which complement its existing services or
increase its customer base. See "Risk Factors -- Risks Associated with
Acquisition Strategy."
SERVICES
The Company is one of the largest providers of accounts receivable
management services in the United States. The Company offers its customers
contingent fee services, portfolio purchasing services and related outsourcing
services.
CONTINGENT FEE SERVICES. The Company is one of the largest providers of
contingent fee services in the United States. The Company offers a full range of
contingent fee services, including early-out programs, to all consumer credit
end-markets. The Company utilizes its sophisticated MIS and vast experience with
locating, contacting and effecting payment from delinquent account holders in
providing its core contingent fee services. With 54 call centers in 26 states
and approximately 3,750 account representatives, the Company has the ability to
service a large volume of accounts with national coverage. In addition to
traditional contingent fee services involving the placement of accounts over 120
days delinquent, creditors have begun to demand services in which accounts are
outsourced earlier in the collection cycle. The Company has responded to this
trend by developing "early-out" programs, whereby the Company receives placed
accounts that are less than 120 days past due and earns a fixed fee per placed
account rather than a percentage of realized collections. These programs require
a greater degree of technological integration between the Company and its
customers, leading to higher switching costs. The Company primarily services
consumer creditors although the Company maintains a growing presence in the
commercial collections business, offering contingent fee services to commercial
creditors as well. On a combined basis after giving effect to the Payco
Acquisition, contingent fee services (including both consumer and commercial
services) accounted for approximately 66.5% of the Company's total pro forma
1995 revenue.
PORTFOLIO PURCHASING SERVICES. The Company offers portfolio purchasing
services to a wide range of educational institutions, financial institutions,
government agencies and retailers. The Company purchases large and diverse
portfolios of non-performing consumer receivables both on an individually
negotiated basis as well as through "forward flow" agreements. Most individually
negotiated transactions involve tertiary paper (i.e., accounts that are greater
than 360 days past due). Under forward flow agreements, the Company agrees to
purchase charged-off receivables on a monthly basis as they become past due.
Creditors selling portfolios to the Company realize a number of benefits,
including increased predictability of cash flow, reduction in monitoring and
administrative expenses and reallocation of assets from non-core business
functions to core business functions. As of September 30, 1996, on a pro forma
basis after giving effect to the Payco Acquisition, the Company had purchased
119 portfolios at an aggregate cost of $113.2 million, representing over $3.5
billion in total face value of debt. On a combined basis after giving effect to
the Payco Acquisition, portfolio purchasing accounted for approximately 20.3% of
the Company's total pro forma 1995 revenue.
RELATED OUTSOURCING SERVICES. As the volume of consumer credit has expanded
across a number of industries, credit grantors have begun demanding a wider
range of outsourcing services. In response, the Company has developed a number
of other accounts receivable management services. The Company leverages its
operational expertise and call and data management technology by offering the
following services: (1) contract management, through which the Company performs
a range of
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accounts receivable management services at the customer's location, (2) student
loan billing, whereby the Company provides billing, due diligence and customer
service services, (3) health care accounts receivable management, whereby the
Company assumes responsibility for managing third-party billing, patient pay
resolution, inbound and outbound patient communication services and cash
application functions, (4) teleservicing, whereby the Company offers inbound and
outbound calling programs to perform sales, customer retention programs, market
research and customer service. On a combined basis after giving effect to the
Payco Acquisition, these outsourcing services accounted for approximately 13.2%
of the Company's total pro forma 1995 revenue.
OPERATIONS
CONTINGENT FEE SERVICES. Once an account has been placed with the Company,
the collection process consists of (1) locating and contacting the debtor
through mail and telephone and (2) getting the debtor to settle his or her
outstanding balance. Work standards (the method and order in which accounts are
worked by the Company) may be specified by the credit issuer placing the
accounts, and the Company is contractually bound to follow these work standards.
Some accounts may have different work standards than others based on criteria
such as account age or balance. For example, some customers require letters and
telephone contacts for each debtor in the portfolio at regularly scheduled
intervals, while others give the Company more discretion in its collection
operations. In addition, the Company must comply with the federal Fair Debt
Collection Practices Act and comparable state statutes, which restrict the
methods it uses to collect consumer debt.
Productivity standards are established by the Company using sophisticated
statistical scoring models that are applied to each account. These scoring
systems are developed using historical collection patterns of similar accounts.
Once scored, the accounts are segmented into groups ranked by likelihood of
repayment. Each group requires a different strategy to effect payment. This
ranking process is critical as it greatly influences how profitably the accounts
are worked. The objective is to maximize collections and to minimize expenses.
For example, instead of sending letters to the entire account base, a targeted
telemarketing campaign may be used to directly contact selected account groups,
thus saving the costs associated with an unnecessary broad-based mail campaign.
Once the work standards and productivity standards are established, this
information is stored in an account database. This database holds the
"inventory" of individual placed accounts and their respective work and
productivity standards. The accounts are distributed to account representatives
from the account database starting with the accounts with the highest likelihood
of repayment. Automated predictive dialers and skip tracing databases are
essential tools in the process of establishing contact with debtors. An
automated predictive dialer extracts telephone numbers from the account database
and makes a number of simultaneous calls based on account rankings. When the
dialer detects a response to a call, it signals an available account
representative and displays the appropriate data file on his or her screen. The
dialing rate automatically adjusts to the number of available account
representatives, creating significant cost efficiencies. Skip tracing databases
facilitate the location of debtors whose accounts have wrong addresses and phone
numbers. These databases contain a variety of information such as credit bureau
reports, credit/loan applications, change of address notices, etc., and are
continually updated with current addresses and phone numbers. Once an individual
has been contacted, the account representative is authorized to negotiate a
settlement in accordance with the work standards. According to the
characteristics of the account, such as the age of the paper and the stage of
placement, the settlement may include immediate payment, a mutually agreeable
payment plan, a reduction in accrued interest, and, least likely, a reduction in
principal.
In the normal course of business, legal action is sometimes required. The
Company's litigation process consists of various stages of escalating actions
against the debtor-defendant, with each stage providing greater motivation than
the last for payment in full. The stages consist of filing a suit, request
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for production of documents, depositions and motion for summary judgment. Each
is a highly effective method of securing payment or a mutually agreeable payment
plan.
PORTFOLIO PURCHASING SERVICES. When considering the purchase of a new
portfolio, the Company systematically analyzes and values the portfolio based on
proprietary scoring models which evaluate the underlying accounts. The Company
requests extensive information on the portfolio accounts, including whether
payments have been made in the previous six months, the average age of the
debtors, the number and locatability of skipped accounts, the debtor income
range and geography, the average balance of other accounts and the age of the
obligation. The Company conducts a detailed audit of the portfolio during which
its auditors verify the accuracy of the characteristics of a statistically
representative sample of accounts. Based upon a comparison of these and other
portfolio characteristics with those of previously purchased portfolios, the
Company constructs a liquidation model which becomes the basis for valuing the
portfolio. The Company then submits a bid for the portfolio. Once the Company
has purchased a portfolio, it uses a methodology similar to that employed in
contingent fee servicing to collect on the accounts.
As the Company owns the non-performing accounts, it has broad flexibility in
its collection efforts. The Company can service the purchased portfolio over a
period of time of 3 to 5 years, which allows it to make repeated efforts to
locate debtors and request payment. Additionally, as the Company is not subject
to customer work standards, it can work accounts in any order or fashion which
it chooses and can work creatively with debtors to arrange for payment by
restructuring terms over an extended period of time. As the principal holder of
the debt, the Company also can offer debtors a reduction in accrued finance
charges, and in certain limited circumstances, reductions in principal balances,
in exchange for immediate payment.
A record of all contacts with debtors is maintained in the mainframe system.
Once a payment schedule has been established, the computer system monitors
subsequent payments by the debtor and notifies an account representative if
payment is not received within 2 days after a due date.
RELATED OUTSOURCING SERVICES. The Company leverages its operational
expertise and call and data management technology by offering a number of
related outsourcing services, including: (1) contract management, through which
the Company performs a range of accounts receivable management services at the
customer's location, (2) student loan billing, whereby the Company provides
billing, due diligence and customer service services, (3) health care accounts
receivable management, whereby the Company assumes responsibility for managing
third-party billing, patient pay resolution, inbound and outbound patient
communication services and cash application functions, and (4) teleservicing,
whereby the Company offers inbound and outbound calling programs to perform
sales, customer retention programs, market research and customer service.
TECHNOLOGY AND SYSTEMS
The Company utilizes a variety of management information and
telecommunications systems to enhance productivity in all areas of its business.
Each of the Company's four operating entities has developed its own accounts
receivable management operating systems tailored to the needs of the particular
customer base it serves. The Company's operating units use mainframe hardware
configurations to operate a combination of proprietary and
commercially-available software to prioritize account collections activity and
maximize account representative contacts. The majority of the Company's software
can be customized to accommodate specific work standards provided by the
Company's customers.
The Company believes that Payco's recently-developed World-class Integrated
Network ("WIN") system provides the Company with one of the most technically
advanced accounts receivable management systems in the industry. The WIN system,
which is currently being installed throughout the Payco
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operating facilities, is a customized automated collections management system
which integrates predictive dialers and access to consumer databases into the
operating system. The WIN system enhances the Company's ability to service large
customers by providing the flexibility to distribute account information for
national clients among the Company's branches and then compile productivity
results from each branch to provide the customer with one consolidated report.
Additionally, the WIN system has customized modules which facilitate insurance
billing services, early-out programs and complete outsourcing of the accounts
receivable management process.
In addition to the WIN system, API, Continental and Miller maintain
operating systems and software which place them each among the technological
leaders in the industry. At API, the Company utilizes proprietary debtor scoring
models to evaluate prospective portfolio purchases and to properly price bids.
The debtor scoring models analyze underlying portfolio accounts according to
certain statistical measures and calculate a value for the portfolio. The
Company's national data base, developed at Continental, aggregates information
regarding consumers from various sources and contains the names, addresses and
phone numbers for over 100 million people in the United States. The national
database provides a proprietary and cost-effective means of "skiptracing," or
locating account debtors. When used in connection with its account scoring
models, Continental can effectively estimate which accounts have the highest
probability of debtor contact and payment and focus its resources accordingly.
In addition, the Company uses sophisticated telecommunications equipment,
including automated predictive dialers. Predictive dialers extract telephone
numbers from an account database and place simultaneous calls based on account
rankings. Through interface with the Company's management information systems,
the predictive dialer signals an available account representative and displays
the relevant account information on his or her computer screen upon detecting a
response to a call. The system automatically adjusts the rate of call placement
based upon the number of available account representatives. Predictive dialers
significantly increase account representative productivity, allowing experienced
ones to complete 300 to 400 contacts in a single shift compared to 75 to 125
contacts a shift using conventional manual dialing.
The Company expects to benefit from migrating the most advanced and
effective technology of the Company among all of the Company's operating
entities. For example, the national database can be used by each operating
company to enhance the probability of locating debtors and effecting payment on
accounts in a cost effective manner. Similarly, the most effective debtor
scoring models developed throughout the Company can be shared with the other
operating entities to improve the Company's statistical analysis of accounts and
increase the efficiency by determining how and when accounts are worked.
SALES AND MARKETING
On a combined basis, the Company has a sales force of approximately 170
sales representatives, providing comprehensive geographic coverage of the United
States on a local, regional and national basis. Each of the operating companies
maintains its own sales force and has a marketing strategy closely tailored to
the credit-granting markets that it serves. The Company's primary sales and
marketing objective is to expand its customer base in those customer industries
in which it has a particular expertise and to target new customers in high
growth end markets. The Company, through its established operating company
brandnames, emphasizes its industry experience and reputation, two key factors
considered by creditors when selecting an accounts receivable service provider.
Increasingly, the Company will focus on cross-selling its full range of
outsourcing services to its existing customers and will use its product breadth
as a key selling point in creating new business. The Company's overall sales and
marketing strategies are coordinated by the corporate office in Atlanta, which
is also responsible for monitoring the sales performance of each of the
operating entities.
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CUSTOMERS
The Company's customer base includes a full range of local, regional and
national creditors. The Company's customers include American Express, The Chase
Manhattan Bank, Citibank, Bank One, Discover Card, Ameritech, US West, AT&T,
Sprint, the Internal Revenue Service and various student loan guaranty agencies
(including the California Student Aid Commission, USA Group Guaranty Services
Inc. and the Great Lakes Higher Education Corporation). On a combined basis,
after giving effect to the Payco Acquisition, the Company's pro forma 1995
revenues were realized from the following customer industries:
<TABLE>
<CAPTION>
% OF 1995
CUSTOMER INDUSTRY PRO FORMA REVENUES
- --------------------------------------------------- -----------------------
<S> <C>
Education.......................................... 28.3%
Health Care........................................ 18.8
Retail............................................. 16.6
Banking/Credit Card................................ 13.8
Telecommunications/Utilities....................... 6.7
Government......................................... 5.6
Commercial......................................... 5.0
Other.............................................. 5.2
</TABLE>
On a combined basis, after giving pro forma effect to the Payco Acquisition,
the largest customer accounted for less than 10% of the Company's pro forma 1995
revenues, and the top ten customers represented 25% of the Company's pro forma
1995 revenues. With its extensive national coverage, the Company believes that
it is well-positioned to capitalize on the increased consolidation among the
largest credit-granting entities.
FACILITIES
On a combined basis, after giving pro forma effect to the Payco Acquisition,
as of September 30, 1996, the Company operated 58 facilities in the U.S., all of
which are leased. The Company's facilities are strategically located across the
U.S. to give effective broad geographic coverage for customers.
EMPLOYEES
On a combined basis, the Company employs approximately 4,300 people, of
which 3,750 are account representatives, 170 are sales representatives and 380
work in corporate/administrative functions. None of the Company's employees are
unionized, and the Company believes its relations with employees are
satisfactory.
The Company is committed to providing continuous training and performance
improvement plans to increase the productivity of its account representatives.
Account representatives receive extensive training in a classroom environment
for several days on Company procedures, information systems and regulations
regarding contact with debtors. The training includes technical topics, such as
use of on-line collection systems and skip-tracing techniques and tools, as well
as instruction regarding the Company's approach to the collection process and
listening, negotiation and problem-solving skills, all of which are essential to
efficient and effective collections.
Account representatives are then assigned to work groups for a training
period. Initially, the trainees only screen incoming calls. This allows less
experienced account representatives to communicate with debtors in a less
confrontational environment than may be experienced with outgoing calls.
Additionally, the trainees are assigned accounts, which based upon scoring by
the Company's information systems, have a higher likelihood of collection. After
the training period, the account representatives begin working accounts
directly.
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The Company also has extensive training programs for managers and
supervisors. For example, to further improve the productivity and performance of
its account representatives, the Company identifies and shares "best practices"
company-wide. The Company believes its investment in training provides its
account representatives with the skills and tools to collect amounts on placed
and purchased accounts more efficiently.
COMPETITION
The accounts receivable management industry is highly fragmented and
competitive. According to the American Collectors Association, there are
approximately 6,000 contingent fee service companies in the United States, with
the 15 largest agencies currently receiving 33% of all accounts placed with
outside collection agencies. Competition is based largely on recovery rates,
industry experience and reputation and service fees. Large volume creditors
typically employ more than one accounts receivable management company at one
time, and often compare performance rates and rebalance account placements
towards higher performing servicers. The largest competitors include Deluxe
Corporation, Equifax Corporation, FCA International, First Data Corporation,
G.C. Services and Union Corporation.
LEGAL PROCEEDINGS
The Company is a defendant in various legal proceedings involving claims for
damages which constitute ordinary routine litigation incidental to its business.
In addition, Payco and its wholly owned subsidiary Payco-General American
Credits, Inc. are party to a class-action lawsuit filed in July 1995 in the
Circuit Court of Etowah County, Alabama. The suit alleges that Payco-General
American Credits, Inc., which was performing collection services on behalf of
co-defendant Transamerica Business Credit Corporation ("Transamerica") committed
violations of the FDCPA and Alabama state law. Plaintiffs demanded judgment
against defendants for compensatory and punitive damages in an amount deemed
appropriate by a jury, plus interest and the costs of the action. In January
1996, Transamerica filed a cross-claim against Payco-General American Credits,
Inc., seeking judgment against Payco-General American Credits, Inc., for any
liability, loss, cost or expense Transamerica has or will incur. Payco-General
American Credits, Inc., has, in turn, filed a similar claim against
Transamerica. On May 13, 1996, Transamerica entered into a settlement with the
settlement class subject to court approval for a sum of $2.0 million plus
$50,000 administrative fees, plus forgiveness of the debt of 1,818 debtors which
Transamerica estimated at approximately $1.3 million. On August 1, 1996, the
court approved the general settlement but reserved the right to approve
individual settlements. Transamerica advised the court that the benefit to the
class was $3.9 million which represents forgiveness of debt of $1.9 million
(instead of the $1.3 million forgiveness of debt noted above). Furthermore, on
August 1, 1996, the plaintiff's motion of certification of a class of 1,818
individuals to which letters were sent by Payco-General American Credits, Inc.
was conditionally granted. The parties in the lawsuit have agreed to non-binding
mediation and have agreed to utilize one mediator. Mediation is presently
scheduled to commence in January 1997. The Company believes it has meritorious
defenses to the complaint and the cross-claim in this suit.
In March 1995, Payco reached a settlement in its litigation with the Federal
Trade Commission (the "FTC"), which had been pending in federal court in
Wisconsin. In a complaint filed in August 1993, the FTC alleged that Payco had
violated the FDCPA. Payco vigorously defended the case, and asserted that any
violations of the Act were contrary to the policy and practice of Payco. The
case was resolved with a Consent Decree, in which Payco did not admit any
liability. Pursuant to the Consent Decree, Payco agreed to take additional steps
to ensure compliance with the Act and paid a penalty of $500,000. The Company
believes that compliance with provisions of the Consent Decree by Payco and its
subsidiaries will not materially effect the Company's financial condition or
ongoing operations.
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GOVERNMENTAL REGULATORY MATTERS
Certain of the Company's operations are subject to compliance with the FDCPA
and comparable statutes in many states. Under the FDCPA, a third-party
collection agency is restricted in the methods it uses to collect consumer debt.
For example, a third-party collection agency is limited in communicating with
persons other than the consumer about the consumer's debt, may not telephone at
inconvenient hours and must provide verification of the debt at the consumer's
request. Requirements under state collection agency statutes vary, with most
requiring compliance similar to that required under the FDCPA. In addition, most
states and certain municipalities require collection agencies to be licensed
with the appropriate authorities before collecting debts from debtors within
those jurisdictions. It is the Company's policy to comply with the provisions of
the FDCPA, comparable state statutes and applicable licensing requirements. The
Company has established certain policies and procedures to reduce the likelihood
of violations of the FDCPA and related state statutes. All account
representatives receive extensive training on these policies and must pass a
test on the FDCPA. Each account representative's desk has a list of suggested
and prohibited language by the telephone. The agents work in an open environment
which allows managers to monitor interaction with debtors, and the system
automatically alerts managers of potential problems if calls extend beyond a
certain duration.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Directors of the Company are elected annually by its shareholders to serve
during the ensuing year or until a successor is duly elected and qualified.
Executive officers of the Company are duly elected by its Board of Directors to
serve until their respective successors are elected and qualified. The following
table sets forth certain information with respect to the directors and executive
officers of the Company following the Payco Acquisition.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------------------------- ----------- -----------------------------------------------------
<S> <C> <C>
Jeffrey E. Stiefler.................................. 50 Chairman of the Board of Directors
Timothy G. Beffa..................................... 45 Director, President and Chief Executive Officer
David E. De Leeuw.................................... 52 Director
David E. King........................................ 37 Director, Secretary and Treasurer
Tyler T. Zachem...................................... 30 Director and Vice President
David G. Hanna....................................... 32 Director
Frank J. Hanna, III.................................. 34 Director
Peter C. Rosvall..................................... 45 Director and Executive Vice President
Allen M. Capsuto..................................... 44 Senior Vice President-Finance and Chief Financial
Officer
Dennis G. Punches.................................... 60 Director
</TABLE>
JEFFREY E. STIEFLER (50), Chairman of the Board of Directors since January
1996. From June 1993 to September 1995, Mr. Stiefler was President and Director
of American Express Company, where he had previously served in various
capacities since 1983, including President and Chief Executive Officer of IDS
Financial Services. Prior to joining the Company, Mr. Stiefler held various
positions with the Meritor Financial Group, including Chairman of the Meritor
Savings Bank Florida and the Meritor Savings Bank Washington, D.C., and
Citicorp, including Vice President and Regional Business Manager of the New York
Banking Division and Senior Vice President and Regional Business Manager of
Nationwide Financial Services. Mr. Stiefler is an Operating Partner of McCown De
Leeuw & Co. Mr. Stiefler currently serves as a director of National Computer
Systems and chairman of International Data Response Corporation.
TIMOTHY G. BEFFA (45), President, Chief Executive Officer and Director of
the Company since August 1996. From August 1995 until August 1996, Mr. Beffa
served as President and Chief Operating Officer of DIMAC Corporation ("DIMAC")
and DIMAC DIRECT Inc. ("DDI"), divisions of Heritage Media Corp. , and as a
director of DDI. From 1989 until August 1995, Mr. Beffa had served as a Vice
President of DIMAC and as Senior Vice President and Chief Financial Officer of
DDI. Prior to joining DIMAC, Mr. Beffa was Vice President of Administration and
Controller for the International Division of Pet Incorporated, a food and
consumer products company, where previously he had been Manager of Financial
Analysis.
DAVID E. DE LEEUW (52), Director of the Company since September 1995. Mr. De
Leeuw is a managing general partner of MDC Management Company III, L.P., which
is the general partner of McCown De Leeuw & Co. III, L.P. and McCown De Leeuw &
Co. Offshore (Europe) III, L.P., a managing general partner of MDC Management
Company IIIA, L.P., which is the general partner of McCown De Leeuw & Co. III
(Asia), L.P. and a member of Gamma Fund, LLC. He currently serves as a director
of Vans, Inc., DEC International Inc., Nimbus CD International, Inc., Tiara
Motorcoach Corporation and Papa Gino's Inc.
DAVID E. KING (37), Secretary, Treasurer and Director of the Company since
September 1995. Mr. King is a general partner of MDC Management Company III,
L.P., which is the general partner of McCown De Leeuw & Co. III, L.P. and McCown
De Leeuw & Co. Offshore (Europe) III, L.P., a general partner of MDC Management
Company IIIA, L.P., which is the general partner of McCown De Leeuw &
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Co. III (Asia), L.P. and a member of Gamma Fund, LLC. Mr. King has been
associated with McCown De Leeuw & Co. since 1990. He currently serves as a
director of DEC International Inc., International Data Response Corporation,
Nimbus CD International, Inc., ASC Network Corp. and Fitness Holdings Inc.
TYLER T. ZACHEM (30), Vice President and Director of the Company since
September 1995. Mr. Zachem is a principal of MDC Management Company III, which
is the general partner of McCown De Leeuw & Co. III, L.P. and McCown De Leeuw &
Co. Offshore (Europe) III, L.P. and a principal of MDC Management Company IIIA,
L.P., which is the general partner of McCown De Leeuw & Co. III (Asia), L.P. Mr.
Zachem has been associated with McCown De Leeuw & Co. since July 1993. Mr.
Zachem previously worked at McKinsey & Co. and McDonald & Company.
DAVID G. HANNA (32), Director of the Company since September 1995. Mr. Hanna
served as President of Account Portfolios, L.P. from November 1992 to September
1995 and as President of API from September 1995 to September 1996. From 1989 to
November 1992, Mr. Hanna served as President of the Governmental Division of
Nationwide Credit, Inc. David G. Hanna is the brother of Frank J. Hanna, III.
Mr. Hanna is currently a director of The Button Gwinnett Financial Corp.
FRANK J. HANNA, III (34), Director of the Company since September 1995. Mr.
Hanna founded Account Portfolios, L.P. in July 1989, and served as its Chief
Executive Officer until its acquisition by OSI in September 1995. From September
1995 to September 1996, Mr. Hanna served as Chief Executive Officer of API. From
February 1988 to January 1990, Mr. Hanna served as Group Vice President of
Nationwide Credit, Inc., a large accounts receivable management company. Frank
J. Hanna, III is the brother of David G. Hanna. Mr. Hanna currently serves as a
director of Cerulean Companies, Inc.
PETER C. ROSVALL (45), Executive Vice President and Director of the Company
since January 1996. From June 1980 until its acquisition by OSI in January 1996,
Mr. Rosvall served as President of Continental Credit Services, Inc.
ALLEN M. CAPSUTO (44), Senior Vice President-Finance and Chief Financial
Officer of the Company since January 1996. From 1991 to January 1996, Mr.
Capsuto served as the Senior Vice President, Chief Financial Officer and Vice
President of Finance and Treasury for Purolator Courier Ltd. Mr. Capsuto's
previous experience includes positions with Federal Express Corporation and
United Airlines.
DENNIS G. PUNCHES (60), Director of the Company since November 1996. From
May 1988 to October 1988 and January 1990 to November 1990, Mr. Punches served
as Chairman of the Board of Directors of Payco American Corporation. From
October 1988 to January 1990, Mr. Punches served as Co-Chairman of the Board of
Directors of Payco American Corporation. From 1969 to January 1990, Mr. Punches
served as President and Chief Executive Officer of Payco American Corporation.
EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation paid
or accrued for the year ended December 31, 1995 for the Chief Executive Officer
and the other most highly compensated executive officer of the Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
NAME AND COMMON STOCK ALL OTHER
PRINCIPAL POSITION SALARY ($) BONUS($) OPTIONS (#) COMPENSATION($)
- ----------------------------------------------------- ---------- --------------- --------------------- ---------------------
<S> <C> <C> <C> <C>
David B. Kreiss...................................... 75,000(1) -- -- --
Gregory M. Shelton................................... 37,500(1) -- -- --
</TABLE>
- ------------------------
(1) Represents total salary paid by the Company in fiscal year 1995, commencing
on September 21, 1995, based on annual salaries of $300,000 and $150,000 for
Mr. Kreiss and Mr. Shelton, respectively.
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On October 23,1996, Mr. Kreiss, formerly a director of the Company and
President and Chief Executive Officer of API, and Mr. Shelton, formerly
Executive Vice President of the Company, resigned from the Company.
On January 12, 1996, OSI entered into an employment agreement with Allen M.
Capsuto. Pursuant to the employment agreement, Mr. Capsuto serves as Senior Vice
President-Finance and Chief Financial Officer of the Company. Mr. Capsuto
receives an annual salary of $200,000 and a guaranteed bonus of $100,000 for
fiscal year 1996. Mr. Capsuto was also awarded a lump sum starting bonus of
$75,000 in January 1996. Effective February 16, 1996, Mr. Capsuto received
options to purchase 46,088.67 shares of common stock of the Company, which
shares vest upon the satisfaction of certain performance targets and/or the
occurrence of certain liquidity events.
On August 27, 1996, OSI entered into an employment agreement with Timothy G.
Beffa. Pursuant to the employment agreement, Mr. Beffa serves as Chief Executive
Officer of the Company. Mr. Beffa receives an annual salary of $300,000 and a
guaranteed bonus of $200,000 for fiscal year 1996. Effective October 9, 1996,
Mr. Beffa received options to purchase 131,421.66 shares of common stock of the
Company, which shares vest upon the satisfaction of certain performance targets
and/or the occurrence of certain liquidity events.
DIRECTOR COMPENSATION
Non-employee directors of OSI receive $2,000 per regularly scheduled meeting
of the Board of Directors, $1,000 per special meeting of the Board of Directors
and $500 per Committee meeting plus, in each case, reimbursement for travel and
out-of-pocket expenses incurred in connection with attendance at all such
meetings. No other director of OSI receives compensation from OSI for
performance of services as a director of OSI (other than reimbursement for
travel and out-of-pocket expenses incurred in connection with attendance at
Board of Director meetings).
OPTION PLANS
The Company maintains a 1995 Stock Option and Stock Award Plan (the "Stock
Option Plan"). The Stock Option Plan is administered by the Compensation
Committee of the Board of Directors of the Company. Under the Stock Option Plan,
the Compensation Committee may grant or award (a) options to purchase stock of
the Company (which may be either incentive stock options ("ISOs"), within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended, or
stock options other than ISOs), (b) stock appreciation rights granted in
conjunction with stock options, (c) restricted stock, or (d) bonuses payable in
stock, to key salaried employees of the Company, including officers, as well as
to consultants of the Company, but excluding non-employee directors.
A total of 304,255 shares of common stock of the Company are reserved for
issuance under the Stock Option Plan. As of November 25, 1996, options to
purchase 200,554.66 shares of the Company's common stock are outstanding under
the Stock Option Plan.
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SECURITY OWNERSHIP
The authorized capital stock of the Company consists of (i) 1,000,000 shares
of Preferred Stock, no par value (the "Preferred Stock"), of which 865,280.01
shares are issued and outstanding, (ii) 7,500,000 shares of Voting Common Stock,
par value $.01 per share (the "Voting Common Stock"), of which 3,425,126.01 are
issued and outstanding, (iii) 7,500,000 shares of Class A Non-Voting Common
Stock, par value $.01 per share (the "Class A Non-Voting Common Stock"), of
which 391,740.58 are issued and outstanding, (iv) 500,000 shares of Class B
Non-Voting Stock, par value $.01 per share (the "Class B Non-Voting Common
Stock"), of which 400,000 are issued and outstanding, and (v) 1,500,000 shares
of Class C Non-Voting Common Stock, par value $.01 per share (the "Class C
Non-Voting Common Stock" and together with the Class A Non-Voting Common Stock
and the Class B Non-Voting Common Stock, the "Non-Voting Common Stock," and
together with the Voting Common Stock, the "Common Stock"), of which 1,040,000
are issued and outstanding. In addition, a total of 46,088.67 shares of Voting
Common Stock were issuable upon exercise of warrants held by certain
warrantholders, and 200,554.66 shares of Voting Common Stock were issuable upon
the exercise of certain management options.
Each holder of Voting Common Stock has one vote for each share of Voting
Common Stock held by such holder on all matters to be voted upon by the
stockholders of the Company. The holders of Preferred Stock have no voting
rights except as expressly provided by law and the holders of Non-Voting Common
Stock have no voting rights other than the right to vote as a separate class on
certain matters that would adversely the rights of such holders. Each share of
Preferred Stock is convertible into one share of Common Stock at the holder's
option at any time after September 20, 1996. The Company may, at its sole
option, upon written notice to the holders of Preferred Stock, redeem any or all
of the shares of Preferred Stock outstanding for $12.50 per share plus cash
equal to all accrued and unpaid dividends through the redemption date, whether
or not such dividends have been authorized or declared. Each share of Voting
Common Stock is convertible into one share of Class A Non-Voting Common Stock at
the holder's option, and each share of Class A Non-Voting Common Stock is
convertible into one share of Voting Common Stock at the holder's option. Each
share of Class B Non-Voting Common Stock and Class C Non-Voting Common Stock is
convertible into one share of Voting Common Stock, at the holder's option, upon
the occurrence of certain "Conversion Events," as defined in the Company's
certificate of incorporation.
The following table sets forth the number and percentage of shares of each
class of the Company's capital stock beneficially owned as of November 25, 1996
by (i) each person known to the Company to be the beneficial owner of more than
5% of any class of the Company's equity securities, (ii) each of the Company's
directors and nominees, and (iii) all directors and executive officers of the
Company as a group.
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<TABLE>
<CAPTION>
AMOUNT
AND NATURE OF PERCENT
NAME AND ADDRESS BENEFICIAL OF
TITLE OF CLASS BENEFICIAL OWNER OWNERSHIP CLASS(1)
- -------------------------- ---------------------------------------------------------- --------------- -----------
<S> <C> <C> <C>
Preferred Stock McCown De Leeuw & Co. III, L.P.(2)........................ 576,852.97 66.6%
McCown De Leeuw & Co. Offshore (Europe) III, L.P.(2)...... 576,852.97 66.6%
McCown De Leeuw & Co. III (Asia), L.P.(2)................. 576,852.97 66.6%
Gamma Fund LLC(2)......................................... 576,852.97 66.6%
Rainbow Trust One(3)...................................... 144,214.02 16.7%
Rainbow Trust Two(4)...................................... 144,213.02 16.7%
David E. De Leeuw(2)...................................... 576,852.97 66.6%
David E. King(2).......................................... 576,852.97 66.6%
Frank J. Hanna, III(3).................................... 144,214.02 16.7%
David G. Hanna(4)......................................... 144,213.02 16.7%
All directors and officers as a group(2)(3)(4)............ 865,280.01 100.0%
Voting Common Stock McCown De Leeuw & Co. III, L.P.(5)........................ 1,897,793.01 55.4%
McCown De Leeuw & Co. Offshore (Europe) III, L.P.(5)...... 1,897,793.01 55.4%
McCown De Leeuw & Co. III (Asia), L.P.(5)................. 1,897,793.01 55.4%
Gamma Fund LLC(5)......................................... 1,897,793.01 55.4%
Rainbow Trust One(3)...................................... 466,667.00 13.6%
Rainbow Trust Two(4)...................................... 466,666.00 13.6%
Peter C. Rosvall.......................................... 383,600.00 11.2%
David E. De Leeuw(5)...................................... 1,897,793.01 55.4%
David E. King(5).......................................... 1,897,793.01 55.4%
Frank J. Hanna,III(3)..................................... 466,667.00 13.6%
David G. Hanna(4)......................................... 466,666.00 13.6%
All directors and officers as a group(3)(4)(5)............ 3,214,726.01 93.9%
Class A Non-Voting McCown De Leeuw & Co. III, L.P.(6)........................ 391,740.58 100.0%
Common Stock David E. De Leeuw(6)...................................... 391,740.58 100.0%
David E. King(6).......................................... 391,740.58 100.0%
All directors and officers as a group(6).................. 391,740.58 100.0%
Class B Non-Voting Common Chase Equity Associates, L.P.(7).......................... 400,000.00 100.0%
Stock All directors and officers as a group..................... 0.00 0.00%
Class C Non-Voting MLQ Investors, L.P.(8).................................... 640,000.00 61.5%
Common Stock The Clipper Group(9)...................................... 400,000,00 38.5%
All directors and officers as a group..................... 0.00 0.00%
</TABLE>
- ------------------------
(1) The information as to beneficial ownership is based on statements furnished
to the Company by the beneficial owners. As used in this table, "beneficial
ownership" means the sole or shared power to vote, or direct the voting of a
security, or the sole or shared investment power with respect to a security
(i.e., the power to dispose of, or direct the disposition of). A person is
deemed as of any date to have "beneficial ownership" of any security that
such person has the right to acquire within 60 days after such date. For
purposes of computing the percentage of outstanding shares held by each
person named above, any security that such person has the right to acquire
within 60 days of the date of calculation is deemed to be outstanding, but
is not deemed to be outstanding for purposes of computing the percentage
ownership of any other person.
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(2) Shares of Preferred Stock are convertible, at the holder's option, into an
identical number of shares of Common Stock at any time after September 20,
1996. Includes 511,957.01 shares owned by McCown De Leeuw & Co. III, L.P.,
an investment partnership whose general partner is MDC Management Company
III, L.P. ("MDC III"), 43,263.98 shares held by McCown De Leeuw & Co.
Offshore (Europe) III, L.P., an investment partnership whose general partner
is MDC III, 10,094.92 shares held by McCown De Leeuw & Co. III (Asia), L.P.,
an investment partnership whose general partner is MDC Management Company
IIIA, L.P. ("MDC IIIA"), and 11,537.06 shares owned by Gamma Fund LLC, a
California limited liability company. The voting members of Gamma Fund LLC
are George E. McCown, David De Leeuw, David E. King, Robert B. Hellman, Jr.,
Charles Ayres and Steven Zuckerman, who are also the only general partners
of MDC III and MDC IIIA. Dispositive decisions regarding the Preferred Stock
are made by Mr. McCown and Mr. De Leeuw, as Managing General Partners of
each of MDC III and MDC IIIA, who together have more than the required two-
thirds-in-interest vote of the Managing General Partners necessary to effect
such decision on behalf of any such entity. Dispositive decisions regarding
the Preferred Stock owned by Gamma Fund LLC are made by a vote or consent of
a majority in number of the voting members of Gamma Fund LLC. Messrs.
McCown, De Leeuw, King, Hellman, Ayres and Zuckerman have no direct
ownership of any shares of Preferred Stock and disclaim beneficial ownership
of any shares of Preferred Stock except to the extent of their proportionate
partnership interests or membership interests (in the case of Gamma Fund
LLC). The address of all the above-mentioned entities is c/o McCown De Leeuw
& Co., 3000 Sand Hill Road, Building 3, Suite 290, Menlo Park, California
94025.
(3) Shares of Preferred Stock are convertible, at the holder's option, into an
identical number of shares of Common Stock at any time after September 20,
1996. Frank J. Hanna, III, a director of the Company, is trustee of Rainbow
Trust One. The address of Rainbow Trust One is c/o HBR Capital, Two Ravinia
Drive, Suite 1750, Atlanta, Georgia 30346.
(4) Shares of Preferred Stock are convertible, at the holder's option, into an
identical number of shares of Common Stock at any time after September 20,
1996. David G. Hanna, a director of the Company, is trustee of Rainbow Trust
Two. The address of Rainbow Trust Two is c/o HBR Capital, Two Ravinia Drive,
Suite 1750, Atlanta, Georgia 30346.
(5) Includes 1,640,220.48 shares owned by McCown De Leeuw & Co. III, L.P., an
investment partnership whose general partner is MDC III, 171,715.02 shares
held by McCown De Leeuw & Co. Offshore (Europe) III, L.P., an investment
partnership whose general partner is MDC III, 40,066.84 shares held by
McCown De Leeuw & Co. III (Asia), L.P., an investment partnership whose
general partner is MDC IIIA, and 45,790.67 shares owned by Gamma Fund LLC, a
California limited liability company. The voting members of Gamma Fund LLC
are George E. McCown, David De Leeuw, David E. King, Robert B. Hellman, Jr.,
Charles Ayres and Steven Zuckerman, who are also the only general partners
of MDC III and MDC IIIA. Voting and dispositive decisions regarding the
Voting Common Stock are made by Mr. McCown and Mr. De Leeuw, as Managing
General Partners of each of MDC III and MDC IIIA, who together have more
than the required two-thirds-in-interest vote of the Managing General
Partners necessary to effect such decision on behalf of any such entity.
Voting and dispositive decisions regarding the Voting Common Stock owned by
Gamma Fund LLC are made by a vote or consent of a majority in number of the
voting members of Gamma Fund LLC. Messrs. McCown, De Leeuw, King, Hellman,
Ayres and Zuckerman have no direct ownership of any shares of Voting Common
Stock and disclaim beneficial ownership of any shares of Voting Common Stock
except to the extent of their proportionate partnership interests or
membership interests (in the case of Gamma Fund LLC).
(6) Shares of Class A Non-Voting Common Stock are convertible, at the holder's
option, into an identical number of shares of Voting Common Stock at the
holder's option. See "Security Ownership." The general partner of McCown De
Leeuw & Co. III, L.P. is MDC III. The only general partners of MDC III are
George E. McCown, David De Leeuw, David E. King, Robert B. Hellman, Jr.,
Charles Ayres and Steven Zuckerman. Dispositive decisions regarding the
Class A Non-Voting Common Stock are made by Mr. McCown and Mr. De Leeuw, as
Managing General Partners of MDC III, who together have more than the
required two-thirds-in-interest vote of the Managing General Partners
necessary to effect such decision on behalf of any such entity. Messrs.
McCown, De Leeuw, King,
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Hellman, Ayres and Zuckerman have no direct ownership of any shares of Class
A Non-Voting Common Stock and disclaim beneficial ownership of any shares of
Class A Non-Voting Common Stock except to the extent of their proportionate
partnership interests. The address of each of the above-mentioned entities
is c/o McCown De Leeuw & Co., 3000 Sand Hill Road, Building 3, Suite 290,
Menlo Park, California 94025.
(7) Shares of Class B Non-Voting Common Stock are convertible, at the holder's
option, into an identical number of shares of Voting Common Stock upon the
occurrence of certain "Conversion Events," as defined in the Company's
certificate of incorporation. See "Security Ownership." The general partner
of Chase Equity Associates, L.P. is Chase Capital Partners. The address of
each of these entities is c/o Chase Capital Partners, 380 Madison Ave., 12th
Floor, New York, New York 10017.
(8) Shares of Class C Non-Voting Common Stock are convertible, at the holder's
option, into an identical number of shares of Voting Common Stock upon the
occurrence of certain "Conversion Events," as defined in the Company's
certificate of incorporation. See "Security Ownership." The general partner
of MLQ Investors, L.P. is MLQ, Inc. The address of each of these entities is
c/o Goldman, Sachs & Co., 85 Broad Street, New York, New York 10004.
(9) Shares of Class C Non-Voting Common Stock are convertible, at the holder's
option, into an identical number of shares of Voting Common Stock upon the
occurrence of certain "Conversion Events," as defined in the Company's
certificate of incorporation. See "Security Ownership." Consists of shares
held as follows: Clipper Capital Associates, L.P. ("CCA"), 9,268.50 shares;
Clipper/Merchant Partners, L.P., 102,642.16 shares; Clipper Equity Partners
I, L.P., 90,168.81 shares; Clipper/Merban, L.P. ("Merban"), 120,225.07
shares; Clipper/European Re, L.P., 60,112.54 shares; and CS First Boston
Merchant Investments 1995/96, L.P. ("Merchant"), 17,582.92 shares. CCA is
the general partner of all of the Clipper Group partnerships other than
Merchant. The general partner of CCA is Clipper Capital Associates, Inc.
("CCI"), and Mr. Robert B. Calhoun, Jr. is the sole stockholder and a
director of CCI. Clipper Capital Partners, an affiliate of Mr. Calhoun, has
sole investment power with respect to the shares beneficially owned by
Merchant. As a result, each of Mr. Calhoun, CCA and CCI is deemed to
beneficially own all shares of Class C Non-Voting Common Stock beneficially
owned by the Clipper Group (other than Merchant), and Mr. Calhoun is deemed
to beneficially own the shares of Class C Non-Voting Common Stock
beneficially owned by Merchant. Merchant Capital, Inc. ("Merchant Capital"),
an affiliate of CS First Boston Corporation, is the general partner of
Merchant and the 99% limited partner of Clipper/Merchant Partners, L.P. CS
Holding, an affiliate of CS First Boston Corporation, is the indirect 99%
limited partner of Merban. None of Merchant, Merchant Capital, CS First
Boston Corporation and CS Holding is an affiliate of Clipper or CCA. The
address for Merchant is 11 Madison Avenue, 26th Floor, New York, NY 10010,
the address for Clipper/European Re, L.P. and Merban is c/o CITCO, De
Ruyterkade, 62, P.O. Box 812, Curacao, Netherlands Antilles, and the address
for all other Clipper Group entities is 11 Madison Avenue, 26th Floor, New
York, NY 10010.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ACQUISITION ARRANGEMENTS
As a condition to entering into the Merger Agreement, the Company required
Payco to enter into certain covenant not-to-compete agreements and employment or
consulting agreements with certain of the executive officers and directors of
Payco, which agreements became effective upon consummation of the Merger, as
follows: (i) a consulting agreement with Dennis G. Punches, Chairman of the
Board of Payco prior to the Merger, in which he has agreed to make himself
available to consult with Payco for a period of three years after November 6,
1996 (the date on which the Merger was consummated) (the "Effective Time") and
providing for a payment to him of $150,000 at the conclusion of the three year
period plus reimbursement of expenses, (ii) a covenant not-to-compete agreement
with Dennis G. Punches which prohibits him from engaging in the accounts
receivable management business in North America (including Canada, Mexico and
Puerto Rico) and any other jurisdiction where Payco is doing business or
qualified to do business for a period of three years after the Effective Time in
consideration of a lump sum payment to him at the Effective Time of $3,000,000,
(iii) employment agreements with six other directors and executive officers of
Payco, namely Messrs. Neal R. Sparby, William W. Kagel, Alvin W. Keeley, Patrick
E. Carroll, David S. Patterson and James R. Bohmann, pursuant to which they will
be employed by Payco in their present capacities for a period of one year after
the Effective Time at salaries that range from $189,000 to $246,413, annually,
and which require payment of any bonus due and continued payment of base salary
for the remaining portion of such one year period (offset by remuneration from
other employment) if the employee is terminated without cause during the initial
one year term, and (iv) covenant not-to-compete agreements with the six
directors and executive officers of Payco referred to in clause (iii), above,
prohibiting them from engaging in the accounts receivable management business in
any jurisdiction where Payco is doing business or qualified to do business for a
period of one year after the Effective Time in consideration of lump sum
payments made to them upon the closing of the Payco Acquisition, ranging in
amount from $25,000 to $100,000. In addition, the Company required Payco to
enter into employment agreements on similar terms with two other executive
officers of Payco who are not directors and to enter into covenant
not-to-compete agreements with such officers and also with Joseph T. Treleven,
Director of Mergers/Acquisitions of Payco, pursuant to which he was paid
$200,000 and will be restricted from competing with Payco for a three year
period.
ADVISORY SERVICES AGREEMENT
On September 21, 1995 the Company entered into an Advisory Services
Agreement (the "Advisory Services Agreement") with MDC Management Company III,
L.P. ("MDC Management"), an affiliate. Under the Advisory Services Agreement,
MDC Management provides certain consulting, financial, and managerial functions
for a $300,000 annual fee. The Advisory Services Agreement expires September 21,
2005 and is renewable annually thereafter, unless terminated by the Company. The
Company may terminate the Advisory Services Agreement at any time for cause by
written notice to MDC Management authorized by a majority of the directors other
than those who are partners, principals or employees of MDC Management or any of
its affiliates. The Advisory Services Agreement may be amended by written
agreement of MDC Management and the Company. The Company believes that the terms
of and fees paid for the professional services rendered are at least as
favorable to the Company as those which could be negotiated with a third party.
Upon closing of the Transactions, MDC Management received a one-time fee of
$3,000,000 for financial advisory services provided to OSI in connection
therewith.
CERTAIN INTERESTS OF INITIAL PURCHASERS
Goldman Sachs and its affiliates have certain interests in the Company in
addition to being an Initial Purchaser of the Notes. Goldman Sachs also served
as financial advisor to OSI in connection with the
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Payco Acquisition and received certain fees and reimbursement of expenses in
connection therewith. Moreover, Goldman Sachs acted as co-arranger and Goldman
Sachs Credit Partners, L.P., an affiliate of Goldman Sachs, acts as
co-administrative agent and lender in connection with the New Bank Credit
Facility and receives certain fees and reimbursement of expenses in connection
therewith. MLQ Investors, L.P., an affiliate of Goldman Sachs, owns a non-voting
equity interest in the Company. See "Security Ownership."
In addition to acting as an Initial Purchaser of the Notes, Chase Securities
Inc. ("Chase Securities") and its affiliates have certain other relationships
with the Company. Chase Securities acted as co-arranging agent and The Chase
Manhattan Bank, an affiliate of Chase Securities, acts as co-administrative
agent and a lender under the New Bank Credit Facility and each receives
customary fees and reimbursement of expenses in connection therewith.
Additionally, Chase Equity Associates, L.P., an affiliate of Chase Securities,
owns a non-voting equity interest in the Company. See "Security Ownership."
ARRANGEMENTS WITH CERTAIN AFFILIATES
Payco leases its corporate headquarters in Brookfield, Wisconsin, its data
processing center in New Berlin, Wisconsin and the office space for three of its
collection operations from partnerships in which certain officers of Payco are
the principal partners. The terms of the leases provided for aggregate annual
payments of approximately $2.4 million, $2.2 million and $2.1 million for the
three years ended December 31, 1995, 1994 and 1993. Such lease amounts are
subject to an escalation adjustment, not to exceed 5% annually. All operating
and maintenance costs associated with these buildings are paid by Payco. The
Company believes that the terms of these leases are at least as favorable as
could have been obtained in arms-length negotiations with an unaffiliated
lessor.
MASTER SERVICES AGREEMENT
APLP has entered into a Master Services Agreement (the "Master Services
Agreement") with HBR Capital, Ltd. ("HBR"), which is wholly owned by David G.
Hanna and Frank J. Hanna, III. Under the Master Services Agreement, HBR provides
certain management and investment services to APLP for a monthly fee of $50,000.
The Master Services Agreement expires on October 1, 1997 and is renewable
annually thereafter, unless terminated by either party. The Master Services
Agreement can be terminated upon mutual written agreement of the parties or by
one party after a breach by the other party that is not cured within 15 days of
the date of written notice by the non-breaching party. The Company believes that
the terms of and the fees paid for the professional services rendered are at
least as favorable to APLP as those which could be negotiated with a third
party.
Upon closing of the Transactions, HBR received a one-time fee of $600,000
for financial advisory services provided to OSI in connection therewith.
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DESCRIPTION OF NEW BANK CREDIT FACILITY; OTHER INDEBTEDNESS
NEW BANK CREDIT FACILITY. The Company has entered into a Credit Agreement
with Goldman Sachs Credit Partners L.P. ("GSCP"), an affiliate of Goldman Sachs,
The Chase Manhattan Bank ("Chase" together with GSCP, the "Lenders") and its
affiliate Chase Securities Inc. ("Chase Securities") providing for (i)
syndicated senior secured term loan facilities aggregating $142.0 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 acted as
Syndication Agent, GSCP and Chase Securities acted as Co-Arrangers, and GSCP and
Chase act as Co-Administrative Agents.
The Term Facilities consist of (i) a Tranche A Term Loan of $71.0 million
and (ii) a Tranche B Term Loan of $71.0 million. The Term Facilities provide for
quarterly amortization until final maturity. The Tranche A Term Loan will mature
on October 15, 2001, and the Tranche B Term Loan will mature on October 15,
2003.
In addition, the Company will be required to make prepayments on the Senior
Facilities under certain circumstances, including upon certain asset sales and
issuance of equity securities. The Company will also be required to make
prepayments on the Senior Facilities in an amount equal to 50% of the Company's
Consolidated Excess Cash Flow (as defined therein) in 1998 and thereafter and
upon receipt of cash proceeds from property and casualty insurance or
condemnation awards. These mandatory prepayments will be applied to prepay the
Senior Facilities in the following order: first, to the Term Facilities, ratably
among each tranche, and second, to the permanent reduction of the Revolving
Facility. Subject to reduction in the event the Company meets certain leverage
and interest coverage tests, the Tranche A Term Loan bears interest, at the
Company's option, (a) at a base rate equal to the greater of the federal funds
rate plus 0.5% or Chase's customary base rate, plus 1.5% or (b) at the reserve
adjusted Eurodollar rate plus 2.5%. The Tranche B Term Loan bears interest, at
the Company's option, (a) at a base rate equal to the greater of the federal
funds rate plus 0.5% or Chase's customary base rate, plus 2.0% or (b) at the
reserve adjusted Eurodollar rate plus 3.0%. As shown in Note (j) to the Pro
Forma Consolidated Statement of Operations, interest expense, excluding
amortization of debt issuance costs, for the year ended December 31, 1995, on a
pro forma basis, on the $142.0 million of Term Facilities would have been $11.3
million based on scheduled repayments.
Subject to certain conditions, the Company 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 has a term of five years and is fully revolving until
final maturity. Subject to reduction in the event the Company meets certain
leverage and interest coverage tests, the Revolving Facility bears interest, at
the Company's option, (a) at a base rate equal to the greater of the federal
funds rate plus 0.5% or Chase's customary base rate, plus 1.5% or (b) at the
reserve adjusted Eurodollar rate plus 2.5%.
The Senior Facilities are guaranteed by certain of the Company's present and
future domestic Subsidiaries and are secured by all of the stock of the
Company's present and future Subsidiaries and by substantially all of the
Company's present and future domestic property and assets. Any additional
present or future domestic subsidiaries of the Company that become guarantors
under the Senior Facilities will also jointly and severally guarantee the
Company's payment obligations on the Notes on a senior subordinated basis.
The Senior Facilities contain certain financial covenants, including, but
not limited to, covenants related to interest coverage, fixed charge coverage, a
leverage test and a limitation on capital expenditures. In addition, the Senior
Facilities contain other affirmative and negative covenants relating to (among
other things) liens, negative pledge, limitations on other debt, transactions
with affiliates, mergers and acquisitions, sales of assets, leases, portfolio
purchases, restricted junior payments,
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capital expenditures, guarantees and investments. The Senior Facilities contain
customary events of default for highly-leveraged financings, including certain
changes in control of the Company.
OTHER INDEBTEDNESS. One note, in the principal amount of $5 million, which
bears interest at the rate of 9% per annum and is due on July 10, 2001, remains
outstanding as an obligation of the Company following the Payco Acquisition. The
note ranks PARI PASSU in right of payment with the Notes.
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DESCRIPTION OF NOTES
GENERAL
The New Notes will be issued, and the Old Notes were issued, under an
Indenture dated as of November 6, 1996 (the "Indenture") among the Company, the
Guarantors and Wilmington Trust Company, as trustee (the "Trustee"). For
purposes of the following summary, the Old Notes and the New Notes shall be
collectively referred to as the "Notes." The terms and conditions of the Notes
include those stated in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act of 1939 as in effect on the date of the
Indenture. The following statements are summaries of the provisions of the Notes
and the Indenture and do not purport to be complete. Such summaries make use of
certain terms defined in the Indenture and are qualified in their entirety by
express reference to the Indenture. The definitions of certain capitalized terms
used in the following summary are set forth below under "-- Certain
Definitions." A copy of the Indenture is filed as an exhibit to the Registration
Statement of which this Prospectus is a part. The term "Company" as used in this
Description of Notes refers only to OSI and does not include any of its
subsidiaries.
The Notes are general unsecured obligations of the Company and are
subordinated in right of payment to all Senior Debt of the Company, whether
outstanding on the date of the Indenture or incurred thereafter. See
"-- Subordination." The Company's obligations under the Notes are
unconditionally guaranteed on an unsecured, senior subordinated basis, jointly
and severally, by each of the domestic Subsidiaries of the Company that are
Restricted Subsidiaries and each Subsidiary of the Company that becomes a
guarantor under the New Bank Credit Facility. See "-- Subsidiary Guarantees."
As of the date of the Indenture, all of the Company's Subsidiaries are
Restricted Subsidiaries. However, under certain circumstances, the Company will
be able to designate current or future Subsidiaries as Unrestricted
Subsidiaries. Unrestricted Subsidiaries will not be subject to many of the
restrictive covenants set forth in the Indenture.
The New Notes will be issued in fully registered form only, without coupons,
in denominations of $1,000 and integral multiples thereof. Initially, the
Trustee will act as paying agent and registrar for the Notes. The Notes may be
presented for registration of transfer and exchange at the offices of the
registrar, which initially will be the Trustee's corporate trust office. The
Company may change any paying agent and registrar without notice to holders of
the Notes (the "Holders"). The Company will pay principal (and premium, if any)
on the Notes at the Trustee's corporate office in New York, New York. At the
Company's option, interest may be paid at the Trustee's corporate trust office
or by check mailed to the registered addresses of the Holders. Any Old Notes
that remain outstanding after the completion of the Exchange Offer, together
with the New Notes issued in connection with the Exchange Offer, will be treated
as a single class of securities under the Indenture. See "The Exchange Offer"
and "Old Notes Registration Rights."
PRINCIPAL, MATURITY AND INTEREST
The Notes will be limited in aggregate principal amount to $100.0 million
and will mature on November 1, 2006. Interest on the Notes will accrue at the
rate of 11% per annum and will be payable in cash semi-annually in arrears on
May 1 and November 1, commencing on May 1, 1997, to Holders of record on the
immediately preceding April 15 and October 15. Interest on the Notes will accrue
from the most recent date to which interest has been paid or, if no interest has
been paid, from the date of original issuance. Interest will be computed on the
basis of a 360-day year comprised of twelve 30-day months. Principal, interest
and premium, if any, on the Notes will be payable at the office or agency of the
Company maintained for such purpose within the City and State of New York or, at
the option of the Company, payment of interest may be made by check mailed to
the Holders of the Notes at their respective addresses set forth in the register
of Holders of Notes; PROVIDED that all payments with respect to the Global Note
and definitive notes the Holders of which have given wire transfer instructions
to the
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Company is required to be made by wire transfer of immediately available funds
to the accounts specified by the Holders thereof. Until otherwise designated by
the Company, the Company's office or agency in New York will be the office of
the Trustee maintained for such purpose. The Notes will be issued in minimum
denominations of $1,000 and integral multiples thereof.
SETTLEMENT AND PAYMENT
Settlement for the Notes will be made in immediately available funds.
Payments by the Company in respect of the Notes (including principal, interest
and premium, if any) will be made in immediately available funds. The Notes are
expected to be eligible to trade in the PORTAL Market and to trade in the
Depositary's Same-Day Funds Settlement System, and any permitted secondary
market trading activity in the Notes will, therefore, be required by the
Depositary to be settled in immediately available funds. No assurance can be
given as to the effect, if any, of such settlement arrangements on trading
activity in the Notes.
Because of time zone differences, the securities account of a Euroclear or
CEDEL participant purchasing an interest in the Global Note from a Participant
(as defined herein) in DTC will be credited, and any such crediting will be
reported to the relevant Euroclear or CEDEL participant, during the securities
settlement processing day (which must be a business day for Euroclear and CEDEL)
immediately following the settlement date of DTC. DTC has advised the Company
that cash received in Euroclear or CEDEL as a result of sales of interests in
the Global Note by or through a Euroclear or CEDEL participant to a Participant
in DTC will be received with value on the settlement date of DTC but will be
available in the relevant Euroclear or CEDEL cash account only as of the
business day for Euroclear or CEDEL following DTC's settlement date.
SUBORDINATION
The payment of principal of, interest, premium, if any, on, and all other
Obligations in respect of, the Notes is subordinated in right of payment, in
certain circumstances as set forth in the Indenture, to the prior payment in
full in cash or Cash Equivalents of all Senior Debt, whether outstanding on the
date of the Indenture or thereafter incurred.
The Indenture provides that, upon any distribution to creditors of the
Company in a liquidation or dissolution of the Company or in a bankruptcy,
reorganization, insolvency, receivership or similar proceeding relating to the
Company or its property, an assignment for the benefit of creditors or any
marshaling of the Company's assets and liabilities, the holders of Senior Debt
will be entitled to receive payment in full in cash or Cash Equivalents of all
Obligations due in respect of such Senior Debt (including interest after the
commencement of any such proceeding at the rate specified in the documents
relating to the applicable Senior Debt, whether or not the claim for such
interest is allowed as a claim in such proceeding) before the Holders of Notes
will be entitled to receive any payment on account of any Obligations with
respect to the Notes, and until all Obligations with respect to Senior Debt are
paid in full in cash or Cash Equivalents, any distribution to which the Holders
of Notes would be entitled will be made to the holders of Senior Debt (except
that Holders of Notes may receive Permitted Junior Securities and payments made
from the trust described below under "-- Legal Defeasance and Covenant
Defeasance").
The Indenture also provides that the Company may not make any payment on
account of any Obligations in respect of the Notes (except in Permitted Junior
Securities or from the trust described below under "-- Legal Defeasance and
Covenant Defeasance") if (i) a default in the payment of the principal of,
premium, if any, or interest on Designated Senior Debt occurs and is continuing,
or any judicial proceeding is pending to determine whether any such default has
occurred, or (ii) any other default occurs and is continuing with respect to
Designated Senior Debt that permits, or would permit, with the passage of time
or the giving of notice or both, holders of the Designated Senior Debt as to
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which such default relates to accelerate its maturity and the Trustee receives a
notice of such default (a "Payment Blockage Notice") from the Company of the
holders of any Designated Senior Debt. Payments on the Notes may and shall be
resumed (a) in the case of a payment default, upon the date on which such
default is cured or waived or shall have ceased to exist, unless another
default, event of default or other event that would prohibit such payment shall
have occurred and be continuing, or all Obligations in respect of such
Designated Senior Debt shall have been paid in full in cash or Cash Equivalents
and (b) in case of a nonpayment default, the earlier of the date on which such
nonpayment default is cured or waived or 179 days after the date on which the
applicable Payment Blockage Notice is received by the Trustee. No new period of
payment blockage may be commenced unless and until 360 days have elapsed since
the first day of effectiveness of the immediately prior Payment Blockage Notice.
No nonpayment default that existed or was continuing on the date of delivery of
any Payment Blockage Notice to the Trustee shall be, or be made, the basis for a
subsequent Payment Blockage Notice unless such default shall have been
subsequently cured or waived for a period of not less than 180 days.
The Indenture further requires that the Company promptly notify holders of
Senior Debt if payment of the Notes is accelerated because of an Event of
Default.
As a result of the subordination provisions described above, in the event of
a liquidation or insolvency, Holders of Notes may recover less ratably than
creditors of the Company who are holders of Senior Debt. See "Risk Factors." On
a pro forma basis, after giving effect to the Transactions, the principal amount
of Senior Debt outstanding at September 30, 1996 would have been approximately
$142.6 million. The Indenture will limit, subject to certain financial tests,
the amount of additional Indebtedness, including Senior Debt, that the Company
and its Restricted Subsidiaries can incur. See "-- Certain
Covenants -- Incurrence of Indebtedness and Issuance of Disqualified Stock."
The Notes rank PARI PASSU or senior in right of payment to all Subordinated
Indebtedness of the Company. On a pro forma basis, after giving effect to the
Transactions, the principal amount of Subordinated Indebtedness outstanding at
September 30, 1996 would have been approximately $5.0 million.
"DESIGNATED SENIOR DEBT" means (i) so long as the Senior Bank Debt is
outstanding, the Senior Bank Debt and (ii) at any time thereafter, any other
Senior Debt permitted under the Indenture the aggregate principal amount of
which is $25.0 million or more and that has been designated by the Company as
"Designated Senior Debt."
"PERMITTED JUNIOR SECURITIES" means equity securities of the Company or
debt securities of the Company that are subordinated in right of payment to all
Senior Debt and all securities issued in exchange for Senior Debt that may at
the time be outstanding, to substantially the same extent as, or to a greater
extent than, the Notes.
"SENIOR BANK DEBT" means all Obligations under or in respect of the New
Bank Credit Facility, together with any refunding, refinancing or replacement,
in whole or part, of such Indebtedness.
"SENIOR DEBT" means (i) the Senior Bank Debt and (ii) any other
Indebtedness permitted to be incurred by the Company under the terms of the
Indenture, unless the instrument under which such Indebtedness is incurred
expressly provides that it is on a parity with or subordinated in right of
payment to the Notes. Notwithstanding anything to the contrary in the foregoing,
Senior Debt will not include (1) any liability for federal, state, local or
other taxes owed or owing by the Company, (2) any Indebtedness of the Company to
any of its Restricted Subsidiaries or other Affiliates, (3) any trade payables,
(4) that portion of any Indebtedness that is incurred in violation of the
Indenture, (5) Indebtedness which, when incurred and without respect to any
election under Section 1111(b) of the Title 11, United States Code, is without
recourse to the Company, (6) Indebtedness evidenced by the Notes and (7) Capital
Stock.
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SUBSIDIARY GUARANTEES
The Company's payment obligations under the Notes are jointly and severally
guaranteed on a senior subordinated basis (the "Subsidiary Guarantees") by the
Guarantors. The Subsidiary Guarantee of each Guarantor is subordinated to the
prior payment in full of all Senior Debt of such Guarantor and the amounts for
which the Guarantors are liable under the guarantees issued from time to time
with respect to Senior Debt. The obligations of each Guarantor under its
Subsidiary Guarantee are limited so as not to constitute a fraudulent conveyance
under applicable law. See, however, "Risk Factors -- Fraudulent Conveyance
Issues."
The Indenture provides that, except for a merger of a Guarantor with and
into the Company or another Guarantor, no Guarantor may consolidate with or
merge with or into (whether or not such Guarantor is the surviving Person),
another corporation, Person or entity unless (i) subject to the provisions of
the following paragraph, the Person formed by or surviving any such
consolidation or merger (if other than such Guarantor) assumes all the
obligations of such Guarantor pursuant to a supplemental indenture in form and
substance reasonably satisfactory to the Trustee under the Notes and the
Indenture; (ii) immediately after giving effect to such transaction, no Default
or Event of Default exists; and (iii) the Company would be permitted to incur,
immediately after giving effect to such transaction, at least $1.00 of
additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set
forth in the covenant described below under the caption "-- Incurrence of
Indebtedness and Issuance of Disqualified Stock."
The Indenture provides that in the event of a sale or other disposition of
all of the assets of any Guarantor, by way of merger, consolidation or
otherwise, or a sale or other disposition of all of the capital stock of any
Guarantor, then such Guarantor (in the event of a sale or other disposition, by
way of such a merger, consolidation or otherwise, of all of the capital stock of
such Guarantor) or the corporation acquiring the property (in the event of a
sale or other disposition of all of the assets of such Guarantor) will be
released and relieved of any obligations under its Subsidiary Guarantee;
provided that the Net Proceeds of such sale or other disposition are applied in
accordance with the applicable provisions of the Indenture. See "-- Repurchase
at the Option of Holders -- Asset Sales."
OPTIONAL REDEMPTION
Except as described below, the Notes are not redeemable at the Company's
option prior to November 1, 2001. From and after November 1, 2001, the Notes
will be subject to redemption at the option of the Company, in whole or in part,
upon not less than 30 nor more than 60 days' written notice, at the redemption
prices (expressed as percentages of principal amount) set forth below, plus
accrued and unpaid interest thereon to the applicable redemption date, if
redeemed during the twelve-month period beginning on November 1 of each of the
years indicated below:
<TABLE>
<CAPTION>
PERCENTAGE OF
PRINCIPAL
YEAR AMOUNT
- ----------------------------------------------------------------------------------------------- -----------------
<S> <C>
2001........................................................................................... 105.500%
2002........................................................................................... 103.667%
2003........................................................................................... 101.833%
2004 and thereafter............................................................................ 100.000%
</TABLE>
Prior to November 1, 1999, the Company may, at its option, on any one or
more occasions, redeem up to 35% of the aggregate principal amount of Notes
originally offered in the Offering at a redemption price equal to 111% of the
principal amount thereof, plus accrued and unpaid interest thereon to the
redemption date, with the net proceeds of a public or private sale of common
stock of the Company; PROVIDED that at least 65% of the original aggregate
principal amount of Notes remains outstanding
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immediately after the occurrence of each such redemption; and PROVIDED, FURTHER,
that any such redemption shall occur within 60 days of the date of the closing
of the corresponding sale of common stock of the Company.
SELECTION AND NOTICE
Notices of purchase or redemption shall be mailed by first class mail at
least 30 but not more than 60 days before the purchase or redemption date to
each Holder of Notes to be purchased or redeemed at such Holder's registered
address. If any Note is to be purchased or redeemed in part only, the notice of
purchase or redemption that relates to such Note shall state the portion of the
principal amount thereof to be purchased or redeemed. A new Note in principal
amount equal to the unpurchased or unredeemed portion thereof will be issued in
the name of the Holder thereof upon cancellation of the original Note. On and
after the purchase or redemption date, unless the Company defaults in payment of
the purchase or redemption price, interest ceases to accrue on Notes or portions
of Notes purchased or called for redemption.
MANDATORY REDEMPTION
Except as set forth below under "-- Repurchase at the Option of Holders,"
the Company is not required to make mandatory redemption or sinking fund
payments with respect to the Notes.
REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each Holder of Notes will have
the right to require the Company to repurchase all or any part (equal to $1,000
or an integral multiple thereof) of such Holder's Notes pursuant to the offer
described below (the "Change of Control Offer") at an offer price in cash (the
"Change of Control Payment") equal to 101% of the aggregate principal amount
thereof plus accrued and unpaid interest and Liquidated Damages, if any, thereon
to the date of purchase. Within 30 days following any Change of Control, the
Company will mail a notice to each Holder describing the transaction or
transactions that constitute the Change of Control and offering to repurchase
Notes pursuant to the procedures required by the Indenture and described in such
notice. The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of the Notes as a result of a Change of Control.
The Indenture provides that, prior to complying with the provisions of this
covenant, but in any event within 30 days following a Change of Control, the
Company will either repay in full in cash or Cash Equivalents all outstanding
amounts under the New Bank Credit Facility or offer to repay in full in cash or
Cash Equivalents all outstanding amounts under the New Bank Credit Facility and
repay the Obligations held by each lender under the New Bank Credit Facility who
has accepted such offer or obtain the requisite consents, if any, under the New
Bank Credit Facility to permit the repurchase of the Notes required by this
covenant.
On the Change of Control Payment Date, the Company will, to the extent
lawful, (1) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer, (2) deposit with the Paying Agent an
amount equal to the Change of Control Payment in respect of all Notes or
portions thereof so tendered and (3) deliver or cause to be delivered to the
Trustee for cancellation the Notes so accepted together with an Officers'
Certificate stating the aggregate principal amount of Notes or portions thereof
being purchased by the Company. The Paying Agent will promptly mail to each
Holder of Notes so tendered the Change of Control Payment for such Notes, and
the
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Trustee will promptly authenticate and mail (or cause to be transferred by book
entry) to each Holder a new Note equal in principal amount to any unpurchased
portion of the Notes surrendered, if any; PROVIDED that each such new Note will
be in a principal amount of $1,000 or an integral multiple thereof. The Company
will publicly announce the results of the Change of Control Offer on or as soon
as practicable after the Change of Control Payment Date.
The Change of Control provisions described above will be applicable whether
or not any other provisions of the Indenture are applicable. Except as described
above with respect to a Change of Control, the Indenture does not contain
provisions that permit the Holders of the Notes to require that the Company
repurchase or redeem the Notes in the event of a takeover, recapitalization or
similar transaction.
The Company will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in the Indenture applicable to a Change of Control Offer made by the Company and
purchases all Notes validly tendered and not withdrawn under such Change of
Control Offer.
The existence of a Holder's right to require the Company to repurchase such
Holder's Notes upon the occurrence of a Change of Control may deter a third
party from seeking to acquire the Company in a transaction that would constitute
a Change of Control.
ASSET SALES
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, cause, make or suffer to exist an Asset Sale
unless (i) the Company (or the Restricted Subsidiary, as the case may be)
receives consideration at the time of such Asset Sale at least equal to the Fair
Market Value (evidenced by a resolution of the Board of Directors set forth in
an Officers' Certificate delivered to the Trustee) of the assets or Equity
Interests issued or sold or otherwise disposed of and (ii) at least 85% of the
consideration therefor received by the Company or such Restricted Subsidiary is
in the form of cash or Cash Equivalents; PROVIDED that the amount of (x) any
liabilities (as shown on the Company's or such Subsidiary's most recent balance
sheet) of the Company or any Restricted Subsidiary (other than contingent
liabilities and liabilities that are by their terms subordinated to the Notes or
any guarantee thereof) that are assumed by the transferee of any such assets
pursuant to a customary novation agreement that releases the Company or such
Restricted Subsidiary from further liability and (y) any notes or other
obligations received by the Company or any such Restricted Subsidiary from such
transferee that are immediately converted by the Company or such Restricted
Subsidiary into cash (to the extent of the cash received), shall be deemed to be
cash for purposes of this provision.
Within 270 days after the Company's or any Restricted Subsidiary's receipt
of the Net Proceeds of any Asset Sale, the Company or such Restricted Subsidiary
may apply the Net Proceeds from such Asset Sale, at its option, (i) to
permanently reduce Obligations under the New Bank Credit Facility (and to
correspondingly reduce commitments with respect thereto) or other Senior Debt or
Pari Passu Indebtedness, (ii) to the acquisition of a controlling interest in
any one or more businesses, to the making of a capital expenditure or the
acquisition of Purchased Portfolios or other long-term assets, in each case,
that is engaged in or that is used or useful in a Principal Business and/or
(iii) to an investment in properties or assets that replace the properties and
assets that are the subject of such Asset Sale. Pending the final application of
any such Net Proceeds, the Company or such Restricted Subsidiary may temporarily
reduce Indebtedness under a revolving credit facility, if any, or otherwise
invest such Net Proceeds in Cash Equivalents. The Indenture provides that any
Net Proceeds from the Asset Sale that are not invested as provided and within
the time period set forth in the first sentence of this paragraph will be deemed
to constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds
exceeds $10.0 million, the Company will be required to make an offer to all
Holders of Notes (an "Asset Sale
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Offer") to purchase the maximum principal amount of Notes, that is an integral
multiple of $1,000, that may be purchased out of the Excess Proceeds at an offer
price in cash in an amount equal to 100% of the principal amount thereof, plus
accrued and unpaid interest and Liquidated Damages, if any, thereon to the date
fixed for the closing of such offer, in accordance with the procedures set forth
in the Indenture. The Company will commence an Asset Sale Offer with respect to
Excess Proceeds within ten business days after the date that the aggregate
amount of Excess Proceeds exceeds $10.0 million by mailing the notice required
pursuant to the terms of the Indenture, with a copy to the Trustee. To the
extent that the aggregate amount of Notes tendered pursuant to an Asset Sale
Offer is less than the Excess Proceeds, the Company may use any remaining Excess
Proceeds for any purpose not prohibited by the Indenture. If the aggregate
principal amount of Notes surrendered by Holders thereof exceeds the amount of
Excess Proceeds, the Trustee shall select the Notes to be purchased on a PRO
RATA basis. Upon completion of any such Asset Sale Offer, the amount of Excess
Proceeds shall be reset at zero.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of the Notes as a result of an Asset Sale.
The New Bank Credit Facility currently prohibits the Company from purchasing
any Notes, and also provides that certain change of control events with respect
to the Company would constitute a default thereunder. Any future credit
agreements or other agreements relating to Senior Debt to which the Company
becomes a party may contain similar restrictions and provisions. In the event a
Change of Control occurs or an Asset Sale Offer is required to be made at a time
when the Company is prohibited from purchasing Notes, the Company could seek the
consent of the lenders under the New Bank Credit Facility or such future
agreements relating to Senior Debt to the purchase of Notes or could attempt to
refinance the borrowings that contain such prohibition. If the Company does not
obtain such a consent or repay such borrowings, the Company will remain
prohibited from purchasing Notes. In such case, the Company's failure to
purchase tendered Notes would constitute an Event of Default under the
Indenture. In such circumstances, the subordination provisions in the Indenture
would restrict payments to the Holders of Notes.
CERTAIN COVENANTS
RESTRICTED PAYMENTS
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly: (i) declare or pay any
dividend or make any other payment or distribution on account of the Company's
Equity Interests (other than dividends or distributions payable in Equity
Interests (other than Disqualified Stock) of the Company); (ii) purchase,
redeem, defease or otherwise acquire or retire for value any Equity Interests of
the Company or any direct or indirect parent of the Company; (iii) make any
principal payment on, or purchase, redeem, defease or otherwise acquire or
retire for value any Subordinated Indebtedness, except at final maturity; or
(iv) make any Restricted Investment (all such payments and other actions set
forth in clauses (i) through (iv) above being collectively referred to as
"Restricted Payments"), unless, at the time of and after giving effect to such
Restricted Payment:
(a) no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof;
(b) the Company would, at the time of such Restricted Payment and
immediately after giving pro forma effect thereto as if such Restricted
Payment had been made at the beginning of the applicable four-quarter
period, have been permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in
the first paragraph of the
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covenant described below under the caption "-- Incurrence of Indebtedness
and Issuance of Disqualified Stock;" and
(c) such Restricted Payment, together with the aggregate of all other
Restricted Payments made by the Company and its Restricted Subsidiaries
after the date of the Indenture (including Restricted Payments permitted by
clauses (i), (v) and (vii) of the next succeeding paragraph, but excluding
all other Restricted Payments permitted by the next succeeding paragraph),
is less than the sum of (i) 50% of the Consolidated Net Income of the
Company for the period (taken as one accounting period) from the beginning
of the first fiscal quarter commencing after the date of the Indenture to
the end of the Company's most recently ended fiscal quarter for which
internal financial statements are available at the time of such Restricted
Payment (or, if such Consolidated Net Income for such period is a deficit,
less 100% of such deficit), plus (ii) 100% of the aggregate net cash
proceeds received by the Company from the issue or sale since the date of
the Indenture of Equity Interests of the Company or of Disqualified Stock or
debt securities of the Company that have been converted into such Equity
Interests (other than Equity Interests, Disqualified Stock or convertible
debt securities of the Company sold to a Restricted Subsidiary of the
Company and other than Disqualified Stock or debt securities that have been
converted into Disqualified Stock), plus (iii) 100% of the aggregate amounts
contributed to the capital of the Company since the date of the Indenture,
plus (iv) to the extent that any Restricted Investment that was made after
the date of the Indenture was sold for cash, the lesser of (A) the cash
return of capital with respect to such Restricted Investment (less the cost
of disposition, if any) and (B) the initial amount of such Restricted
Investment, plus (v) without duplication, to the extent that any
Unrestricted Subsidiary is designated by the Company as a Restricted
Subsidiary, an amount equal to the lesser of (A) the net book value of the
Company's Investment in such Unrestricted Subsidiary at the time of such
designation and (B) the Fair Market Value of such Investment at the time of
such designation, plus (vi) 50% of any dividends received by the Company or
a Wholly Owned Restricted Subsidiary of the Company (except to the extent
that such dividends were already included in Consolidated Net Income) after
the date of the Indenture from an Unrestricted Subsidiary of the Company.
The foregoing provisions will not prohibit:
(i) the payment of any dividend or redemption payment within 60 days
after the date of declaration thereof, if at the date of declaration such
payment would have complied with the provisions of the Indenture;
(ii) the redemption, repurchase, retirement or other acquisition of any
Equity Interests of the Company or any Restricted Subsidiary or any
Subordinated Indebtedness of the Company in exchange for, or out of the
proceeds of, the substantially concurrent sale (other than to a Restricted
Subsidiary of the Company) of Equity Interests of the Company (other than
any Disqualified Stock); provided that the amount of any such net cash
proceeds that are utilized for any such redemption, repurchase, retirement
or other acquisition shall be excluded from clause (c)(ii) of the preceding
paragraph;
(iii) the defeasance, redemption, repurchase, retirement or other
acquisition of Subordinated Indebtedness with the net cash proceeds from an
incurrence of Permitted Refinancing Indebtedness;
(iv) the redemption, repurchase, retirement or other acquisition of
Subordinated Indebtedness; PROVIDED that the aggregate price paid for all
such redemptions, repurchases, retirements or other acquisitions since the
date of the Indenture does not exceed the consideration received by the
Company or any of its Restricted Subsidiaries from the incurrence of
Subordinated Indebtedness since the date of the Indenture; PROVIDED that the
amount of any such net cash proceeds that are utilized for any such
redemption, repurchase, retirement or other acquisition shall be excluded
from the immediately preceding clause (iii) and from clause (c)(ii) of the
preceding paragraph;
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(v) the repurchase, redemption, retirement or other acquisition for
value of any Equity Interests of the Company or any Restricted Subsidiary of
the Company held by any director, officer or employee of the Company or any
of its Restricted Subsidiaries pursuant to any employment agreement,
management equity subscription agreement or stock option agreement; PROVIDED
that the aggregate price paid for all such repurchased, redeemed, acquired
or retired Equity Interests shall not exceed the sum of $1.0 million in any
twelve-month period;
(vi) repurchases of Equity Interests deemed to occur upon exercise of
stock options if such Equity Interests represent a portion of the exercise
price of such options;
(vii) the payment of any dividend on, or the redemption of, the Company
Preferred Stock, in each case in accordance with the terms thereof as in
effect on the date of the Indenture; PROVIDED that the Fixed Charge Coverage
Ratio for the Company for the most recently ended four full fiscal quarters
for which internal financial statements are available immediately preceding
the date of such payment, redemption, repurchase, retirement or other
acquisition would have been at least 2.0 to 1.0 determined on a pro forma
basis, as if such payment, redemption, repurchase, retirement or other
acquisition, together with any other payments, redemptions, repurchases,
retirements and other acquisitions permitted by this clause (vii) occurring
during the preceding twelve-month period, had occurred at the beginning of
the applicable four-quarter period;
(viii) the redemption, repurchase, retirement or other acquisition of
Seller Paper; and
(ix) the making of other Restricted Payments not to exceed $10.0 million
in the aggregate.
PROVIDED, FURTHER, that at the time of, and after giving effect to, any
Restricted Payment permitted under clauses (iv), (v), (vii), (viii) or (ix)
above, no Default or Event of Default shall have occurred and be continuing or
would occur as a consequence thereof; and PROVIDED FURTHER that for purposes of
determining the aggregate amount expended for Restricted Payments in accordance
with clause (c) of the immediately preceding paragraph, only the amounts
expended under clauses (i), (v) and (vii) shall be included.
As of the date of the Indenture, all of the Company's Subsidiaries were
Restricted Subsidiaries. The Company will not permit any Unrestricted Subsidiary
to become a Restricted Subsidiary except pursuant to the last sentence of the
definition of "Unrestricted Subsidiary." For purposes of designating any
Restricted Subsidiary as an Unrestricted Subsidiary, all outstanding Investments
by the Company and its Restricted Subsidiaries (except to the extent repaid) in
the Subsidiary so designated will be deemed to be Restricted Payments in an
amount equal to the Fair Market Value of such Investment at the time of such
designation. Such designation will only be permitted if a Restricted Payment in
such amount would be permitted at such time and if such Subsidiary otherwise
meets the definition of an Unrestricted Subsidiary. Unrestricted Subsidiaries
will not be subject to any of the restrictive covenants set forth in the
Indenture.
The amount of all Restricted Payments (other than cash) shall be the Fair
Market Value (evidenced by a resolution of the Board of Directors set forth in
an Officers' Certificate delivered to the Trustee) on the date of the Restricted
Payment of the asset(s) proposed to be transferred by the Company or such
Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment.
Not later than the date of making any Restricted Payment, the Company shall
deliver to the Trustee an Officers' Certificate stating that such Restricted
Payment is permitted and setting forth the basis upon which the calculations
required by the covenant "Restricted Payments" were computed, which calculations
may be based upon the Company's latest available financial statements.
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INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF DISQUALIFIED STOCK
The Indenture provides that the Company will not, and will not permit any of
its Subsidiaries to, directly or indirectly, create, incur, issue, assume,
guarantee or otherwise become directly or indirectly liable, contingently or
otherwise, with respect to (collectively, "incur" and correlatively, an
"incurrence" of) any Indebtedness (including Acquired Debt) and that the Company
will not issue any Disqualified Stock and will not permit any of its
Subsidiaries to issue any shares of Preferred Stock; PROVIDED, HOWEVER, that the
Company may incur Indebtedness (including Acquired Debt) or issue shares of
Disqualified Stock if the Fixed Charge Coverage Ratio for the Company for the
most recently ended four full fiscal quarters for which internal financial
statements are available immediately preceding the date of such incurrence would
have been at least 2.0 to 1.0 determined on a pro forma basis (including a pro
forma application of the net proceeds therefrom), as if the additional
Indebtedness had been incurred or the Disqualified Stock had been issued, as the
case may be, and the application of proceeds therefrom had occurred, at the
beginning of such four-quarter period.
The foregoing provisions will not apply to:
(a) the incurrence by the Company or any of its Restricted Subsidiaries
of Indebtedness under the New Bank Credit Facility and Guarantees thereof by
the Guarantors and the issuance of letters of credit thereunder (with
letters of credit being deemed to have a principal amount equal to the
maximum face amount thereunder) so long as, immediately after any such
incurrence, the aggregate principal amount outstanding under the New Bank
Credit Facility (together with any Permitted Refinancing Indebtedness
incurred to refund, replace or refinance any Indebtedness incurred pursuant
to the New Bank Credit Facility) does not exceed an amount equal to $ 200.0
million, less the aggregate amount of all principal repayments of term loans
(other than repayments that are immediately reborrowed) and permanent
commitment reductions with respect to revolving loans and letters of credit
under the New Bank Credit Facility (or any such Permitted Refinancing
Indebtedness) that have been made since the date of the Indenture;
(b) the incurrence by the Company or any of its Restricted Subsidiaries
of any Existing Indebtedness;
(c) the incurrence by the Company or any of its Restricted Subsidiaries
of Indebtedness represented by the Notes and the Subsidiary Guarantees;
(d) Guarantees by the Company or a Guarantor of Indebtedness incurred by
the Company or a Restricted Subsidiary of the Company so long as the
incurrence of such Indebtedness by the primary obligor thereon was permitted
under the terms of the Indenture;
(e) the incurrence by the Company or a Restricted Subsidiary of the
Company of intercompany Indebtedness between or among the Company and any of
its Restricted Subsidiaries; PROVIDED, HOWEVER, that (i) all such
intercompany Indebtedness is expressly subordinate to the prior payment in
full of all Obligations with respect to the Notes and the Guarantees and
(ii)(A) any subsequent issuance or transfer of Equity Interests that results
in any such intercompany Indebtedness being held by a Person other than the
Company or a Restricted Subsidiary and (B) any sale or transfer of any such
intercompany Indebtedness to a Person that is not either the Company or a
Restricted Subsidiary of the Company shall be deemed, in each case, to
constitute an incurrence of such Indebtedness by the Company or such
Restricted Subsidiary, as the case may be, that is not permitted by this
clause (e);
(f) the issuance by a Restricted Subsidiary of the Company of any
shares of Preferred Stock to the Company or any of its Restricted
Subsidiaries; PROVIDED, HOWEVER, that (i) all such Preferred Stock is
expressly subordinate to the prior payment in full of all Obligations with
respect to the Notes and the Guarantees and (ii)(A) any subsequent issuance
or transfer of Equity Interests that results in any such Preferred Stock
being held by a Person other than the Company or a Restricted Subsidiary
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and (B) any sale or transfer of any such shares of Preferred Stock to a
Person that is not either the Company or a Restricted Subsidiary of the
Company shall be deemed, in each case, to constitute an issuance of such
Preferred Stock by such Restricted Subsidiary that is not permitted by this
clause (f);
(g) Hedging Obligations that are incurred (1) for the purpose of fixing
or hedging interest rate risk with respect to any Indebtedness that is
permitted by the terms of the Indenture to be outstanding or (2) for the
purpose of fixing or hedging currency exchange rate risk with respect to any
currency exchanges;
(h) the incurrence of Acquired Debt of a Restricted Subsidiary in
connection with the acquisition of such Subsidiary in an aggregate principal
amount at any time outstanding (including any Permitted Refinancing
Indebtedness incurred to refund, replace or refinance any Acquired Debt
incurred pursuant to this clause (h)) not to exceed $25.0 million; PROVIDED
that such Indebtedness is not incurred in contemplation of such acquisition;
and PROVIDED FURTHER that the Company's Fixed Charge Coverage Ratio for the
most recently ended four full fiscal quarters for which internal financial
statements are available immediately preceding the date of such transaction
would have been at least 2.0 to 1.0 determined on a pro forma basis, as if
such transaction had occurred at the beginning of such four-quarter period
and such Indebtedness or Disqualified Stock had been included for all
purposes in such pro forma calculation;
(i) the incurrence by the Company or any of its Restricted Subsidiaries
of Permitted Refinancing Indebtedness in exchange for, or the net proceeds
of which are used to extend, refinance, renew, replace, defease or refund,
Indebtedness that was permitted by the Indenture to be incurred;
(j) the incurrence by the Company's Unrestricted Subsidiaries of
Non-Recourse Debt; PROVIDED, HOWEVER, that if any such Indebtedness ceases
to be Non-Recourse Debt of an Unrestricted Subsidiary, such event shall be
deemed to constitute an incurrence of Indebtedness by a Restricted
Subsidiary of the Company;
(k) Capital Lease Obligations and Purchase Money Indebtedness of the
Company or any of its Restricted Subsidiaries (including any Permitted
Refinancing Indebtedness incurred to refund, replace or refinance any
Capital Lease Obligations or Purchase Money Indebtedness incurred pursuant
to this clause (k)) not to exceed $5.0 million at any one time outstanding;
and
(l) additional Indebtedness of the Company or any of its Restricted
Subsidiaries (including any Permitted Refinancing Indebtedness incurred to
refund, replace or refinance any Indebtedness incurred pursuant to this
clause (l)) in an aggregate principal amount not to exceed $15.0 million at
any one time outstanding (which Indebtedness may, but need not, be incurred
under the New Bank Credit Facility).
ANTI-LAYERING
The Indenture provides that (i) the Company will not directly or indirectly
incur, create, issue, assume, guarantee or otherwise become liable for any
Indebtedness that is subordinate or junior in right of payment to any Senior
Debt and senior in any respect in right of payment to the Notes and (ii) no
Guarantor will incur, create, issue, assume, guarantee or otherwise become
liable for any Indebtedness that is subordinate or junior in right of payment to
its Senior Debt and senior in any respect in right of payment to the Subsidiary
Guarantees.
SALE AND LEASEBACK TRANSACTIONS
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, enter into any sale and leaseback transaction;
provided that the Company may enter into a sale and leaseback transaction if (i)
the Company could have (a) incurred Indebtedness in an amount equal
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to the Attributable Debt relating to such sale and leaseback transaction
pursuant to the Fixed Charge Coverage Ratio test set forth in the first
paragraph of the covenant described above under the caption "--Incurrence of
Indebtedness and Issuance of Disqualified Stock" and (b) incurred a Lien to
secure such Indebtedness pursuant to the covenant described above under the
caption "--Liens," (ii) the gross cash proceeds of such sale and leaseback
transaction are at least equal to the Fair Market Value (as determined in good
faith by the Board of Directors and set forth in an Officers' Certificate
delivered to the Trustee) of the property that is the subject of such sale and
leaseback transaction and (iii) the transfer of assets in such sale and
leaseback transaction is permitted by, and the Company applies the proceeds of
such transaction in compliance with, the covenant described above under the
caption "--Repurchase at the Option of Holders--Asset Sales."
LIENS
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly, create, incur, assume or
suffer to exist any Lien that secures obligations under any Pari Passu
Indebtedness or Subordinated Indebtedness on any asset or property now owned or
hereafter acquired by the Company or any of its Restricted Subsidiaries, or any
income or profits therefrom or assign or convey any right to receive income
therefrom, unless the Notes are equally and ratably secured with the obligations
so secured or until such time as such obligations are no longer secured by a
Lien; PROVIDED, that in any case involving a Lien securing Subordinated
Indebtedness, such Lien is subordinated to the Lien securing the Notes on a
basis no less favorable than such Subordinated Indebtedness is subordinated to
the Notes.
DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED SUBSIDIARIES
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly, create or otherwise
cause or suffer to exist or become effective any encumbrance or restriction on
the ability of any Restricted Subsidiary to (i)(a) pay dividends or make any
other distributions to the Company or any of its Restricted Subsidiaries (1) on
its Capital Stock or (2) with respect to any other interest or participation in,
or measured by, its profits, or (b) pay any indebtedness owed to the Company or
any of its Restricted Subsidiaries, (ii) make loans or advances to the Company
or any of its Restricted Subsidiaries or (iii) sell, lease or transfer any of
its properties or assets to the Company or any of its Restricted Subsidiaries,
except for such encumbrances or restrictions existing under or by reason of (a)
Existing Indebtedness as in effect on the date of the Indenture, (b) the New
Bank Credit Facility as in effect as of the date of the Indenture, and any
amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings thereof, in whole or in part, PROVIDED
that such amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacement or refinancings are no more restrictive in
any material respect with respect to such dividend and other payment
restrictions than those contained in the New Bank Credit Facility as in effect
on the date of the Indenture, (c) the Indenture and the Notes, (d) applicable
law, (e) Indebtedness or Capital Stock of a Person acquired by the Company or
any of its Restricted Subsidiaries as in effect at the time of such acquisition
(except to the extent such Indebtedness was incurred in connection with or in
contemplation of such acquisition), which encumbrance or restriction is not
applicable to any Person, or the properties or assets of any Person, other than
the Person, or the property or assets of the Person, so acquired, PROVIDED that,
in the case of Indebtedness, such Indebtedness was permitted by the terms of the
Indenture to be incurred, (f) by reason of customary non-assignment provisions
in leases entered into in the ordinary course of business and consistent with
past practices, (g) purchase money obligations for property acquired in the
ordinary course of business that impose restrictions of the nature described in
clause (iii) above on the property so acquired, or (h) Permitted Refinancing
Indebtedness, PROVIDED that the restrictions contained in the agreements
governing such Permitted Refinancing Indebtedness are no more restrictive in any
material respect than those contained in the agreements governing the
Indebtedness being refinanced.
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ADDITIONAL SUBSIDIARY GUARANTEES
The Indenture provides that if (i) the Company acquires or creates any
additional Subsidiary that is a domestic Restricted Subsidiary or (ii) any
Restricted Subsidiary of the Company that is not a Guarantor guarantees any
Indebtedness of the Company other than the Notes, the Company will cause such
Restricted Subsidiary to (A) execute and deliver to the Trustee a supplemental
indenture in form and substance reasonably satisfactory to the Trustee pursuant
to which such Restricted Subsidiary shall unconditionally guarantee all of the
Company's obligations under the Notes on the terms set forth in such
supplemental indenture and (B) deliver to the Trustee an Opinion of Counsel
reasonably satisfactory to the Trustee that such supplemental indenture has been
duly executed and delivered by such Restricted Subsidiary.
MERGER, CONSOLIDATION OR SALE OF ASSETS
The Indenture provides that the Company may not consolidate or merge with or
into (whether or not the Company is the surviving corporation), or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of its
properties or assets in one or more related transactions, to another
corporation, Person or entity unless (i) the Company is the surviving
corporation or the entity or the Person formed by or surviving any such
consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made is a corporation organized or existing under the laws of the United States,
any state thereof or the District of Columbia; (ii) the entity or Person formed
by or surviving any such consolidation or merger (if other than the Company) or
the entity or Person to which such sale, assignment, transfer, lease, conveyance
or other disposition shall have been made assumes all the obligations of the
Company under the Notes and the Indenture pursuant to a supplemental indenture
in a form reasonably satisfactory to the Trustee; (iii) immediately after such
transaction no Default or Event of Default exists; and (iv) except in the case
of a merger of the Company with or into a Wholly Owned Restricted Subsidiary of
the Company, the Company or the entity or Person formed by or surviving any such
consolidation or merger (if other than the Company), or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made (A) will have Consolidated Net Worth immediately after the transaction
equal to or greater than the Consolidated Net Worth of the Company immediately
prior to the transaction and (B) will, at the time of such transaction and after
giving pro forma effect thereto as if such transaction had occurred at the
beginning of the applicable four-quarter period, be permitted to incur at least
$1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio
test set forth in the first paragraph of the covenant described above under the
caption "--Incurrence of Indebtedness and Issuance of Disqualified Stock."
Notwithstanding the foregoing, any Restricted Subsidiary may consolidate with,
merge into or transfer all or part of its properties and assets to the Company.
TRANSACTIONS WITH AFFILIATES
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or
otherwise dispose of any of its properties or assets to, or purchase any
property or assets from, or enter into or make or amend any contract, agreement,
understanding, loan, advance or guarantee with, or for the benefit of, any
Affiliate (each of the foregoing, an "Affiliate Transaction"), unless (i) such
Affiliate Transaction is on terms that are no less favorable to the Company or
the relevant Restricted Subsidiary than those that might reasonably have been
obtained in a comparable transaction by the Company or such Restricted
Subsidiary with an unrelated Person and (ii) the Company delivers to the Trustee
(a) with respect to any Affiliate Transac-tion or series of related Affiliate
Transactions involving aggregate consideration in excess of $1.0 million, a
resolution of the Board of Directors set forth in an Officers' Certificate
certifying that such Affiliate Transaction complies with clause (i) above and
that such Affiliate Transaction has been approved by a majority of the
disinterested members of the Board of Directors and (b) with respect to any
Affiliate Transaction or series
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of related Affiliate Transactions involving aggregate consideration in excess of
$5.0 million, an opinion as to the fairness to the Holders of the Notes of such
Affiliate Transaction from a financial point of view issued by an accounting,
appraisal or investment banking firm of national standing.
The foregoing provisions will not apply to the following: (i) transactions
between or among the Company and/or any of its Restricted Subsidiaries; (ii)
Restricted Payments or Permitted Investments permitted by the provisions of the
Indenture described above under the caption entitled "--Restricted Payments;"
(iii) the payment of reasonable and customary regular fees and compensation to,
and indemnity provided on behalf of, officers, directors, employees or
consultants of the Company or any Restricted Subsidiary of the Company; (iv) the
payment of fees in an aggregate amount not to exceed $750,000 in any
twelve-month period pursuant to the Advisory Services Agreement; (v) any other
transactions pursuant to the Advisory Services Agreement or transactions
pursuant to the HBR Services Agreement, in each case, as in effect on the date
of the Indenture; and (vi) the payment of fees and expenses as set forth under
the caption "Use of Proceeds" in the Offering Circular dated October 31, 1996
distributed in connection with the Initial Offering.
LIMITATION ON ISSUANCES AND SALES OF CAPITAL STOCK OF WHOLLY OWNED
RESTRICTED SUBSIDIARIES
The Indenture provides that the Company (i) will not, and will not permit
any Wholly Owned Restricted Subsidiary of the Company to, transfer, convey,
sell, lease or otherwise dispose of any Capital Stock of any Wholly Owned
Restricted Subsidiary of the Company to any Person (other than the Company or a
Wholly Owned Restricted Subsidiary of the Company), unless (a) such transfer,
conveyance, sale, lease or other disposition is of all the Capital Stock of such
Wholly Owned Restricted Subsidiary and (b) the cash Net Cash Proceeds from such
transfer, conveyance, sale, lease or other disposition are applied in accordance
with the covenant described above under the caption "--Repurchase at the Option
of Holders--Asset Sales," and (ii) will not permit any Wholly Owned Restricted
Subsidiary of the Company to issue any of its Equity Interests (other than, if
necessary, shares of its Capital Stock constituting directors' qualifying
shares) to any Person other than to the Company or a Wholly Owned Restricted
Subsidiary of the Company.
BUSINESS ACTIVITIES
The Company will not, and will not permit any Restricted Subsidiary to,
engage in any business other than a Principal Business, except to such extent as
would not be material to the Company and its Restricted Subsidiaries, taken as a
whole.
REPORTS
The Indenture provides that, whether or not required by the rules and
regulations of the Securities and Exchange Commission (the "Commission"), so
long as any Notes are outstanding, the Company will furnish to the Holders of
Notes (i) all quarterly and annual financial information that would be required
to be contained in a filing with the Commission on Forms 10-Q and 10-K if the
Company were required to file such Forms, including a "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and, with respect
to the annual information only, a report thereon by the Company's certified
independent accountants and (ii) all current reports that would be required to
be filed with the Commission on Form 8-K if the Company were required to file
such reports. In addition, whether or not required by the rules and regulations
of the Commission, commencing immediately after the consummation of the Exchange
Offer contemplated by the Registration Rights Agreement, the Company will file a
copy of all such information and reports with the Commission for public
availability (unless the Commission will not accept such a filing) and make such
information available to securities analysts and prospective investors upon
request.
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EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an Event of
Default: (i) default for 30 days in the payment when due of interest on the
Notes (whether or not prohibited by the subordination provisions of the
Indenture); (ii) default in payment when due of the principal of or premium, if
any, on the Notes (whether or not prohibited by the subordination provisions of
the Indenture); (iii) failure by the Company for 30 days after notice from the
Trustee or the Holders of at least 25% in aggregate principal amount of the then
outstanding Notes to comply with the provisions described above under the
captions "--Change of Control," "--Restricted Payments," "--Incurrence of
Indebtedness and Issuance of Disqualified Stock" or "--Merger, Consolidation or
Sale of All Assets;" (iv) failure by the Company for 60 days after notice from
the Trustee or the Holders of at least 25% in aggregate principal amount of the
then outstanding Notes to comply with any of its other agreements in the
Indenture or the Notes; (v) default under any mortgage, indenture or instrument
under which there may be issued or by which there may be secured or evidenced
any Indebtedness for money borrowed by the Company or any of its Restricted
Subsidiaries (or the payment of which is guaranteed by the Company or any of its
Restricted Subsidiaries) whether such Indebtedness or guarantee now exists, or
is created after the date of the Indenture, which default results in the
acceleration of such Indebtedness prior to its express maturity and, in each
case, the principal amount of any such Indebtedness, together with the principal
amount of any other such Indebtedness the maturity of which has been so
accelerated, aggregates $10.0 million or more; (vi) failure by the Company or
any of its Restricted Subsidiaries to pay final judgments aggregating in excess
of $10.0 million, which judgments are not paid, discharged or stayed for a
period of 60 days; (vii) except as permitted by the Indenture, any Significant
Subsidiary Guarantee shall be held in any judicial proceeding to be
unenforceable or invalid or shall cease for any reason to be in full force and
effect (except by its terms) or any Guarantor, or any Person acting on behalf of
any Guarantor, shall deny or disaffirm its obligations under its Significant
Subsidiary Guarantee; and (viii) certain events of bankruptcy or insolvency with
respect to the Company or any of its Significant Subsidiaries.
If any Event of Default occurs and is continuing, the Trustee or the Holders
of at least 25% in principal amount of the then outstanding Notes may declare
all the Notes to be due and payable immediately; PROVIDED, HOWEVER, that so long
as the New Bank Credit Facility shall be in full force and effect, if an Event
of Default shall have occurred and be continuing (other than an Event of Default
under clause (viii) of the preceding paragraph with respect to the Company), any
such acceleration shall not be effective until the earlier to occur of (x) five
days following the delivery of a notice of such acceleration to the agent or
other representative of the lenders under the New Bank Credit Facility and (y)
acceleration of any Indebtedness under the New Bank Credit Facility.
Notwithstanding the foregoing, in the case of an Event of Default arising from
certain events of bankruptcy or insolvency described in clause (viii) of the
preceding paragraph, with respect to the Company, any Significant Restricted
Subsidiary or any group of Restricted Subsidiaries that, taken together, would
constitute a Significant Restricted Subsidiary, all outstanding Notes will
become due and payable without further action or notice. Holders of the Notes
may not enforce the Indenture or the Notes except as provided in the Indenture.
Subject to certain limitations, Holders of a majority in principal amount of the
then outstanding Notes may direct the Trustee in its exercise of any trust or
power. The Trustee may withhold from Holders of the Notes notice of any
continuing Default or Event of Default (except a Default or Event of Default
relating to the payment of principal or interest) if it determines that
withholding notice is in their interest.
The Indenture provides that, at any time after a declaration of acceleration
with respect to the Notes, the Holders of a majority in principal amount of the
Notes may rescind and cancel such declaration and its consequences (i) if the
recission would not conflict with any judgment or decree, (ii) if all existing
Events of Default have been cured or waived except nonpayment of principal or
interest that has become due solely because of the acceleration, (iii) if, to
the extent the payment of such interest is lawful, interest on overdue
installments of interest and overdue principal at a rate equal to 1% per annum
in excess of the rate borne by the Notes, which has become due otherwise than by
such declaration of acceleration,
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has been paid, (iv) if the Company has paid the Trustee its reasonable
compensation and reimbursed the Trustee for its expenses, disbursements and
advances and (v) if, in the event of the cure or waiver of an Event of Default
of the type described in clause (viii) of the description above of Events of
Default, the Trustee shall have received an Officer's Certificate and an opinion
of counsel that such Event of Default has been cured or waived. No such
rescission shall affect any subsequent Default or impair any right consequent
thereto.
The Holders of a majority in principal amount of the Notes may waive any
existing Default or Event of Default under the Indenture, and its consequences,
except a default in the payment of the principal of or interest on any Notes.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding payment of the premium that the Company would have had
to pay if the Company then had elected to redeem the Notes pursuant to the
optional redemption provisions of the Indenture, an equivalent premium shall
also become and be immediately due and payable to the extent permitted by law
upon the acceleration of the Notes. If an Event of Default occurs prior to
November 1, 2001 by reason of any willful action (or inaction) taken (or not
taken) by or on behalf of the Company with the intention of avoiding the
prohibition on redemption of the Notes prior to November 1, 2001, then the
premium specified in the Indenture shall also become immediately due and payable
to the extent permitted by law upon the acceleration of the Notes.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of the Company
or any Guarantor, as such, shall have any liability for any obligations of the
Company or the Guarantors under the Notes, the Subsidiary Guarantees, the
Indenture or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder of Notes by accepting a Note waives
and releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes. Such waiver may not be effective to
waive liabilities under the federal securities laws and it is the view of the
Commission that such a waiver is against public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding Notes ("Legal
Defeasance") except for (i) the rights of Holders of outstanding Notes to
receive payments in respect of the principal of, premium, if any, and interest
on such Notes when such payments are due from the trust referred to below, (ii)
the Company's obligations with respect to the Notes concerning issuing temporary
Notes, registration of Notes, mutilated, destroyed, lost or stolen Notes and the
maintenance of an office or agency for payment and money for security payments
held in trust, (iii) the rights, powers, trusts, duties and immunities of the
Trustee, and the Company's obligations in connection therewith and (iv) the
Legal Defeasance provisions of the Indenture. In addition, the Company may, at
its option and at any time, elect to have the obligations of the Company
released with respect to certain covenants that are described in the Indenture
("Covenant Defeasance") and thereafter any omission to comply with such
obligations shall not constitute a Default or Event of Default with respect to
the Notes. In the event Covenant Defeasance occurs, certain events (not
including non-payment, bankruptcy, receivership, rehabilitation and insolvency
events) described above under the caption "--Events of Default" will no longer
constitute an Event of Default with respect to the Notes.
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In order to exercise either Legal Defeasance or Covenant Defeasance, (i) the
Company must irrevocably deposit with the Trustee, in trust, for the benefit of
the Holders of the Notes, cash in U.S. dollars, non-callable Government
Securities, or a combination thereof, in such amounts as will be sufficient, in
the opinion of a nationally recognized firm of independent public accountants,
to pay the principal of, premium, if any, and interest on the outstanding Notes
on the stated maturity or on the applicable redemption date, as the case may be,
and the Company must specify whether the Notes are being defeased to maturity or
to a particular redemption date; (ii) in the case of Legal Defeasance, the
Company shall have delivered to the Trustee an opinion of counsel in the United
States reasonably acceptable to the Trustee confirming that (A) the Company has
received from, or there has been published by, the Internal Revenue Service a
ruling or (B) since the date of the Indenture, there has been a change in the
applicable federal income tax law, in either case to the effect that, and based
thereon such opinion of counsel shall confirm that, the Holders of the
outstanding Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such Legal Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such Legal Defeasance had not occurred; (iii) in the
case of Covenant Defeasance, the Company shall have delivered to the Trustee an
opinion of counsel in the United States reasonably acceptable to the Trustee
confirming that the Holders of the outstanding Notes will not recognize income,
gain or loss for federal income tax purposes as a result of such Covenant
Defeasance and will be subject to federal income tax on the same amounts, in the
same manner and at the same times as would have been the case if such Covenant
Defeasance had not occurred; (iv) no Default or Event of Default shall have
occurred and be continuing on the date of such deposit (other than a Default or
Event of Default resulting from the borrowing of funds to be applied to such
deposit) or insofar as Events of Default from bankruptcy or insolvency events
are concerned, at any time in the period ending on the 91st day after the date
of deposit; (v) such Legal Defeasance or Covenant Defeasance will not result in
a breach or violation of, or constitute a default under the New Bank Credit
Facility or any other material agreement or instrument (other than the
Indenture) to which the Company or any of its Restricted Subsidiaries is a party
or by which the Company or any of its Restricted Subsidiaries is bound; (vi) the
Company must have delivered to the Trustee an opinion of counsel to the effect
that after the 91st day following the deposit, the trust funds will not be
subject to the effect of any applicable bankruptcy, insolvency, reorganization
or similar laws affecting creditors' rights generally; (vii) the Company must
deliver to the Trustee an Officers' Certificate stating that the deposit was not
made by the Company with the intent of preferring the Holders of Notes over the
other creditors of the Company with the intent of defeating, hindering, delaying
or defrauding creditors of the Company or others; and (viii) the Company must
deliver to the Trustee an Officers' Certificate and an opinion of counsel, each
stating that all conditions precedent provided for or relating to the Legal
Defeasance or the Covenant Defeasance have been complied with.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Notes in accordance with the Indenture.
The Registrar and the Trustee may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and the Company may
require a Holder to pay any taxes and fees required by law or permitted by the
Indenture. The Company is not required to transfer or exchange any Note selected
for redemption. Also, the Company is not required to transfer or exchange any
Note for a period of 15 days before a selection of Notes to be redeemed.
The registered Holder of a Note will be treated as the owner of it for all
purposes.
BOOK-ENTRY, DELIVERY AND FORM
The New Notes initally will be represented by one or more permanent global
certificate in definitive, fully registered form (the "Global Note"). The Global
Note will be deposited with, or on behalf of, The Depository Trust Company
("DTC") and registered in the name of a nominee of DTC.
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DEPOSITORY PROCEDURES
DTC has advised the Company that DTC is a limited-purpose trust company
created to hold securities for its participating organizations (collectively,
the "Participants") and to facilitate the clearance and settlement of
transactions in those securities between Participants through electronic book-
entry changes in accounts of its Participants. The Participants include
securities brokers and dealers (including the Initial Purchasers), banks, trust
companies, clearing corporations and certain other organizations. Access to
DTC's system is also available to other entities such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship with
a Participant, either directly or indirectly (collectively, the "Indirect
Participants"). Persons who are not Participants may beneficially own securities
held by or on behalf of DTC only through the Participants or the Indirect
Participants. The ownership interests and transfer of ownership interests of
each actual purchaser of each security held by or on behalf of DTC are recorded
on the records of the Participants and Indirect Participants.
DTC has also advised the Company that, pursuant to procedures established by
it, (i) upon deposit of the Global Note, DTC will credit the accounts of
Participants designated by the Exchange Agent with portions of the principal
amount of the Global Note and (ii) ownership of such interests in the Global
Note will be shown on, and the transfer of ownership thereof will be effected
only through, records maintained by DTC (with respect to the Participants) or by
the Participants and the Indirect Participants (with respect to other owners of
beneficial interests in the Global Note).
Investors in the Global Note may hold their interests therein directly
through DTC, if they are participants in such system, or indirectly through
organizations (including Euroclear and CEDEL) which are participants in such
system. Euroclear and CEDEL will hold interests in the Global Note on behalf of
their participants through customers' securities accounts in their respective
names on the books of their respective depositaries, which are Morgan Guaranty
Trust Company of New York, Brussels office, as operator of Euroclear, and
Citibank, N.A., as operator of CEDEL. The depositaries, in turn, will hold such
interests in the Global Note in customers' securities accounts in the
depositaries' names on the books of DTC. All interests in the Global Note,
including those held through Euroclear or CEDEL, may be subject to the
procedures and requirements of DTC. Those interests held through Euroclear or
CEDEL may also be subject to the procedures and requirements of such systems.
The laws of some states require that certain persons take physical delivery in
definitive form of securities that they own. Consequently, the ability to
transfer beneficial interests in the Global Note to such persons will be limited
to that extent. Because DTC can act only on behalf of Participants, which in
turn act on behalf of Indirect Participants and certain banks, the ability of a
person having beneficial interests in the Global Note to pledge such interests
to persons or entities that do not participate in the DTC system, or otherwise
take actions in respect of such interests, may be affected by the lack of a
physical certificate evidencing such interests. For certain other restrictions
on the transferability of the Notes, see "--Exchange of Book-Entry Notes for
Certificated Notes."
EXCEPT AS DESCRIBED BELOW, OWNERS OF INTERESTS IN THE GLOBAL NOTE WILL NOT
HAVE NOTES REGISTERED IN THEIR NAMES, WILL NOT RECEIVE PHYSICAL DELIVERY OF
NOTES IN CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE REGISTERED OWNERS OR
HOLDERS THEREOF UNDER THE INDENTURE FOR ANY PURPOSE.
Payments in respect of the principal of and premium and interest on the
Global Note registered in the name of DTC or its nominee will be payable by the
Trustee to DTC in its capacity as the registered Holder under the Indenture.
Under the terms of the Indenture, the Company and the Trustee will treat the
persons in whose names the Notes, including the Global Note, are registered as
the owners thereof for the purpose of receiving such payments and for any and
all other purposes whatsoever. Consequently, neither the Company, the Trustee
nor any agent of the Company or the Trustee has or will have any responsibility
or liability for (i) any aspect of DTC's records or any Participant's or
Indirect Participant's records relating to or payments made on account of
beneficial ownership interests in the Global Note or for maintaining,
supervising or reviewing any of DTC's records or any Participant's or Indirect
Participant's records relating to the beneficial ownership interests in the
Global Note or (ii) any other matter
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relating to the actions and practices of DTC or any of its Participants or
Indirect Participants. DTC has advised the Company that its current practice,
upon receipt of any payment in respect of securities such as the Notes
(including principal and interest), is to credit the accounts of the relevant
Participants with the payment on the payment date, in amounts proportionate to
their respective holdings in the principal amount of beneficial interests in the
relevant security as shown on the records of DTC unless DTC has reason to
believe it will not receive payment on such payment date. Payments by the
Participants and the Indirect Participants to the beneficial owners of Notes
will be governed by standing instructions and customary practices and will be
the responsibility of the Participants or the Indirect Participants and will not
be the responsibility of DTC, the Trustee or the Company. Neither the Company
nor the Trustee will be liable for any delay by DTC or any of its Participants
in identifying the beneficial owners of the Notes, and the Company and the
Trustee may conclusively rely on and will be protected in relying on
instructions from DTC or its nominee for all purposes.
Except for trades involving only Euroclear and CEDEL participants, interests
in the Global Note are expected to be eligible to trade in DTC's Same-Day Funds
Settlement System and secondary market trading activity in such interests will
therefore settle in immediately available funds, subject in all cases to the
rules and procedures of DTC and its participants. See "--Same-Day Settlement and
Payment."
Transfers between Participants in DTC will be effected in accordance with
DTC's procedures, and will be settled in same-day funds, and transfers between
participants in Euroclear and CEDEL will be effected in the ordinary way in
accordance with their respective rules and operating procedures.
Cross-market transfers between the Participants in DTC, on the one hand, and
Euroclear or CEDEL participants, on the other hand, will be effected through DTC
in accordance with DTC's rules on behalf of Euroclear or CEDEL, as the case may
be, by its respective depositary; however such cross-market transactions will
require delivery of instructions to Euroclear or CEDEL, as the case may be, by
the counterparty in such system in accordance with the rules and procedures and
within the established deadlines (Brussels time) of such system. Euroclear or
CEDEL, as the case may be, will, if the transaction meets its settlement
requirements, deliver instructions to its respective depositary to take action
to effect final settlement on its behalf by delivering or receiving interests in
the Global Note in DTC, and making or receiving payment in accordance with
normal procedures for same-day funds settlement applicable to DTC. Euroclear
participants and CEDEL participants may not deliver instructions directly to the
depositaries for Euroclear or CEDEL.
Because of time zone differences, the securities account of a Euroclear or
CEDEL participant purchasing an interest in the Global Note from a Participant
in DTC will be credited, and any such crediting will be reported to the relevant
Euroclear or CEDEL participant, during the securities settlement processing day
(which must be a business day for Euroclear and CEDEL) immediately following the
settlement date of DTC. DTC has advised the Company that cash received in
Euroclear or CEDEL as a result of sales of interests in the Global Note by or
through a Euroclear or CEDEL participant to a Participant in DTC will be
received with value on the settlement date of DTC but will be available in the
relevant Euroclear or CEDEL cash account only as of the business day for
Euroclear or CEDEL following DTC's settlement date.
DTC has advised the Company that it will take any action permitted to be
taken by a Holder of Notes only at the direction of one or more Participants to
whose account with DTC interests in the Global Note are credited and only in
respect of such portion of the aggregate principal amount of the Notes as to
which such Participant or Participants has or have given such direction.
However, if there is an Event of Default under the Notes, DTC reserves the right
to exchange the Global Note for legended Notes in certificated form, and to
distribute such Notes to its Participants.
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The information in this section concerning DTC, Euroclear and CEDEL and
their book-entry systems has been obtained from sources that the Company
believes to be reliable, but the Company takes no responsibility for the
accuracy thereof.
Although DTC, Euroclear and CEDEL have agreed to the foregoing procedures to
facilitate transfers of interests in the Global Note among participants in DTC,
Euroclear and CEDEL, they are under no obligation to perform or to continue to
perform such procedures, and such procedures may be discontinued at any time.
Neither the Company nor the Trustee will have any responsibility for the
performance by DTC, Euroclear or CEDEL or their respective participants or
indirect participants of their respective obligations under the rules and
procedures governing their operations.
EXCHANGE OF BOOK-ENTRY NOTE FOR CERTIFICATED NOTES
The Global Note is exchangeable for definitive Notes in registered
certificated form if (i) DTC (x) notifies the Company that it is unwilling or
unable to continue as depositary for the Global Note and the Company thereupon
fails to appoint a successor depositary or (y) has ceased to be a clearing
agency registered under the Exchange Act, (ii) the Company, at its option,
notifies the Trustee in writing that it elects to cause the issuance of the
Notes in certificated form or (iii) there shall have occurred and be continuing
an Event of Default or any event which after notice or lapse of time or both
would be an Event of Default with respect to the Notes. In addition, beneficial
interests in the Global Note may be exchanged for certificated Notes upon
request but only upon at least 20 days prior written notice given to the Trustee
by or on behalf of DTC in accordance with its customary procedures. In all
cases, certificated Notes delivered in exchange for the Global Note or
beneficial interests therein will be registered in the names, and issued in any
approved denominations, requested by or on behalf of the depositary (in
accordance with its customary procedures).
OLD NOTES REGISTRATION RIGHTS; LIQUIDATED DAMAGES
The Company, the Guarantors and the Initial Purchasers entered into the
Registration Rights Agreement on November 6, 1996 (the "Closing Date"). Pursuant
to the Registration Rights Agreement, the Company agreed to file with the
Commission, on or prior to 45 days after the Closing Date, the Exchange Offer
Registration Statement on the appropriate form under the Securities Act with
respect to the New Notes. Upon the effectiveness of the Exchange Offer
Registration Statement, pursuant to the Exchange Offer, the Company will offer
to the Holders of Transfer Restricted Securities (as defined below) who are able
to make certain representations the opportunity to exchange their Transfer
Restricted Securities for New Notes. If (i) the Company is not required to file
the Exchange Offer Registration Statement or permitted to consummate the
Exchange Offer because the Exchange Offer is not permitted by applicable law or
Commission policy or (ii) any Holder of Transfer Restricted Securities notifies
the Company on or prior to the 20th business day following consummation of the
Exchange Offer that it (A) is prohibited by law or Commission policy from
participating in the Exchange Offer or (B) may not resell the New Notes acquired
by it in the Exchange Offer to the public without delivering a prospectus and
the prospectus contained in the Exchange Offer Registration Statement is not
appropriate or available for such resales or (C) is a broker-dealer and owns New
Notes acquired directly from the Company or an affiliate of the Company, the
Company will file with the Commission a Shelf Registration Statement to cover
resales of the Notes by the Holders thereof who satisfy certain conditions
relating to the provision of information in connection with the Shelf
Registration Statement. The Company will use its best efforts to cause the
applicable registration statement to be declared effective as promptly as
possible by the Commission. For purposes of the foregoing, "Transfer Restricted
Securities" means each Old Note until (i) the date on which such Note has been
exchanged by a person other than a broker-dealer for a New Note in the Exchange
Offer, (ii) following the exchange by a broker-dealer in the Exchange Offer of a
Old Note for a New Note, the date on which such New Note is sold to a purchaser
who receives from such broker-dealer on or prior to the date of such sale a copy
of the prospectus contained in the Exchange Offer Registration Statement, (iii)
the date on which such Old Note has been
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effectively registered under the Securities Act and disposed of in accordance
with the Shelf Registration Statement or (iv) the date on which such Note is
distributed to the public pursuant to Rule 144 under the Securities Act.
Notwithstanding the foregoing, subject to the limitations contained in the
Registration Rights Agreement, at any time after Consummation (as defined in the
Registration Rights Agreement) of the Exchange Offer, the Company may allow the
Shelf Registration Statement to cease to be effective and usable if (i) the
Board of Directors of the Company determines in good faith that such action is
in the best interests of the Company, and the Company notifies the Holders
within a certain period of time after the Board of Directors of the Company
makes such determination or (ii) the prospectus contained in the Shelf
Registration Statement contains an untrue statement of a material fact or omits
to state a material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading; PROVIDED
that the period referred to in the Registration Rights Agreement during which
the Shelf Registration Statement is required to be effective and usable will be
extended by the number of days during which such registration statement was not
effective or usable pursuant to the foregoing provisions.
The Registration Rights Agreement provides that (i) the Company will file an
Exchange Offer Registration Statement with the Commission on or prior to 45 days
after the Closing Date, (ii) the Company will use its best efforts to have the
Exchange Offer Registration Statement declared effective by the Commission on or
prior to 150 days after the date on which such Exchange Offer Registration
Statement is filed with the Commission (which 150-day period shall be extended
for a number of days equal to the number of business days, if any, that the
Commission is officially closed during such period), (iii) unless the Exchange
Offer would not be permitted by applicable law or Commission policy, the Company
will commence the Exchange Offer and use its best efforts to issue on or prior
to 30 days after the date on which the Exchange Offer Registration Statement was
declared effective by the Commission, New Notes in exchange for all Old Notes
tendered prior thereto in the Exchange Offer and (iv) if obligated to file the
Shelf Registration Statement, the Company will use its best efforts to file the
Shelf Registration Statement with the Commission on or prior to 45 days after
such filing obligation arises and to cause the Shelf Registration Statement to
be declared effective by the Commission on or prior to 150 days after such
filing obligation arises. If (a) the Company fails to file either of the
Registration Statements required by the Registration Rights Agreement on or
before the date specified for such filing, (b) either of such Registration
Statements is not declared effective by the Commission on or prior to the date
specified for such effectiveness (the "Effectiveness Target Date"), (c) the
Company fails to consummate the Exchange Offer within 30 days of the
Effectiveness Target Date with respect to the Exchange Offer Registration
Statement, or (d) subject to the last sentence of the preceding paragraph, the
Shelf Registration Statement or the Exchange Offer Registration Statement is
declared effective but thereafter ceases to be effective or usable in connection
with resales of Transfer Restricted Securities during the periods specified in
the Registration Rights Agreement (each such event referred to in clauses (a)
through (d) above a "Registration Default"), then, subject to the last sentence
of the preceding paragraph, the Company will pay Liquidated Damages to each
Holder of Transfer Restricted Securities, with respect to the first 90-day
period immediately following the occurrence of such Registration Default, in an
amount equal to $0.05 per week per $1,000 in principal amount of Notes
constituting Transfer Restricted Securities held by such Holder. The amount of
the Liquidated Damages will increase by an additional $0.05 per week per $1,000
in principal amount of Notes constituting Transfer Restricted Securities with
respect to each subsequent 90-day period until all Registration Defaults have
been cured, up to a maximum amount of Liquidated Damages of $0.50 per week per
$1,000 in principal amount of Notes constituting Transfer Restricted Securities.
All accrued Liquidated Damages will be paid by the Company in cash on each
Damages Payment Date to the Global Note Holder (and any Holder of Certificated
Securities who has given wire transfer instructions to the Company prior to the
Damages Payment Date) by wire transfer of immediately available funds and to all
other Holders of Certificated Securities by mailing checks to their registered
addresses. Following the cure of all Registration Defaults, the accrual of
Liquidated Damages will cease.
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Holders of Old Notes will be required to make certain representations to the
Company (as described in the Registration Rights Agreement) in order to
participate in the Exchange Offer and will be required to deliver information to
be used in connection with the Shelf Registration Statement and to provide
comments on the Shelf Registration Statement within the time periods set forth
in the Registration Rights Agreement in order to have their Notes included in
the Shelf Registration Statement and benefit from the provisions regarding
Liquidated Damages set forth above.
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, all the provisions of the Registration Rights
Agreement, a copy of which will be available upon request to the Company.
Except as described below under "-- Amendment, Supplement and Waiver," the
Old Notes and the New Notes will be considered collectively to be a single class
for all purposes under the Indenture, including, without limitation, waivers,
amendments, redemptions and repurchase offers, and for purposes of this
"Description of Notes" (except under this caption, "-- Old Notes Registration
Rights; Liquidated Damages") all reference herein to "Notes" shall be deemed to
refer collectively to the Old Notes and any New Notes, unless the context
otherwise requires.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the Indenture or
the Notes may be amended or supplemented with the consent of the Holders of at
least a majority in principal amount of the Notes then outstanding (including,
without limitation, consents obtained in connection with a purchase of, or
tender offer or exchange offer for, Notes), and any existing default or
compliance with any provision of the Indenture or the Notes may be waived with
the consent of the Holders of a majority in principal amount of the then
outstanding Notes (including consents obtained in connection with a tender offer
or exchange offer for Notes).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting Holder): (i) reduce the
principal amount of Notes whose Holders must consent to an amendment, supplement
or waiver, (ii) reduce the principal of or change the fixed maturity of any Note
or alter the provisions with respect to the redemption of the Notes (other than
provisions relating to the covenants described above under the caption
"-- Repurchase at the Option of Holders"), (iii) reduce the rate of or change
the time for payment of interest on any Note, (iv) waive a Default or Event of
Default in the payment of principal of or premium, if any, or interest on the
Notes (except a rescission of acceleration of the Notes by the Holders of at
least a majority in aggregate principal amount of the Notes and a waiver of the
payment default that resulted from such acceleration), (v) make any Note payable
in money other than that stated in the Notes, (vi) make any change in the
provisions of the Indenture relating to waivers of past Defaults or the rights
of Holders of Notes to receive payments of principal of or premium, if any, or
interest on the Notes, (vii) waive a redemption payment with respect to any Note
(other than a payment required by one of the covenants described above under the
caption "-- Repurchase at the Option of Holders") or (viii) make any change in
the foregoing amendment and waiver provisions. In addition, any amendment to the
provisions of Article 10 of the Indenture (which relate to subordination) will
require the consent of the Holders of at least 75% in aggregate principal amount
of the Notes then outstanding if such amendment would adversely affect the
rights of Holders of Notes.
Notwithstanding the foregoing, without the consent of any Holder of Notes,
the Company and the Trustee may amend or supplement the Indenture or the Notes
to cure any ambiguity, defect or inconsistency, to provide for uncertificated
Notes in addition to or in place of certificated Notes, to provide for the
assumption of the Company's obligations to Holders of Notes in the case of a
merger or consolidation, to make any change that would provide any additional
rights or benefits to the Holders of Notes or that does not adversely affect the
legal rights under the Indenture of any such Holder, or to comply with
requirements of the Commission in order to effect or maintain the qualification
of the Indenture under the Trust Indenture Act.
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CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any such
claim as security or otherwise. The Trustee will be permitted to engage in other
transactions; however, if it acquires any conflicting interest it must eliminate
such conflict within 90 days, apply to the Commission for permission to continue
or resign.
The Holders of a majority in principal amount of the then outstanding Notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
shall occur (which shall not be cured), the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the conduct
of his own affairs. Subject to such provisions, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request of any Holder, unless such Holder shall have offered to the Trustee
security and indemnity satisfactory to it against any loss, liability or
expense.
ADDITIONAL INFORMATION
Anyone who receives this Prospectus may obtain a copy of the Indenture
without charge by writing to Outsourcing Solutions Inc., 300 Galleria Parkway,
Suite 690, Atlanta, Georgia 30339; Attention: Chief Financial Officer.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"ACQUIRED DEBT" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Restricted Subsidiary of such specified Person,
including, without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Restricted Subsidiary of such specified Person, and (ii) Indebtedness secured by
a Lien encumbering any asset acquired by such specified Person.
"ADVISORY SERVICES AGREEMENT" means the Advisory Services Agreement, dated
as of September 21, 1995, between the Company and MDC Management Company III,
L.P. as amended from time to time.
"AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; PROVIDED that (i)
beneficial ownership of 10% or more of the voting securities of a Person shall
be deemed to be control and (ii)(a) Goldman, Sachs & Co. and its Affiliates,
including, without limitation, Goldman Sachs Credit Partners L.P., (b) Chase
Securities Inc. and its Affiliates, including, without limitation, The Chase
Manhattan Bank and Chase Equity Associates, L.P., and (c) Clipper Capital
Associates, L.P. and its Affiliates, in each case, shall not be deemed to be
Affiliates of the Company solely by virtue of clause (i) of this proviso.
"ASSET SALE" means:
(i) the sale, conveyance, transfer or other disposition (whether in a
single transaction or a series of related transactions) of property or
assets (including by way of a sale and leaseback) of the
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Company or any Restricted Subsidiary to any Person other than the Company or
any Restricted Subsidiary of the Company (each referred to in this
definition as a "disposition") or
(ii) the issuance or sale of Equity Interests of any Restricted
Subsidiary to any Person other than the Company or any Restricted Subsidiary
of the Company (whether in a single transaction or a series of related
transactions), in each case, other than:
(a) a disposition of Cash Equivalents or goods held for sale in the
ordinary course of business or obsolete equipment in the ordinary course of
business of the Company or the applicable Restricted Subsidiary;
(b) the disposition of all or substantially all of the assets of the
Company in a manner permitted pursuant to the provisions described above
under the caption "-- Merger, Consolidation or Sale of Assets" or any
disposition that constitutes a Change of Control pursuant to the Indenture;
(c) any disposition that is a Restricted Payment or Permitted Investment
that is permitted under the covenant described above under the caption
"-- Restricted Payments;" and
(d) any disposition, or related series of dispositions, of assets with
an aggregate Fair Market Value of less than $1.0 million.
"ATTRIBUTABLE DEBT" means in respect of a sale and leaseback transaction
means, at the time of determination, the present value (discounted at the rate
of interest implicit in such transaction, determined in accordance with GAAP) of
the obligation of the lessee for net rental payments during the remaining term
of the lease included in such sale and leaseback transaction (including any
period for which such lease has been extended or may, at the option of the
lessor, be extended).
"BOARD OF DIRECTORS" means, as to any Person, the board of directors of such
Person or any duly authorized committee thereof.
"CAPITAL LEASE OBLIGATION" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"CAPITAL STOCK" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership, partnership interests
(whether general or limited) and (iv) any other interest or participation that
confers on a Person the right to receive a share of the profits and losses of,
or distributions of assets of, the issuing Person.
"CASH EQUIVALENTS" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof having maturities of not more than one
year from the date of acquisition, (iii) certificates of deposit and eurodollar
time deposits with maturities of one year or less from the date of acquisition,
bankers' acceptances with maturities not exceeding one year and overnight bank
deposits, in each case with any domestic commercial bank having capital and
surplus in excess of $500.0 million and a Thomson Bank Watch Rating of "B" or
better, (iv) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (ii) and (iii) above
entered into with any financial institution meeting the qualifications specified
in clause (iii) above and (v) commercial paper rated A-1 or higher by Standard &
Poor's Corporation or P-1 by Moody's Investors Service, Inc. and in each case
maturing within one year after the date of acquisition.
"CHANGE OF CONTROL" means the occurrence of any of the following:
(i) the sale, lease or transfer, in one or a series of related
transactions (other than by merger or consolidation), of all or
substantially all of the assets of the Company and its Restricted
Subsidiaries, taken as a whole, to any "person" (as such term is used in
Section 13(d)(3) of the Exchange Act) (other than the Principals or their
Related Parties);
(ii) the adoption of a plan relating to the liquidation or dissolution
of the Company;
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(iii) the acquisition by any Person or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Exchange Act) (other than the Principals
and their Related Parties) of a direct or indirect interest in more than 35%
of the voting power of the voting stock of the Company by way of merger or
consolidation or otherwise; or
(iv) a majority of the members of the Board of Directors of the Company
cease to be Continuing Directors.
"COMPANY PREFERRED STOCK" means the $10.8 million in aggregate liquidation
preference of the 8.0% Preferred Stock of the Company outstanding on the date of
the Indenture.
"CONSOLIDATED CASH FLOW" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus (i) an amount
equal to any extraordinary loss plus any net loss realized in connection with
all Asset Sales (to the extent such losses were deducted in computing such
Consolidated Net Income), plus (ii) provision for taxes based on income or
profits of such Person and its Restricted Subsidiaries for such period, to the
extent that such provision for taxes was deducted in computing such Consolidated
Net Income, plus (iii) consolidated interest expense of such Person and its
Restricted Subsidiaries for such period, whether paid or accrued and whether or
not capitalized (including, without limitation, amortization of original issue
discount, non-cash interest payments, the interest component of any deferred
payment obligations, the interest component of all payments associated with
Capital Lease Obligations, imputed interest with respect to Attributable Debt,
commissions, discounts and other fees and charges incurred in respect of letter
of credit or bankers' acceptance financings, and net payments (if any) pursuant
to Hedging Obligations), to the extent that any such expense was deducted in
computing such Consolidated Net Income, plus (iv) any Consolidated Non-Cash
Charges that were deducted in computing such Consolidated Net Income, less (v)
the aggregate amount of contingent and "earnout" payments in respect of any
Permitted Business acquired by the Company or any Restricted Subsidiary of the
Company that are paid in cash during such period and less (vi) any non-cash
items increasing Consolidated Net Income for such period.
"CONSOLIDATED NET INCOME" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Restricted Subsidiaries
for such period, on a consolidated basis, determined in accordance with GAAP;
PROVIDED that (i) the Net Income (but not loss) of any Person that is not a
Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the referent Person or a Wholly Owned Restricted
Subsidiary thereof, (ii) the Net Income of any Restricted Subsidiary shall be
excluded to the extent that the declaration or payment of dividends or similar
distributions by that Restricted Subsidiary of that Net Income is not at the
date of determination permitted without any prior governmental approval (that
has not been obtained) or, directly or indirectly, by operation of the terms of
its charter or any agreement, instrument, judgment, decree, order, statute, rule
or governmental regulation applicable to that Restricted Subsidiary or its
stockholders, (iii) the Net Income of any Person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition shall
be excluded, (iv) the cumulative effect of a change in accounting principles
shall be excluded and (v) the Net Income of any Unrestricted Subsidiary shall be
excluded, whether or not distributed to the Company or one of its Subsidiaries.
"CONSOLIDATED NET WORTH" means, with respect to any Person as of any date,
the sum of (i) the consolidated equity of the common stockholders of such Person
and its consolidated Subsidiaries as of such date (provided that the
Consolidated Net Worth of any Person shall exclude the effect of non-cash
charges relating to the acceleration of stock options or similar securities of
such Person or another Person with which such Person is merged or consolidated)
plus (ii) the respective amounts reported on such Person's balance sheet as of
such date with respect to any series of Preferred Stock (other than Disqualified
Stock) that by its terms is not entitled to the payment of dividends unless such
dividends may be declared and paid only out of net earnings in respect of the
year of such declaration and payment, but only to the extent of any cash
received by such Person upon issuance of such preferred
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stock, less (x) all write-ups (other than write-ups resulting from foreign
currency translations and write-ups of tangible assets of a going concern
business made within 12 months after the acquisition of such business)
subsequent to the date of the Indenture in the book value of any asset owned by
such Person or a consolidated Subsidiary of such Person, (y) all investments as
of such date in unconsolidated Subsidiaries and in Persons that are not
Subsidiaries (except, in each case, Permitted Investments), and (z) all
unamortized debt discount and expense and unamortized deferred charges as of
such date, all of the foregoing determined in accordance with GAAP.
"CONSOLIDATED NON-CASH CHARGES" means, with respect to any Person, for any
period, the aggregate depreciation and amortization (including (a) amortization
of goodwill, (b) amortization of Purchased Portfolios, (c) amortization of
amounts reflected on the Company's combined consolidated balance sheet as of the
date of the Indenture related to "in-process technology," (e) any incremental
increase in amortization of account inventory resulting from write-ups of such
inventory in connection with the purchase accounting treatment of an acquisition
and (f) amortization of other intangibles and other non-cash charges (excluding
any such intangible and non-cash charge to the extent that it represents an
accrual of or reserve for cash charges in any future period (other than any
non-cash charge relating to the Payco Acquisition or the rationalization of
operations in connection with the Payco Acquisition incurred within 12 months
after the date of the Indenture) or amortization of a prepaid cash expense that
was paid in a prior period) of such Person and its Restricted Subsidiaries for
such period, in each case, determined on a consolidated basis in accordance with
GAAP.
"CONTINUING DIRECTORS" means, as of any date of determination, any member of
the Board of Directors who (i) was a member of such Board of Directors on the
date of the Indenture or (ii) was nominated for election or elected to such
Board of Directors with, or whose election to such Board of Directors was
approved by, the affirmative vote of a majority of the Continuing Directors who
were members of such Board of Directors at the time of such nomination or
election.
"DEFAULT" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"DISQUALIFIED STOCK" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the Holder thereof, in whole or in part, on or prior to the date
that is 91 days after the date on which the Notes mature.
"EQUITY INTERESTS" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"EXISTING INDEBTEDNESS" means Indebtedness of the Company and its Restricted
Subsidiaries (other than Indebtedness under the New Bank Credit Facility) in
existence on the date of the Indenture, until such amounts are repaid.
"FAIR MARKET VALUE" means, with respect to any asset or property, the price
which could be negotiated in an arm's-length, free market transaction, in cash,
between an informed and willing seller and an informed and willing and able
buyer, neither of whom is under undue pressure or compulsion to complete the
transaction. Fair Market Value shall be determined by the Board of Directors of
the Company acting reasonably and in good faith and shall be evidenced by a
Board Resolution delivered to the Trustee; PROVIDED, HOWEVER, that, in the case
of any determination of Fair Market Value for purposes of the covenant described
under the caption "-- Restricted Payments," if the aggregate Fair Market Value
could be reasonably likely to exceed $5.0 million, the Fair Market Value shall
be determined by an accounting, appraisal or investment banking firm of
nationally recognized standing that is, in the reasonable and good faith
judgment of the Board of Directors of the Company, qualified to perform the task
for which such firm has been engaged.
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"FIXED CHARGES" means, with respect to any Person for any period, the sum of
(i) the consolidated interest expense of such Person and its Restricted
Subsidiaries for such period, whether paid or accrued (including, without
limitation, amortization of original issue discount, non-cash interest payments,
the interest component of any deferred payment obligations, the interest
component of all payments associated with Capital Lease Obligations, imputed
interest with respect to Attributable Debt, commissions, discounts and other
fees and charges incurred in respect of letter of credit or bankers' acceptance
financings, and net payments (if any) pursuant to Hedging Obligations, BUT
excluding amortization of those deferred financing costs reflected on the
Company's combined consolidated balance sheet as of the date of the Indenture)
and (ii) the consolidated interest expense of such Person and its Restricted
Subsidiaries that was capitalized during such period, and (iii) any interest
expense on Indebtedness of another Person that is Guaranteed by such Person or
one of its Restricted Subsidiaries or secured by a Lien on assets of such Person
or one of its Restricted Subsidiaries (whether or not such Guarantee or Lien is
called upon) and (iv) the product of (a) all cash dividend payments (and
non-cash dividend payments in the case of a Person that is a Restricted
Subsidiary) on any series of Preferred Stock of such Person, times (b) a
fraction, the numerator of which is one and the denominator of which is one
minus the then current effective federal, state and local statutory tax rate of
such Person, expressed as a decimal, in each case, on a consolidated basis and
in accordance with GAAP.
"FIXED CHARGE COVERAGE RATIO" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person for such period
to the Fixed Charges of such Person for such period. In the event that the
Company or any of its Restricted Subsidiaries incurs, assumes, Guarantees or
redeems any Indebtedness (other than revolving credit borrowings) or issues
Preferred Stock subsequent to the commencement of the period for which the Fixed
Charge Coverage Ratio is being calculated but prior to the date on which the
event for which the calculation of the Fixed Charge Coverage Ratio is made (the
"Calculation Date"), then the Fixed Charge Coverage Ratio shall be calculated
giving pro forma effect to such incurrence, assumption, Guarantee or redemption
of Indebtedness, or such issuance or redemption of Preferred Stock, as if the
same had occurred at the beginning of the applicable four-quarter reference
period. In addition, for purposes of making the computation referred to above,
(i) acquisitions that have been made by the Company or any of its Restricted
Subsidiaries, including through mergers or consolidations and including any
related financing transactions, during the four-quarter reference period or
subsequent to such reference period and on or prior to the Calculation Date
shall be deemed to have occurred on the first day of the four-quarter reference
period and Consolidated Cash Flow for such reference period shall be calculated
giving pro forma effect (excluding any pro forma increase in revenues but
including any pro forma expense and cost reductions calculated on a basis
consistent with Regulation S-X under the Securities Act) to such acquisition and
without giving effect to clause (iii) of the proviso set forth in the definition
of Consolidated Net Income, and (ii) the Consolidated Cash Flow attributable to
discontinued operations, as determined in accordance with GAAP, and operations
or businesses disposed of prior to the Calculation Date, calculated giving pro
forma effect to such disposition, shall be excluded, and (iii) the Fixed Charges
attributable to discontinued operations, as determined in accordance with GAAP,
and operations or businesses disposed of prior to the Calculation Date, shall be
excluded, but only to the extent that the obligations giving rise to such Fixed
Charges will not be obligations of the referent Person or any of its Restricted
Subsidiaries following the Calculation Date.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the date of the Indenture.
"GUARANTEE" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation,
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letters of credit and reimbursement agreements in respect thereof), of all or
any part of any Indebtedness.
"HBR SERVICES AGREEMENT" means the Master Services Agreement, dated as of
October 1, 1992, by and between Account Portfolios, L.P. and HBR Capital, Ltd.
"HEDGING OBLIGATIONS" means, with respect to any Person, the obligations of
such Person under (i) currency exchange or interest rate swap agreements,
currency exchange or interest rate cap agreements and currency exchange or
interest rate collar agreements and (ii) other agreements or arrangements
designed to protect such Person against fluctuations in currency exchange or
interest rates.
"HOLDER" means a holder of any of the Notes.
"INDEBTEDNESS" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of the
purchase price of any property (other than contingent or "earnout" payment
obligations) or representing any Hedging Obligations, except any such balance
that constitutes an accrued expense or trade payable, if and to the extent any
of the foregoing indebtedness (other than letters of credit and Hedging
Obligations) would appear as a liability upon a balance sheet of such Person
prepared in accordance with GAAP, as well as all indebtedness of others secured
by a Lien on any asset of such Person (whether or not such indebtedness is
assumed by such Person) and, to the extent not otherwise included, the Guarantee
by such Person of any indebtedness of any other Person.
"INVESTMENTS" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
If the Company or any Subsidiary of the Company sells or otherwise disposes of
any Equity Interests of any direct or indirect Restricted Subsidiary of the
Company such that, after giving effect to any such sale or disposition, such
Person is no longer a Subsidiary of the Company, the Company shall be deemed to
have made an Investment on the date of any such sale or disposition equal to the
Fair Market Value of the Equity Interests of such Subsidiary not sold or
disposed of.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, whether
or not filed, recorded or otherwise perfected under applicable law (including
any conditional sale or other title retention agreement, any lease in the nature
thereof, any option or other agreement to sell or give a security interest in
and any filing of or agreement to give any financing statement under the Uniform
Commercial Code (or equivalent statutes) of any jurisdiction).
"NET INCOME" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of Preferred Stock dividends, excluding, however, (i) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions) or (b) the
disposition of any securities by such Person or any of its Restricted
Subsidiaries or the extinguishment of any Indebtedness of such Person or any of
its Restricted Subsidiaries and (ii) any extraordinary or nonrecurring gain (but
not loss), together with any related provision for taxes on such extraordinary
or nonrecurring gain (but not loss).
"NET PROCEEDS" means the aggregate cash proceeds received by the Company or
any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of the
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direct costs relating to such Asset Sale (including, without limitation, legal,
accounting and investment banking fees, and brokerage and sales commissions) and
any relocation expenses incurred as a result thereof, taxes paid or payable as a
result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements), amounts required to be applied to
the repayment of Indebtedness (other than Senior Bank Debt) secured by a Lien on
the asset or assets that were the subject of such Asset Sale and any reserve for
adjustment in respect of the sale price of such asset or assets established in
accordance with GAAP.
"NEW BANK CREDIT FACILITY" means that certain credit facility dated as of
November 6, 1996, by and among the Company, Goldman Sachs Credit Partners L.P.
and The Chase Manhattan Bank, as Co-Administrative Agents, Goldman Sachs Credit
Partners L.P. and Chase Securities Inc., as Arranging Agents, and the financial
institutions party thereto, including any related notes, guarantees, collateral
documents, instruments and agreements executed in connection therewith, and in
each case as amended (including any amendment and restatement thereof),
modified, renewed, refunded, replaced or refinanced from time to time, including
any agreement extending the maturity of, refinancing, replacing or otherwise
restructuring (including increasing the amount of available borrowings
thereunder (provided that such increase in borrowings is permitted by the
covenant described under the caption "-- Incurrence of Indebtedness and Issuance
of Disqualified Stock") or adding Subsidiaries of the Company as additional
borrowers or guarantors thereunder) all or any portion of the Indebtedness under
such agreement or any successor or replacement agreement and whether by the same
or any other agent, lender or group of lenders.
"NON-RECOURSE DEBT" means Indebtedness (i) as to which neither the Company
nor any of its Restricted Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable (as a guarantor or
otherwise), or (c) constitutes the lender; and (ii) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness of the
Company or any of its Restricted Subsidiaries to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its stated maturity; and (iii) as to which the lenders have been notified in
writing that they will not have any recourse to the stock or assets of the
Company or any of its Restricted Subsidiaries.
"OBLIGATIONS" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"OFFICER'S CERTIFICATE" means a certificate signed on behalf of the Company
by the principal executive officer, the principal financial officer, the
treasurer or the principal accounting officer of the Company, that meets the
requirements set forth in the Indenture.
"PARI PASSU INDEBTEDNESS" means Indebtedness that ranks PARI PASSU in right
of payment to the Notes.
"PERMITTED INVESTMENTS" means (a) any Investment in the Company or in a
Restricted Subsidiary of the Company; (b) any Investment in cash and Cash
Equivalents; (c) any Investment by the Company or any Restricted Subsidiary of
the Company in a Person, if as a result of such Investment (A) such Person
becomes a Restricted Subsidiary of the Company or (B) such Person, in one
transaction or a series of related transactions, is merged, consolidated or
amalgamated with or into, or transfers or conveys substantially all of its
assets to, or is liquidated into, the Company or a Restricted Subsidiary of the
Company; (d) any Restricted Investment made as a result of the receipt of
consideration not constituting cash or Cash Equivalents from an Asset Sale that
was made pursuant to and in compliance with the covenant described above under
the caption "-- Repurchase at the Option of Holders -- Asset Sales;" (e) any
Investment existing on the date of the Indenture; (f) any Investment by
Restricted Subsidiaries in other Restricted Subsidiaries and Investments by
Subsidiaries that are not Restricted Subsidiaries in other Subsidiaries that are
not Restricted Subsidiaries; (g) any Investment acquired by the Company or
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any of its Restricted Subsidiaries (A) in exchange for any other Investment or
receivable held by the Company or any such Restricted Subsidiary in connection
with or as a result of a bankruptcy, workout, reorganization or recapitalization
of the issuer of such other Investment or receivable or (B) as a result of a
foreclosure by the Company or any of its Restricted Subsidiaries with respect to
any secured Investment or other transfer of title with respect to any secured
Investment in default; (h) Hedging Obligations; (i) any acquisition of assets,
Equity Interests or other securities by the Company for consideration consisting
of common Equity Interests of the Company; (j) any acquisition by the Company or
any of its Subsidiaries of Purchased Portfolios; (k) loans and advances to
officers, directors and employees for business-related travel expenses, moving
expenses and other similar expenses, in each case, incurred in the ordinary
course of business; (l) Investments the payment for which consists exclusively
of Equity Interests (exclusive of Disqualified Stock) of the Company and (m)
Investments in Unrestricted Subsidiaries or Persons other than Subsidiaries not
to exceed $5.0 million, in the aggregate, at any time outstanding (measured as
of the date made and without giving effect to subsequent changes in value).
"PERMITTED REFINANCING INDEBTEDNESS" means any Indebtedness of the Company
or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Company or any of its Restricted Subsidiaries;
PROVIDED that: (i) the principal amount (or accreted value, if applicable) of
such Permitted Refinancing Indebtedness does not exceed the principal amount (or
accreted value, if applicable) of the Indebtedness so extended, refinanced,
renewed, replaced, defeased or refunded (plus the amount of any premium required
to be paid in connection therewith and plus reasonable expenses incurred in
connection therewith); (ii) such Permitted Refinancing Indebtedness has a final
maturity date later than the final maturity date of, and has a Weighted Average
Life to Maturity equal to or greater than the Weighted Average Life to Maturity
of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded; (iii) if the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded is subordinated in right of payment to the Notes,
such Permitted Refinancing Indebtedness has a final maturity date later than the
final maturity date of, and is subordinated in right of payment to, the Notes on
terms at least as favorable to the Holders of Notes as those contained in the
documentation governing the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded; and (iv) such Indebtedness is incurred either by
the Company or by the Restricted Subsidiary who is the obligor on the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded.
"PERSON" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, government
or any agency or political subdivision thereof or any other entity.
"PREFERRED STOCK" means any Equity Interest with preferential right of
payment of dividends or upon liquidation, dissolution, or winding up.
"PRINCIPAL BUSINESS" means the accounts receivable management and
outsourcing business and lines of businesses and services that are related to or
complementary to the foregoing.
"PRINCIPALS" means each of the general partners of MDC Management Company
III, L.P., MDC Management Company IIIE, L.P. and MDC Management Company IIIA,
L.P. and any Person controlled by one or more of such general partners.
"PURCHASE MONEY INDEBTEDNESS" means Indebtedness the net proceeds of which
are used for the purchase of property or assets acquired in the ordinary course
of business by the Person incurring such Indebtedness.
"PURCHASED PORTFOLIOS" means account receivable portfolios purchased by the
Company or any of its Subsidiaries in the ordinary course of business.
"RELATED PARTIES" means any Person controlled by the Principals, including
any partnership of which the Principals or their Affiliates is the general
partner.
"RESTRICTED INVESTMENT" means an Investment other than a Permitted
Investment.
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"RESTRICTED SUBSIDIARY" of a Person means any Subsidiary of the referent
Person that is not (i) an Unrestricted Subsidiary or (ii) a direct or indirect
Subsidiary of an Unrestricted Subsidiary; PROVIDED, HOWEVER, that upon the
occurrence of any Unrestricted Subsidiary ceasing to be an Unrestricted
Subsidiary, such Subsidiary shall be included in the definition of Restricted
Subsidiary.
"SELLER PAPER" means Indebtedness of the Company or a Restricted Subsidiary
of the Company that is outstanding on the date of the Indenture and that was
issued in connection with an acquisition of a business or assets in respect of
the balance deferred and unpaid of the purchase price of any property, the
aggregate principal amount of which, as of the date of the Indenture, does not
exceed $11.0 million.
"SIGNIFICANT SUBSIDIARY" means any Restricted Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Act, as such Regulation is in effect on the date
hereof.
"SIGNIFICANT SUBSIDIARY GUARANTEE" means the Subsidiary Guarantee of a
Significant Subsidiary.
"SUBORDINATED INDEBTEDNESS" means any Indebtedness of the Company or any of
its Restricted Subsidiaries which is expressly by its terms subordinated in
right of payment to any other Indebtedness.
"SUBSIDIARY" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"UNRESTRICTED SUBSIDIARY" means (i) any Subsidiary that is designated by the
Board of Directors as an Unrestricted Subsidiary pursuant to a Board Resolution;
but only to the extent that such Subsidiary: (a) has no Indebtedness other than
Non-Recourse Debt; (b) is not party to any agreement, contract, arrangement or
understanding with the Company or any Restricted Subsidiary of the Company
unless the terms of any such agreement, contract, arrangement or understanding
are no less favorable to the Company or such Restricted Subsidiary than those
that might be obtained at the time from Persons who are not Affiliates of the
Company; (c) is a Person with respect to which neither the Company nor any of
its Restricted Subsidiaries has any direct or indirect obligation (x) to
subscribe for additional Equity Interests or (y) to maintain or preserve such
Person's financial condition or to cause such Person to achieve any specified
levels of operating results; (d) has not guaranteed or otherwise directly or
indirectly provided credit support for any Indebtedness of the Company or any of
its Restricted Subsidiaries; and (e) has at least one director on its board of
directors that is not a director or executive officer of the Company or any of
its Restricted Subsidiaries and has at least one executive officer that is not a
director or executive officer of the Company or any of its Restricted
Subsidiaries. Any such designation by the Board of Directors shall be evidenced
to the Trustee by filing with the Trustee a certified copy of the Board
Resolution giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing conditions and was
permitted by the covenant described above under the caption "-- Certain
Covenants -- Restricted Payments." If, at any time, any Unrestricted Subsidiary
would fail to meet the foregoing requirements as an Unrestricted Subsidiary, it
shall thereafter cease to be an Unrestricted Subsidiary for purposes of the
Indenture and any Indebtedness of such Subsidiary shall be deemed to be incurred
by a Restricted Subsidiary of the Company as of such date (and, if such
Indebtedness is not permitted to be incurred as of such date under the covenant
described above under the caption "-- Incurrence of Indebtedness and Issuance of
Disqualified Stock," the Company shall be in default of such covenant). The
Board of Directors of the Company may at any time designate any Unrestricted
Subsidiary to be a Restricted Subsidiary; PROVIDED that such designation shall
be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of the
Company of any outstanding Indebtedness of such Unrestricted Subsidiary and such
designation shall only be
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permitted if (i) such Indebtedness is permitted to be incurred by the covenant
described above under the caption "-- Certain Covenants -- Incurrence of
Indebtedness and Issuance of Disqualified Stock," and (ii) no Default or Event
of Default would be in existence following such designation.
"VOTING STOCK" means, with respect to any Person, any class or series of
capital stock of such Person that is ordinarily entitled to vote in the election
of directors thereof at a meeting of stockholders called for such purpose,
without the occurrence of any additional event or contingency.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"WHOLLY OWNED RESTRICTED SUBSIDIARY" is any Wholly Owned Subsidiary that is
a Restricted Subsidiary.
"WHOLLY OWNED SUBSIDIARY" of any Person means a Subsidiary of such Person
all of the outstanding Capital Stock or other ownership interests of which
(other than directors' qualifying shares) shall at the time be owned by such
Person or by one or more Wholly Owned Subsidiaries of such Person and one or
more Wholly Owned Subsidiaries of such Person.
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CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES
The following summary of the material anticipated federal income tax
consequences of the issuance of New Notes and the Exchange Offer is based upon
the provisions of the Internal Revenue Code of 1986, as amended, the final,
temporary and proposed regulations promulgated thereunder, and administrative
rulings and judicial decisions now in effect, all of which are subject to change
(possibly with retroactive effect) or different interpretations. The following
summary is based on an opinion of White & Case, special counsel to the Company,
which is not binding on the Internal Revenue Service ("IRS") and there can be no
assurance that the IRS will take a similar view with respect to the tax
consequences described below. No ruling has been or will be requested by the
Company from the IRS on any tax matters relating to the New Notes or the
Exchange Offer. This discussion does not purport to address all of the possible
federal income tax consequences or any state, local or foreign tax consequences
of the acquisition, ownership and disposition of the Old Notes, the New Notes or
the Exchange Offer. It is limited to investors who will hold the Old Notes and
the New Notes as capital assets and does not address the federal income tax
consequences that may be relevant to particular investors in light of their
unique circumstances or to certain types of investors (such as dealers in
securities, insurance companies, financial institutions, foreign corporations,
partnerships, trusts, nonresident individuals, and tax-exempt entities) who may
be subject to special treatment under federal income tax laws.
INDEBTEDNESS
The Old Notes and the New Notes should be treated as indebtedness of the
Company. In the unlikely event the Old Notes or the New Notes were treated as
equity, the amount treated as a distribution on any such Old Note or New Note
would first be taxable to the holder as dividend income to the extent of the
Company's current and accumulated earnings and profits, and would next be
treated as a return of capital to the extent of the holder's tax basis in the
Old Notes or New Notes, with any remaining amount treated as a gain from the
sale of an Old Note or a New Note. In addition, in the event of equity
treatment, amounts received in retirement of an Old Note or a New Note might in
certain circumstances be treated as a dividend, and the Company could not deduct
amounts paid as interest on such Old Notes or New Notes. The remainder of this
discussion assumes that the Old Notes and the New Notes will constitute
indebtedness.
EXCHANGE OFFER
The exchange of the Old Notes for New Notes pursuant to the Exchange Offer
should not be treated as an "exchange" because the New Notes should not be
considered to differ materially in kind or extent from the Old Notes. Rather,
the New Notes received by a holder of the Old Notes should be treated as a
continuation of the Old Notes in the hands of such holder. As a result, there
should be no federal income tax consequences to holders exchanging the Old Notes
for the New Notes pursuant to the Exchange Offer, and the holding period of New
Notes in the hands of a holder should include the holding period of the Old
Notes exchanged into such New Notes.
INTEREST
A holder of an Old Note or a New Note will be required to report stated
interest on the Old Note and the New Note as interest income in accordance with
the holder's method of accounting for tax purposes. Because the Old Notes were
issued at par there is no original issue discount pursuant to the de minimis
exception to the "original issue discount" rules.
TAX BASIS IN OLD NOTES AND NEW NOTES
A holder's tax basis in an Old Note will generally be the holder's purchase
price for the Old Note. If a holder of an Old Note exchanges the Old Note for a
New Note pursuant to the Exchange Offer, the tax
107
<PAGE>
basis of the New Note immediately after such exchange should equal the holder's
tax basis in the Old Note immediately prior to the exchange.
DISPOSITION OF OLD NOTES OR NEW NOTES
The sale, exchange, redemption or other disposition of an Old Note or a New
Note, except in the case of an exchange pursuant to the Exchange Offer (see the
above discussion), generally will be a taxable event. A holder generally will
recognize gain or loss equal to the difference between (i) the amount of cash
plus the fair market value of any property received upon such sale, exchange,
redemption or other taxable disposition of the Old Note or the New Note (except
to the extent attributable to accrued interest) and (ii) the holder's adjusted
tax basis in such debt instrument. Such gain or loss will be capital gain or
loss, and will be long term if the Old Notes or the New Notes have been held for
more than one year at the time of the sale or other disposition.
PURCHASERS OF OLD NOTES AT OTHER THAN ORIGINAL ISSUANCE PRICE
The foregoing does not discuss special rules which may affect the treatment
of purchasers that acquired Old Notes other than at par, including those
provisions of the Internal Revenue Code relating to the treatment of "market
discount," and "amortizable bond premium." Any such purchaser should consult its
tax advisor as to the consequences to him of the acquisition, ownership, and
disposition of Old Notes.
BACKUP WITHHOLDING
Unless a holder provides its correct taxpayer identification number
(employer identification number or social security number) to the Company and
certifies that such number is correct, generally under the federal income tax
backup withholding rules, 31% of (1) the interest paid on the Old Notes and the
New Notes, and (2) proceeds of sale of the Old Notes and the New Notes, must be
withheld and remitted to the United States Treasury. Therefore, each holder
should complete and sign the Substitute Form W-9 included so as to provide the
information and certification necessary to avoid backup withholding. However,
certain holders (including, among others, certain foreign individuals) are not
subject to these backup withholding and reporting requirements. For a foreign
individual holder to qualify as an exempt foreign recipient, that holder must
submit a statement, signed under penalties of perjury, attesting to that
individual's exempt foreign status. Such statements can be obtained from the
Company. For further information concerning backup withholding and instructions
for completing the Substitute Form W-9 (including how to obtain a taxpayer
identification number if you do not have one and how to complete the Substitute
Form W-9 if the Old Notes are held in more than one name), contact the Company's
Chief Financial Officer, 300 Galleria Parkway, Suite 690, Atlanta, Georgia 30339
or telephone number (770) 988-2900.
Backup withholding is not an additional federal income tax. Rather, the
federal income tax liability of a person subject to backup withholding will be
reduced by the amount of tax withheld. If backup withholding results in an
overpayment of taxes, a refund may be obtained from the IRS.
PLAN OF DISTRIBUTION
Based on interpretations by the Commission set forth in no-action letters
issued to third parties, the Company believes that New Notes issued pursuant to
the Exchange Offer in exchange for the Old Notes may be offered for resale,
resold and otherwise transferred by holders thereof (other than any holder which
is (i) an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act, (ii) a broker-dealer who acquired Notes directly from the
Company or (iii) broker-dealers who acquired Notes as a result of market-making
or other trading activities) without compliance with the registration and
prospectus delivery provisions of the Securities Act provided that such New
Notes are acquired in the
108
<PAGE>
ordinary course of such holders' business, and such holders are not engaged in,
and do not intend to engage in, and have no arrangement or understanding with
any person to participate in, a distribution of such New Notes; provided that
broker-dealers ("Participating Broker-Dealers") receiving New Notes in the
Exchange Offer will be subject to a prospectus delivery requirement with respect
to resales of such New Notes. To date, the Commission has taken the position
that Participating Broker-Dealers may fulfill their prospectus delivery
requirements with respect to transactions involving an exchange of securities
such as the exchange pursuant to the Exchange Offer (other than a resale of an
unsold allotment from the sale of the Old Notes to the Initial Purchasers) with
the Prospectus, contained in the Exchange Offer Registration Statement. Pursuant
to the Registration Rights Agreement, the Company has agreed to permit
Participating Broker-Dealers and other persons, if any, subject to similar
prospectus delivery requirements to use this Prospectus in connection with the
resale of such New Notes. The Company and the Guarantors have agreed that, for a
period of 180 days after the Expiration Date, they will make this Prospectus,
and any amendment or supplement to this Prospectus, available to any
broker-dealer that requests such documents in the Letter of Transmittal.
Each holder of the Old Notes who wishes to exchange its Old Notes for New
Notes in the Exchange Offer will be required to make certain representations to
the Company as set forth in "The Exchange Offer--Terms and Conditions of the
Letter of Transmittal." In addition, each holder who is a broker-dealer and who
receives New Notes for its own account in exchange for Old Notes that were
acquired by it as a result of market-making activities or other trading
activities, will be required to acknowledge that it will deliver a prospectus in
connection with any resale by it of such New Notes.
The Company will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the New Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such New Notes. Any broker-dealer
that resells New Notes that were received by it for its own account pursuant to
the Exchange Offer and any broker or dealer that participates in a distribution
of such New Notes may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit on any such resale of New Notes and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
The Company has agreed to pay all expenses incidental to the Exchange Offer
other than commissions and concessions of any brokers or dealers and will
indemnify holders of the Old Notes (including any broker-dealers) against
certain liabilities, including liabilities under the Securities Act, as set
forth in the Registration Rights Agreement.
109
<PAGE>
EXPERTS
The consolidated financial statements of Outsourcing Solutions Inc. as of
December 31, 1995 and for the period September 21, 1995 to December 31, 1995
included in this Prospectus have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report appearing herein, and have been
so included in reliance upon the report of such firm given upon their authority
as experts in accounting and auditing.
The Payco consolidated balance sheets as of December 31, 1994 and 1995, and
the consolidated statements of income, changes in shareholders' equity and cash
flows for each of the years in the three year period ended December 31, 1995
have been included in this Prospectus in reliance on the report of Arthur
Andersen LLP, independent auditors, appearing elsewhere herein.
The consolidated financial statements of Account Portfolios, L.P. as of
December 31, 1994 and September 20, 1995 and for the years ended December 31,
1993 and 1994 and for the period from January 1, 1995 to September 20, 1995
included in this Prospectus have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report appearing herein, and have been
so included in reliance upon the report of such firm given upon their authority
as experts in accounting and auditing.
The A.M. Miller and Associates, Inc. balance sheet as of December 31, 1995
and the statements of income and retained earnings and of cash flows for the
year ended December 31, 1995 have been included in this Prospectus in reliance
on the report of Schweitzer Rubin Karon & Bremer, independent auditors,
appearing elsewhere herein.
LEGAL MATTERS
The validity of the issuance of securities offered hereby will be passed
upon for the Company by White & Case, New York, New York.
110
<PAGE>
INDEX TO FINANCIAL STATEMENTS
OUTSOURCING SOLUTIONS INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Independent Auditors' Report............................................................................... F-3
Consolidated Balance Sheet at December 31, 1995............................................................ F-4
Consolidated Statement of Operations for the period from September 21, 1995 to
December 31, 1995........................................................................................ F-5
Consolidated Statement of Stockholders' Equity for the period from
September 21, 1995 to December 31, 1995.................................................................. F-6
Consolidated Statement of Cash Flows for the period from September 21, 1995 to
December 31, 1995........................................................................................ F-7
Notes to Consolidated Financial Statements................................................................. F-8
Unaudited Condensed Consolidated Balance Sheet at September 30, 1996....................................... F-17
Unaudited Consolidated Statements of Operations for the nine months ended
September 30, 1996 and for the period from September 21, 1995 to
September 30, 1995....................................................................................... F-18
Unaudited Consolidated Statement of Stockholders' Equity for the nine
months ended September 30, 1996.......................................................................... F-19
Unaudited Consolidated Statements of Cash Flows for the nine months ended
September 30, 1996 and for the period from September 21, 1995 to
September 30, 1995....................................................................................... F-20
Notes to Unaudited Consolidated Financial Statements....................................................... F-21
</TABLE>
PAYCO AMERICAN CORPORATION AND SUBSIDIARIES
<TABLE>
<S> <C>
Report of Independent Public Accountants............................................. F-23
Consolidated Balance Sheets at December 31, 1995 and 1994............................ F-24
Consolidated Statements of Income for the years ended December 31, 1995, 1994 and
1993............................................................................... F-26
Consolidated Statements of Shareholders' Investment for the years ended
December 31, 1995, 1994 and 1993................................................... F-27
Consolidated Statements of Cash Flows for the years ended December 31, 1995, 1994 and
1993............................................................................... F-28
Notes to Consolidated Financial Statements........................................... F-29
Unaudited Consolidated Balance Sheet at September 30, 1996........................... F-38
Unaudited Consolidated Statements of Income for the nine months ended September 30,
1996 and 1995...................................................................... F-40
Unaudited Consolidated Statements of Cash Flows for the nine months ended September
30, 1995 and 1996.................................................................. F-41
Notes to Unaudited Consolidated Financial Statements................................. F-42
</TABLE>
ACCOUNT PORTFOLIOS, L.P. AND SUBSIDIARIES
<TABLE>
<S> <C>
Independent Auditors' Report......................................................... F-43
Consolidated Balance Sheets at September 20, 1995 and December 31, 1994.............. F-44
Consolidated Statements of Operations for the period from January 1, 1995 to Septem-
ber 20, 1995 and for the years ended December 31, 1994 and 1993.................... F-45
Consolidated Statements of Partners' Capital for the period from January 1, 1995 to
September 20, 1995 and for the years ended December 31, 1994 and 1993.............. F-46
Consolidated Statements of Cash Flows for the period from January 1, 1995 to Septem-
ber 20, 1995 and for the years ended December 31, 1994 and 1993.................... F-47
Notes to Consolidated Financial Statements........................................... F-48
</TABLE>
F-1
<PAGE>
INDEX TO FINANCIAL STATEMENTS (CONTINUED)
A.M. MILLER & ASSOCIATES, INC.
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Independent Auditor's Report............................................................................... F-53
Balance Sheet at December 31, 1995......................................................................... F-54
Statement of Income and Retained Earnings for the year ended December 31, 1995............................. F-55
Statement of Cash Flows for the year ended December 31, 1995............................................... F-56
Notes to Financial Statements.............................................................................. F-57
Unaudited Balance Sheet at September 30, 1995.............................................................. F-62
Unaudited Statement of Income and Retained Earnings for the nine months ended September 30, 1995........... F-63
Unaudited Statement of Cash Flows for the nine months ended September 30, 1995............................. F-64
Notes to Unaudited Financial Statements.................................................................... F-65
</TABLE>
F-2
<PAGE>
INDEPENDENT AUDITORS' REPORT
Stockholders of Outsourcing Solutions Inc.:
We have audited the accompanying consolidated balance sheet of Outsourcing
Solutions Inc. (the "Company") and its subsidiaries as of December 31, 1995 and
the related consolidated statements of operations, stockholders' equity, and
cash flows for the period from September 21, 1995 (date of inception) to
December 31, 1995. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such consolidated financial statements presents fairly, in
all material respects, the financial position of the Company and its
subsidiaries as of December 31, 1995 and the results of their operations and
their cash flows for the period from September 21, 1995 to December 31, 1995 in
conformity with generally accepted accounting principles.
/s/ DELOITTE & TOUCHE LLP
- -------------------------------
Deloitte & Touche LLP
Atlanta, Georgia
August 9, 1996
(October 11, 1996 as to Note 10)
F-3
<PAGE>
OUTSOURCING SOLUTIONS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1995
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<S> <C>
ASSETS
Current Assets:
Cash and cash equivalents....................................................... $ 1,469
Loans and accounts receivable purchased......................................... 23,513
Accounts receivable--trade...................................................... 216
Other current assets............................................................ 90
---------
Total current assets.......................................................... 25,288
Loans and accounts receivable purchased........................................... 41,550
Property and equipment, net....................................................... 1,099
Goodwill, less accumulated amortization of $250................................... 17,715
---------
Total assets.................................................................. $ 85,652
---------
---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable--trade......................................................... $ 842
Accrued transaction costs....................................................... 1,125
Accrued consulting fees......................................................... 167
Accrued salaries and wages...................................................... 126
Accrued interest................................................................ 153
Other current liabilities....................................................... 212
---------
Total current liabilities..................................................... 2,625
Notes payable..................................................................... 36,462
Deferred income taxes............................................................. 3,892
Other long-term liability......................................................... 225
---------
Total liabilities............................................................. 43,204
---------
Stockholders' Equity:
8% non-voting cumulative redeemable exchangeable preferred stock; authorized
1,000,000 shares, 800,000.01 shares issued and outstanding, at liquidation
value of $12.50 per share..................................................... 10,000
Common stock; $.01 par value; authorized 5,600,000 shares, 2,812,000 shares
issued and outstanding........................................................ 28
Additional paid-in capital...................................................... 35,122
Accumulated deficit............................................................. (2,702)
---------
Total stockholders' equity.................................................... 42,448
---------
Total liabilities & stockholders' equity...................................... $ 85,652
---------
---------
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
OUTSOURCING SOLUTIONS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
PERIOD FROM SEPTEMBER 21, 1995 (DATE OF INCEPTION)
TO DECEMBER 31, 1995
(IN THOUSANDS OF DOLLARS)
<TABLE>
<S> <C>
REVENUES........................................................................... $ 8,311
EXPENSES:
Amortization of loans and accounts receivable.................................... 5,390
Service fees and other operating and administrative expenses..................... 5,332
Professional fees................................................................ 310
---------
OPERATING LOSS..................................................................... (2,721)
OTHER INCOME (EXPENSE):
Interest expense................................................................. (1,365)
Interest income.................................................................. 4
---------
LOSS BEFORE INCOME TAXES........................................................... (4,082)
INCOME TAX BENEFIT................................................................. (1,605)
---------
NET LOSS........................................................................... (2,477)
PREFERRED STOCK DIVIDEND REQUIREMENTS.............................................. 225
---------
NET LOSS TO COMMON STOCKHOLDERS.................................................... $ (2,702)
---------
---------
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
OUTSOURCING SOLUTIONS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
PERIOD FROM SEPTEMBER 21, 1995 (DATE OF INCEPTION)
TO DECEMBER 31, 1995
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NON-VOTING
CUMULATIVE
REDEEMABLE
EXCHANGEABLE ADDITIONAL
PREFERRED COMMON PAID-IN ACCUMULATED
STOCK STOCK CAPITAL DEFICIT TOTAL
-------------- ------------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C>
Balance at September 21, 1995.................. $ 10,000 $ 28 $ 35,122 $ -- $ 45,150
Preferred stock dividend of $0.28 per share.... -- -- -- (225) (225)
Net loss....................................... -- -- -- (2,477) (2,477)
-------------- --- ----------- ------------- ---------
Balance at December 31, 1995................... $ 10,000 $ 28 $ 35,122 $ (2,702) $ 42,448
-------------- --- ----------- ------------- ---------
-------------- --- ----------- ------------- ---------
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
OUTSOURCING SOLUTIONS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
PERIOD FROM SEPTEMBER 21, 1995 (DATE OF INCEPTION)
TO DECEMBER 31, 1995
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
<S> <C>
OPERATING ACTIVITIES:
Net loss............................................................................................. $ (2,477)
Adjustments to reconcile net loss to net cash provided by operating activities:......................
Depreciation expense............................................................................... 81
Amortization of goodwill........................................................................... 250
Amortization of loans and accounts receivable purchased............................................ 5,390
Interest expense added to notes payable............................................................ 688
Deferred taxes..................................................................................... (1,605)
Change in assets and liabilities:
Loans and accounts receivable purchased.......................................................... (903)
Other current assets............................................................................. (233)
Accounts payable, accrued expenses and other current liabilities................................. 808
---------
Net cash provided by operating activities...................................................... 1,999
---------
INVESTING ACTIVITIES:
Acquisition of property and equipment................................................................ (97)
Payment of acquisition transaction costs............................................................. (375)
---------
Net cash used in investing activities.......................................................... (472)
---------
FINANCING ACTIVITY--Repayment of debt.................................................................. (576)
---------
NET INCREASE IN CASH AND CASH EQUIVALENTS.............................................................. 951
CASH AND CASH EQUIVALENTS--Beginning of period......................................................... 518
---------
CASH AND CASH EQUIVALENTS--End of period............................................................... $ 1,469
---------
---------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during period for interest................................................................. $ 543
---------
---------
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITIES:
For the period September 21, 1995 to December 31, 1995, dividends totaling $225 were accrued on the
Company's 8% Non-voting Cumulative Redeemable Exchangeable Preferred Stock.
</TABLE>
See notes to consolidated financial statements.
F-7
<PAGE>
OUTSOURCING SOLUTIONS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1995 AND THE PERIOD FROM SEPTEMBER 21, 1995
(DATE OF INCEPTION) TO DECEMBER 31, 1995
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION--Outsourcing Solutions Inc. ("OSI"), formerly known as OSI
Holdings Corp., was formed on September 21, 1995 as part of a strategy to
consolidate the accounts receivable management industry. The Company purchases
portfolios of nonperforming loans and accounts receivable and services loans.
Pursuant to a Purchase Agreement dated September 21, 1995 (the "Purchase
Agreement"), OSI, a Delaware corporation, acquired the Class A limited
partnership interests in Account Portfolios, L.P. for 933,333 shares of OSI
common stock and 266,667 shares of OSI 8% Non-Voting Cumulative Redeemable
Exchangeable Preferred Stock (see Note 4). OSI contributed the Class A
partnership interests, valued at $15.0 million, to Account Portfolios, Inc.
("AP, Inc."), a subsidiary of OSI. AP, Inc. acquired the Class B limited
partnership interests in Account Portfolio, L.P. for cash of approximately $28.8
million and notes of $35.0 million (see Note 3). Account Portfolios, G.P. Inc.
("APGP, Inc."), another subsidiary of OSI, acquired the general partnership
interests of Account Portfolios, L.P. and its subsidiaries for cash of
approximately $1.2 million. The total value of this transaction was $80.0
million, plus acquisition costs of $3.1 million. The acquisition has been
accounted for using the purchase method. Accordingly, the costs of the
acquisition were allocated to the assets acquired and liabilities assumed based
upon their estimated fair values at the date of acquisition.
CONSOLIDATION POLICY--The consolidated financial statements include the
accounts of OSI and all of its subsidiaries (collectively, the "Company"). All
significant intercompany accounts and transactions have been eliminated.
CASH AND CASH EQUIVALENTS--Cash and cash equivalents consist of cash, money
market investments, and overnight deposits. Cash equivalents are valued at cost,
which approximates market.
LOANS AND ACCOUNTS RECEIVABLE PURCHASED--Loans and accounts receivable
purchased ("Receivables") in connection with the acquisition on September 21,
1995 are recorded at the present value of estimated future cash flows.
Receivables purchased subsequent to the acquisition date are recorded at cost.
The Company periodically reviews all Receivables to assess recoverability.
Impairments will be recognized in operations when the present value of expected
future operating cash flows derived from the Receivables are less than their
carrying value. All Receivables are purchased without recourse to the seller.
REVENUE RECOGNITION--Collections on Receivables are recorded as revenue when
received. Revenue from loan servicing is recorded as such services are provided.
The Company amortizes on an individual portfolio basis the cost of the
Receivables based on the ratio of current collections for a portfolio to current
and anticipated future collections for that portfolio. If not amortized earlier,
a Receivable portfolio's cost is fully amortized by the end of three years from
date of purchase.
PROPERTY AND EQUIPMENT--Property and equipment is recorded at cost.
Depreciation is computed on the straight-line method based on the estimated
useful lives (3 years to 5 years) of the related assets. Leasehold improvements
are depreciated over the term of the related lease.
F-8
<PAGE>
OUTSOURCING SOLUTIONS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF DECEMBER 31, 1995 AND THE PERIOD FROM SEPTEMBER 21, 1995
(DATE OF INCEPTION) TO DECEMBER 31, 1995
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
GOODWILL--The excess of cost over the fair value of net assets of businesses
acquired is amortized on a straight-line basis over 20 years. The Company
periodically reviews goodwill to assess recoverability. Impairments will be
recognized in operations when the expected future operating cash flow derived
from such intangible assets is less than its carrying value.
INCOME TAXES--The Company accounts for income taxes using an asset and
liability approach. The Company recognizes the amount of taxes payable or
refundable for the current year and deferred tax liabilities and assets for
future tax consequences of events that have been recognized in the financial
statements.
ACCOUNTING ESTIMATES--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS--Management has considered the
disclosure requirements of SFAS No. 107. "Disclosures about Fair Value of
Financial Instruments," and has determined that the fair values of its financial
instruments do not differ significantly from carrying values recorded in the
financial statements.
NEW ACCOUNTING PRONOUNCEMENTS--Statement of Financial Accounting Standards
("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of," which is effective for fiscal years
beginning after December 15, 1995, requires that long-lived assets and certain
identifiable intangibles to be held and used by an entity be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying value of an asset may not be recoverable. SFAS No. 121 also requires
that long-lived assets and certain identifiable intangibles to be disposed of be
reported at the lower of carrying amount or fair value less cost to sell.
Management does not believe the impact of adopting this new Standard will be
material to the Company's financial condition and results of operations.
In October 1995, SFAS No. 123, "Accounting for Stock-Based Compensation,"
was issued. The adoption of the new recognition provisions for stock-based
compensation expense included in SFAS No. 123 is optional; however, the pro
forma effects on net income and earnings per share had the new recognition
provisions been elected is required to be disclosed in the financial statements.
The Company will follow the requirements of APB No. 25, "Accounting for Stock
Issued to Employees," in its accounting for employee stock options; therefore,
no impact on the Company's financial position and results of operations is
expected. The Company will adopt the new disclosure requirements under SFAS No.
123 in 1996.
F-9
<PAGE>
OUTSOURCING SOLUTIONS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF DECEMBER 31, 1995 AND THE PERIOD FROM SEPTEMBER 21, 1995
(DATE OF INCEPTION) TO DECEMBER 31, 1995
2. PROPERTY AND EQUIPMENT
Property and equipment, which is recorded at cost, consists of the following
at December 31, 1995 (in thousands):
<TABLE>
<S> <C>
Furniture and fixtures......................................... $ 187
Data processing equipment...................................... 547
Telephone equipment............................................ 420
Leasehold improvements......................................... 21
Computer software.............................................. 5
-------------
1,180
Less accumulated depreciation.................................. (81)
-------------
$ 1,099
-------------
-------------
</TABLE>
3. NOTES PAYABLE
The Company entered into a two-year Master Loan Agreement with Cargill
Financial Services Corporation on May 14, 1992 (the "Cargill Agreement") which
allowed it to borrow up to $50.0 million for the purchase of portfolios of
nonperforming loans and accounts receivable approved by both parties. Under the
terms of the Cargill Agreement, after payment of principal, noncontingent
interest, and return of the Company's investment in certain portfolios, the
Partnership is required to pay an additional 20% of all future collections less
service fees (as defined) in such portfolios as contingent interest to the
lender. The Company paid contingent interest of $300,804 under the Cargill
Agreement for the period from September 21, 1995 to December 31, 1995 which was
charged to interest expense. There were no principal amounts outstanding under
the Cargill Agreement as of September 21, 1995 or December 31, 1995.
In connection with the Purchase Agreement discussed in Note 1, the Company,
pursuant to a Loan and Security Agreement dated September 21, 1995 (the
"Agreement"), issued two promissory notes to stockholders (the "Notes") for an
aggregate amount of $35.0 million. The Notes were reduced as of the acquisition
date by $100,048 as a result of a purchase price adjustment provided for in the
Agreement. On November 30, 1995, in accordance with the loan agreement, accrued
interest in the amount of $688,305 was capitalized into the principal of the
Notes. The Notes bore interest at 10% per year and were to be due in full on
December 31, 1998. Additional interest equal to 5% was to accrue on all amounts
outstanding under the Agreement beginning on March 21, 1996 and semi-annually
thereafter through March 21, 1998.
On March 21, 1996, the Company signed an agreement with a syndicate of banks
(the "Credit Agreement") to provide financing required to refinance the Notes,
provide for future acquisitions and finance the ongoing working capital
requirements of the Company.
The Credit Agreement is comprised of a term loan facility of $34.0 million
(increased by $3.5 million pursuant to the First Amendment to the Credit
Agreement dated May 17, 1996) and a revolving credit facility of $10.0 million.
The Company borrowed $34.0 million under the term loan facility and $0.7 million
under the revolving credit facility and repaid the Notes and certain other
liabilities of the Company. The
F-10
<PAGE>
OUTSOURCING SOLUTIONS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF DECEMBER 31, 1995 AND THE PERIOD FROM SEPTEMBER 21, 1995
(DATE OF INCEPTION) TO DECEMBER 31, 1995
3. NOTES PAYABLE (CONTINUED)
Credit Agreement provides for quarterly principal payments beginning June 30,
1996. Additionally, the Company is required to make semi-annual prepayments
beginning August 31, 1996 based upon a formula of Excess Cash Flow, as defined.
Borrowings under the revolving credit facility may not exceed $1.0 million
for working capital requirements of the Company. The repayments under the
revolving facility will be made in eight equal quarterly installments beginning
on June 30, 1998. The Company is obligated to pay a facility fee of .25% on the
revolving credit facility. The interest rate on both the term loan and revolving
credit facilities is determined at the Company's option, based on either the
London Interbank Offered Rate ("LIBOR") adjusted by a range of 1% to 2.5% based
on certain financial ratios, or the Base Rate, as defined, less .25%. Interest
payments are to be made monthly for outstanding Base Rate loans. Interest
payments on LIBOR loans are to be paid on the earlier of their maturity date or
90 days depending on their term. Substantially all assets are pledged as
collateral for the borrowings under the Credit Agreement and the Company is
required to maintain certain financial ratios, a positive net worth, and the
Credit Agreement limits the Company's level of capital expenditures and dividend
payments.
The Company executed promissory notes for an aggregate amount of $1,450,000
to four stockholders of the Company for transaction costs incurred in connection
with the Purchase Agreement. Each note bore interest at 8% per year, payable
semi-annually beginning December 31, 1995, and was due on September 21, 2005. On
January 10, 1996, pursuant to an Exchange Agreement with each of the four
noteholders, the promissory notes, plus accrued interest thereon, totaling
$1,485,832 was contributed to capital of the Company in exchange for 118,866.59
shares of Common Stock, $.01 par value, of the Company ("Common Shares").
4. PREFERRED STOCK
As of September 21, 1995, the Company had 800,000.01 shares of 8% Non-Voting
Cumulative Redeemable Exchangeable Preferred Stock ("Preferred Shares") issued
and outstanding. The liquidation value of each Preferred Share is $12.50 plus
accrued and unpaid dividends. Dividends, as may be declared by Holding's Board
of Directors, are cumulative at an annual rate of 8% of the liquidation value
and are payable in equal semi-annual installments of $.50 per preferred share on
the dividend payment date, as defined in the Certificate of Incorporation. The
Company may, at its sole option, pay dividends in additional Preferred Shares.
The Company may also, at its sole option and upon written notice to preferred
stockholders, redeem all or any portion of the outstanding Preferred Shares for
$12.50 per share plus cash equal to all accrued and unpaid dividends, through
the redemption date, whether or not such dividends have been authorized or
declared. Each holder of Preferred Shares shall have the right, at their option,
at any time after September 20, 1996, to exchange any or all of their Preferred
Shares for the same number of Common Shares. The Company must reserve, out of
its authorized but unissued Common Shares, the appropriate number of Common
Shares to effect the exchange of all outstanding Preferred Shares. Upon the
exchange of any Preferred Shares, such Preferred Shares are to be retired and
not reissued.
F-11
<PAGE>
OUTSOURCING SOLUTIONS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF DECEMBER 31, 1995 AND THE PERIOD FROM SEPTEMBER 21, 1995
(DATE OF INCEPTION) TO DECEMBER 31, 1995
5. INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax reporting purposes. the Company's
deferred income taxes result primarily from differences on loans and accounts
receivable and differences in depreciation methods on fixed assets. No deferred
tax liability or asset related to goodwill for which amortization is not
deductible for tax purposes is recognized. Accordingly, the Company treats the
amortization of goodwill as a permanent difference between income as reported in
the financial statements and income reported on the income tax returns.
Income tax benefit for the period September 21, 1995 to December 31, 1995 is
summarized as follows (in thousands):
<TABLE>
<S> <C>
Current:
Federal.......................................................... $ --
State............................................................ --
---------
Total current.................................................. --
---------
Deferred:
Federal.......................................................... (1,437)
State............................................................ (168)
---------
Total deferred................................................. (1,605)
---------
Total income taxes............................................. $ (1,605)
---------
---------
</TABLE>
Deferred income taxes at December 31, 1995 consist of the following (in
thousands):
<TABLE>
<S> <C>
Deferred tax liabilities:
Loans and accounts receivable.................................... $ (4,288)
Depreciation..................................................... (54)
---------
Gross deferred tax liabilities................................. (4,342)
---------
Deferred tax assets:
Net operating loss carryforwards................................. 376
Accrued liabilities.............................................. 74
---------
Gross deferred tax assets...................................... 450
---------
Net deferred tax liabilities................................... $ (3,892)
---------
---------
</TABLE>
F-12
<PAGE>
OUTSOURCING SOLUTIONS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF DECEMBER 31, 1995 AND THE PERIOD FROM SEPTEMBER 21, 1995
(DATE OF INCEPTION) TO DECEMBER 31, 1995
5. INCOME TAXES (CONTINUED)
Income tax benefit for the period September 21, 1995 to December 31, 1995
computed using the U.S. federal statutory rate is reconciled to the reported tax
provision as follows (in thousands):
<TABLE>
<S> <C>
Federal statutory income tax rate.................................. $ (1,388)
State income taxes (net of federal tax benefit).................... (111)
Nondeductible amortization......................................... 85
Other.............................................................. (191)
---------
$ (1,605)
---------
---------
</TABLE>
The Company has net operating loss carryforwards of approximately $992,000.
Such net operating loss carryforwards in Arizona and Texas expire in 2000 and in
Georgia and for federal income taxes expire in 2010. Realization is dependent on
generating sufficient taxable income prior to expiration of the loss
carryforwards. Although realization is not assured, management believes it is
more likely than not that all of the deferred tax asset will be realized.
Therefore, at December 31, 1995, no valuation allowance for the deferred tax
assets was recorded. The amount of the deferred tax asset considered realizable,
however, could be reduced in the near term if estimates of future taxable income
during the carryforward period are reduced.
The Company files its U.S. federal income tax returns on a consolidated
basis with its subsidiaries. The income tax expense (benefit) of OSI and each of
its subsidiaries is computed as if it were filing on a separate return basis.
OSI has a tax sharing arrangement with its subsidiaries.
6. RELATED PARTY TRANSACTIONS
The Company has an agreement with an affiliate of certain OSI stockholders
to provide management and investment services for a monthly fee of $50,000. The
Company recorded management fees to this entity of $150,000 during the period
from September 21, 1995 to December 31, 1995.
On September 21, 1995, the Company entered into an advisory services
agreement with a related party. The agreement provides for the payment by the
Company of $300,000 annually. The Company recorded fees to this entity of
approximately $42,000 during the period from September 21, 1995 to December 31,
1995. The advisory services agreement terminates on September 21, 2005 and may
be terminated by the Company for justifiable cause, as defined, or by the
related party upon 30 days written notice to the Company.
The Purchase Agreement provides that the Company pay, to certain OSI
stockholders, $1.5 million in transaction costs related to the acquisition.
Accrued transaction costs totaled $1,125,000 at December 31, 1995.
7. STOCK OPTION AND AWARD PLAN
The Company has established the OSI Holdings Corp. 1995 Stock Option and
Stock Award Plan (the "Plan"). The Plan is a stock award and incentive plan
which permits the issuance of options, stock appreciation rights ("SARs") in
tandem with such options, restricted stock and other stock-based awards to
selected employees of and consultants to the Company. The Plan reserves 179,500
F-13
<PAGE>
OUTSOURCING SOLUTIONS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF DECEMBER 31, 1995 AND THE PERIOD FROM SEPTEMBER 21, 1995
(DATE OF INCEPTION) TO DECEMBER 31, 1995
7. STOCK OPTION AND AWARD PLAN (CONTINUED)
(increased to 304,255 shares by the Board of Directors subsequent to December
31, 1995) Common Shares for grants and provides that the term of each award, not
to exceed ten years, be determined by the Compensation Committee of the Board of
Directors (the "Committee") charged with administering the Plan.
Under the terms of the Plan, options granted may be either nonqualified or
incentive stock options and the exercise price may not be less than the fair
market value of a Common Share, as determined by the Committee, on the date of
grant. SARs granted in tandem with an option shall be exercisable only to the
extent the underlying option is exercisable and the grant price shall be equal
to the exercise price of the underlying option. At December 31, 1995, no stock
options or SARs have been granted. In addition, the Committee may grant
restricted stock to participants of the Plan at no cost. Other than the
restrictions which limit the sale and transfer of these shares, recipients of
restricted stock awards are entitled to vote shares of restricted stock and
dividends paid on such stock. No restricted stock has been granted at December
31, 1995. The Committee may pay bonuses in Common Shares.
8. EMPLOYEE BENEFIT PLAN
The Company's predecessor adopted a 401(k) profit sharing plan and trust
(the "Profit Sharing Plan") on March 1, 1994 which covers all full-time
employees who have completed three months of service. Employees may contribute
up to 15% of their annual compensation and employer contributions are
discretionary. Effective December 22, 1995, the Company's predecessor terminated
the Profit Sharing Plan. The Profit Sharing Plan participants were given the
option to rollover their account balances into another qualified plan or to
receive a lump-sum distribution from the Profit Sharing Plan. The Company did
not make any contributions to the Plan during the period from September 21, 1995
to the date of termination.
9. COMMITMENTS AND CONTINGENCIES
From time to time, the Company enters into servicing agreements with
companies which service loans for others. The servicers handle the collection
efforts on certain nonperforming loans and accounts receivable on the Company's
behalf. Payments to the servicers vary depending on the servicing contract.
Current contracts expire on the anniversary date of such contracts but are
automatically renewable at the option of the Company.
The Company has a consulting agreement with an individual which provides for
the payment of fees for services performed in connection with the acquisition of
loan portfolios. Such fees are based on the portfolio purchase price and future
collections. The Company recorded consulting expenses to this individual of
$182,880 during the period from September 21, 1995 to December 31, 1995.
The Company has a three-year employment agreement with an employee which
provides for the payment of additional compensation based on future collections
of loan portfolios identified by the employee.
During August 1994, a subsidiary of the Company entered into a Portfolio
Flow Purchase Agreement whereby the subsidiary has a monthly commitment to
purchase nonperforming loans meeting
F-14
<PAGE>
OUTSOURCING SOLUTIONS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF DECEMBER 31, 1995 AND THE PERIOD FROM SEPTEMBER 21, 1995
(DATE OF INCEPTION) TO DECEMBER 31, 1995
9. COMMITMENTS AND CONTINGENCIES (CONTINUED)
certain criteria for an agreed upon price up to a total purchase price of $1.0
million per month. The purchases under the Portfolio Purchase Agreement were
$902,683 for the period September 21, 1995 to December 31, 1995. The subsidiary
also entered into certain Participation Agreements whereby from time to time it
may sell undivided interests in the loan portfolios purchased under the
Portfolio Flow Purchase Agreement. The Company records the loan portfolios
purchased net of the participation interests sold. Subsequent to year-end, the
Company repurchased participation interests in certain loan portfolios (see Note
10).
The Company is obligated under operating lease agreements with terms in
excess of one year as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
- ------------------------------------------------------------------------------------
<S> <C>
1996................................................................................ $ 422
1997................................................................................ 317
1998................................................................................ 251
1999................................................................................ 284
2000 and thereafter................................................................. 65
---------
$ 1,339
---------
---------
</TABLE>
Rent expense under operating leases was $150,308 for the period from
September 21, 1995 to December 31, 1995.
The Company is a party to certain legal matters arising in the ordinary
course of business. In the opinion of management, none of these matters are
expected to have a material effect on the financial position or results of
operations of the Company.
10. SUBSEQUENT EVENTS
On January 9, 1996, the Board of Directors of the Company approved an
amendment to the Certificate of Incorporation which authorized the Company to
issue up to 7,500,000 shares of Voting Common Stock and up to 7,500,000 shares
of Class A Non-Voting Common Stock.
On January 10, 1996, the Company acquired A. M. Miller & Associates, Inc.
for cash of approximately $24.0 million, subject to a working capital
adjustment, 80,000 shares of Voting Common Stock (valued at $1.0 million) and a
9% unsecured, subordinated promissory note in an aggregate amount of $5.0
million due July 10, 2001. Also, in a separate transaction on January 10, 1996,
the Company acquired Continental Credit Services, Inc. for cash of $10.0
million, subject to a working capital adjustment, 400,000 shares of Voting
Common Stock (valued at $5.0 million) and a 10% unsecured, subordinated
promissory note in an aggregate amount of $3.0 million due July 9, 2001. Both
acquisitions were accounted for as purchases. The acquisitions were funded with
proceeds from a $50.0 million credit agreement, dated January 10, 1996, between
Outsourcing Solutions Incorporated, a subsidiary of the Company, and certain
banks. On October 11, 1996, the Certificate of Incorporation of Outsourcing
Solutions Incorporated was amended to change the name of the company to CFC
Services Corp.
F-15
<PAGE>
OUTSOURCING SOLUTIONS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF DECEMBER 31, 1995 AND THE PERIOD FROM SEPTEMBER 21, 1995
(DATE OF INCEPTION) TO DECEMBER 31, 1995
10. SUBSEQUENT EVENTS (CONTINUED)
On February 15, 1996, the Board of Directors further amended its Certificate
of Incorporation to authorize the Company to issue up to 500,000 shares of Class
B Non-Voting Common Stock and up to 1,500,000 shares of Class C Non-Voting
Common Stock.
Voting Common Stock can be converted into Class A Non-Voting Common Stock
(and vice versa) upon written notice to the Company. The Class B and Class C
Non-Voting Common Stock are both convertible into Voting Common Stock of the
Company upon the occurrence of certain regulatory or liquidity events.
On February 15, 1996, the Board of Directors of the Company approved,
pursuant to a stock purchase agreement, the sale of 800,000 shares of non-voting
common stock by certain existing stockholders to two equity investors for a
total of $10 million. The 800,000 shares of non-voting common stock consists of
400,000 shares each of Class B and Class C Non-Voting Common Stock.
On May 17, 1996, a subsidiary of the Company acquired participation
interests in certain loan portfolios for aggregate consideration of
approximately $14,772,000. The consideration consisted of 640,000 shares of
Class C Non-Voting Common Stock of the Company (valued at $8 million), a 10%
unsecured $3.5 million promissory note due September 1, 2000, and cash of
approximately $3.3 million.
On August 13, 1996, the Company entered into an agreement to acquire Payco
American Corporation ("Payco") and its subsidiaries for aggregate consideration
of approximately $150.2 million. The agreement is expected to be financed with
proceeds from a private placement offering of senior subordinated debt and a new
bank credit facility. Payco provides a variety of outsource services, including
consumer and commercial debt collections, billing and management of accounts
receivable, and various calling programs. In addition, Payco purchases and
manages portfolios of discounted accounts receivable.
On October 11, 1996, the Company's Certificate of Incorporation was amended
to change the name of the Company from OSI Holdings Corp. to Outsourcing
Solutions Inc.
F-16
<PAGE>
OUTSOURCING SOLUTIONS INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1996
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents...................................................... $ 4,637
Cash held for clients.......................................................... 1,925
Loans and accounts receivable purchased........................................ 37,011
Accounts receivable--trade..................................................... 2,617
Other current assets........................................................... 1,183
---------
Total current assets......................................................... 47,373
Loans and accounts receivable purchased.......................................... 27,298
Property and equipment, net...................................................... 4,567
Goodwill, less accumulated amortization of $1,926................................ 56,143
Intangible assets, less accumulated amortization of $4,017....................... 4,187
Deferred financing fees.......................................................... 1,612
Deferred income taxes............................................................ 552
Other............................................................................ 54
---------
Total assets............................................................... $ 141,786
---------
---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable--trade........................................................ $ 705
Accounts payable--clients...................................................... 1,925
Current portion of notes payable............................................... 13,143
Accrued expenses............................................................... 3,576
Due to related parties......................................................... 1,476
Other current liabilities...................................................... 31
---------
Total current liabilities.................................................... 20,858
Notes payable.................................................................... 55,995
Other long-term liabilities...................................................... 67
---------
Total liabilities.......................................................... 76,920
---------
Stockholders' Equity:
8% non-voting cumulative redeemable exchangeable preferred stock; authorized
1,000,000 shares, 865,280.01 shares issued and outstanding, at liquidation
value of $12.50 per share.................................................... 10,816
Voting common stock; $.01 par value; authorized 7,500,000 shares, 3,425,126.01
shares issued and outstanding................................................ 35
Class A convertible non-voting common stock; $.01 par value; authorized
7,500,000 shares, 391,740.58 shares issued and outstanding................... 4
Class B convertible non-voting common stock; $.01 par value; authorized 500,000
shares, 400,000 shares issued and outstanding................................ 4
Class C convertible non-voting common stock; $.01 par value; authorized
1,500,000 shares, 1,040,000 shares issued and outstanding.................... 10
Additional paid-in capital..................................................... 65,658
Accumulated deficit............................................................ (11,661)
---------
Total stockholders' equity................................................. 64,866
---------
Total liabilities & stockholders' equity................................... $ 141,786
---------
---------
</TABLE>
See notes to unaudited consolidated financial statements.
F-17
<PAGE>
OUTSOURCING SOLUTIONS INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND FOR THE PERIOD FROM
SEPTEMBER 21, 1995 TO SEPTEMBER 30, 1995
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
PERIOD FROM
NINE MONTHS ENDED SEPTEMBER 21,1995 TO
SEPTEMBER 30, 1996 SEPTEMBER 30, 1995
-------------------- ---------------------
<S> <C> <C>
REVENUES.............................................................. $ 60,443 $ 869
EXPENSES:
Amortization of loans and accounts receivable....................... 20,586 572
Service fees and other operating and administrative expenses........ 46,014 165
Professional fees................................................... 968 3
-------- -----
OPERATING (LOSS) INCOME............................................... (7,125) 129
OTHER INCOME (EXPENSE):
Interest expense.................................................... (5,633) (5)
Interest income..................................................... 30 --
Other expense....................................................... (42) --
-------- -----
(LOSS) INCOME BEFORE INCOME TAXES..................................... (12,770) 124
INCOME TAX BENEFIT.................................................... (4,424) --
-------- -----
NET (LOSS) INCOME..................................................... (8,346) 124
PREFERRED STOCK DIVIDEND REQUIREMENTS................................. 613 --
-------- -----
NET (LOSS) INCOME TO COMMON STOCKHOLDERS.............................. $ (8,959) $ 124
-------- -----
-------- -----
</TABLE>
See notes to unaudited consolidated financial statements.
F-18
<PAGE>
OUTSOURCING SOLUTIONS INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 1996
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
NON-VOTING
CUMULATIVE
REDEEMABLE
EXCHANGEABLE COMMON STOCK ADDITIONAL
PREFERRED -------------------------------------------------------- PAID-IN ACCUMULATED
STOCK VOTING CLASS A CLASS B CLASS C CAPITAL DEFICIT
--------------- ----------- ------------- ------------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December
31, 1995........... $ 10,000 $ 28 $ -- $ -- $ -- $ 35,122 $ (2,702)
Issuance of
118,866.59
shares of common
stock in
exchange for
notes payable to
stockholders.... -- 2 -- -- -- 1,484 --
Issuance of
2,326,000 shares
of common
stock........... -- 7 10 -- 6 29,052 --
Conversion of
common stock.... -- (2) (6) 4 4 -- --
Preferred stock
dividends of
$0.75 per
share........... -- -- -- -- -- -- (613)
Payment of
preferred stock
dividends
through issuance
of 65,280 shares
of preferred
stock 816 -- -- -- -- -- --
Net loss.......... -- -- -- -- -- -- --
--------------- --- --- --- --- ----------- -------------
Balance at September
30, 1996........... $ 10,816 $ 35 $ 4 $ 4 $ 10 $ 65,658 $ (11,661)
--------------- --- --- --- --- ----------- -------------
--------------- --- --- --- --- ----------- -------------
<CAPTION>
TOTAL
---------
<S> <C>
Balance at December
31, 1995........... $ 42,448
Issuance of
118,866.59
shares of common
stock in
exchange for
notes payable to
stockholders.... 1,486
Issuance of
2,326,000 shares
of common
stock........... 29,075
Conversion of
common stock.... --
Preferred stock
dividends of
$0.75 per
share........... (613)
Payment of
preferred stock
dividends
through issuance
of 65,280 shares
of preferred
stock 816
Net loss.......... (8,346)
---------
Balance at September
30, 1996........... $ 64,866
---------
---------
</TABLE>
See notes to unaudited consolidated financial statements.
F-19
<PAGE>
OUTSOURCING SOLUTIONS INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND FOR THE PERIOD
FROM SEPTEMBER 21, 1995 TO SEPTEMBER 30, 1995
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
PERIOD FROM
SEPTEMBER 21, 1995
NINE MONTHS ENDED TO
SEPTEMBER 30, 1996 SEPTEMBER 30, 1995
-------------------- -----------------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net (loss) income......................................................... $ (8,346) $ 124
Adjustments to reconcile net (loss) income to net cash provided by
operating activities:
Depreciation expense.................................................... 876 8
Amortization of goodwill................................................ 1,676 25
Amortization of loans and accounts receivable purchased................. 20,586 572
Other amortization...................................................... 4,370 --
Deferred taxes.......................................................... (4,444) --
Changes in assets and liabilities, net of acquisitions:
Loans and accounts receivable purchased............................... (8,299) --
Accounts receivable-trade, other current assets and other assets...... (14) (85)
Accounts payable, accrued expenses and other liabilities.............. (120) (244)
---------- ------
Net cash provided by operating activities........................... 6,285 400
---------- ------
INVESTING ACTIVITIES:
Payments for acquisitions, net of cash acquired........................... (35,096) --
Acquisition of property and equipment..................................... (1,902) --
Payment of prior acquisition transaction costs............................ (1,125) --
---------- ------
Net cash used in investing activities............................... (38,123) --
---------- ------
FINANCING ACTIVITIES:
Proceeds from term loans.................................................. 95,000 --
Repayments of term loans.................................................. (43,130) --
Proceeds from revolving credit facilities................................. 5,210 --
Repayment of notes payable to stockholders................................ (35,012) --
Repayments of other debt and capital lease obligations.................... (72) --
Deferred financing fees................................................... (1,965) --
Issuance of common stock.................................................. 14,975 --
---------- ------
Net cash provided by financing activities........................... 35,006 --
---------- ------
NET INCREASE IN CASH AND CASH EQUIVALENTS................................. 3,168 400
CASH AND CASH EQUIVALENTS--beginning of period............................ 1,469 518
---------- ------
CASH AND CASH EQUIVALENTS--end of period.................................. $ 4,637 $ 918
---------- ------
---------- ------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest................................ $ 5,103 $ --
---------- ------
---------- ------
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
In connection with the January 1996 acquisition of A.M. Miller &
Associates, Inc., the Company issued 80,000 shares of voting common stock
valued at $1,000 and a $5,000 9% unsecured note payable.
In connection with the January 1996 acquisition of Continental Credit
Services, Inc., the Company issued 400,000 shares of voting common stock
valued at $5,000 and a $3,000 10% unsecured note payable.
In connection with the May 1996 purchase of participation interests in
certain loan portfolios, the Company issued 640,000 shares of Class C
non-voting common stock valued at $8,000 and a $3,500 10% unsecured note
payable.
In January 1996, notes payable to certain stockholders, plus accrued
interest thereon, totaling $1,486 were contributed to capital in exchange
for 118,866.59 shares of voting common stock.
During the nine months ended September 30, 1996, the Company paid
preferred stock dividends of $816 through the issuance of 65,280 shares
of preferred stock
During the nine months ended September 30, 1996, the Company acquired $193
of property and equipment under capital lease obligations.
</TABLE>
See notes to unaudited consolidated financial statements.
F-20
<PAGE>
OUTSOURCING SOLUTIONS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
AND THE PERIOD FROM SEPTEMBER 21, 1995 TO SEPTEMBER 30, 1995
1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited consolidated financial statements of Outsourcing
Solutions Inc. and subsidiaries ("the Company") have been prepared in accordance
with generally accepted accounting principles for interim financial information.
Accordingly, certain information and footnote disclosures required by generally
accepted accounting principles for complete financial statements have been
excluded. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. All significant intercompany accounts and transactions have been
eliminated in consolidation. Operating results for the nine month period ended
September 30, 1996 are not necessarily indicative of the results that may be
expected for the year ended December 31, 1996. The accompanying unaudited
consolidated financial statements should be read in conjunction with the audited
consolidated financial statements of the Company as of December 31, 1995 and for
the period from September 21, 1995 to December 31, 1995.
DEFERRED FINANCING FEES--Costs incurred to obtain financing are amortized
using the straight-line method over the term of the related debt agreement.
INTANGIBLE ASSETS--Intangible assets primarily represent the value of the
expected future revenues from existing account placements acquired in connection
with business combinations, and are amortized on a straight-line basis over the
18 month average life of the placements.
2. ACQUISITIONS
On January 10, 1996, the Company acquired A. M. Miller & Associates, Inc.
for cash of $23.7 million (after a working capital adjustment), 80,000 shares of
voting common stock (valued at $1.0 million) and a 9% unsecured, subordinated
promissory note in an aggregate amount of $5.0 million due July 10, 2001. Also,
in a separate transaction on January 10, 1996, the Company acquired Continental
Credit Services, Inc. for cash of $11.2 million (after a working capital
adjustment), 400,000 shares of voting common stock (valued at $5.0 million) and
a 10% unsecured, subordinated promissory note in an aggregate amount of $3.0
million due July 9, 2001. Both acquisitions were accounted for as purchases. The
pro forma impact on the results of operations of the Company, had the
acquisitions been made as of the beginning of the year, would not have been
material. All activity subsequent to the acquisitions has been reported in the
consolidated financial statements of the Company.
3. NOTES PAYABLE
The acquisitions discussed in Note 2 were funded with proceeds from a
$50,000,000 Credit Agreement (the "Credit Agreement"), dated January 10, 1996,
between Outsourcing Solutions Incorporated, currently known as CFC Services
Corp., a subsidiary of the Company, and certain banks. The Credit Agreement is
comprised of a term loan facility of $30,000,000, a revolving loan facility of
$5,000,000 and an acquisition loan facility of $15,000,000. The interest rate on
each facility is determined, at the Company's option, based upon either the
London Interbank Offered Rate ("LIBOR") plus 2.75% to 3.25% or the Base Rate, as
defined, plus 1.5% to 2.0%, depending on the facility. Interest payments are
made quarterly for Base Rate loans. Interest payments on LIBOR loans are made on
the earlier of their maturity date or 90 days depending on their term. In
addition, the Company is required to pay a commitment fee of .50% on the unused
portion of the revolving and acquisition loan facilities and on the commitment
for part of the term loan facility. The loans are repaid in quarterly
installments, which began March 31, 1996 for term loans, and will begin March
31, 1999 for acquisition loans. Additionally, the Company is required to make
annual prepayments, beginning with the year ended December 31, 1996, from Excess
Cash Flow, as defined. Prepayments are also required in the event of an equity
or debt issuance, as defined, or upon certain dispositions of assets.
Substantially all of the assets of OSI and its subsidiaries are pledged as
collateral for borrowings under the Credit Agreement. The Credit Agreement
requires the Company to, among other things, maintain certain financial ratios
and limits the Company's
F-21
<PAGE>
OUTSOURCING SOLUTIONS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
AND THE PERIOD FROM SEPTEMBER 21, 1995 TO SEPTEMBER 30, 1995
3. NOTES PAYABLE (CONTINUED)
indebtedness, acquisitions and capital expenditures. Subsequent to September 30,
1996, all credit agreements of the Company were terminated. See Note 4.
4. SUBSEQUENT EVENTS
Pursuant to an Agreement and Plan of Merger, dated as of August 13, 1996,
OSI acquired Payco American Corporation ("Payco") on November 6, 1996 in a
merger transaction for an aggregate cash consideration of approximately $150.2
million. The acquistion of Payco was financed with proceeds from a private
placement of $100.0 million 11% Senior Subordinated Notes due 2006 and a new
bank credit facility which provides borrowing availability up to $200.0 million.
In connection with the private placement and execution of the new bank credit
facility, the Company repaid a portion of its existing indebtedness and
terminated its existing credit agreements.
F-22
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of
Payco American Corporation
We have audited the accompanying consolidated balance sheets of Payco
American Corporation (a Wisconsin corporation) and subsidiaries as of December
31, 1995 and 1994, and the related consolidated statements of income,
shareholders' investment, and cash flows for the years ended December 31, 1995,
1994 and 1993. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Payco
American Corporation and subsidiaries as of December 31, 1995 and 1994, and the
results of their operations and their cash flows for the years ended December
31, 1995, 1994 and 1993, in conformity with generally accepted accounting
principles.
/s/ ARTHUR ANDERSEN LLP
----------------------------------------
Arthur Andersen LLP
Milwaukee, Wisconsin
February 9, 1996
F-23
<PAGE>
PAYCO AMERICAN CORPORATION
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1995 1994
----------- ---------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and Cash Equivalents.............................................................. $ 7,752 $ 10,867
Cash and Cash Equivalents Held for Clients............................................. 20,233 17,794
Accounts Receivable--Trade, Net of Allowances.......................................... 21,013 15,541
Accounts Receivable--Purchased......................................................... 11,012 13,826
Prepaid Expenses....................................................................... 1,527 1,054
Accrued Income Taxes................................................................... -- 23
Deferred Income Taxes.................................................................. 1,087 743
----------- ---------
Total Current Assets................................................................. 62,624 59,848
PROPERTY AND EQUIPMENT:
Data Processing Equipment.............................................................. 45,373 33,105
Furniture and Equipment................................................................ 12,793 11,334
Leasehold Improvements................................................................. 3,513 2,998
Property Held under Capital Leases..................................................... 634 634
----------- ---------
62,313 48,071
Less Accumulated Depreciation and Amortization......................................... 39,450 34,463
----------- ---------
Net Property and Equipment............................................................... 22,863 13,608
ACCOUNTS RECEIVABLE--PURCHASED........................................................... 4,338 4,164
OTHER LONG-TERM RECEIVABLES.............................................................. 519 839
NON-COMPETE COVENANTS, NET............................................................... 1,151 2,691
GOODWILL, NET............................................................................ 11,661 5,939
DEFERRED INCOME TAXES.................................................................... 238 287
OTHER ASSETS............................................................................. 281 122
----------- ---------
$ 103,675 $ 87,498
----------- ---------
----------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
F-24
<PAGE>
PAYCO AMERICAN CORPORATION
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1995 1994
----------- ---------
<S> <C> <C>
LIABILITIES & SHAREHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Collections Due to Clients............................................................. $ 20,233 $ 17,794
Accounts Payable....................................................................... 5,441 5,459
Short-Term Borrowings.................................................................. 13,034 6,200
Other Notes Payable.................................................................... 1,000 --
Obligations under Capital Leases....................................................... 60 77
Accrued Liabilities--
Salaries and Benefits................................................................ 6,493 5,597
Taxes, Other Than Income............................................................. 1,224 1,101
Other................................................................................ 1,705 1,698
Deferred Revenue....................................................................... 118 192
Accrued Income Taxes................................................................... 49 --
----------- ---------
Total Current Liabilities.......................................................... 49,357 38,118
OTHER LONG-TERM LIABILITIES.............................................................. 834 942
LONG-TERM DEBT........................................................................... 334 334
OBLIGATIONS UNDER CAPITAL LEASES......................................................... -- 61
COMMITMENTS AND CONTINGENCIES (Note 11)
SHAREHOLDERS' INVESTMENT:
Preferred Stock, No Par Value--Authorized 500,000 Shares, None Issued.................. -- --
Common Stock, $0.10 Par Value--Authorized 50,000,000 Shares, Issued & Outstanding,
10,155,085 and 10,128,503 Shares, Respectively....................................... 1,016 1,013
Additional Paid-in Capital............................................................. 2,020 1,637
Cumulative Translation Adjustments..................................................... (24) (51)
Stock Options Issuable................................................................. 148 704
Retained Earnings...................................................................... 49,990 44,740
----------- ---------
Total Shareholders' Investment..................................................... 53,150 48,043
----------- ---------
$ 103,675 $ 87,498
----------- ---------
----------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
F-25
<PAGE>
PAYCO AMERICAN CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
1995 1994 1993
-------------- -------------- --------------
<S> <C> <C> <C>
OPERATING REVENUE............................................... $ 175,560 $ 150,696 $ 150,795
OPERATING EXPENSES:
Salaries and Benefits......................................... 100,108 82,786 82,007
Telephone..................................................... 10,619 10,846 10,160
Postage and Supplies.......................................... 10,824 8,962 9,206
Occupancy Costs............................................... 9,053 8,381 8,741
Data Processing Equipment..................................... 8,415 7,353 7,938
Amortization of Acquisition Costs............................. 14,803 12,543 13,874
Other Operating Costs......................................... 11,822 11,360 11,362
-------------- -------------- --------------
Total Operating Expenses.................................... 165,644 142,231 143,288
-------------- -------------- --------------
Income from Operations.......................................... 9,916 8,465 7,507
OTHER INCOME, Primarily from
Short-Term Investments........................................ 234 68 28
INTEREST EXPENSE................................................ 770 148 268
-------------- -------------- --------------
Income Before Income Taxes...................................... 9,380 8,385 7,267
PROVISION FOR INCOME TAXES...................................... 4,130 3,826 3,266
-------------- -------------- --------------
NET INCOME...................................................... $ 5,250 $ 4,559 $ 4,001
-------------- -------------- --------------
-------------- -------------- --------------
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING...................... 10,133,173 10,080,889 10,075,886
NET INCOME PER SHARE............................................ $ 0.52 $ 0.45 $ 0.40
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-26
<PAGE>
PAYCO AMERICAN CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(IN THOUSANDS OF DOLLARS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL CUMULATIVE
------------------------ PAID-IN TRANSLATION STOCK OPTIONS RETAINED
SHARES AMOUNT CAPITAL ADJUSTMENTS ISSUABLE EARNINGS
------------- --------- ----------- --------------- -------------- ---------
<S> <C> <C> <C> <C> <C> <C>
BALANCE
December 31, 1992......................... 10,075,886 $ 1,008 $ 1,084 $ -- $ 1,311 $ 36,180
Net Income................................ -- -- -- -- -- 4,001
------------- --------- ----------- ----- -------------- ---------
BALANCE
December 31, 1993......................... 10,075,886 1,008 1,084 -- 1,311 40,181
Currency Translation Adjustment........... -- -- -- (51) -- --
Net Income................................ -- -- -- -- -- 4,559
Exercise of Stock Options................. 52,617 5 553 -- (607) --
------------- --------- ----------- ----- -------------- ---------
BALANCE
December 31, 1994......................... 10,128,503 1,013 1,637 (51) 704 44,740
Currency Translation Adjustment........... -- -- -- 27 -- --
Net Income................................ -- -- -- -- -- 5,250
Exercise of Stock Options................. 26,582 3 383 -- (556) --
------------- --------- ----------- ----- -------------- ---------
BALANCE
December 31, 1995......................... 10,155,085 $ 1,016 $ 2,020 ($ 24) $ 148 $ 49,990
------------- --------- ----------- ----- -------------- ---------
------------- --------- ----------- ----- -------------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-27
<PAGE>
PAYCO AMERICAN CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income.................................................................... $ 5,250 $ 4,559 $ 4,001
Adjustments to Reconcile Net Income to Net Cash Provided by Operating
Activities:
Amortization of Acquisition Costs............................................. 14,803 12,543 13,874
Depreciation and Amortization................................................. 5,367 4,681 4,777
Benefit of Deferred Income Taxes.............................................. (201) (465) (363)
Changes in Assets and Liabilities:
Accounts Receivable--Trade.................................................. (5,472) (2,262) (761)
Prepaid Expenses............................................................ (361) (119) 444
Accounts Payable............................................................ (54) 839 (838)
Accrued Liabilities......................................................... 954 835 1,442
Deferred Revenue............................................................ (74) (46) 34
Accrued Income Taxes........................................................ 72 (967) 302
--------- --------- ---------
Net Cash Provided by Operations............................................. 20,284 19,598 22,912
--------- --------- ---------
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES:
Capital Expenditures, Net of Retirements...................................... (13,447) (4,755) (2,598)
Purchase of Accounts Receivable............................................... (9,725) (17,309) (15,152)
Purchase of Other Businesses, Net............................................. (8,160) (4,333) --
Long-Term Notes Receivable.................................................... 320 (354) (485)
--------- --------- ---------
Net Cash Used in Investing Activities....................................... (31,012) (26,751) (18,235)
--------- --------- ---------
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES:
Net Proceeds (Payments) from Short-Term Borrowings............................ 6,834 4,200 (1,600)
Net Proceeds from Other Notes Payable......................................... 1,000 -- --
Payments Under Capital Lease Obligations...................................... (78) (119) (245)
Other Long-Term Debt and Other................................................ 27 (26) 309
Net Payments from Exercise of Stock Options................................... (170) (49) --
--------- --------- ---------
Net Cash Provided by (Used In) Financing Activities......................... 7,613 4,006 (1,536)
--------- --------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.......................... (3,115) (3,147) 3,141
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR................................ 10,867 14,014 10,873
--------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR...................................... $ 7,752 $ 10,867 $ 14,014
--------- --------- ---------
--------- --------- ---------
SUPPLEMENTAL CASH FLOWS INFORMATION:
Cash Paid For:
Income Taxes, Net of Refunds................................................ $ 4,361 $ 5,374 $ 3,327
Interest.................................................................... 691 216 266
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-28
<PAGE>
PAYCO AMERICAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
1. BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
Payco American Corporation and its subsidiaries (the Company) provide the
following outsource services: consumer debt collection; commercial debt
collection; student loan billing; contract management of accounts receivable;
health care accounts receivable billing and management; precollection programs;
and inbound and outbound calling programs. The Company also purchases and
manages portfolios of discounted accounts receivable. The markets for the
Company's services are the United States, Puerto Rico, Mexico and Japan.
BASIS OF CONSOLIDATION
The consolidated financial statements include the accounts of Payco American
Corporation and its majority-owned subsidiaries. All significant intercompany
transactions and balances have been eliminated in consolidation.
REVENUE RECOGNITION
Collection revenue is recognized at a commission rate when a collection
payment is received. Revenue is recognized on purchased accounts receivable
portfolios when payments are collected. Revenue on all other services provided
by the Company is recognized as the service is performed.
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost. Maintenance and repairs are
expensed as incurred. When assets are retired or otherwise disposed of in the
normal course of business, the cost and related accumulated depreciation are
removed from the accounts, and resulting gains or losses are included in the
Consolidated Statements of Income. The Company provides for depreciation and
amortization by the straight-line method over the estimated useful lives as
follows:
<TABLE>
<S> <C>
Data Processing Equipment....................................... 3-8 years
Telephone Equipment............................................. 3-7 years
Office Furniture & Other........................................ 3-10 years
</TABLE>
Leasehold improvements are amortized over the term of the related leases.
GOODWILL AND ACQUISITION COSTS
Goodwill represents the excess of purchase price over the fair market value
of net assets of acquired businesses. Goodwill is amortized on a straight-line
basis principally over 20 years. Accumulated amortization at December 31, 1995
and 1994 totalled $1.8 million and $1.2 million, respectively.
Non-compete covenants are recorded at cost and are amortized on a
straight-line basis over the term of the covenant, typically three to five
years. Accumulated amortization at December 31, 1995 and 1994 totalled $6.3
million and $5.5 million, respectively.
F-29
<PAGE>
PAYCO AMERICAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
1. BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121 (SFAS 121). "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of."
This standard, which must be adopted in 1996, requires long-lived impaired
assets still in use to be carried at fair value and all long-lived assets to be
disposed of to be reported at the lower of carrying amount or fair value less
cost to sell.
SFAS 121 prescribes a cash flow test for recoverability whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. For purposes of SFAS 121, assets include certain identifiable
intangibles, goodwill, property and equipment.
The Company does not anticipate that SFAS 121 will have a material impact on
the Consolidated Financial Statements.
ACCOUNTS RECEIVABLE-PURCHASED
Purchased accounts receivable portfolios are recorded at cost and amortized,
based upon a percentage of expected collections, over the life of the individual
portfolios. The amortization rates are reviewed periodically and adjusted, based
on the projected overall collection performance of each portfolio. Although the
contractual lives of certain purchased receivables is 20 years, management
expects to recover its portfolio costs over four years.
CASH AND CASH EQUIVALENTS
Short-term investments, which consist of certificates of deposit, government
instruments and commercial paper, are included in Cash and Cash Equivalents on
the Consolidated Balance Sheets. Short-term investments at December 31, 1995 and
1994 were $2.1 million and $1.8 million, respectively. The Company considers all
highly liquid investments with an original maturity of less than 90 days to be
cash equivalents for cash flow purposes.
INCOME TAXES
Deferred tax liabilities and assets are determined based on the difference
between the financial statement and tax basis of assets and liabilities using
enacted tax rates in effect for the year in which the differences are expected
to reverse.
FOREIGN CURRENCY TRANSLATION
Foreign currency assets and liabilities are translated into United States
dollars at end of period rates of exchange, and income and expense accounts are
translated at the weighted average rates of exchange for the period. Resulting
translation adjustments are a separate component of Shareholders' Investment.
RECLASSIFICATION
Certain 1994 and 1993 amounts have been reclassified to conform to
presentation for 1995.
F-30
<PAGE>
PAYCO AMERICAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
1. BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from the estimates.
2. FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair values and the methods and assumptions used to estimate
the fair values of the financial instruments of the Company as of December 31,
1995 are reflected below. The carrying amount of cash and cash equivalents,
notes payable and long-term debt approximate the fair value. The fair values of
the notes payable and debt were determined based on current market rates offered
on notes and debt with similar terms and maturities. Purchased accounts
receivable balances were assigned fair values based on a discounted cash flow
analysis. The discount rate was based on an acceptable rate of return adjusted
for the risk inherent in the purchased accounts receivable portfolios. The
estimated fair value of purchased receivables was $17.8 million at December 31,
1995.
3. INCOME TAXES
The provision for income taxes for the three years ended December 31, 1995
consists of the following:
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Current:
Federal...................................................... $ 3,412 $ 3,336 $ 2,795
State and Foreign............................................ 919 955 834
--------- --------- ---------
Total Current.................................................. 4,331 4,291 3,629
Total Deferred................................................. (201) (465) (363)
--------- --------- ---------
Total Provision................................................ $ 4,130 $ 3,826 $ 3,266
--------- --------- ---------
--------- --------- ---------
</TABLE>
The following is a reconciliation of the statutory Federal rate to the
effective tax rate applicable to the Company's consolidated income before taxes:
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Federal Statutory Rate.............................................. 34.0% 34.0% 34.0%
State and Foreign Taxes
Net of Federal Benefit............................................ 5.8 7.6 6.9
Other............................................................. 4.2 4.1 4.0
--- --- ---
Effective Tax Rate.................................................. 44.0% 45.7% 44.9%
--- --- ---
--- --- ---
</TABLE>
F-31
<PAGE>
PAYCO AMERICAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
3. INCOME TAXES (CONTINUED)
The components of the net deferred tax asset (liability) as of December 31,
1995 and 1994 were as follows:
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
(DOLLARS IN
THOUSANDS)
Deferred Tax Assets:
Related to Intangible Assets...................................... $ 1,155 $ 847
Deferred Compensation............................................. 408 914
Accruals and Reserves Not Currently Deductible For Tax Purposes... 1,256 743
--------- ---------
Total Deferred Tax Assets......................................... 2,819 2,504
Deferred Tax Liabilities:
Related to Fixed Assets........................................... (1,366) (1,407)
Other............................................................. (128) (67)
--------- ---------
Total Deferred Tax Liabilities.................................... (1,494) (1,474)
--------- ---------
Net Deferred Tax Asset............................................ $ 1,325 $ 1,030
--------- ---------
--------- ---------
</TABLE>
The net deferred tax asset is classified in the December 31, 1995 and 1994
Consolidated Balance Sheets as follows:
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
(DOLLARS IN
THOUSANDS)
Non-current Deferred Income Tax Asset................................. $ 238 $ 287
Current Deferred Income Tax Asset..................................... 1,087 743
--------- ---------
Net Deferred Tax Asset................................................ $ 1,325 $ 1,030
--------- ---------
--------- ---------
</TABLE>
4. EMPLOYEE BENEFIT PLANS
The Company maintains a separate profit sharing/401(k) savings plan. The
discretionary contributions to the profit sharing/401(k) savings plan that were
charged to operations for the year ended December 31, 1993 were $200,000.
Effective January 1, 1994, the Company amended the profit sharing/401(k) savings
plan to add a provision to allow for partial matching of employee contributions
by the Company. All employees who participate in the savings feature of the plan
are eligible for the discretionary employer matching contributions. For each
dollar an employee contributes up to 4% of compensation, the Company contributed
25% in 1995 and 20% in 1994. During 1995 and 1994 the charge to operations for
matching contributions was $196,000 and $159,000, respectively.
The Company also maintained an employee Stock Ownership Plan (ESOP).
Effective January 1, 1995, the ESOP was merged into the profit sharing/401(k)
savings plan. In conjunction with the merger of the plans, the new combined
plan, the Payco American Retirement Plan, was amended to provide the employee
with the ability to continue to purchase the Company's common stock through the
401(k) savings feature of the plan. No discretionary contribution was made to
the ESOP during 1994 or 1993. All ESOP shares have been allocated to participant
accounts.
F-32
<PAGE>
PAYCO AMERICAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
4. EMPLOYEE BENEFIT PLANS (CONTINUED)
In addition to the plans described above, the Company has another defined
contribution pension plan which covers employees hired in connection with a 1995
acquisition. The cost of this plan was $25,000 in 1995.
The Company does not provide post-retirement health or life insurance
benefits or post-employment benefits to employees.
5. ACCOUNTS RECEIVABLE PURCHASED
In November, 1990, the Company began purchasing discounted accounts
receivable portfolios. Revenue recognized on cash collected from these
portfolios totalled $15.8 million, $13.1 million and $14.3 million during 1995,
1994 and 1993, respectively. Amortization costs associated with these revenues
totalled $12.4 million, $10.3 million and $11.8 million during 1995, 1994 and
1993, respectively.
6. OPERATING REVENUE
In 1995 and 1994, no single client contributed 10% or more to operating
revenue. The Company had one client that contributed approximately 10% of its
total operating revenue in 1993.
7. TRADE ACCOUNTS RECEIVABLE
Trade accounts receivable are reported net of an allowance for doubtful
accounts. The allowance at December 31, 1995 and 1994 was $604,000 and $555,000,
respectively.
Trade accounts receivable consist of amounts due from clients which can be
summarized into "Group Concentrations of Credit Risk" as defined in the SFAS No.
105. As of December 31, 1995 and 1994, 35% and 17% of the Company's accounts
receivable were from clients in the health care and education industries,
respectively, and 19% and 13% from utility clients, respectively.
8. PURCHASE OF OTHER BUSINESSES
On January 1, 1995, the Company purchased certain assets of Furst and Furst
(F&F). F&F provides accounts receivable management services to commercial
clients through offices in Illinois, New Jersey and California. On February 1,
1995 the Company purchased the collection business of Continental Credit
Adjustors (CCA). CCA is located in Houston, Texas and provides primarily medical
and retail collection services to Texas clients. On May 1, 1995, the Company
purchased the collection business of Grable, Greiner & Wolff, (GGW). GGW
provides accounts receivable management services to commercial and retail
clients and is located in Beachwood, Ohio. A total of $7.9 million was paid for
these companies via cash and a note payable. In addition, the purchase
agreements require certain future contingent payments which, if paid out, will
be accounted for as additional purchase price.
On February 1, 1994 the Company purchased certain assets of Indiana Mutual
Credit Association, Inc. (IMC) at a cost of $3 million, plus certain payments
contingent on performance. IMC provides accounts receivable management services
primarily to the medical marketplace through its office in Indianapolis,
Indiana.
The pro forma impact on the results of operations of the Company, had the
acquisitions been made as of the beginning of the year purchased, would not have
been material. All activity subsequent to the acquisitions has been reported in
the consolidated financial statements of the Company.
F-33
<PAGE>
PAYCO AMERICAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
9. STOCK PLANS
The Board of Directors has approved various stock option plans for certain
employees and officers. The stock options have been granted at market prices.
Under a stock option plan established in 1988, the Board of Directors granted
options to purchase up to 500,000 shares of common stock. The award of such
options was dependent upon meeting certain performance goals over the three year
period ended December 31, 1991. Under the 1988 plan, options to purchase 306,367
shares of common stock have been awarded to management, and 193,633 options have
been forfeited. Under a 1992 stock option plan, 443,500 options have been
granted, of which 19,500 options have been forfeited.
The Company also maintains a common stock equivalent plan. Under this plan
certain management employees were granted, at the discretion of the Board of
Directors, units that are valued at the market price of the Company's common
stock. Employees vest in these units over the sixth to tenth year of service
subsequent to the award. The units are to be paid out at the Board's discretion
in common stock or cash. Participants can make an election to defer receipt of
the value of the units until termination of their employment. In the absence of
such election, participants are paid 20% of the value on the 6th through 10th
anniversary dates of the grant. As of December 31, 1995, there were 136,767
outstanding units awarded under the plan. The Board has no plans to award any
additional units under this plan. On May 19, 1992, participants representing
160,831 units in the common stock equivalent plan agreed to cap the value of
units awarded to a maximum value of $12.63 per unit. In exchange for this
agreement, the Board of Directors granted each participant an equivalent number
of options to purchase shares of the Company's common stock at the then current
market price of $12.63. This agreement was amended on May 20, 1993, to cap the
value of units awarded to a maximum value of $7.50 per unit in exchange for a
reduction of their option price to $7.50. Of the 160,831 options granted under
this agreement, 8,066 and 3,213 were forfeited in 1995 and 1994, respectively.
The Company realized compensation expense related to the common stock
equivalent plan of $67,000, $53,000, and $(209,000) for the years ended 1995,
1994 and 1993 respectively. The related accrual is included in Other Long-Term
Liabilities.
The following table summarizes stock option activity for each of the three
years in the period ended December 31, 1995 and options outstanding as of
December 31, 1995.
Stock option activity for the three years ended December 31, 1995 was as
follows:
<TABLE>
<CAPTION>
OPTIONS EXERCISED
OPTIONS AWARDED OPTION PRICE OR FORFEITED
-------------------- --------------- ------------------
<S> <C> <C> <C>
1993.............................. -- -- 17,046
1994.............................. -- -- 96,477
1995.............................. -- -- 88,335
</TABLE>
F-34
<PAGE>
PAYCO AMERICAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
9. STOCK PLANS (CONTINUED)
As of December 31, 1995, options outstanding were as follows:
<TABLE>
<CAPTION>
OPTIONS
OUTSTANDING EXERCISE PRICE EXPIRATION
- ----------------- --------------- -------------
<S> <C> <C>
17,022 $ 4.38 1996
136,000 $ 12.25 1999
283,667 $ 7.81 1999
136,767 $ 7.50 2002
</TABLE>
The impact of these options on earnings per share is immaterial.
In October, 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123 (SFAS 123), "Accounting for
Stock-Based Compensation." This standard, which must be adopted in 1996,
establishes financial accounting and reporting standards for stock-based
employee compensation. This standard permits entities to continue to measure
compensation cost for stock-based employee compensation plans, using the
accounting method prescribed by APB 25, as long as pro forma disclosures of net
income and earnings per share are presented as if the fair value based method of
accounting, as defined in SFAS 123, had been applied. The Company has not yet
determined whether it will adopt the SFAS 123 method of accounting or continue
APB 25 accounting with the required disclosures.
10. LINE OF CREDIT
The Company has a $25.0 million short-term borrowing agreement with its
primary lender. The agreement allows the Company to borrow funds under a line of
credit agreement or through the issuance of commercial paper. All loans made to
the Company by its lender under the line of credit are payable upon demand and
are evidenced by a single promissory note. The Company is not required to
maintain compensating balances, and there are no restrictive covenants under the
agreement. As of December 31, 1995, the Company had $12.0 million available to
borrow. Funds borrowed were used primarily to finance the Company's acquisitions
and for capital expenditures related to the Company's World-class Integrated
Network (WIN) collection system. The maximum interest rate at December 31, 1995
was 5.95%.
The Company borrows funds under its line of credit as needed and repays the
notes as funds become available from operations. The following table provides
supplemental information for the three years ended December 31:
<TABLE>
<CAPTION>
WEIGHTED
WEIGHTED AVERAGE
AVERAGE INTEREST
INTEREST AMOUNTS OUTSTANDING RATE
YEAR ENDED ENDING RATE AT ------------------------ DURING THE
DECEMBER 31, BALANCE YEAR END MAXIMUM AVERAGE(1) YEAR(2)
- -------------------------------- --------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
1993............................ $ 2,000 4.31% $ 8,000 $ 4,557 4.46%
1994............................ $ 6,200 6.98% $ 6,200 $ 2,176 5.80%
1995............................ $ 13,034 5.88% $ 15,800 $ 10,793 6.25%
</TABLE>
- ------------------------
(1) Average amounts outstanding during the year were computed on daily
outstanding balances.
(2) Weighted average interest rates during the year were computed by dividing
actual interest expense by the average amounts outstanding.
F-35
<PAGE>
PAYCO AMERICAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
11. COMMITMENTS AND CONTINGENCIES
LEASES
The Company is obligated under operating leases for certain office space and
equipment for various periods through 2007. The Company is also obligated under
capital leases for certain furniture, telephone and computer equipment.
These operating and capital leases are due in approximate amounts as shown
below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, OPERATING CAPITAL
- ------------------------------------------------------------------ ----------- -----------
<S> <C> <C>
(DOLLARS IN THOUSANDS)
1996.............................................................. $ 5,570 $ 59
1997.............................................................. 4,409 6
1998.............................................................. 3,398 --
1999.............................................................. 3,089 --
2000.............................................................. 1,766 --
2001 and subsequent............................................... 7,825 --
---
Total Capital Lease Payments...................................... 65
Less Interest..................................................... (5)
---
Present Value of Capital Lease Payments........................... $ 60
---
---
</TABLE>
Certain of the leases for office space require the Company to pay, as
additional rent, any allocable increases in real estate taxes and other expenses
over a specified base rent. Total rental expense was $5.8 million, $5.4 million,
and $5.7 million for the three years ended December 31, 1995, 1994, and 1993.
The Company leases its corporate headquarters, data processing center and
the office space for three of its collection operations from partnerships in
which certain officers and directors of the Company are the principal partners.
The terms of the leases provided for aggregate annual payments of approximately
$2.4 million, $2.2 million and $2.1 million for the three years ended December
31, 1995, 1994, and 1993. Such lease amounts are subject to an escalation
adjustment, not to exceed 5% annually. All operating and maintenance costs
associated with these buildings are paid by the Company. In the opinion of
management, the terms of the leases are at least as favorable as could have been
obtained in arm's-length negotiations with an unaffiliated lessor.
OTHER CONTINGENCIES
At December 31, 1995, the Company was involved in a number of legal
proceedings and claims that were routine to the nature of the collection
business. The Company has provided for the estimated uninsured amounts and costs
of defense against these pending suits through charges to operations and
believes that reserves it has established for ultimate settlement are adequate
at December 31, 1995.
On August 2, 1993 a complaint was filed by the Department of Justice on
behalf of the Federal Trade Commission against the Company based on alleged
violations of the Federal Fair Debt Collection Practices Act. On March 8, 1995,
the Company reached a settlement regarding this matter. The case was
F-36
<PAGE>
PAYCO AMERICAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
11. COMMITMENTS AND CONTINGENCIES (CONTINUED)
resolved with a consent decree in which the Company did not admit any liability
and paid a $500,000 civil penalty. The Company had previously established a
reserve adequate to cover the settlement.
Reliance National Insurance Co. Ltd. (RNIC), a wholly-owned subsidiary in
Bermuda, provides professional liability insurance coverage for the Company. As
of December 31, 1995, RNIC had recorded reserves totaling $0.8 million for
future reported and unreported claims.
F-37
<PAGE>
PAYCO AMERICAN CORPORATION
UNAUDITED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1996
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash and Cash Equivalents...................................................... $ 11,834
Cash and Cash Equivalents Held for Clients..................................... 20,983
Accounts Receivable--Trade
Net of Allowances............................................................ 18,617
Accounts Receivable--Purchased................................................. 3,614
Prepaid Expenses............................................................... 1,615
Accrued Income Taxes........................................................... 279
Deferred Income Taxes.......................................................... 972
---------
Total Current Assets....................................................... 57,914
PROPERTY AND EQUIPMENT:
Data Processing Equipment...................................................... 54,984
Furniture and Equipment........................................................ 13,427
Leasehold Improvements......................................................... 3,777
Property Held under Capital Leases............................................. 581
---------
72,769
Less Accumulated Depreciation and Amorization.................................. 43,355
---------
Net Property and Equipment..................................................... 29,414
ACCOUNTS RECEIVABLE--PURCHASED................................................... 1,738
OTHER LONG-TERM RECEIVABLES...................................................... 439
NON-COMPETE COVENANTS, NET....................................................... 781
GOODWILL, NET.................................................................... 13,579
DEFERRED INCOME TAXES............................................................ 197
OTHER ASSETS..................................................................... 74
---------
$ 104,136
---------
---------
</TABLE>
The accompanying notes are an integral part of this consolidated balance sheet.
F-38
<PAGE>
PAYCO AMERICAN CORPORATION
UNAUDITED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1996
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<S> <C>
LIABILITIES & SHAREHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Collections Due to Clients..................................................... $ 20,983
Accounts Payable............................................................... 5,916
Short-Term Borrowings.......................................................... 11,633
Obligations under Capital Leases............................................... 16
Accrued Liabilities--
Salaries and Benefits........................................................ 5,252
Taxes, Other Than Income..................................................... 1,069
Other........................................................................ 1,600
Deferred Revenue............................................................... 286
---------
Total Current Liabilities.................................................... 46,755
OTHER LONG-TERM LIABILITIES...................................................... 850
LONG-TERM DEBT................................................................... 334
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' INVESTMENT:
Preferred Stock, No Par Value--Authorized 500,000 Shares, None Issued.......... --
Common Stock, $0.10 Par Value--Authorized 50,000,000 Shares, Issued & Outstand-
ing Shares, 10,155,085....................................................... 1,016
Additional Paid-In Capital..................................................... 2,020
Cumulative Translation Adjustments............................................. (24)
Stock Options Issuable......................................................... 148
Retained Earnings.............................................................. 53,037
---------
Total Shareholders' Investment............................................... 56,197
---------
$ 104,136
---------
---------
</TABLE>
The accompanying notes are an integral part of this consolidated balance sheet.
F-39
<PAGE>
PAYCO AMERICAN CORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE & PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED SEPTEMBER 30,
----------------------------
<S> <C> <C>
1996 1995
------------- -------------
OPERATING REVENUE................................................................... $ 135,147 $ 130,559
OPERATING EXPENSES:
Salaries and Benefits............................................................. 75,664 73,696
Telephone......................................................................... 8,035 7,862
Postage and Supplies.............................................................. 8,012 7,969
Occupancy Costs................................................................... 6,663 6,807
Data Processing Equipment......................................................... 8,462 6,008
Amortization of Acquisition Costs................................................. 14,063 11,533
Other Operating Costs............................................................. 8,393 8,339
------------- -------------
Total Operating Expenses............................................................ 129,292 122,214
------------- -------------
Income from Operations.............................................................. 5,855 8,345
OTHER INCOME, Primarily from Short-Term
Investments....................................................................... 148 168
INTEREST EXPENSE.................................................................... 694 531
------------- -------------
Income Before Income Taxes.......................................................... 5,309 7,982
PROVISION FOR INCOME TAXES.......................................................... 2,262 3,520
------------- -------------
NET INCOME.......................................................................... $ 3,047 $ 4,462
------------- -------------
------------- -------------
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING.......................................... 10,155,085 10,133,478
NET INCOME PER SHARE................................................................ $ 0.30 $ 0.44
------------- -------------
------------- -------------
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-40
<PAGE>
PAYCO AMERICAN CORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED SEPTEMBER 30,
--------------------------
<S> <C> <C>
1996 1995
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income.......................................................................... $ 3,047 $ 4,462
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
Amortization of Acquisition Costs................................................... 1,375 1,944
Amortization of Accounts Receivable Portfolios...................................... 12,688 9,589
Depreciation and Amortization....................................................... 5,773 4,008
Benefit of Deferred Income Taxes.................................................... 156 (151)
Changes in Assets and Liabilities:
Accounts Receivable--Trade........................................................ 2,396 (4,773)
Prepaid Expenses.................................................................. (88) (434)
Accounts Payable.................................................................. (475) 1,409
Accrued Liabilities............................................................... (1,501) (126)
Deferred Revenue.................................................................. 168 40
Accrued Income Taxes.............................................................. (328) 201
------------ ------------
Net Cash Provided by Operations................................................... 24,129 16,169
------------ ------------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Capital Expenditures, Net of Retirements............................................ (12,324) (10,676)
Purchase of Accounts Receivable..................................................... (2,689) (5,891)
Purchase of Other Businesses........................................................ (2,717) (7,975)
Long-Term Notes Receivable.......................................................... 80 240
------------ ------------
Net Cash Used In Investing Activities............................................. (17,650) (24,302)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net Proceeds from Short-Term Borrowings............................................. (1,401) 7,677
Net Payments of Other Notes Payable................................................. (1,000) --
Payments Under Capital Lease Obligations............................................ (44) (65)
Other Long-Term Debt and Other...................................................... 16 18
Proceeds from Exercise of Stock Options............................................. -- 36
------------ ------------
Net Cash (Used In) Provided by Financing Activities............................... (2,429) 7,666
------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.................................. 4,082 (467)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD...................................... 7,752 10,867
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD............................................ $ 11,834 $ 10,400
------------ ------------
------------ ------------
SUPPLEMENTAL CASH FLOWS INFORMATION
Cash Paid For:
Income Taxes, Net of Refunds........................................................ $ 2,434 $ 3,471
Interest............................................................................ 699 472
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-41
<PAGE>
PAYCO AMERICAN CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
I. ACCOUNTING POLICIES
The information furnished in this report reflects all normal and recurring
adjustments which are, in the opinion of management, necessary to form a fair
statement of the results of the interim periods. This report should be read in
conjunction with the 1995 Annual Report and Form 10-K.
A. STATEMENT OF CASH FLOWS
The following paragraph provides additional disclosure regarding cash flow
as required under the indirect method of reporting.
For purposes of the Statement of Cash Flows, the Company considers all
highly liquid investments with a maturity of less than 90 days to be cash
equivalents.
B. TRADE ACCOUNTS RECEIVABLE
Accounts Receivable--Trade is presented net of an allowance for doubtful
accounts. The allowance was $755,000 and $604,000 for the period ended September
30, 1996 and December 31, 1995, respectively.
C. SHORT-TERM BORROWINGS
The Company maintains a short-term borrowing agreement with its primary
lender which provides the Company with an option to borrow under a line of
credit or issue commercial paper up to $25.0 million. During the first nine
months of 1996, the weighted average interest rate on borrowed funds was 5.70%.
F-42
<PAGE>
INDEPENDENT AUDITORS' REPORT
Partners of Account Portfolios, L.P.:
We have audited the accompanying consolidated balance sheets of Account
Portfolios, L.P. (a Georgia Limited Partnership, the "Partnership") and its
subsidiaries as of September 20, 1995 and December 31, 1994 and the related
consolidated statements of operations, partners' capital, and cash flows for the
period from January 1, 1995 to September 20, 1995 and for the years ended
December 31, 1994 and 1993. These financial statements are the responsibility of
the Partnership's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the Partnership and its
subsidiaries as of September 20, 1995 and December 31, 1994 and the results of
their operations and their cash flows for the period from January 1, 1995 to
September 20, 1995 and for the years ended December 31, 1994 and 1993 in
conformity with generally accepted accounting principles.
/s/ DELOITTE & TOUCHE LLP
- -------------------------------
Deloitte & Touche LLP
Atlanta, Georgia
August 9, 1996
F-43
<PAGE>
ACCOUNT PORTFOLIOS, L.P.
(A GEORGIA LIMITED PARTNERSHIP)
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 20, 1995 AND DECEMBER 31, 1994
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
SEPTEMBER 20, DECEMBER 31,
1995 1994
-------------- --------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents...................................................... $ 557 $ 13,998
Loans and accounts receivable purchased........................................ 3,778 1,672
Accounts receivable--trade..................................................... 3 93
Investment in partnership...................................................... -- 1,833
Other current assets........................................................... 174 80
-------------- --------------
Total current assets......................................................... 4,522 17,676
Loans and accounts receivable purchased.......................................... 5,667 4,589
Property and equipment, net...................................................... 1,083 676
-------------- --------------
Total assets................................................................. $ 11,272 $ 22,941
-------------- --------------
-------------- --------------
LIABILITIES AND PARTNERS' CAPITAL
Current Liabilities:
Accounts payable--trade........................................................ $ 164 $ 331
Accrued consulting fees........................................................ 145 289
Accrued salaries and wages..................................................... 304 51
Accrued vacation............................................................... 57 31
Other current liabilities...................................................... 43 77
-------------- --------------
Total current liabilities.................................................... 713 779
-------------- --------------
Partners' capital................................................................ 10,559 22,162
-------------- --------------
Total liabilities and partners' capital...................................... $ 11,272 $ 22,941
-------------- --------------
-------------- --------------
</TABLE>
See notes to consolidated financial statements.
F-44
<PAGE>
ACCOUNT PORTFOLIOS, L.P.
(A GEORGIA LIMITED PARTNERSHIP)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
PERIOD FROM JANUARY 1, 1995 TO SEPTEMBER 20, 1995
AND FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1993
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
PERIOD FROM YEARS ENDED
JANUARY 1, 1995 DECEMBER 31,
TO SEPTEMBER 20, -------------------------
1995 1994 1993
----------------- -------------- ---------
<S> <C> <C> <C>
REVENUES........................................................... $ 21,293 $ 39,292 $ 23,696
EXPENSES:
Amortization of loans and accounts receivable.................... 2,308 2,667 6,013
Service fees and other operating and administrative expenses..... 8,595 6,131 4,890
Professional fees................................................ 911 2,638 1,385
-------- -------------- ---------
OPERATING INCOME................................................... 9,479 27,856 11,408
OTHER INCOME (EXPENSE):
Interest expense................................................. (955) (2,941) (1,388)
Interest income.................................................. 460 342 87
Other expense.................................................... -- (166) --
-------- -------------- ---------
NET INCOME......................................................... $ 8,984 $ 25,091 $ 10,107
-------- -------------- ---------
-------- -------------- ---------
</TABLE>
See notes to consolidated financial statements.
F-45
<PAGE>
ACCOUNT PORTFOLIOS, L.P.
(A GEORGIA LIMITED PARTNERSHIP)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
PERIOD FROM JANUARY 1, 1995 TO SEPTEMBER 20, 1995
AND FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1993
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
GENERAL LIMITED
PARTNER PARTNERS TOTAL
----------- --------- ---------
<S> <C> <C> <C>
Balance at December 31, 1992.................................... $ (2) $ (256) $ (258)
Contributions by partners..................................... 12 1,200 1,212
Distributions to partners..................................... (65) (6,414) (6,479)
Net income.................................................... 101 10,006 10,107
----- --------- ---------
Balance at December 31, 1993.................................... 46 4,536 4,582
Distributions to partners..................................... (75) (7,436) (7,511)
Net income.................................................... 251 24,840 25,091
----- --------- ---------
Balance at December 31, 1994.................................... 222 21,940 22,162
----- --------- ---------
Contributions by partners..................................... 1 134 135
Distributions to partners..................................... (207) (20,515) (20,722)
Net income.................................................... 90 8,894 8,984
----- --------- ---------
Balance at September 20, 1995................................... $ 106 $ 10,453 $ 10,559
----- --------- ---------
----- --------- ---------
</TABLE>
See notes to consolidated financial statements.
F-46
<PAGE>
ACCOUNT PORTFOLIOS, L.P.
(A GEORGIA LIMITED PARTNERSHIP)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
PERIOD FROM JANUARY 1, 1995 TO SEPTEMBER 20, 1995
AND FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1993
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 1,
1995 YEARS ENDED
TO SEPTEMBER DECEMBER 31,
20, ----------------------
1995 1994 1993
-------------- ----------- ---------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income.......................................... $ 8,984 $ 25,091 $ 10,107
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation expense.............................. 167 102 57
Amortization of loans and accounts receivable..... 2,308 2,667 6,013
Loss on withdrawal from long-term investment...... -- 166 --
Change in assets and liabilities:
Loans and accounts receivable purchased......... (5,502) (6,800) (7,088)
Accounts receivable--trade...................... 90 (93) --
Deposits on purchase portfolio.................. -- -- 500
Note receivable from affiliate.................. -- -- 40
Other current assets............................ (94) (19) 172
Accounts payable, accrued expenses and other
current liabilities........................... (66) (40) (4,977)
Payable to related party........................ -- -- (65)
-------------- ----------- ---------
Net cash provided by operating activities..... 5,887 21,074 4,759
-------------- ----------- ---------
INVESTING ACTIVITIES:
Acquisition of property and equipment............... (574) (463) (222)
Acquisition of long-term investment................. -- -- (2,000)
Proceeds from sale of long-term investment.......... 1,833 -- --
-------------- ----------- ---------
Net cash provided by (used in) investing
activities.................................. 1,259 (463) (2,222)
-------------- ----------- ---------
FINANCING ACTIVITIES:
Proceeds from issuance of debt...................... -- -- 6,624
Proceeds from affiliate notes....................... -- -- 3,900
Payments on debt.................................... -- (3,544) (5,132)
Payment on affiliate notes.......................... -- -- (3,900)
Contributions from partners......................... 135 -- 1,212
Distributions to partners........................... (20,722) (7,511) (6,479)
-------------- ----------- ---------
Net cash used in financing activities......... (20,587) (11,055) (3,775)
-------------- ----------- ---------
NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS.................................... (13,441) 9,556 (1,238)
CASH AND CASH EQUIVALENTS, Beginning of period........ 13,998 4,442 5,680
-------------- ----------- ---------
CASH AND CASH EQUIVALENTS, End of period.............. $ 557 $ 13,998 $ 4,442
-------------- ----------- ---------
-------------- ----------- ---------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during period for interest................ $ 967 $ 2,920 $ 1,381
-------------- ----------- ---------
-------------- ----------- ---------
</TABLE>
See notes to consolidated financial statements.
F-47
<PAGE>
ACCOUNT PORTFOLIOS, L.P.
(A GEORGIA LIMITED PARTNERSHIP)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PERIOD FROM JANUARY 1, 1995 TO SEPTEMBER 20, 1995
AND FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1993
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION--Account Portfolios, L.P. (a Georgia Limited Partnership, the
"Partnership") is a limited partnership organized for the purpose of purchasing
portfolios of nonperforming loans and accounts receivable ("Receivables"). The
Receivables are purchased by the Partnership without recourse to the seller. The
Partnership Agreement ("Agreement") provides that the Partnership shall continue
in existence until December 31, 2050 unless sooner terminated, liquidated, or
dissolved by law or by terms within the Agreement. The shareholders of the
General Partner are also trustees of the Limited Partners.
USE OF ESTIMATES--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
CONSOLIDATION POLICY--During 1995 and 1994, the Partnership invested in
various subsidiaries which purchased portfolios of nonperforming Receivables.
The consolidated financial statements include the Partnership and all of its
subsidiaries. All significant intercompany accounts and transactions have been
eliminated.
REVENUE RECOGNITION--Collection on Receivables are recorded as revenue when
received. Revenue from loan servicing is recorded as such services are provided.
Fees, paid on the closing of each portfolio of purchased Receivables, are
capitalized and included in the amortization of the portfolio. Effective January
1, 1994, the Partnership began amortizing on an individual portfolio basis the
cost of the Receivables based on the ratio of current collections for a
portfolio to current and anticipated future collections for that portfolio. If
not amortized earlier, a Receivable portfolio's loan cost becomes fully
amortized by the end of three years from date of purchase. Prior to 1994, the
Partnership amortized purchased loan costs under the cost recovery method. The
change in method was a result of the Partnership's improved historical
collection experience for similar types of loan portfolios and its ability to
estimate expected cash flow. The effect of this change was accounted for
prospectively as a change in estimate and reduced amortization expense and
increased net income by $962,000 in 1994.
ALLOCATION OF NET EARNINGS (LOSS)--Income, losses, and the net cash from
operations of the Partnership are allocated 1% to the General Partner and 99% to
the Limited Partners. Net cash from operations is defined as cash flow from
operations less amounts used to pay or establish reserves for all Partnership
expenses, debt payments, capital improvements, replacements, and contingencies
as determined by the General Partner.
In the event of the sale of Partnership property, profits or losses are
allocated to the Partners as follows:
- First, to the Partners so as to take account of any variation between the
adjusted basis of the property and its initial gross asset value.
- Second, to any Partner who has a negative capital account at the time of
disposition.
F-48
<PAGE>
ACCOUNT PORTFOLIOS, L.P.
(A GEORGIA LIMITED PARTNERSHIP)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
PERIOD FROM JANUARY 1, 1995 TO SEPTEMBER 20, 1995
AND FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1993
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
- Third, to all Partners in accordance with their interests in the income
and losses of the Partnership as set forth in the Agreement.
CASH AND CASH EQUIVALENTS--Cash and cash equivalents consist of cash, money
market investments, and overnight deposits. The Partnership considers all other
highly liquid temporary cash investments with low interest rate risk to be cash
equivalents. Cash equivalents are valued at cost, which approximates market.
PROPERTY AND EQUIPMENT--Property and equipment is recorded at cost.
Depreciation is computed on the straight-line method based on the estimated
useful lives of the related assets.
INCOME TAXES--No provision for income taxes is made in the financial
statements of the Partnership. Taxable income or loss of the Partnership is
reported in the income tax returns of its partners.
2. PROPERTY AND EQUIPMENT
Property and equipment, which is recorded at cost, consists of the following
at September 20, 1995 and December 31, 1994 (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 20, DECEMBER 31,
1995 1994
--------------- ---------------
<S> <C> <C>
Furniture and Fixtures....................................... $ 201 $ 111
Data processing equipment.................................... 688 377
Telephone equipment.......................................... 496 347
Leasehold improvements....................................... 30 13
Computer software............................................ 7 --
------- -----
1,422 848
Less accumulated depreciation................................ (339) (172)
------- -----
Property and equipment, net.................................. $ 1,083 $ 676
------- -----
------- -----
</TABLE>
3. INVESTMENT IN PARTNERSHIP
At December 31, 1994, the investment in partnership consisted of the
Partnership's limited partner investment in a private investment limited
partnership whose emphasis is on capital appreciation through investments. A
$2.0 million capital contribution was made on December 30, 1993 and was recorded
at cost. The Partnership withdrew its investment during the year ended December
31, 1994 and received 80% of the total anticipated distribution in January 1995.
The remaining 20% was distributed to the Partnership in 1995 upon completion of
the audit of the private investment limited partnership. Estimated losses of
$166,473 on this investment were included in 1994 other expense.
F-49
<PAGE>
ACCOUNT PORTFOLIOS, L.P.
(A GEORGIA LIMITED PARTNERSHIP)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
PERIOD FROM JANUARY 1, 1995 TO SEPTEMBER 20, 1995
AND FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1993
4. NOTE PAYABLE
The Partnership entered into a two-year Master Loan Agreement with Cargill
Financial Services Corporation ("Cargill") on May 14, 1992 ("the Loan
Agreement") which allowed it to borrow up to $50.0 million for the purchase of
portfolios of nonperforming loans and accounts receivable approved by both
parties. Under the terms of the Loan Agreement, interest accrues at a rate of
prime plus 7% and all borrowings are payable in 24 months. There were no
principal amounts outstanding under the Loan Agreement as of September 20, 1995
and December 31, 1994. Borrowings were collateralized by current and future
loans purchased under the Loan Agreement.
Under the terms of the Loan Agreement, after payment of principal,
noncontingent interest, and return of the Partnership's investment, the
Partnership is required to pay an additional 20% of all future collections less
service fees (as defined) as contingent interest to the lender. The Partnership
paid contingent interest of $955,290 and $2,940,593 under the Loan Agreement for
the period from January 1, 1995 to September 20, 1995 and for the year ended
December 31, 1994, respectively, which was charged to interest expense.
The Partnership was obligated to pay a fee to an investment bank on all
amounts borrowed from Cargill up to total borrowings of $50.0 million. There are
no outstanding borrowings from Cargill as of September 20, 1995 and December 31,
1994 and all related consulting fees have been paid. The Partnership recorded
consulting fees relating to the Cargill borrowing of $198,730 for the year ended
December 31, 1994. No consulting fees were paid during the period from January
1, 1995 to September 20, 1995.
5. RELATED PARTY TRANSACTIONS
On October 1, 1992, the Partnership entered into a management and investment
services agreement with a related party. The agreement provides for the payment
by the Partnership of monthly management fees of $75,000 through March 1993 and
monthly fees of $50,000 thereafter. The Partnership recorded management fees to
this entity of $450,000 and $600,000 for the period from January 1, 1995 to
September 20, 1995 and the year ended December 31, 1994, respectively.
6. EMPLOYEE BENEFIT PLAN
The Partnership adopted a 401(k) profit sharing plan and trust(the "Plan")
on March 1, 1994 which covers all full-time employees who have completed three
months of service. Employees may contribute up to 15% of their annual
compensation and employer contributions are discretionary. The Partnership did
not make any contributions to the Plan during the period from January 1, 1995 to
September 20, 1995 and for the year ended December 31, 1994, respectively.
Effective December 22, 1995, the Partnership terminated the Plan. Participants
in the Plan were given the option to roll over their account balance into
another qualified plan or to receive a lump-sum distribution to the Plan.
7. COMMITMENTS AND CONTINGENCIES
From time to time, the Partnership enters into servicing agreements with
companies which service loans for others. The servicers handle the collection
efforts on certain nonperforming loans and
F-50
<PAGE>
ACCOUNT PORTFOLIOS, L.P.
(A GEORGIA LIMITED PARTNERSHIP)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
PERIOD FROM JANUARY 1, 1995 TO SEPTEMBER 20, 1995
AND FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1993
7. COMMITMENTS AND CONTINGENCIES (CONTINUED)
accounts receivable on the Partnership's behalf. Payments to the servicers vary
depending on the servicing contract. Current contracts expire in 1995 but are
automatically renewable at the option of the Partnership.
The Partnership has a consulting agreement with an individual which provides
for the payment of fees for services preformed in connection with acquisition of
loan portfolios. Such fees are based on the portfolio purchase price and future
collections. The Partnership recorded consulting expenses of $556,000 and
$2,279,000 during the period from January 1, 1995 to September 20, 1995 and for
the year ended December 31, 1994, respectively.
The Partnership has a three-year employment agreement with an employee which
provides for the payment of additional compensation based on future collections
of loan portfolios identified by the employee. No additional compensation was
paid to this individual during the period from January 1, 1995 to September 20,
1995 and for the year ended December 31, 1994, respectively.
During August 1994, a subsidiary of the Partnership entered into a two-year
Portfolio Flow Purchase Agreement whereby the subsidiary has a monthly
commitment to purchase nonperforming loans meeting certain criteria for an
agreed upon price up to a total purchase price of $1,000,000 per month. The
purchases under the Portfolio Flow Purchase Agreement were $2,515,480 and
$1,156,485 for the period from January 1, 1995 to September 20, 1995 and for the
year ended December 31, 1994, respectively. The subsidiary also entered into
certain Participation Agreements whereby from time to time it may sell (at its
sole discretion) undivided interests in the loan portfolios purchased under the
Portfolio Flow Purchase Agreement. The subsidiary records the loan portfolios
purchased net of the participation interests sold.
The Partnership is obligated under operating lease agreements with terms in
excess of one year as follows (in thousands):
<TABLE>
<S> <C>
1995............................................................... $ 108
1996............................................................... 422
1997............................................................... 316
1998............................................................... 251
1999 and thereafter................................................ 349
---------
$ 1,446
---------
---------
</TABLE>
Rent expense under operating leases was $200,680 and $118,806 for the period
from January 1, 1995 to September 20, 1995 and for the year ended December 31,
1994, respectively.
The Partnership is a party to certain legal matters arising in the ordinary
course of business. In the opinion of management, none of these matters are
expected to have a material effect on the financial position or results of
operations of the Partnership.
F-51
<PAGE>
ACCOUNT PORTFOLIOS, L.P.
(A GEORGIA LIMITED PARTNERSHIP)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
PERIOD FROM JANUARY 1, 1995 TO SEPTEMBER 20, 1995
AND FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1993
8. SUBSEQUENT EVENTS
Pursuant to a Purchase Agreement dated September 21, 1995 (the "Purchase
Agreement"), OSI Holdings Corp. (the "Company"), currently known as Outsourcing
Solutions Inc., a Delaware corporation, acquired the Class A limited partnership
interests in Account Portfolios, L.P. for 933,333 shares of the Company common
stock and 266,667 shares of the Company 8% Non-Voting Cumulative Redeemable
Exchangeable Preferred Stock. The Company contributed the Class A partnership
interests valued at $15,000,000, to Account Portfolios, Inc. ("AP, Inc."), a
subsidiary of the Company. AP, Inc. acquired the Class B limited partnership
interests in the Partnership for cash of approximately $28.8 million and notes
of $35.0 million. Account Portfolios, G.P., Inc. ("APGP, Inc."), another
subsidiary of the Company, acquired the general partnership interests of the
Partnership and its subsidiaries for cash of approximately $1.2 million. The
total value of this transaction was $80.0 million.
F-52
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
A.M. Miller & Associates, Inc.
Minneapolis, Minnesota
We have audited the accompanying balance sheet of A.M. Miller & Associates, Inc.
(A Minnesota S Corporation) as of December 31, 1995 and the related statements
of income, retained earnings, and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of A.M. Miller & Associates, Inc.
as of December 31, 1995, and the results of its operations and its cash flows
for the year then ended, in conformity with generally accepted accounting
principles.
SCHWEITZER RUBIN KARON & BREMER
Certified Public Accountants
Minneapolis, Minnesota
January 17, 1996
MEMBER OF INDEPENDENT ACCOUNTANTS INTERNATIONAL WITH CORRESPONDENCE OFFICES IN
PRINCIPAL CITIES OF THE WORLD
F-53
<PAGE>
A.M. MILLER & ASSOCIATES, INC.
BALANCE SHEET
DECEMBER 31, 1995
<TABLE>
<CAPTION>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash (Note 2)................................................................................... $ 2,904,695
Commissions receivable.......................................................................... 2,197,544
Miscellaneous accounts receivable............................................................... 98,963
Prepaid expenses................................................................................ 31,117
--------------
Total current assets........................................................................ 5,232,319
--------------
PROPERTY AND EQUIPMENT (Note 3)................................................................... 1,370,898
--------------
OTHER ASSETS:
Deposits........................................................................................ 1,857
Software, less accumulated amortization of $41,396.............................................. 256,605
--------------
Total other assets.......................................................................... 258,462
--------------
Total assets................................................................................ $ 6,861,679
--------------
--------------
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Notes payable (Note 4).......................................................................... $ 400,000
Current maturities of long-term debt (Note 5)................................................... 205,151
Payables:
Clients....................................................................................... 1,417,653
Trade......................................................................................... 579,734
Accrued expenses (Notes 8 and 9)................................................................ 1,975,524
--------------
Total current liabilities................................................................... 4,578,062
--------------
LONG-TERM DEBT, less current maturities (Note 5).................................................. 657,915
--------------
COMMITMENTS AND CONTINGENCIES (Note 6 and 7)
STOCKHOLDER'S EQUITY:
Common stock, par value $1 per share; 1,000 shares authorized: issued and outstanding........... 1,000
Additional paid-in capital...................................................................... 803,000
Retained earnings............................................................................... 821,702
--------------
Total stockholder's equity.................................................................. 1,625,702
--------------
Total liabilities and stockholder's equity.................................................. $ 6,861,679
--------------
--------------
</TABLE>
See notes to financial statements.
F-54
<PAGE>
A.M. MILLER & ASSOCIATES, INC.
STATEMENT OF INCOME AND RETAINED EARNINGS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
<S> <C>
REVENUES:
Collection................................................................................. $ 19,412,323
Performance incentive...................................................................... 206,649
Service revenue............................................................................ 15,234
-------------------
Total revenues......................................................................... 19,634,206
-------------------
COSTS AND EXPENSES:
Collection costs........................................................................... 8,881,652
Sales expenses............................................................................. 508,878
General and administrative expenses........................................................ 6,253,822
Other expenses............................................................................. 177,638
-------------------
Total costs and expenses............................................................... 15,821,990
-------------------
NET INCOME................................................................................... 3,812,216
BEGINNING RETAINED EARNINGS.................................................................. 1,541,772
LESS S CORPORATION DIVIDEND DISTRIBUTIONS.................................................... (4,532,286)
-------------------
ENDING RETAINED EARNINGS..................................................................... $ 821,702
-------------------
-------------------
</TABLE>
See notes to financial statements.
F-55
<PAGE>
A.M. MILLER & ASSOCIATES, INC.
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers.................................................................... $ 18,704,511
Cash paid to suppliers and employees............................................................ (14,049,318)
Interest paid................................................................................... (60,031)
--------------
Net cash provided by operating activities................................................... 4,595,162
--------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment.............................................................. (514,876)
Proceeds received from sale of property and equipment........................................... 30,000
--------------
Net cash used in investing activities....................................................... (484,876)
--------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (payments) on note payable....................................................... 400,000
Principal payments on long-term debt, including capital lease obligations....................... (229,071)
Proceeds from long-term borrowings.............................................................. 300,000
Proceeds from capital contribution.............................................................. 800,000
Cash distributions to stockholder............................................................... (4,766,329)
--------------
Net cash used in financing activities....................................................... (3,495,400)
--------------
Net increase in cash.............................................................................. 614,886
Cash:
Beginning....................................................................................... 2,289,809
--------------
Ending.......................................................................................... $ 2,904,695
--------------
--------------
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES:
Net income...................................................................................... $ 3,812,216
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization............................................................... 362,265
(Gain) loss on sale of property and equipment............................................... 67,403
Increase in:
Commissions receivable.................................................................... (1,117,373)
Miscellaneous accounts receivable......................................................... (31,239)
Other..................................................................................... (527)
Increase in:
Payables:
Clients................................................................................. 218,917
Trade................................................................................... 217,133
Accrued expenses........................................................................ 1,066,367
--------------
Net cash provided by operating activities................................................... $ 4,595,162
--------------
--------------
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCIAL ACTIVITIES:
Property and equipment acquired through acquisition of debt..................................... $ 470,108
Miscellaneous receivable offset against distributions to stockholder............................ 60,957
</TABLE>
See notes to financial statements.
F-56
<PAGE>
A.M. MILLER & ASSOCIATES, INC.
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1995
1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS:
A.M. Miller and Associates, Inc. (the Company) provides collection and
related financial services throughout the United States.
SIGNIFICANT ACCOUNTING POLICIES OF THE COMPANY ARE SUMMARIZED BELOW:
INCOME TAX STATUS:
The Company, with consent of its stockholder, has elected to be taxed under
sections of the federal and state income tax laws, which provide that, in lieu
of corporation income taxes, the stockholder separately accounts for his prorata
shares of the Company's items of income, deductions, losses and credits.
Therefore, these statements do not include any provision for corporation income
taxes (refunds) other than state minimum taxes imposed on S corporations.
PROPERTY AND EQUIPMENT:
Property and equipment is carried at cost. Maintenance, repairs and renewals
are expended as incurred. When assets are retired or otherwise disposed of in
the normal course of business, the cost and related accumulated depreciation are
removed from the accounts and resulting gains or losses are included in the
Statements of Income.
DEPRECIATION AND AMORTIZATION:
The cost of property and equipment is depreciated on the straight-line
method over the estimated useful lives. Leasehold improvements are amortized on
the straight-line method over the base life of the lease and estimated useful
lives.
It is the Company's policy to include amortization expense on assets
acquired under capital lease with depreciation expense on owned assets.
ESTIMATE USEFUL LIVES ARE AS FOLLOWS:
<TABLE>
<CAPTION>
YEARS
-----------
<S> <C>
Furniture & Fixtures.................................................................. 0-7
Office equipment...................................................................... 5-7
Computer equipment.................................................................... 5-7
Leasehold improvements................................................................ 7
Transportation equipment.............................................................. 5-7
</TABLE>
Depreciation expense charged to operations for the year ended December 31,
1995 amounted to $329,954.
ACCOUNTS RECEIVABLE:
The Company has not provided an evaluation allowance on accounts receivable.
Management believes that, based on historical analysis of accounts written-off,
an allowance account would be immaterial in relation to total accounts
receivable.
F-57
<PAGE>
A.M. MILLER & ASSOCIATES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED DECEMBER 31, 1995
1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
COMPUTER SOFTWARE:
The Company has elected to amortize major additions of computer software
over a 60 to 84 month period. Amortization of software charged to operations for
the year ended December 31, 1995 amounted to $32,311.
2. CASH
Included in the cash amounts are $1,731,363 at December 31, 1995 from the
Company's trust accounts. Such cash is held on behalf of clients and therefore
restricted as to its use in the amount of $1,417,653 at December 31, 1995.
3. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following as of December 31, 1995:
<TABLE>
<CAPTION>
<S> <C>
Furniture and fixtures......................................................... $ 585,372
Office equipment............................................................... 96,597
Computer equipment, including equipment acquired under capital leases of
$470,108..................................................................... 896,421
Leasehold improvements......................................................... 143,117
Transportation equipment....................................................... 356,632
-------------
Total cost..................................................................... 2,078,139
Less accumulated depreciation and amortization, including accumulated
amortization on equipment acquired under capital leases of $39,176........... 707,241
-------------
Total property and equipment................................................... $ 1,370,898
-------------
-------------
</TABLE>
4. NOTES PAYABLE
Notes payable consisted of the following as of December 31, 1995:
<TABLE>
<CAPTION>
<S> <C>
Note payable, advanced under working capital line-of-credit, with interest
payable monthly at 1.0% in excess of the prime rate (effective rate of 9.50%
at December 31, 1995), expiring May 1996, and collateralized by equipment,
accounts receivable, intangible assets, and guaranteed by the shareholder of
the Company. The total credit line available is $1,000,000................... $ 400,000
</TABLE>
F-58
<PAGE>
A.M. MILLER & ASSOCIATES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED DECEMBER 31, 1995
5. LONG-TERM DEBT
Long-term debt consisted of the following as of December 31, 1995:
<TABLE>
<CAPTION>
<S> <C>
Note payable to bank, with monthly interest payments of $11,307 including
interest at 1.5% in excess of the prime rate (effective rate of 8.5% at
December 31, 1995), principal due January 31, 1997, and collateralized by
equipment, accounts receivable, intangible assets, and guaranteed by the
shareholder of the Company................................................... $ 300,000
Note payable to bank in monthly installments of $2,179 including interest at
1.5% in excess of the prime rate (effective rate of 10.0% at December 31,
1995) maturing January 1996, and collateralized by equipment, accounts
receivable, intangible assets, and guaranteed by the shareholder of the
Company...................................................................... 5,463
Note payable to bank in monthly principal installments of $13,250 plus interest
at 1.5% in excess of the prime rate (effective rate of 10.0% at December 31,
1995), maturing September 1996, and collateralized by equipment, accounts
receivable, intangible assets, and guaranteed by the shareholder of the
Company...................................................................... 119,000
Liability under capitalized lease, see below................................... 438,603
-------------
Total long-term debt........................................................... 863,066
Less current maturities........................................................ 205,151
-------------
Total long-term maturities..................................................... $ 657,915
-------------
-------------
</TABLE>
The approximate future maturities of long-term debt, excluding capital lease
obligations at December 31, 1995 are as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
- --------------------------------------------------------------------------------- -----------
<S> <C>
1996............................................................................. $ 124,463
1997............................................................................. 300,000
-----------
Total future maturities of long-term debt........................................ $ 424,463
-----------
-----------
</TABLE>
F-59
<PAGE>
A.M. MILLER & ASSOCIATES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED DECEMBER 31, 1995
5. LONG-TERM DEBT (CONTINUED)
The Company leased computer equipment under capital lease obligations at
December 31, 1995. The minimum payments under the capitalized leases as of
December 31, 1995, are as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
- --------------------------------------------------------------------------------- -----------
<S> <C>
1996............................................................................. $ 117,565
1997............................................................................. 117,565
1998............................................................................. 117,565
1999............................................................................. 117,565
2000............................................................................. 68,579
-----------
Total minimum lease payments..................................................... 538,839
Less amount representing interest................................................ 100,236
-----------
Present value of net minimum lease payments...................................... $ 438,603
-----------
-----------
</TABLE>
6. LEASE COMMITMENTS
The Company has entered into master lease agreements for office and parking
space. Under the terms of these leases, the Company is obligated to a monthly
lease of $70,000 until May 31, 1996. The Company is also obligated to pay
monthly its share of increases in real estate taxes and operating costs over and
above the base rent.
The Company leases telephone equipment used in its operations. The current
annual rental expense for the equipment is $73,168.
The minimum rental for future periods is as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
- --------------------------------------------------------------------------------- -----------
<S> <C>
1996............................................................................. $ 425,453
1997............................................................................. 73,168
1998............................................................................. 73,168
1999............................................................................. 73,168
2000............................................................................. 12,194
-----------
Total minimum rentals............................................................ $ 657,151
-----------
-----------
</TABLE>
7. COMMITMENTS AND CONTINGENCIES
The Company is subject to certain claims and litigation arising out of
routine business operations. Management believes that it has valid defenses in
regards to these claims and that the maximum exposure under such claims would
not exceed $100,000.
The Company has contracted with a software provider to develop software to
support the operations of the business. Of the original contract of $510,000,
the Company has paid $255,000. The Company will be liable for the balance upon
completion of various stages to the software program.
F-60
<PAGE>
A.M. MILLER & ASSOCIATES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED DECEMBER 31, 1995
8. EXECUTIVE AND MANAGEMENT INCENTIVE COMPENSATION PLAN
The Company has an Executive and Management Incentive Compensation Plan
under which employees are paid bonuses equal to a specified percentage of income
before bonuses and taxes on income. These bonuses totaled $574,468 for the year
ended December 31, 1995. During 1995 the Company also declared bonuses totaling
$705,000 to key personnel of the Company. These bonuses are included in accrued
expenses on the balance sheets.
9. MAJOR CLIENTS
Major clients are clients that account for over 10% of revenues. The
following revenues and balances represent major client activity:
<TABLE>
<CAPTION>
DECEMBER 31, 1995
-----------------------
<S> <C>
Revenues................................................................. 54%
Commission receivable.................................................... 53%
</TABLE>
These clients are in the consumer credit card and student loan servicing
industries. Both of these industries are subject to regulations and controls to
which the Company must subscribe. Lack of compliance with these industry
regulations can result in canceled contracts and monetary penalties.
10. FINANCIAL INSTRUMENTS
FAIR VALUE CONSIDERATIONS:
Substantially all of the Company's financial instruments are carried at fair
value or at amounts that approximate fair value.
SHORT-TERM ASSETS AND LIABILITIES:
Cash and receivables, notes and payables carrying amounts approximate the
fair value of those financial instruments because of the short maturity of those
instruments.
LONG-TERM DEBT:
The carrying value of the Company's long-term debt approximates the fair
value of the debt based on the current rates offered the Company for debt of the
same remaining maturities.
F-61
<PAGE>
A.M. MILLER & ASSOCIATES, INC.
UNAUDITED BALANCE SHEET
SEPTEMBER 30, 1995
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash......................................................................... $ 2,276
Commissions receivable....................................................... 1,348
Prepaid expenses............................................................. 34
-------------
Total current assets..................................................... 3,658
-------------
PROPERTY AND EQUIPMENT......................................................... 1,683
-------------
Total assets............................................................. $ 5,341
-------------
-------------
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Notes payable................................................................ $ 400
Current maturities of long-term debt......................................... 238
Payables:
Clients.................................................................... 1,674
Trade...................................................................... 179
Accrued expenses............................................................. 592
Other current liabilities.................................................... 25
-------------
Total current liabilities................................................ 3,108
-------------
LONG-TERM DEBT, less current maturities........................................ 340
-------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDER'S EQUITY:
Common stock, par value $1 per share; 1,000 shares authorized: issued and
outstanding................................................................ 1
Additional paid-in capital................................................... 3
Retained earnings............................................................ 1,889
-------------
Total stockholder's equity............................................... 1,893
-------------
Total liabilities and stockholder's equity............................... $ 5,341
-------------
-------------
</TABLE>
See notes to unaudited financial statements.
F-62
<PAGE>
A.M. MILLER & ASSOCIATES, INC
UNAUDITED STATEMENT OF INCOME AND RETAINED EARNINGS
NINE MONTHS ENDED SEPTEMBER 30, 1995
(IN THOUSANDS OF DOLLARS)
<TABLE>
<S> <C>
REVENUE......................................................................... $ 13,559
EXPENSES:
Salaries and benefits......................................................... 5,881
Telephone..................................................................... 837
Postage and supplies.......................................................... 560
Occupancy costs............................................................... 621
Data processing equipment..................................................... 140
Other operating expenses...................................................... 2,162
-----------
Total operating expenses.................................................... 10,201
OPERATING INCOME................................................................ 3,358
OTHER EXPENSE:
Interest expense............................................................ (41)
Other expense............................................................... (19)
-----------
INCOME BEFORE TAXES............................................................. 3,298
INCOME TAX EXPENSE.............................................................. 5
-----------
NET INCOME...................................................................... 3,293
BEGINNING RETAINED EARNINGS..................................................... 1,542
LESS S CORPORATION DIVIDEND DISTRIBUTIONS....................................... (2,946)
-----------
ENDING RETAINED EARNINGS........................................................ $ 1,889
-----------
-----------
</TABLE>
See notes to unaudited financial statements.
F-63
<PAGE>
A.M. MILLER & ASSOCIATES, INC.
UNAUDITED STATEMENT OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1995
(IN THOUSANDS OF DOLLARS)
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................................... $ 3,293
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation............................................................... 265
Changes in assets and liabilities:
Commissions receivable................................................... (268)
Prepaid expenses and other assets........................................ 127
Client payables.......................................................... 475
Trade payables........................................................... (184)
Accrued expenses and other liabilities................................... (591)
-------------
Net cash provided by operating activities.................................... 3,117
-------------
CASH FLOWS USED IN INVESTING ACTIVITIES--Capital expenditures.................. (383)
-------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable.................................................. 400
Payments on long-term debt................................................... (202)
Cash distributions to stockholder............................................ (2,946)
-------------
Net cash used in financing activities........................................ (2,748)
-------------
NET INCREASE IN CASH........................................................... (14)
CASH AT BEGINNING OF PERIOD.................................................... 2,290
-------------
CASH AT END OF PERIOD.......................................................... $ 2,276
-------------
-------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:
Cash paid during the period for interest..................................... $ 41
-------------
-------------
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
</TABLE>
During the nine months ended September 30, 1995 the Company acquired $470 of
property and equipment under capital lease obligations.
See notes to unaudited financial statements.
F-64
<PAGE>
A.M. MILLER & ASSOCIATES, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements of A.M. Miller & Associates,
Inc. ("the Company") have been prepared in accordance with generally accepted
accounting principles for interim financial information. Accordingly, certain
information and footnote disclosures required by generally accepted accounting
principles for complete financial statements have been excluded. In the opinion
of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the nine month period ended September 30, 1995 are not necessarily
indicative of the results that may be expected for the year ended December 31,
1995. The accompanying unaudited financial statements should be read in
conjunction with the audited financial statements of the Company as of and for
the year ended December 31, 1994.
F-65
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Available Information........................... ii
Prospectus Summary.............................. 1
Risk Factors.................................... 13
Use of Proceeds of the New Notes................ 18
Pro Forma Capitalization........................ 18
The Exchange Offer.............................. 20
Unaudited Pro Forma Consolidated Financial
Data.......................................... 27
Selected Historical Financial Data--OSI......... 39
Selected Historical Financial Data-- Payco...... 41
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 42
Business........................................ 54
Management...................................... 64
Security Ownership.............................. 67
Certain Relationships and Related
Transactions.................................. 71
Description of New Bank Credit Facility; Other
Indebtedness.................................. 73
Description of Notes............................ 75
Certain U.S. Federal Income Tax Consequences.... 107
Plan of Distribution............................ 108
Experts......................................... 110
Legal Matters................................... 110
Index to Consolidated Financial Statements...... F-1
</TABLE>
OUTSOURCING
SOLUTIONS INC.
OFFER TO EXCHANGE
11% SERIES B SENIOR
SUBORDINATED NOTES DUE 2006
FOR ALL OUTSTANDING
11% SENIOR SUBORDINATED
NOTES DUE 2006
-------------
PROSPECTUS
-------------
, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Certificate of Incorporation of the Company provides that no director
shall be personally liable to the Corporation or its stockholders for monetary
damages for any breach of fiduciary duty by such director as a director except
for those breaches and acts or omissions with respect to which the General
Corporation Law of the State of Delaware expressly provides that the Certificate
of Incorporation shall not eliminate or limit such personal liability of
directors.
Section 145 of the Delaware General Corporation Law (the "DGCL") provides
that a corporation may indemnify directors and officers as well as other
employees and individuals against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement in connection with specified
actions, suits or proceedings, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation, a
"derivative action") if they acted in good faith and in a manner they reasonably
believed to be in or not opposed to the best interests of the corporation, and,
with respect to any criminal action or proceeding, if they had no reasonable
cause to believe their conduct was unlawful. A similar standard is applicable in
the case of derivative actions, except that indemnification only extends to
expenses (including attorneys' fees) incurred in connection with the defense or
settlement of such actions, and the statute requires court approval before there
can be any indemnification where the person seeking indemnification has been
found liable to the corporation. The statute provides that it is not exclusive
of other indemnification that may be granted by a corporation's bylaws,
disinterested director vote, stockholder vote, agreement or otherwise.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- --------------------------------------------------------------------------------------------------
<C> <S>
1.1 Purchase Agreement dated October 31, 1996 by and among the Company, CFC Services Corp., A.M.
Miller & Associates, Inc., Continental Credit Services, Inc., Alaska Financial Services, Inc.,
Southwest Credit Services, Inc., Account Portfolios, Inc., Account Portfolios G.P., Inc.,
Account Portfolios, L.P., Perimeter Credit, L.P., Gulf State Credit, L.P. and Goldman, Sachs &
Co. and Chase Securities Inc.
2.1 Agreement and Plan of Merger dated as of August 13, 1996 by and among the Company, Boxer
Acquisition Corp. and Payco American Corporation.
2.2 Purchase Agreement dated as of September 21, 1995 by and among the Company, Account Portfolios,
Inc., Account Portfolios G.P., Inc., AP Management, Inc., GSC Management, Inc., Perimeter Credit
Management Corporation, Account Portfolios Trust One and Account Portfolios Trust Two.
2.3 Stock Purchase Agreement dated as of January 10, 1996 by and among the Company, The Continental
Alliance, Inc. and Peter C. Rosvall.
2.4 Stock Purchase Agreement dated as of December 13, 1995 by and among the Company, Outsourcing
Solutions Incorporated, A.M. Miller & Associates, Inc. and Alan M. Miller.
2.5 Purchase and Inducement Agreement dated as of May 17, 1996 by and among the Company, Account
Portfolios, Inc., Account Portfolios, L.P., Gulf State Credit, L.P., Perimeter Credit, L.P., MLQ
Investors, L.P. and Goldman, Sachs & Co.
3.1 Certificate of Incorporation of the Company, as amended to date, filed with the Secretary of State
of the State of Delaware on September 21, 1995.
3.2 By-laws of the Company.
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- --------------------------------------------------------------------------------------------------
4.1 Indenture dated as of November 6, 1996 by and among the Company, the Guarantors and Wilmington
Trust Company (the "Indenture").
<C> <S>
4.2 Specimen Certificate of 11% Senior Subordinated Note due 2006 (included in Exhibit 4.1 hereto).
4.3 Specimen Certificate of 11% Series B Senior Subordinated Note due 2006 (the "New Notes") (included
in Exhibit 4.1 hereto).
4.4 Form of Guarantee of securities issued pursuant to the Indenture (included in Exhibit 4.1 hereto).
4.5 Registration Rights Agreement dated as of November 6, 1996 by and among the Company, CFC Services
Corp., A.M. Miller & Associates, Inc., The Continental Alliance, Inc., Alaska Financial
Services, Inc., Southwest Credit Services, Inc., Account Portfolios, Inc., Account Portfolios
G.P., Inc., Account Portfolios, L.P., Perimeter Credit, L.P., Gulf State Credit, L.P., Payco
American Corporation, Payco-General American Credits, Inc., National Account Systems, Inc.,
University Accounting Service, Inc., Asset Recovery & Management Corp., Indiana Mutual Credit
Association, Inc., Furst and Furst, Inc., Jennifer Loomis & Associates, Inc., FM Services
Corporation, Qualink, Inc., Professional Recoveries Inc., Payco American International Corp.,
Goldman, Sachs & Co. and Chase Securities Inc.
5.1 Opinion of White & Case regarding the legality of the New Notes.
8.1 Opinion of White & Case regarding certain tax matters.
10.1 Amended and Restated Stockholders Agreement dated as of February 16, 1996 by and among the Company
and various stockholders of the Company.
10.2 Advisory Services Agreement dated September 21, 1995 between the Company and MDC Management
Company III, L.P.
10.3 Master Services Agreement dated as of October 1, 1992 between Account Portfolios, L.P. and HBR
Capital, Ltd.
10.4 Lease Agreement between Payco American Corporation and the Brookfield Investment Company dated
July 12, 1979, as amended to the date hereof.
10.5 Lease Agreement between Payco American Corporation and the Percom Investment Company dated April
27, 1984, as amended to the date hereof.
10.6 Lease Agreement between Payco American Corporation and the Westlake Investment Corporation dated
June 1, 1984, as amended to the date hereof.
10.7 Lease Agreement between Payco American Corporation and the Dublin Investment Company dated July
14, 1986, as amended to the date hereof.
10.8 Lease Agreement between Payco American Corporation and the Hacienda Investment Company dated
October 14, 1986, as amended to the date hereof.
10.9 Employment Agreement dated as of August 27, 1996 between the Company and Timothy G. Beffa.
10.10 Employment Agreement dated as of January 12, 1996 between the Company and Allen M. Capsuto.
10.11 Consulting Agreement dated as of August 13, 1996 between Payco American Corporation and Dennis G.
Punches.
10.12 Employment Agreement dated as of August 13, 1996 between Payco American Corporation and James
Bohmann.
10.13 Employment Agreement dated as of August 13, 1996 between Payco American Corporation and Patrick
Carroll.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- --------------------------------------------------------------------------------------------------
10.14 Employment Agreement dated as of August 13, 1996 between Payco American Corporation and William
Kagel.
<C> <S>
10.15 Employment Agreement dated as of August 13, 1996 between Payco American Corporation and Alvin
Keeley.
10.16 Employment Agreement dated as of August 13, 1996 between Payco American Corporation and Susan
Mathison.
10.17 Employment Agreement dated as of August 13, 1996 between Payco American Corporation and David
Patterson.
10.18 Employment Agreement dated as of August 13, 1996 between Payco American Corporation and Neal
Sparby.
10.19 Employment Agreement dated as of August 13, 1996 between Payco American Corporation and John
Stetzenbach.
10.20 Covenant Not-to-Compete Agreement dated as of August 13, 1996 between Payco American Corporation
and Dennis G. Punches.
10.21 Covenant Not-to-Compete Agreement dated as of August 13, 1996 between Payco American Corporation
and James Bohmann.
10.22 Covenant Not-to-Compete Agreement dated as of August 13, 1996 between Payco American Corporation
and Patrick Carroll.
10.23 Covenant Not-to-Compete Agreement dated as of August 13, 1996 between Payco American Corporation
and William Kagel.
10.24 Covenant Not-to-Compete Agreement dated as of August 13, 1996 between Payco American Corporation
and Alvin Keeley.
10.25 Covenant Not-to-Compete Agreement dated as of August 13, 1996 between Payco American Corporation
and Susan Mathison.
10.26 Covenant Not-to-Compete Agreement dated as of August 13, 1996 between Payco American Corporation
and David Patterson.
10.27 Covenant Not-to-Compete Agreement dated as of August 13, 1996 between Payco American Corporation
and Neal Sparby.
10.28 Covenant Not-to-Compete Agreement dated as of August 13, 1996 between Payco American Corporation
and John Stetzenbach.
10.29 Covenant Not-to-Compete Agreement dated as of August 13, 1996 between Payco American Corporation
and Joseph Treleven.
10.30 9% Non-Negotiable Junior Subordinated Note dated January 10, 1996 issued by the Company to Alan M.
Miller.
10.31 1995 Stock Option and Stock Award Plan of the Company.
10.32 Form of Non-Qualified Stock Option Award Agreement [A].
10.33 Form of Non-Qualified Stock Option Award Agreement [B].
10.34 Credit Agreement dated as of November 6, 1996 by and among the Company, the Lenders listed
therein, Goldman Sachs Credit Partners L.P. and the Chase Manhattan Bank, as Co-Administrative
Agents, Goldman Sachs Credit Partners L.P. and Chase Securities, Inc., as Arranging Agents and
Suntrust Bank, Atlanta as Collateral Agent and Exhibits thereto.
12.1 Statement re computation of ratios.
21.1 Subsidiaries of Registrant.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- --------------------------------------------------------------------------------------------------
23.1 Consent of Deloitte & Touche LLP.
<C> <S>
23.2 Consent of Deloitte & Touche LLP.
23.3 Consent of Arthur Andersen LLP.
23.4 Consent of Schweitzer Rubin Karon & Bremer.
23.5 Consent of White & Case (contained in the opinion filed as Exhibit 5.1 hereto).
23.6 Consent of White & Case (contained in Exhibit 8.1 hereto).
24.1 Power of Attorney (see pages II-5 through II-27).
25.1 Statement of eligibility of trustee.
99.1 Form of Letter of Transmittal for New Notes.
99.2 Form of Notice of Guaranteed Delivery for New Notes.
99.3 Letter to Brokers.
99.4 Letter to Clients.
99.5 Instruction to Registered Holder and/or Book Entry Transfer Participant from Beneficial Owner.
99.6 Guidelines for Certificate of Taxpayer Identification Number on substitute Form W-9.
</TABLE>
ITEM 22. UNDERTAKINGS.
(a) The undersigned registrants hereby undertake that insofar as
indemnification for liabilities arising under the Securities Act of 1933, as
amended (the "Act") may be permitted to directors, officers and controlling
persons of the Registrants pursuant to the foregoing provisions, or otherwise,
the Registrants have been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim of
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by its is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
(b) The undersigned registrants hereby undertake to respond to requests for
information that is incorporated by reference into this prospectus pursuant to
Item 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(c) The undersigned registrants hereby undertake to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on November 26, 1996.
<TABLE>
<S> <C> <C>
OUTSOURCING SOLUTIONS INC.
By: /s/ TYLER T. ZACHEM
------------------------------------------
Tyler T. Zachem
VICE PRESIDENT
AND DIRECTOR
</TABLE>
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints and
hereby authorizes David E. King and Tyler T. Zachem, and each of them, as
attorney-in-fact, to sign on such person's behalf, individually and in each
capacity stated below, and to file any amendments, including post-effective
amendments to this registration statement.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on November 26, 1996.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
/S/ TIMOTHY G. BEFFA
-------------------------------------------- Director, President and Chief Executive Officer
Timothy G. Beffa (Principal Executive Officer)
/S/ ALLEN M. CAPSUTO
-------------------------------------------- Chief Financial Officer
Allen M. Capsuto (Principal Financial and Accounting Officer)
/S/ JEFFREY E. STIEFLER
-------------------------------------------- Chairman of the Board of Directors
Jeffrey E. Stiefler
/S/ DAVID E. DE LEEUW
-------------------------------------------- Director
David E. De Leeuw
/S/ DAVID E. KING
-------------------------------------------- Director, Secretary and Treasurer
David E. King
/S/ TYLER T. ZACHEM
-------------------------------------------- Director and Vice President
Tyler T. Zachem
/S/ DAVID G. HANNA
-------------------------------------------- Director
David G. Hanna
/S/ FRANK J. HANNA, III
-------------------------------------------- Director
Frank J. Hanna, III
/S/ PETER C. ROSVALL
-------------------------------------------- Director and Executive Vice President
Peter C. Rosvall
/S/ DENNIS G. PUNCHES
-------------------------------------------- Director
Dennis G. Punches
</TABLE>
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on November 26, 1996.
CFC SERVICES CORP.
By: /s/ TYLER T. ZACHEM
-----------------------------------
Tyler T. Zachem
VICE PRESIDENT AND DIRECTOR
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints and
hereby authorizes David E. King and Tyler T. Zachem, and each of them, as
attorney-in-fact, to sign on such person's behalf, individually and in each
capacity stated below, and to file any amendments, including post-effective
amendments to this registration statement.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on November 26, 1996.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
Director, President and Treasurer
/S/ TIMOTHY G. BEFFA (Principal Executive Officer and
-------------------------------------------- Principal Financial and
Timothy G. Beffa Accounting Officer)
/S/ DAVID E. KING
-------------------------------------------- Director, Vice President
David E. King and Secretary
/S/ TYLER T. ZACHEM
-------------------------------------------- Director and Vice President
Tyler T. Zachem
</TABLE>
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York on November 26, 1996.
<TABLE>
<S> <C> <C>
A.M. MILLER & ASSOCIATES, INC.
By: /s/ TYLER T. ZACHEM
------------------------------------------
Tyler T. Zachem
ASSISTANT SECRETARY AND DIRECTOR
</TABLE>
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints and
hereby authorizes David E. King and Tyler T. Zachem, and each of them, as
attorney-in-fact, to sign on such person's behalf, individually and in each
capacity stated below, and to file any amendments, including post-effective
amendments to this registration statement.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on November 26, 1996.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
/S/ DAVID M. BURTON
-------------------------------------------- President and Chief Operating Officer
David M. Burton (Principal Executive Officer)
/S/ TIMOTHY G. BEFFA
-------------------------------------------- Director and Treasurer
Timothy G. Beffa (Principal Financial and Accounting Officer)
/S/ DAVID E. KING
-------------------------------------------- Director and Vice President
David E. King
/S/ TYLER T. ZACHEM
-------------------------------------------- Director and Assistant Secretary
Tyler T. Zachem
</TABLE>
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York on November 26, 1996.
<TABLE>
<S> <C> <C>
THE CONTINENTAL ALLIANCE, INC.
By: /s/ TYLER T. ZACHEM
------------------------------------------
Tyler T. Zachem
VICE PRESIDENT, ASSISTANT TREASURER AND
DIRECTOR
</TABLE>
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints and
hereby authorizes David E. King and Tyler T. Zachem, and each of them, as
attorney-in-fact, to sign on such person's behalf, individually and in each
capacity stated below, and to file any amendments, including post-effective
amendments to this registration statement.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on November 26, 1996.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
/S/ PETER C. ROSVALL
-------------------------------------------- President and Secretary
Peter C. Rosvall (Principal Executive Officer)
/S/ DORRISE KALBFLEISCH Treasurer
-------------------------------------------- (Principal Financial and Accounting
Dorrise Kalbfleisch Officer
/S/ TYLER T. ZACHEM
-------------------------------------------- Director, Vice President and
Tyler T. Zachem Assistant Treasurer
/S/ DAVID E. KING
-------------------------------------------- Director and Assistant Secretary
David E. King
/S/ TIMOTHY G. BEFFA
-------------------------------------------- Director and Vice President
Timothy G. Beffa
</TABLE>
II-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York on November 26, 1996.
<TABLE>
<S> <C> <C>
ALASKA FINANCIAL SERVICES, INC.
By: /s/ TYLER T. ZACHEM
------------------------------------------
Tyler T. Zachem
VICE PRESIDENT, ASSISTANT TREASURER
AND DIRECTOR
</TABLE>
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints and
hereby authorizes David E. King and Tyler T. Zachem, and each of them, as
attorney-in-fact, to sign on such person's behalf, individually and in each
capacity stated below, and to file any amendments, including post-effective
amendments to this registration statement.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on November 26, 1996.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
/S/ PETER C. ROSVALL
-------------------------------------------- President
Peter C. Rosvall (Principal Executive Officer)
/S/ WILLARD L. FANCHER
-------------------------------------------- Secretary and Treasurer
Willard L. Fancher (Principal Financial and Accounting Officer)
/S/ TYLER T. ZACHEM
-------------------------------------------- Director, Vice President and
Tyler T. Zachem Assistant Treasurer
/S/ DAVID E. KING
-------------------------------------------- Director and Assistant Secretary
David E. King
/S/ TIMOTHY G. BEFFA
-------------------------------------------- Director and Vice President
Timothy G. Beffa
</TABLE>
II-9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York on November 26, 1996.
<TABLE>
<S> <C> <C>
SOUTHWEST CREDIT SERVICES, INC.
By: /s/ TYLER T. ZACHEM
------------------------------------------
Tyler T. Zachem
VICE PRESIDENT, ASSISTANT TREASURER
AND DIRECTOR
</TABLE>
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints and
hereby authorizes David E. King and Tyler T. Zachem, and each of them, as
attorney-in-fact, to sign on such person's behalf, individually and in each
capacity stated below, and to file any amendments, including post-effective
amendments to this registration statement.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on November 26, 1996.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
/S/ PETER C. ROSVALL President and Treasurer
-------------------------------------------- (Principal Executive Officer and
Peter C. Rosvall Principal Financial and Accounting Officer)
/S/ TYLER T. ZACHEM
-------------------------------------------- Director, Vice President and
Tyler T. Zachem Assistant Treasurer
/S/ DAVID E. KING
-------------------------------------------- Director and Assistant Secretary
David E. King
/S/ TIMOTHY G. BEFFA
-------------------------------------------- Director and Vice President
Timothy G. Beffa
</TABLE>
II-10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York on November 26, 1996.
<TABLE>
<S> <C> <C>
ACCOUNT PORTFOLIOS, INC.
By: /s/ TYLER T. ZACHEM
------------------------------------------
Tyler T. Zachem
SECRETARY AND DIRECTOR
</TABLE>
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints and
hereby authorizes David E. King and Tyler T. Zachem, and each of them, as
attorney-in-fact, to sign on such person's behalf, individually and in each
capacity stated below, and to file any amendments, including post-effective
amendments to this registration statement.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on , 1996.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
/S/ JAMES R. PAXTON
-------------------------------------------- President
James R. Paxton (Principal Executive Officer)
/S/ DAVID E. KING
-------------------------------------------- Director, Vice President and Treasurer
David E. King (Principal Financial and Accounting Officer)
/S/ TIMOTHY G. BEFFA
-------------------------------------------- Director and Chairman
Timothy G. Beffa
/S/ TYLER T. ZACHEM
-------------------------------------------- Director and Secretary
Tyler T. Zachem
</TABLE>
II-11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York on November 26, 1996.
<TABLE>
<S> <C> <C>
ACCOUNT PORTFOLIOS G.P., INC.
By: /s/ TYLER T. ZACHEM
------------------------------------------
Tyler T. Zachem
SECRETARY AND DIRECTOR
</TABLE>
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints and
hereby authorizes David E. King and Tyler T. Zachem, and each of them, as
attorney-in-fact, to sign on such person's behalf, individually and in each
capacity stated below, and to file any amendments, including post-effective
amendments to this registration statement.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on November 26, 1996.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
/S/ JAMES R. PAXTON
-------------------------------------------- President
James R. Paxton (Principal Executive Officer)
/S/ DAVID E. KING
-------------------------------------------- Director, Vice President and Treasurer
David E. King (Principal Financial and Accounting Officer)
/S/ TYLER T. ZACHEM
-------------------------------------------- Director and Secretary
Tyler T. Zachem
/S/ TIMOTHY G. BEFFA
-------------------------------------------- Director and Chairman
Timothy G. Beffa
</TABLE>
II-12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York on November 26, 1996.
<TABLE>
<S> <C> <C>
ACCOUNT PORTFOLIOS, L.P.
By: Account Portfolios G.P., Inc.
as its General Partner
</TABLE>
<TABLE>
<S> <C> <C>
By: /s/ TYLER T. ZACHEM
-------------------------------------
Tyler T. Zachem
SECRETARY AND DIRECTOR
</TABLE>
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints and
hereby authorizes David E. King and Tyler T. Zachem, and each of them, as
attorney-in-fact, to sign on such person's behalf, individually and in each
capacity stated below, and to file any amendments, including post-effective
amendments to this registration statement.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on November 26, 1996.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
/S/ TIMOTHY G. BEFFA
-------------------------------------------- Director
Timothy G. Beffa
/S/ DAVID E. KING
-------------------------------------------- Director
David E. King
/S/ TYLER T. ZACHEM
-------------------------------------------- Director
Tyler T. Zachem
</TABLE>
II-13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York on November 26, 1996.
<TABLE>
<S> <C> <C>
PERIMETER CREDIT, L.P.
By: Account Portfolios G.P., Inc.
as its General Partner
</TABLE>
<TABLE>
<S> <C> <C>
By: /s/ TYLER T. ZACHEM
-------------------------------------
Tyler T. Zachem
SECRETARY AND DIRECTOR
</TABLE>
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints and
hereby authorizes David E. King and Tyler T. Zachem, and each of them, as
attorney-in-fact, to sign on such person's behalf, individually and in each
capacity stated below, and to file any amendments, including post-effective
amendments to this registration statement.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on November 26, 1996.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
/S/ TIMOTHY G. BEFFA
-------------------------------------------- Director
Timothy G. Beffa
/S/ DAVID E. KING
-------------------------------------------- Director
David E. King
/S/ TYLER T. ZACHEM
-------------------------------------------- Director
Tyler T. Zachem
</TABLE>
II-14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York on November 26, 1996.
<TABLE>
<S> <C> <C>
GULF STATE CREDIT, L.P.
By: Account Portfolios G.P., Inc.
as its General Partner
By: /s/ TYLER T. ZACHEM
-----------------------------------------
Tyler T. Zachem
SECRETARY AND DIRECTOR
</TABLE>
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints and
hereby authorizes David E. King and Tyler T. Zachem, and each of them, as
attorney-in-fact, to sign on such person's behalf, individually and in each
capacity stated below, and to file any amendments, including post-effective
amendments to this registration statement.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on November 26, 1996.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
/S/ TIMOTHY G. BEFFA
-------------------------------------------- Director
Timothy G. Beffa
/S/ DAVID E. KING
-------------------------------------------- Director
David E. King
/S/ TYLER T. ZACHEM
-------------------------------------------- Director
Tyler T. Zachem
</TABLE>
II-15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York on November 26, 1996.
<TABLE>
<S> <C> <C>
PAYCO AMERICAN CORPORATION
By: /s/ TYLER T. ZACHEM
------------------------------------------
Tyler T. Zachem
ASSISTANT SECRETARY
AND DIRECTOR
</TABLE>
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints and
hereby authorizes David E. King and Tyler T. Zachem, and each of them, as
attorney-in-fact, to sign on such person's behalf, individually and in each
capacity stated below, and to file any amendments, including post-effective
amendments to this registration statement.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on November 26, 1996.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
/S/ TIMOTHY G. BEFFA
-------------------------------------------- Director, President and Chief Executive Officer
Timothy G. Beffa (Principal Executive Officer)
/S/ JAMES R. BOHMANN
-------------------------------------------- Executive Vice President and Treasurer
James R. Bohmann (Principal Financial and Accounting Officer)
/S/ JOHN STETZENBACH
-------------------------------------------- Senior Vice President and Secretary
John Stetzenbach
/S/ DAVID E. KING
-------------------------------------------- Director and Vice President
David E. King
/S/ TYLER T. ZACHEM
-------------------------------------------- Director and Assistant Secretary
Tyler T. Zachem
</TABLE>
II-16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Brookfield, State of
Wisconsin on November 26, 1996.
<TABLE>
<S> <C> <C>
PAYCO-GENERAL AMERICAN CREDITS, INC.
By: /s/ TIMOTHY G. BEFFA
------------------------------------------
Timothy G. Beffa
VICE PRESIDENT AND DIRECTOR
</TABLE>
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints and
hereby authorizes David E. King and Tyler T. Zachem, and each of them, as
attorney-in-fact, to sign on such person's behalf, individually and in each
capacity stated below, and to file any amendments, including post-effective
amendments to this registration statement.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on November 26, 1996.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
/S/ WILLIAM W. KAGEL President and Treasurer
-------------------------------------------- (Principal Executive Officer and
William W. Kagel Principal Financial and Accounting Officer)
/S/ JAMES R. BOHMANN
-------------------------------------------- Vice President and Secretary
James R. Bohmann
/S/ TIMOTHY G. BEFFA
-------------------------------------------- Director and Vice President
Timothy G. Beffa
/S/ DAVID E. KING
-------------------------------------------- Director
David E. King
/S/ TYLER T. ZACHEM
-------------------------------------------- Director
Tyler T. Zachem
</TABLE>
II-17
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Brookfield, State of
Wisconsin on November 26, 1996.
<TABLE>
<S> <C> <C>
NATIONAL ACCOUNT SYSTEMS, INC.
By: /s/ TIMOTHY G. BEFFA
------------------------------------------
Timothy G. Beffa
VICE PRESIDENT AND DIRECTOR
</TABLE>
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints and
hereby authorizes David E. King and Tyler T. Zachem, and each of them, as
attorney-in-fact, to sign on such person's behalf, individually and in each
capacity stated below, and to file any amendments, including post-effective
amendments to this registration statement.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on November 26, 1996.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
/S/ WILLIAM W. KAGEL President and Treasurer
-------------------------------------------- (Principal Executive Officer and
William W. Kagel Principal Financial and Accounting Officer)
/S/ JAMES R. BOHMANN
-------------------------------------------- Vice President and Secretary
James R. Bohmann
/S/ TIMOTHY G. BEFFA
-------------------------------------------- Director and Vice President
Timothy G. Beffa
/S/ DAVID E. KING
-------------------------------------------- Director
David E. King
/S/ TYLER T. ZACHEM
-------------------------------------------- Director
Tyler T. Zachem
</TABLE>
II-18
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Brookfield, State of
Wisconsin on November 26, 1996.
<TABLE>
<S> <C> <C>
UNIVERSITY ACCOUNTING SERVICE, INC.
By: /s/ TIMOTHY G. BEFFA
------------------------------------------
Timothy G. Beffa
VICE PRESIDENT AND DIRECTOR
</TABLE>
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints and
hereby authorizes David E. King and Tyler T. Zachem, and each of them, as
attorney-in-fact, to sign on such person's behalf, individually and in each
capacity stated below, and to file any amendments, including post-effective
amendments to this registration statement.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on November 26, 1996.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
/S/ WILLIAM W. KAGEL President and Treasurer
-------------------------------------------- (Principal Executive Officer and
William W. Kagel Principal Financial and Accounting Officer)
/S/ JAMES R. BOHMANN
-------------------------------------------- Vice President and Secretary
James R. Bohmann
/S/ TIMOTHY G. BEFFA
-------------------------------------------- Director and Vice President
Timothy G. Beffa
/S/ DAVID E. KING
-------------------------------------------- Director
David E. King
/S/ TYLER T. ZACHEM
-------------------------------------------- Director
Tyler T. Zachem
</TABLE>
II-19
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Brookfield, State of
Wisconsin on November 26, 1996.
<TABLE>
<S> <C> <C>
ASSET RECOVERY & MANAGEMENT CORP.
By: /s/ TIMOTHY G. BEFFA
------------------------------------------
Timothy G. Beffa
VICE PRESIDENT AND DIRECTOR
</TABLE>
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints and
hereby authorizes David E. King and Tyler T. Zachem, and each of them, as
attorney-in-fact, to sign on such person's behalf, individually and in each
capacity stated below, and to file any amendments, including post-effective
amendments to this registration statement.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on November 26, 1996.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
/S/ WILLIAM W. KAGEL President and Treasurer
-------------------------------------------- (Principal Executive Officer and
William W. Kagel Principal Financial and Accounting Officer)
/S/ JAMES R. BOHMANN
-------------------------------------------- Vice President and Secretary
James R. Bohmann
/S/ TIMOTHY G. BEFFA
-------------------------------------------- Director and Vice President
Timothy G. Beffa
/S/ DAVID E. KING
-------------------------------------------- Director
David E. King
/S/ TYLER T. ZACHEM
-------------------------------------------- Director
Tyler T. Zachem
</TABLE>
II-20
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Brookfield, State of
Wisconsin on November 26, 1996.
<TABLE>
<S> <C> <C>
INDIANA MUTUAL CREDIT ASSOCIATION, INC.
By: /s/ TIMOTHY G. BEFFA
------------------------------------------
Timothy G. Beffa
VICE PRESIDENT AND DIRECTOR
</TABLE>
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints and
hereby authorizes David E. King and Tyler T. Zachem, and each of them, as
attorney-in-fact, to sign on such person's behalf, individually and in each
capacity stated below, and to file any amendments, including post-effective
amendments to this registration statement.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on November 26, 1996.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
/S/ WILLIAM W. KAGEL President and Treasurer
-------------------------------------------- (Principal Executive Officer and
William W. Kagel Principal Financial and Accounting Officer)
/S/ JAMES R. BOHMANN
-------------------------------------------- Vice President and Secretary
James R. Bohmann
/S/ TIMOTHY G. BEFFA
-------------------------------------------- Director and Vice President
Timothy G. Beffa
/S/ DAVID E. KING
-------------------------------------------- Director
David E. King
/S/ TYLER T. ZACHEM
-------------------------------------------- Director
Tyler T. Zachem
</TABLE>
II-21
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Brookfield, State of
Wisconsin on November 26, 1996.
<TABLE>
<S> <C> <C>
FURST AND FURST, INC.
By: /s/ TIMOTHY G. BEFFA
------------------------------------------
Timothy G. Beffa
VICE PRESIDENT AND DIRECTOR
</TABLE>
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints and
hereby authorizes David E. King and Tyler T. Zachem, and each of them, as
attorney-in-fact, to sign on such person's behalf, individually and in each
capacity stated below, and to file any amendments, including post-effective
amendments to this registration statement.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on November 26, 1996.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
/S/ WILLIAM W. KAGEL President and Treasurer
-------------------------------------------- (Principal Executive Officer and
William W. Kagel Principal Financial and Accounting Officer)
/S/ JAMES R. BOHMANN
-------------------------------------------- Vice President and Secretary
James R. Bohmann
/S/ TIMOTHY G. BEFFA
-------------------------------------------- Director and Vice President
Timothy G. Beffa
/S/ DAVID E. KING
-------------------------------------------- Director
David E. King
/S/ TYLER T. ZACHEM
-------------------------------------------- Director
Tyler T. Zachem
</TABLE>
II-22
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Brookfield, State of
Wisconsin on November 26, 1996.
<TABLE>
<S> <C> <C>
JENNIFER LOOMIS & ASSOCIATES, INC.
By: /s/ TIMOTHY G. BEFFA
------------------------------------------
Timothy G. Beffa
VICE PRESIDENT AND DIRECTOR
</TABLE>
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints and
hereby authorizes David E. King and Tyler T. Zachem, and each of them, as
attorney-in-fact, to sign on such person's behalf, individually and in each
capacity stated below, and to file any amendments, including post-effective
amendments to this registration statement.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on November 26, 1996.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
/S/ WILLIAM W. KAGEL President and Treasurer
-------------------------------------------- (Principal Executive Officer and
William W. Kagel Principal Financial and Accounting Officer)
/S/ JAMES R. BOHMANN
-------------------------------------------- Vice President and Secretary
James R. Bohmann
/S/ TIMOTHY G. BEFFA
-------------------------------------------- Director and Vice President
Timothy G. Beffa
/S/ DAVID E. KING
-------------------------------------------- Director
David E. King
/S/ TYLER T. ZACHEM
-------------------------------------------- Director
Tyler T. Zachem
</TABLE>
II-23
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Brookfield, State of
Wisconsin on November 26, 1996.
<TABLE>
<S> <C> <C>
FM SERVICES CORPORATION
By: /s/ TIMOTHY G. BEFFA
------------------------------------------
Timothy G. Beffa
VICE PRESIDENT AND DIRECTOR
</TABLE>
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints and
hereby authorizes David E. King and Tyler T. Zachem, and each of them, as
attorney-in-fact, to sign on such person's behalf, individually and in each
capacity stated below, and to file any amendments, including post-effective
amendments to this registration statement.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on November 26, 1996.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
/S/ WILLIAM W. KAGEL President and Treasurer
-------------------------------------------- (Principal Executive Officer and
William W. Kagel Principal Financial and Accounting Officer)
/S/ JAMES R. BOHMANN
-------------------------------------------- Vice President and Secretary
James R. Bohmann
/S/ TIMOTHY G. BEFFA
-------------------------------------------- Director and Vice President
Timothy G. Beffa
/S/ DAVID E. KING
-------------------------------------------- Director
David E. King
/S/ TYLER T. ZACHEM
-------------------------------------------- Director
Tyler T. Zachem
</TABLE>
II-24
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Brookfield, State of
Wisconsin on November 26, 1996.
<TABLE>
<S> <C> <C>
QUALINK, INC.
By: /s/ TIMOTHY G. BEFFA
------------------------------------------
Timothy G. Beffa
VICE PRESIDENT AND DIRECTOR
</TABLE>
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints and
hereby authorizes David E. King and Tyler T. Zachem, and each of them, as
attorney-in-fact, to sign on such person's behalf, individually and in each
capacity stated below, and to file any amendments, including post-effective
amendments to this registration statement.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on November 26, 1996.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
/S/ WILLIAM W. KAGEL President and Treasurer
-------------------------------------------- (Principal Executive Officer and
William W. Kagel Principal Financial and Accounting Officer)
/S/ JAMES R. BOHMANN
-------------------------------------------- Vice President and Secretary
James R. Bohmann
/S/ TIMOTHY G. BEFFA
-------------------------------------------- Director and Vice President
Timothy G. Beffa
/S/ DAVID E. KING
-------------------------------------------- Director
David E. King
/S/ TYLER T. ZACHEM
-------------------------------------------- Director
Tyler T. Zachem
</TABLE>
II-25
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Brookfield, State of
Wisconsin on November 26, 1996.
<TABLE>
<S> <C> <C>
PROFESSIONAL RECOVERIES INC.
By: /s/ TIMOTHY G. BEFFA
------------------------------------------
Timothy G. Beffa
VICE PRESIDENT AND DIRECTOR
</TABLE>
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints and
hereby authorizes David E. King and Tyler T. Zachem, and each of them, as
attorney-in-fact, to sign on such person's behalf, individually and in each
capacity stated below, and to file any amendments, including post-effective
amendments to this registration statement.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on November 26, 1996.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
/S/ WILLIAM W. KAGEL President and Treasurer
-------------------------------------------- (Principal Executive Officer
William W. Kagel and Principal Financial and Accounting Officer)
/S/ JAMES R. BOHMANN
-------------------------------------------- Vice President and Secretary
James R. Bohmann
/S/ TIMOTHY G. BEFFA
-------------------------------------------- Director and Vice President
Timothy G. Beffa
/S/ DAVID E. KING
-------------------------------------------- Director
David E. King
/S/ TYLER T. ZACHEM
-------------------------------------------- Director
Tyler T. Zachem
</TABLE>
II-26
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Brookfield, State of
Wisconsin on November 26, 1996.
<TABLE>
<S> <C> <C>
PAYCO AMERICAN INTERNATIONAL CORP.
By: /s/ TIMOTHY G. BEFFA
------------------------------------------
Timothy G. Beffa
Vice President and Director
</TABLE>
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints and
hereby authorizes David E. King and Tyler T. Zachem, and each of them, as
attorney-in-fact, to sign on such person's behalf, individually and in each
capacity stated below, and to file any amendments, including post-effective
amendments to this registration statement.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on November 26, 1996.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
/S/ WILLIAM W. KAGEL President and Treasurer
-------------------------------------------- (Principal Executive Officer and
William W. Kagel Principal Financial and Accounting Officer)
/S/ JAMES R. BOHMANN
-------------------------------------------- Vice President and Secretary
James R. Bohmann
/S/ TIMOTHY G. BEFFA
-------------------------------------------- Director and Vice President
Timothy G. Beffa
/S/ DAVID E. KING
-------------------------------------------- Director
David E. King
/S/ TYLER T. ZACHEM
-------------------------------------------- Director
Tyler T. Zachem
</TABLE>
II-27
<PAGE>
EXECUTION COPY
$100,000,000
OUTSOURCING SOLUTIONS INC.
11% Senior Subordinated Notes due 2006
Purchase Agreement
October 31, 1996
Goldman, Sachs & Co.
Chase Securities Inc.
c/o Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Ladies and Gentlemen:
Outsourcing Solutions Inc., a Delaware corporation (the "Company"),
proposes, subject to the terms and conditions stated herein, to issue and sell
to the Purchasers named in Schedule I hereto (the "Purchasers") an aggregate of
$100,000,000 principal amount of the Company's 11% Senior Subordinated Notes due
2006 (the "Securities"), which are for resale by the Purchasers to qualified
institutional buyers (within the meaning of Rule 144A ("Rule 144A") under the
Securities Act of 1933, as amended (the "Securities Act")) ("Qualified
Institutional Buyers") in reliance upon Rule 144A and to a limited number of
institutional accredited investors (within the meaning of Rule 501(a)(1), (2),
(3) or (7) under the Securities Act ("Regulation D"))("Institutional Accredited
Investors"), and the remainder of the Securities is being offered by the
Purchasers through Goldman Sachs International and Chase Manhattan International
Limited, as their selling agents, outside the United States in reliance on
Regulation S under the Securities Act. The Company will offer and sell the
Securities (the "Offering") in connection with the acquisition (the "Payco
Acquisition") by the Company of Payco American Corporation ("Payco"). The
Securities and the Exchange Securities (as defined below) will be fully and
unconditionally guaranteed (the "Guarantees") as to payment of principal,
interest, liquidated damages, if any, and premium, if any, on an unsecured,
senior subordinated basis, jointly and severally by each of (i) the Company's
current Subsidiaries (as defined) and Payco and each of its current wholly-owned
domestic Subsidiaries (each a "Guarantor," and collectively, the "Guarantors")
and (ii) each future Restricted Subsidiary of the Company. Upon consummation of
the Payco Acquisition, each of the Guarantors will be a wholly-owned subsidiary
of the Company or a Guarantor.
<PAGE>
It is understood by the parties that concurrently with the Offering and
the Payco Acquisition, the Company will enter into the following additional
transactions (together with the Offering and the Payco Acquisition, the
"Transactions"): (i) the Company will repay a portion of its existing
indebtedness and terminate its existing credit agreements and (ii) the Company
will execute the New Bank Credit Facility (as defined in the Offering Circular),
which will provide borrowing availability of up to $200.0 million. Consummation
of the Offering, the Payco Acquisition and the other Transactions are
conditioned upon each other.
Capitalized terms used herein and not otherwise defined are used as
defined in the Offering Circular (as defined below).
1. The Company and each of the Guarantors represents and warrants to, and
agrees with, each of the Purchasers that:
(a) A preliminary offering circular, dated October 14, 1996 (the
"Preliminary Offering Circular") and an offering circular, dated October
31, 1996 (the "Offering Circular"), in each case including the
international supplement thereto which is attached to and made a part of
the Preliminary Offering Circular and the Offering Circular, have been
prepared in connection with the offering of the Securities. Any reference
to the Preliminary Offering Circular or the Offering Circular shall be
deemed to refer to and include any Additional Issuer Information (as
defined in Section 5(f)) furnished by the Company prior to the completion
of the distribution of the Securities. Neither the Preliminary Offering
Circular nor the Offering Circular and any amendments or supplements
thereto did or will, as of their respective dates, contain an untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading; provided, however, that this
representation and warranty shall not apply to any statements or omissions
made in reliance upon and in conformity with information furnished in
writing to the Company or any Guarantor by or on behalf of the Purchasers
expressly for inclusion in the Preliminary Offering Circular or the
Offering Circular or any amendments or supplements thereto.
(b) Assuming the Securities are issued, sold and delivered under the
circumstances contemplated by the Offering Circular and this Agreement,
that the representations and warranties and covenants of the Purchasers
contained in Section 3 hereof are true, correct and complete, and that the
Purchasers comply with their covenants in Section 3 hereof, (i)
registration under the Securities Act of the Securities or qualification
of the Indenture (as defined below) in respect of the Securities under the
Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"), is
not required in connection with the offer and sale of the Securities to
the Purchasers in the manner contemplated by the Offering Circular or this
Agreement and (ii) initial resales of the Securities by the Purchasers on
the terms and in the manner set forth in the Offering Circular and Section
3 hereof are exempt from the registration requirements of the Securities
Act.
(c) Subsequent to the respective dates as of which information is
given in the Offering Circular, except as set forth in the Offering
Circular, (i) neither the Company nor the Guarantors have incurred any
liabilities or obligations, direct or contingent, which are material,
individually or in the aggregate, to the Company and the Guarantors, nor
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entered into any transaction not in the ordinary course of business, (ii)
except as contemplated by the Offering Circular, there has not been any
decrease in the Company's or any Guarantor's capital stock or increase in
long-term debt or any payment of or declaration to pay any dividends or
other distribution with respect to the capital stock of the Company or any
Guarantor, (iii) neither the Company nor the Guarantors has sustained
since the date of the audited financial statements included in the
Offering Circular any material loss or interference with its business,
whether or not covered by insurance, otherwise than as set forth in or
contemplated by the Offering Circular and (iv) there has not been any
material adverse effect on the business, properties, results of
operations, prospects or condition (financial or otherwise) of the Company
and the Guarantors, taken as a whole (a "Material Adverse Effect").
(d) The Company and the Guarantors have good and marketable title in
fee simple to all real property and good and marketable title to all
personal property owned by them, in each case free and clear of all liens,
encumbrances and defects except such as are described in the Offering
Circular or such as do not materially affect the value of such property
and do not materially interfere with the use made and proposed to be made
of such property by the Company or the Guarantors; and any real property
and buildings held under lease by the Company or the Guarantors are held
by them under valid, subsisting and enforceable leases with such
exceptions as are not material and do not interfere with the use made and
proposed to be made of such property and buildings by the Company or the
Guarantors;
(e) Each of the Company and the Guarantors has been duly
incorporated and is and (after giving effect to the Payco Acquisition)
will be validly existing in good standing under the laws of its respective
jurisdiction of incorporation, with power and authority (corporate or
partnership) to own its properties and conduct its business as described
in the Preliminary Offering Circular and the Offering Circular, is and
(after giving effect to the Payco Acquisition) will be duly qualified to
do business as a foreign corporation (or otherwise) and is in good
standing in all other jurisdictions where the ownership of its properties
or the conduct of its business requires such qualification, except where
the failure to be so qualified or in good standing would not have a
Material Adverse Effect.
(f) The Company and the Guarantors have all requisite corporate or
partnership power (as the case may be) and authority to execute, deliver
and perform their obligations under this Agreement, the Indenture, the
Securities, the Guarantees, the Registration Rights Agreement (as defined
below), the Exchange Securities and the New Bank Credit Agreement
(collectively, with the Acquisition Documents (as defined below), the
"Operative Documents") and the Agreement and Plan of Merger, dated as of
August 13, 1996, by and among the Company, Boxer Acquisition Corp. and
Payco American Corporation, and each other document entered into in
connection with the Payco Acquisition (collectively, as such documents are
amended prior to the date hereof, the "Acquisition Documents") to which
they are, or will be, a party and to consummate the transactions
contemplated hereby and thereby, including without limitation the
corporate power and authority to issue, sell and deliver the Securities
and the Exchange Securities and to issue the Guarantees of the Securities
and the Exchange Securities, as applicable, as provided herein and
therein;
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(g) Each of the Preliminary Offering Circular and the Offering
Circular, as of their respective dates, contains the information specified
in Rule 144A(d)(4) under the Securities Act.
(h) The Company has an authorized capitalization as set forth in the
Offering Circular, and all of the issued shares of capital stock of the
Company have been duly and validly authorized and issued and are fully
paid and non-assessable; and all of the issued shares of capital stock of
each of the Guarantors have been and (after giving effect to the Payco
Acquisition) will have been duly and validly authorized and issued, are
fully paid and non-assessable and (except for directors' qualifying
shares) are owned directly or indirectly by the Company or a Guarantor,
free and clear of all liens, encumbrances, equities or claims, except as
described in the Offering Circular;
(i) The Securities have been duly authorized and, when issued and
delivered pursuant to this Agreement, will have been duly executed,
authenticated, issued and delivered and will constitute valid and legally
binding obligations of the Company entitled to the benefits provided by
the indenture to be dated the Time of Delivery (as defined below) (the
"Indenture") among the Company, the Guarantors and Wilmington Trust
Company, as trustee (the "Trustee"), under which they are to be issued,
which will be substantially in the form previously delivered to you; the
Indenture has been duly authorized and, when executed and delivered by the
Company and the Trustee, the Indenture will constitute a valid and legally
binding instrument, enforceable in accordance with its terms, except as
the enforcement thereof may be limited by applicable bankruptcy,
reorganization, insolvency or other similar laws affecting creditors'
rights generally or by general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law); and the
Securities and the Indenture will conform in all material respects to the
descriptions thereof in the Offering Circular and will be in substantially
the form previously delivered to you;
(j) This Agreement has been duly authorized, executed and delivered
by the Company and the Guarantors;
(k) The registration rights agreement (the "Registration Rights
Agreement"), to be dated the Time of Delivery, has been duly authorized by
the Company and the Guarantors and, when duly executed and delivered by
the Company and the Guarantors, will be the valid and legally binding
obligation of the Company and the Guarantors, enforceable against the
Company and the Guarantors in accordance with its terms, except as the
enforcement thereof may be limited by applicable bankruptcy,
reorganization, insolvency or other similar laws affecting creditors'
rights generally or by general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law) and, as to
rights of indemnification or contribution, to principles of public policy
or federal or state securities laws relating thereto; pursuant to the
Registration Rights Agreement, the Company will agree to file with the
Securities and Exchange Commission (the "Commission"), under the
circumstances set forth therein a registration statement under the
Securities Act relating to another series of debt securities of the
Company with terms substantially identical to the Securities (the
"Exchange Securities") to be offered in exchange for the Securities (the
"Exchange Offer"), and (ii) to the extent required by the Registration
Rights Agreement, a shelf registration statement pursuant to Rule 415
under the Securities Act relating to the resale by certain
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<PAGE>
holders of the Securities, and to use their best efforts to cause such
registration statements to be declared effective; the Exchange Securities
have been duly and validly authorized for issuance by the Company, and
when issued and authenticated in accordance with the terms of the
Indenture and the Registration Rights Agreement, will be the valid and
legally binding obligations of the Company, enforceable against the
Company in accordance with their terms and entitled to the benefits of the
Indenture, subject, as to enforcement, to bankruptcy, insolvency,
reorganization, moratorium and other laws of general applicability
relating to or affecting creditors' rights and to general principles of
equity (whether considered in a proceeding in equity or at law);
(l) The New Bank Credit Agreement has been duly authorized and, when
duly executed and delivered by the Company, will be the valid and legally
binding obligation of the Company, enforceable against the Company in
accordance with its terms, except as the enforcement thereof may be
limited by applicable bankruptcy, reorganization, insolvency or other
similar laws affecting creditors' rights generally or by general
principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law);
(m) Each of the Acquisition Documents has been duly authorized by
the Company and the Guarantors party thereto and, when duly executed and
delivered by the Company and the Guarantors party thereto, will be the
valid and legally binding obligation of the Company and the Guarantors
party thereto, enforceable against the Company and the Guarantors party
thereto in accordance with its terms, except as the enforcement thereof
may be limited by applicable bankruptcy, reorganization, insolvency or
other similar laws affecting creditors' rights generally or by general
principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law);
(n) The Guarantees of the Securities have been duly authorized by
each of the Guarantors and, when executed and delivered in accordance with
the terms of the Indenture and when the Securities have been issued and
authenticated in accordance with the terms of the Indenture and delivered
to and paid for by the Purchasers in accordance with the terms of this
Agreement, will be the valid and legally binding obligation of the
Guarantors, enforceable against the Guarantors in accordance with their
terms, except as the enforcement thereof may be limited by applicable
bankruptcy, reorganization, insolvency or other similar laws affecting
creditors' rights generally or by general principles of equity (regardless
of whether enforcement is sought in a proceeding in equity or at law). The
Guarantees of the Securities, when issued, will conform in all material
respects to the description thereof in the Offering Circular;
(o) The Guarantees of the Exchange Securities have been duly
authorized by each of the Guarantors and, when executed and delivered in
accordance with the terms of the Indenture and when the Exchange
Securities are issued and authenticated in accordance with the terms of
the Indenture and the Registration Rights Agreement, will be the valid and
legally binding obligation of the Guarantors, enforceable against the
Guarantors in accordance with their terms, except as the enforcement
thereof may be limited by applicable bankruptcy, reorganization,
insolvency or other similar laws affecting creditors' rights generally or
by general principles of equity (regardless of whether enforcement is
sought in a proceeding in equity or at law). The Guarantees of the
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Exchange Securities, when issued, will conform in all material respects to
the description thereof in the Offering Circular;
(p) Except as disclosed in the Preliminary Offering Circular and the
Offering Circular, there are and (after giving effect to the Payco
Acquisition) will be no outstanding (A) securities or obligations of the
Company or any of the Guarantors convertible into or exchangeable for any
capital stock of the Company or any such Guarantor, (B) warrants, rights
or options to subscribe for or purchase from the Company or any of the
Guarantors any such capital stock or any such convertible or exchangeable
securities or obligations, or (C) obligations of the Company or any of the
Guarantors to issue any shares of capital stock, any such convertible or
exchangeable securities or obligations, or any such warrants, rights or
option;
(q) There are and (after giving effect to the Payco Acquisition)
will be no holders of securities of the Company or any of the Guarantors
who, by reason of the execution of this Agreement or any other Operative
Document by the Company or the Guarantors, as the case may be, or the
consummation of the transactions contemplated hereby and thereby, have the
right to request or demand the Company or any of the Guarantors to
register under the Securities Act or analogous foreign laws and
regulations any securities held by them (other than pursuant to the
Registration Rights Agreement);
(r) None of the transactions contemplated by this Agreement
(including, without limitation, the use of the proceeds from the sale of
the Securities) will violate or result in a violation of Section 7 of the
United States Securities Exchange Act of 1934, as amended (the "Exchange
Act"), or any regulation promulgated thereunder, including, without
limitation, Regulations G, T, U, and X of the Board of Governors of the
Federal Reserve System;
(s) Prior to the date hereof, none of the Company, the Guarantors or
any of their affiliates has taken any action which is designed to or which
has constituted or which might have been expected to cause or result in
stabilization or manipulation of the price of any security of the Company
in connection with the offering of the Securities;
(t) The issue and sale of the Securities and the compliance by the
Company and the Guarantors with all of the provisions of the Securities,
the Indenture, the Registration Rights Agreement, this Agreement and each
of the other Operative Documents and the consummation of the transactions
herein and therein contemplated will not conflict with or result in a
breach or violation of any of the terms or provisions of, or constitute a
default under, (A) any indenture, mortgage, deed of trust, loan agreement
or other agreement or instrument to which the Company or any of the
Guarantors is a party or by which the Company or any of the Guarantors is
bound or to which any of the property or assets of the Company or any of
the Guarantors is subject, (B) the provisions of the Certificate of
Incorporation, By-laws or partnership agreement (as applicable) of the
Company or any of the Guarantors or (C) (assuming compliance with all
applicable state securities or Blue Sky laws and assuming the accuracy of
the representations and warranties of the Purchasers contained herein) any
statute or any order, rule or regulation of any court or governmental
agency or body having jurisdiction over the Company or any of the
Guarantors or any of their properties, except, in the case of clauses (A)
and (C), for such conflicts, breaches, violations or defaults as would not
have
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a Material Adverse Effect and no consent, approval, authorization, order,
registration or qualification of or with any such court or governmental
agency or body is required for the issue and sale of the Securities or the
consummation by the Company and the Guarantors of the transactions
contemplated by this Agreement, the Indenture or any other Operative
Document, except for the filing of a registration statement by the Company
and the Guarantors with the Commission pursuant to the Securities Act
pursuant to Section 5(k) hereof and such consents, approvals,
authorizations, registrations or qualifications as may be required under
state securities or Blue Sky laws in connection with the purchase and
distribution of the Securities by the Purchasers;
(u) Neither the Company nor any of the Guarantors is or (after
giving effect to the Payco Acquisition) will be in violation of its
Certificate of Incorporation, By-laws or partnership agreement (as
applicable) or in default in the performance or observance of any material
obligation, covenant or condition contained in any indenture, mortgage,
deed of trust, loan agreement, lease or other agreement or instrument to
which it is a party or by which it or any of its properties may be bound,
except to the extent that such failure or default would not have a
Material Adverse Effect;
(v) Other than as set forth in the Offering Circular, there are no
legal or governmental proceedings pending to which the Company or any of
the Guarantors is a party or of which any property of the Company or any
of the Guarantors is the subject which, if determined adversely to the
Company or any of the Guarantors, would individually or in the aggregate
have a Material Adverse Effect; and, to the best of the Company's
knowledge, no such proceedings are threatened or contemplated by
governmental authorities or threatened by others;
(w) When the Securities are issued and delivered pursuant to this
Agreement, the Securities will not be of the same class (within the
meaning of Rule 144A under the Securities Act) as securities which are
listed on a national securities exchange registered under Section 6 of the
Exchange Act or quoted in a U.S. automated inter-dealer quotation system;
(x) Neither the Company nor any of the Guarantors is and (after
giving effect to the offering and sale of the Securities) will be an
"investment company", or an entity "controlled" by an "investment
company", as such terms are defined in the United States Investment
Company Act of 1940, as amended (the "Investment Company Act");
(y) None of the Company, the Guarantors or any person acting on its
or their behalf has offered or sold the Securities by means of any general
solicitation or general advertising within the meaning of Rule 502(c)
under the Securities Act or, with respect to the Securities sold outside
the United States to non-U.S. persons (as defined in Rule 902 under the
Securities Act), by means of any directed selling efforts within the
meaning of Rule 902 under the Securities Act and the Company, any
affiliate of the Company and any person acting on its or their behalf has
complied with and will implement the "offering restriction" within the
meaning of such Rule 902;
(z) Within the preceding six months, none of the Company, the
Guarantors or any other person acting on behalf of the Company or any of
the Guarantors has offered or sold to any person any Securities, or any
securities of the same or a similar class as
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the Securities, other than the Securities offered or sold to the
Purchasers hereunder. The Company and the Guarantors will take reasonable
precautions designed to insure that any offer or sale, direct or indirect,
in the United States or to any U.S. person (as defined in Rule 902 under
the Securities Act) of any Securities or any substantially similar
security issued by the Company or the Guarantors, within six months
subsequent to the date on which the distribution of the Securities has
been completed (as notified to the Company by Goldman, Sachs & Co.), is
made under restrictions and other circumstances reasonably designed not to
affect the status of the offer and sale of the Securities in the United
States and to U.S. persons contemplated by this Agreement as transactions
exempt from the registration provisions of the Securities Act;
(aa) None of the Company, the Guarantors or any of their affiliates
does business with the government of Cuba or with any person or affiliate
located in Cuba within the meaning of Section 517.075, Florida Statutes;
(ab) The consolidated historical financial statements, together with
related schedules and notes, set forth in the Preliminary Offering
Circular and the Offering Circular comply as to form in all material
respects with the requirements applicable to registration statements on
Form S-1 under the Securities Act and fairly present the consolidated
financial position of each of the Company (and Account Portfolios, L.P. as
predecessor) and its Subsidiaries and Payco and its Subsidiaries at the
respective dates indicated and the results of their operations and their
cash flows for the respective periods indicated, in accordance with
generally accepted accounting principles consistently applied throughout
such periods (except as otherwise disclosed therein). The pro forma
financial statements contained in the Offering Circular have been prepared
on a basis consistent with such historical statements, except for the pro
forma adjustments specified therein, and give effect to assumptions made
on a reasonable basis and reflect the proposed transactions contemplated
by this Agreement and the other Operative Documents. The other financial
and statistical information and data included in the Preliminary Offering
Circular and the Offering Circular, historical and pro forma, are, in all
material respects, accurately presented and prepared on a basis consistent
with such financial statements and the books and records of the Company
and the Guarantors;
(ac) Deloitte & Touche LLP, Schweitzer Rubin Karon & Bremer and
Arthur Andersen LLP, who have certified certain financial statements of
the Company and the Guarantors, are each independent public accountants as
required by the Securities Act and the rules and regulations of the
Commission thereunder;
(ad) The present fair saleable value of the assets of the Company
and the Guarantors, taken as a whole, exceeds the amount that will be
required to be paid on or in respect of the existing debts and other
liabilities (including the maximum amount of liability that may reasonably
be expected to result from contingent liabilities) of the Company and the
Guarantors as they become absolute and matured. The assets of the Company
and the Guarantors, taken as a whole, do not constitute unreasonably small
capital to carry out their business as conducted or as proposed to be
conducted. The Company does not intend to, or believe that it will, incur
debts beyond its ability to pay such debts as they mature. The Company
does not intend to permit any of the Guarantors to incur debts beyond its
ability to pay such debts as they mature. Upon
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consummation of the Payco Acquisition and the closing of the New Bank
Credit Agreement and upon the issuance of the Securities and the
Guarantees, the present fair saleable value of the assets of the Company
and the Guarantors, taken as a whole, will exceed the amount that will be
required to be paid on or in respect of their existing debts and other
liabilities (including the maximum amount of liability that may reasonably
be expected to result from contingent liabilities) as they become absolute
and matured, and the assets of the Company and the Guarantors, taken as a
whole, will not constitute unreasonably small capital to carry out their
business as now conducted or as proposed to be conducted, including the
capital needs of the Company and the Guarantors, taking into account the
projected capital requirements and capital availability of the Company and
the Guarantors;
(ae) Each of the Company and the Guarantors has complied in all
respects with all laws, regulations and orders applicable to it or its
businesses the violation of which would have a Material Adverse Effect;
(af) Except as would not, individually or in the aggregate, have a
Material Adverse Effect, (i) each of the Company and the Guarantors has
and (after giving effect to the Payco Acquisition) will have all
certificates, consents, exemptions, orders, permits, licenses,
authorizations, or other approvals (each, an "Authorization") of and from,
and has and (after giving effect to the Payco Acquisition) will have made
all declarations and filings with, all federal, state, local and other
governmental authorities, all self-regulatory organizations and all courts
and other tribunals, necessary or required to engage in the business
currently conducted by it in the manner described in the Offering
Circular; (ii) all such Authorizations are and (after giving effect to the
Payco Acquisition) will be valid and in full force and effect and (iii)
each of the Company and the Guarantors is and (after giving effect to the
Payco Acquisition) will be in compliance in all material respects with the
terms and conditions of all such Authorizations and with the rules and
regulations of the regulatory authorities and governing bodies having
jurisdiction with respect thereto;
(ag) Each of the Company and the Guarantors owns or possesses or has
and (after giving effect to the Payco Acquisition) will own, possess or
have the right to use the patents, patent rights, licenses, inventions,
copyrights, know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or
procedures), trademarks, service marks and trade names (collectively, the
"Intellectual Property") presently employed by it in connection with, and
material to, individually or in the aggregate, the operation of the
businesses now operated by it, and neither the Company nor any of the
Guarantors has received any notice of infringement of or conflict with
asserted rights of others with respect to the foregoing which,
individually or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would result in a Material Adverse Effect.
The use of suchIntellectual Property in connection with the business and
operations of the Company and the Guarantors does not and (after giving
effect to the Payco Acquisition) will not infringe on the rights of any
person, except as would not, individually or in the aggregate, result in a
Material Adverse Effect;
(ah) All tax returns required to be filed by the Company or any of
the Guarantors in all jurisdictions have been timely and duly filed, other
than those filings being contested in good faith, except where the failure
to so file any such returns could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse
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Effect. There are no tax returns of the Company or any of the Guarantors
that are currently being audited by state, local or federal taxing
authorities or agencies (and with respect to which the Company or any of
the Guarantors has received notice), where the findings of such audit, if
adversely determined, would result in a Material Adverse Effect. All
material taxes, including withholding taxes, penalties and interest,
assessments, fees and other charges due or claimed to be due from such
entities have been paid, other than those being contested in good faith
and for which adequate reserves have been provided or those currently
payable without penalty or interest;
(ai) Each of the Company and the Guarantors maintains insurance
covering its properties, operations, personnel and businesses which
insures against such losses and risks as are adequate in accordance with
its reasonable business judgment to protect the Company and the Guarantors
and their businesses. Neither the Company nor the Guarantors has received
notice from any insurer or agent of such insurer that substantial capital
improvements or other expenditures will have to be made in order to
continue such insurance. All such insurance is outstanding and duly in
force on the date hereof and will be outstanding and duly in force at the
Time of Delivery;
(aj) Except as disclosed in the Preliminary Offering Circular and
the Offering Circular (including, without limitation, the documents
incorporated by reference therein), there are no business relationships or
related party transactions which would be required to be disclosed therein
by Item 404 of Regulation S-K of the Commission and each business
relationship or related party transaction described therein is a fair and
accurate description of the relationships and transactions so described;
(ak) Each of the Company and the Guarantors is in compliance in all
material respects with all presently applicable provisions of the Employee
Retirement Income Security Act of 1974, as amended, including the
regulations and published interpretations thereunder ("ERISA"); no
"reportable event" (as defined in ERISA) has occurred with respect to any
"pension plan" (as defined in ERISA) for which the Company or any
Guarantor would have any liability; neither the Company nor any of the
Guarantors has incurred or expects to incur liability under (i) Title IV
of ERISA with respect to termination of, or withdrawal from, any "pension
plan" or (ii) Section 412 or 4971 of the Internal Revenue Code of 1986, as
amended, including the regulations and published interpretations
thereunder (the "Code"); and each "pension plan" for which the Company or
any Guarantor would have any liability that is intended to be qualified
under Section 401(a) of the Code is so qualified in all material respects
and nothing has occurred, whether by action or by failure to act, which
would cause the loss of such qualification, except, in each case, as would
not have a Material Adverse Effect;
(al) There is (i) no material unfair labor practice complaint
pending against the Company or any of the Guarantors, or, to the best
knowledge of the Company, threatened against any of them, before the
National Labor Relations Board or any state or local labor relations
board, and no significant grievance or significant arbitration proceeding
arising out of or under any collective bargaining agreement is so pending
against the Company or any of the Guarantors, or, to the best knowledge of
the Company, threatened against any of them, (ii) no material strike,
labor dispute, slowdown or stoppage pending against the Company or any of
the Guarantors nor, to the best knowledge of the Company, threatened
against the Company or any of the Guarantors
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and (iii) to the best knowledge of the Company, no union representation
question existing with respect to the employees of the Company or any of
the Guarantors and, to the best knowledge of the Company, no union
organizing activities are taking place, except, in each case, as would not
have a Material Adverse Effect;
(am) Each of the Company and the Guarantors is in material
compliance with all applicable federal, state and local laws and
regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants;
(an) None of the Company or the Guarantors, or, to the Company's
knowledge, any director, officer, agent, employee or other person
associated with or acting on behalf of the Company or any of the
Guarantors, has used any corporate funds during the last five years for
any unlawful contribution, gift, entertainment or other unlawful expense
relating to political activity; made any unlawful payment to any foreign
or domestic government official or employee from corporate funds; violated
or is in violation of any provision of the Foreign Corrupt Practices Act
of 1977, as amended; or made any bribe, rebate, payoff, influence payment,
kickback or other unlawful payment, except such as would not have a
Material Adverse Effect;
(ao) Each of the Company and the Guarantors maintains a system of
internal accounting controls sufficient to provide reasonable assurance
that (i) transactions are executed in accordance with management's general
or specific authorizations; (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain accountability for assets;
(iii) access to assets is permitted only in accordance with management's
general or specific authorization and (iv) the recorded accountability for
assets is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect thereto;
(ap) Other than as contemplated by or described in this Agreement,
any other Operative Document and the Preliminary Offering Circular and the
Offering Circular, there is no broker, finder or other party that is
entitled to receive from the Company or any of the Guarantors any
brokerage or finder's fee or other fee or commission as a result of any of
the transactions contemplated by this Agreement or any of the Operative
Documents;
(aq) Each certificate signed by any officer of the Company or any
Guarantor and delivered to the Purchasers or counsel for the Purchasers
shall be deemed to be a representation and warranty by the Company or such
Guarantor, as the case may be, to the Purchasers as to the matters covered
thereby; and
(ar) The Company has delivered to the Purchasers true and correct,
executed copies of each of the Operative Documents which has been executed
prior to or on the date hereof and there have been no amendments,
alterations, modifications or waivers thereto or in the exhibits or
schedules thereto other than those as to which the Purchasers shall
previously have been advised and shall not have reasonably objected after
being furnished a copy thereof.
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2. Subject to the terms and conditions herein set forth, the Company
agrees to issue and sell to each of the Purchasers, and each of the Purchasers
agree, to purchase from the Company, at a purchase price of 97% of the principal
amount thereof, plus accrued interest, if any, from October 31, 1996 to the Time
of Delivery hereunder, the principal amount of the Securities set forth opposite
the name of such Purchaser in Schedule I hereto.
3. Upon authorization by you of the release of the Securities, the
Purchasers propose to offer the Securities for sale upon the terms and
conditions set forth in this Agreement and the Offering Circular and each
Purchaser hereby represents and warrants to, and agrees with the Company and the
Guarantors that:
(a) It will offer and sell the Securities only to (i) persons who it
reasonably believes are "qualified institutional buyers" ("QIBs") within
the meaning of Rule 144A under the Securities Act in transactions meeting
the requirements of Rule 144A or, (ii) institutions which it reasonably
believes are "accredited investors" ("Institutional Accredited Investors")
within the meaning of Rule 501 under the Securities Act, which
institutions shall execute and deliver a letter containing certain
representations and agreements in the form attached as Annex A to the
Offering Circular prior to their purchase of the Securities or, (iii) upon
the terms and conditions set forth in Annex I to this Agreement;
(b) It is an Institutional Accredited Investor;
(c) It will not offer or sell the Securities by any form of general
solicitation or general advertising, including but not limited to the
methods described in Rule 502(c) under the Securities Act; and
(d) It is not acquiring the Securities with a view to any
distribution thereof that is part of a plan or scheme to evade the
registration requirements of the Securities Act.
4. (a) The Securities to be purchased by each Purchaser hereunder will be
represented by one or more definitive global Securities in book-entry form which
will be deposited by or on behalf of the Company with The Depository Trust
Company ("DTC") or its designated custodian; provided, however, that such
Securities, if any, as Goldman, Sachs & Co. may request upon at least
forty-eight hours' prior to notice to the Company (such request to include the
authorized denominations and the names in which they are to be registered),
shall be delivered in definitive certificated form. The Company will deliver the
Securities to Goldman, Sachs & Co., for the account of each Purchaser, against
payment by or on behalf of such Purchaser of the purchase price therefor by
certified or official bank check or checks, payable to the order of the Company
in Federal (same day) funds by causing DTC to credit the Securities to the
account of Goldman, Sachs & Co. at DTC. The Company will cause the certificates
representing the Securities to be made available to Goldman, Sachs & Co. for
checking at least twenty-four hours prior to the Time of Delivery (as defined
below) at the office of DTC or its designated custodian (the "Designated
Office"), or in the case of Securities in definitive certificated form, at the
offices of Goldman, Sachs & Co., 85 Broad Street, New York, New York 10004. The
time and date of such delivery and payment shall be 9:30 a.m., New York City
time, on November 6, 1996 or such other time and date as Goldman, Sachs & Co.
and the Company may agree upon in writing. Such time and date are herein called
the "Time of Delivery."
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(b) The documents to be delivered at the Time of Delivery by or on
behalf of the parties hereto pursuant to Section 7 hereof, including the
cross-receipt for the Securities and any additional documents requested by the
Purchasers pursuant to Sections 7(o) and 7(p) hereof, will be delivered at such
time and date at the offices of White & Case, 1155 Avenue of the Americas, New
York, New York 10036 (the "Closing Location"), and the Securities will be
delivered at the Designated Office, all at the Time of Delivery. A meeting will
be held at the Closing Location at 4:00 p.m., New York City time, on the New
York Business Day next preceding the Time of Delivery, at which meeting the
final drafts of the documents to be delivered pursuant to the preceding sentence
will be available for review by the parties hereto. For the purposes of this
Section 4, "New York Business Day" shall mean each Monday, Tuesday, Wednesday,
Thursday and Friday which is not a day on which banking institutions in New York
are generally authorized or obligated by law or executive order to close.
5. The Company and the Guarantors agree with each of the Purchasers:
(a) To prepare the Preliminary Offering Circular and the Offering
Circular in a form approved by you and not to amend or supplement the
Preliminary Offering Circular and the Offering Circular and any amendments or
supplements thereto unless the Purchasers shall previously have been advised
thereof and shall not have reasonably objected thereto within two business days
after being furnished a copy thereof, and to furnish you with copies thereof;
(b) Promptly from time to time to take such action as you may
reasonably request to qualify the Securities for offering and sale under the
securities laws of such jurisdictions as you may request and to comply with such
laws so as to permit the continuance of sales and dealings therein in such
jurisdictions for as long as may be necessary to complete the distribution of
the Securities, provided that in connection therewith neither the Company nor
any of the Guarantors shall be required to qualify as a foreign corporation, to
file a general consent to service of process or to subject itself to taxation in
excess of a nominal dollar amount in any jurisdiction;
(c) If, at any time prior to the expiration of nine months after the
date of the Offering Circular, any event shall have occurred as a result of
which the Offering Circular as then amended or supplemented would include an
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements therein, in the light of the circumstances under
which they were made when such Offering Circular is delivered, not misleading,
or, if for any other reason it shall be necessary or desirable during such same
period to amend or supplement the Offering Circular, to notify you and upon your
request to prepare and furnish without charge to each Purchaser and to any
dealer in securities as many copies as you may from time to time reasonably
request of an amended Offering Circular or a supplement to the Offering Circular
which will correct such statement or omission or effect such compliance;
(d) During the period beginning from the date hereof and continuing
until the date six months after the Time of Delivery, not to offer, sell
contract to sell or otherwise dispose of, except as provided hereunder, any
securities of the Company that are substantially similar to the Securities;
(e) Not to be or become, at any time prior to the expiration of
three years after the Time of Delivery, an open-end investment company, unit
investment trust, closed-end
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investment company or face-amount certificate company that is or is required to
be registered under Section 8 of the Investment Company Act;
(f) At any time when the Company is not subject to Section 13 or
15(d) of the Exchange Act, for the benefit of holders from time to time of the
Securities, to furnish at its expense, upon request, to holders of the
Securities and prospective purchasers of Securities information (the "Additional
Issuer Information") satisfying the requirements of subsection (d)(4)(i) of Rule
144A under the Securities Act;
(g) To use its best efforts to cause such Securities to be eligible
for the PORTAL trading system of the National Association of Securities Dealers,
Inc.;
(h) To furnish to the holders of the Securities as soon as
practicable after the end of each fiscal year an annual report (including a
balance sheet and statements of income, shareholders' equity and cash flows of
the Company and the Guarantors certified by independent public accountants) and,
as soon as practicable after the end of each of the first three quarters of each
fiscal year (beginning with the fiscal quarter ending after the date of the
Offering Circular), consolidated summary financial information of the Company
and the Guarantors for such quarter in reasonable detail;
(i) During a period of five years from the date of the Offering
Circular (so long as any of the Securities or Exchange Securities remain
outstanding) to furnish to you copies of all reports or other communications
(financial or other) furnished to shareholders of the Company, and to deliver to
you (i) as soon as they are available, copies of any reports and financial
statements furnished to or filed with the Commission or any securities exchange
on which the Securities or any class of securities of the Company or any
Guarantor is listed; and (ii) such additional information concerning the
business and financial condition of the Company or any Guarantor as you may from
time to time reasonably request (such financial statements to be on a
consolidated basis to the extent the accounts of the Company and the Guarantors
are consolidated in reports furnished to its shareholders generally or to the
Commission);
(j) During the period of three years after the Time of Delivery, the
Company will not, and will not permit any of its "affiliates" (as defined in
Rule 144 under the Securities Act) to, resell any of the Securities which
constitute "restricted securities" under Rule 144 that have been reacquired by
any of them;
(k) The Company shall file and use its best efforts to cause to be
declared or become effective under the Securities Act, on or prior to 45 days
after the Time of Delivery, a registration statement on Form S-4 providing for
the registration of the Exchange Securities, and the exchange of the Securities
for the Exchange Securities, all in a manner which will permit persons who
acquire the Exchange Securities to resell the Exchange Securities pursuant to
Section 4(1) of the Securities Act; and
(l) To use the net proceeds received by it from the sale of the
Securities pursuant to this Agreement in the manner specified in the Offering
Circular under the caption "Use of Proceeds."
6. The Company and the Guarantors covenant and agree with each Purchaser
that the Company will pay or cause to be paid the following: (i) the fees,
disbursements and
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expenses of the Company's and the Guarantors' counsel and accountants in
connection with the issue of the Securities and all other expenses in connection
with the preparation, printing and filing of the Preliminary Offering Circular
and the Offering Circular and any amendments and supplements thereto and the
mailing and delivering of copies thereof to the Purchasers and dealers; (ii) the
cost of printing or producing any agreement among Purchasers, this Agreement,
the Indenture, the Blue Sky and Legal Investment Memoranda, closing documents
(including any compilations thereof) and any other documents in connection with
the offering, purchase, sale and delivery of the Securities; (iii) all expenses
in connection with the qualification of the Securities for offering and sale
under state securities laws as provided in Section 5(b) hereof, including the
fees and disbursements of counsel for the Purchasers in connection with such
qualification and in connection with the Blue Sky and legal investment surveys;
(iv) any fees charged by securities rating services for rating the Securities;
(v) the cost of preparing the Securities; (vi) the fees and expenses of the
Trustee and any agent of the Trustee and the fees and disbursements of counsel
for the Trustee in connection with the Indenture and the Securities; (vii) any
cost incurred in connection with the designation of the Securities for trading
in PORTAL and (viii) all other costs and expenses incident to the performance of
its obligations hereunder and under the Indenture, Registration Rights Agreement
and each other Operative Document which are not otherwise specifically provided
for in this Section. It is understood, however, that, except as provided in this
Section, and Sections 8 and 11 hereof, the Purchasers will pay all of their own
costs and expenses, including the fees of their counsel, transfer taxes on
resale of any of the Securities by them, and any advertising expenses connected
with any offers they may make.
7. The obligations of the Purchasers hereunder shall be subject, in their
discretion, to the condition that all representations and warranties and other
statements of the Company and the Guarantors herein are, at and as of the Time
of Delivery, true and correct, the condition that the Company and the Guarantors
shall have performed all of their respective obligations hereunder theretofore
to be performed, and the following additional conditions:
(a) Latham & Watkins, counsel for the Purchasers, shall have
furnished to you such opinion or opinions, dated the Time of Delivery, with
respect to such matters as you may reasonably request, and Latham & Watkins
shall have received such papers and information as they may reasonably request
to enable them to pass upon such matters.
(b) White & Case, counsel for the Company, shall have furnished to
you their written opinion, dated the Time of Delivery, in form and substance
satisfactory to you, to the effect that:
i. The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of Delaware,
with power and authority (corporate and other) to own its properties and
conduct its business as currently conducted;
ii. The Company has an authorized capitalization as set forth
in the Offering Circular, and all of the issued shares of capital stock of
the Company have been duly and validly authorized and issued and are fully
paid and non-assessable;
iii. Each of the Guarantors has been duly incorporated and is
validly existing as a corporation in good standing under the laws of its
jurisdiction of
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incorporation and, to such counsel's knowledge, (except for (a) directors'
qualifying shares and (b) liens granted in connection with the New Bank
Credit Facility are owned directly or indirectly by the Company or a
Guarantor) free and clear of all liens, encumbrances, equities or claims
(such counsel being entitled to rely in respect of the opinion in this
clause upon opinions of local counsel and in respect of matters of fact
upon certificates of officers of the Company or the Guarantors, provided
that such counsel shall state that they believe that both you and they are
justified in relying upon such opinions and certificates);
iv. The Company and each of the Guarantors has corporate or
partnership power and authority, as applicable, to execute, deliver and
perform this Agreement and the agreements contemplated herein, as
applicable, the Company has corporate power and authority to authorize,
issue, sell and deliver the Securities as contemplated by this Agreement
and each Guarantor has corporate or partnership power and authority to
authorize, issue and deliver its Guarantee as contemplated by this
Agreement;
v. This Agreement has been duly authorized, executed and
delivered by the Company and the Guarantors;
vi. The Securities have been duly authorized by the Company,
and when duly executed, authenticated, issued and delivered by the Company
and paid for by the Purchasers in accordance with the terms of this
Agreement (assuming the due authorization, execution and delivery of the
Indenture by the Trustee and due authentication and delivery of the
Securities by the Trustee in accordance with the terms of the Indenture)
will constitute valid and legally binding obligations of the Company
entitled to the benefits provided by the Indenture and enforceable against
the Company in accordance with their terms, except as the enforcement
thereof may be limited by applicable bankruptcy, reorganization,
insolvency or other similar laws affecting creditors' rights generally or
by general principles of equity (regardless of whether enforcement is
sought in a proceeding in equity or at law);
vii. The Indenture has been duly authorized, executed and
delivered by the parties thereto and (assuming the due authorization,
execution and delivery thereof by the Trustee) constitutes a valid and
legally binding instrument, enforceable in accordance with its terms,
except as the enforcement thereof may be limited by applicable bankruptcy,
reorganization, insolvency or other similar laws affecting creditors'
rights generally or by general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law);
viii. The Registration Rights Agreement has been duly
authorized by the Company and the Guarantors and is the valid and legally
binding obligation of the Company and the Guarantors, enforceable against
the Company and the Guarantors in accordance with its terms, except as the
enforcement thereof may be limited by applicable bankruptcy,
reorganization, insolvency or other similar laws affecting creditors'
rights generally or by general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law);
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ix. The Exchange Securities have been duly and validly
authorized for issuance by the Company, and when issued and authenticated
in accordance with the terms of the Indenture and the Registration Rights
Agreement, will be the valid and legally binding obligations of the
Company, enforceable against the Company in accordance with their terms
and entitled to the benefits of the Indenture, except as the enforcement
thereof may be limited by applicable bankruptcy, reorganization,
insolvency or other similar laws affecting creditors' rights generally or
by general principles of equity (regardless of whether enforcement is
sought in a proceeding in equity or at law);
x. The Guarantees of the Securities have been duly authorized
by each of the Guarantors and are the valid and legally binding obligation
of the Guarantors, enforceable against the Guarantors in accordance with
their terms, except as the enforcement thereof may be limited by
applicable bankruptcy, reorganization, insolvency or other similar laws
affecting creditors' rights generally or by general principles of equity
(regardless of whether enforcement is sought in a proceeding in equity or
at law);
xi. The Guarantees of the Exchange Securities have been duly
authorized by each of the Guarantors and, when executed and delivered in
accordance with the terms of the Indenture and when the Exchange
Securities are issued and authenticated in accordance with the terms of
the Indenture and the Registration Rights Agreement, will be the valid and
legally binding obligation of the Guarantors, enforceable against the
Guarantors in accordance with their terms, except as the enforcement
thereof may be limited by applicable bankruptcy, reorganization,
insolvency or other similar laws affecting creditors' rights generally or
by general principles of equity (regardless of whether enforcement is
sought in a proceeding in equity or at law);
xii. The New Bank Credit Agreement has been duly authorized
and is the valid and legally binding obligation of the Company enforceable
against the Company in accordance with its terms, except as the
enforcement thereof may be limited by applicable bankruptcy,
reorganization, insolvency or other similar laws affecting creditors'
rights generally or by general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law);
xiii. Each of the Acquisition Documents has been duly
authorized by the Company and the Guarantors party thereto and is the
valid and legally binding obligation of the Company and the Guarantors
party thereto, enforceable against the Company and the Guarantors party
thereto in accordance with its terms, except as the enforcement thereof
may be limited by applicable bankruptcy, reorganization, insolvency or
other similar laws affecting creditors' rights generally or by general
principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law);
xiv. The issue and sale of the Securities and the compliance
by the Company and the Guarantors with all of the provisions of the
Securities, the Guarantees, the Indenture, this Agreement, the
Registration Rights Agreement and each of the other Operative Documents
and the consummation of the transactions herein and therein contemplated
will not conflict with or result in a breach or violation of any of the
terms or provisions of, or constitute a default under, (A) any indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument
known to such counsel to which the Company or any of the Guarantors is a
party or by which the Company or any of the
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Guarantors is bound or to which any of the property or assets of the
Company or any of the Guarantors is subject, (B) the Certificate of
Incorporation, By-laws (or similar organizational documents) of the
Company or any of the Guarantors or (C) any statute or any order, rule or
regulation of any court or governmental agency or body having jurisdiction
over the Company or any of the Guarantors or any of their properties,
except in the case of clauses (A) and (C), for such conflicts, breaches,
violations or defaults as would not have a Material Adverse Effect;
xv. To the knowledge of such counsel, no consent, approval,
authorization, order, registration or qualification of or with any such
court or governmental agency or body is required for the issue and sale of
the Securities or the consummation by the Company and the Guarantors of
the transactions contemplated by this Agreement, the Indenture, the
Registration Rights Agreement and each of the other Operative Documents,
except for the filing of a registration statement by the Company and the
Guarantors with the Commission pursuant to the Securities Act pursuant to
Section 5(k) hereof and such consents, approvals, authorizations,
registrations or qualifications as may be required under state securities
or Blue Sky laws in connection with the purchase and distribution of the
Securities by the Purchasers;
xvi. The statements set forth in the Offering Circular under
the captions "Certain Relationships and Related Transactions--Acquisition
Arrangements," "--Advisory Services Agreement," "--Arrangements with
Certain Affiliates," "--Master Services Agreement," "Description of Notes"
and "Description of New Bank Credit Facility; Other Indebtedness," insofar
as they purport to constitute a summary of the terms of the Securities and
insofar as they purport to describe the provisions of legal documents, are
accurate summaries thereof in all material respects;
xvii. No registration of the Securities under the Securities
Act, and no qualification of an indenture under the Trust Indenture Act
with respect thereto, is required for the offer, sale and initial resale
of the Securities by the Purchasers in the manner contemplated by this
Agreement, in each case assuming (a) that the persons who buy the
Securities in the initial resale thereof are QIBs or Institutional
Accredited Investors or purchase such Securities outside the United States
in reliance on Regulation S under the Securities Act, (b) the accuracy of
the Purchasers' representations contained herein and those of the Company
contained in this Agreement regarding the absence of a general
solicitation in connection with the sale of the Securities to the
Purchasers and the initial resale thereof, and (c) the accuracy of the
representations and warranties made by each accredited investor as set
forth in the letters of representation executed by such accredited
investors in the form of Annex A to the Offering Circular;
xviii. Each of the Preliminary Offering Circular and the
Offering Circular, as of its date, and each amendment or supplement
thereto, as of its date, contains the information specified in, and meets
the requirements of, Rule 144A(d)(4) under the Securities Act;
xix. Prior to the Exchange Offer or the effectiveness of the
Shelf Registration Statement, the Indenture is not required to be
qualified under the Trust Indenture Act;
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xx. Neither the Company nor any of the Guarantors is an
"investment company" or an entity "controlled" by an "investment company",
as such terms are defined in the Investment Company Act; and
xxi. Although such counsel has not independently verified the
accuracy, completeness or fairness of such statements, such counsel does
not believe that the Preliminary Offering Circular and the Offering
Circular and any further amendments or supplements thereto made by the
Company prior to the Time of Delivery (other than the financial statements
therein, as to which such counsel need express no opinion) contained as of
its date or contains as of the Time of Delivery an untrue statement of a
material fact or omitted or omits, as the case may be, to state a material
fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(c) On the date of the Offering Circular prior to the execution of
this Agreement and also at the Time of Delivery, Deloitte & Touche LLP, Arthur
Andersen LLP and Schweitzer Rubin Karon & Bremer shall have furnished to you
letters, dated the respective dates of delivery thereof, in form and substance
satisfactory to you and your counsel.
(d) (i) Neither the Company nor any of the Guarantors shall have
sustained since the date of the latest audited financial statements included in
the Offering Circular any loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by insurance, or from
any labor dispute or court or governmental action, order or decree, otherwise
than as set forth or contemplated in the Offering Circular, and (ii) since the
respective dates as of which information is given in the Offering Circular there
shall not have been any change in the capital stock or long-term debt of the
Company or any of the Guarantors or any change, or any development involving a
prospective change, in or affecting the general affairs, management, financial
position, shareholders' equity or results of operations of the Company and the
Guarantors, otherwise than as set forth or contemplated in the Offering
Circular, the effect of which, in any such case described in clause (i) or (ii),
is in the judgment of the Purchasers so material and adverse as to make it
impracticable or inadvisable to proceed with the Offering of the Securities on
the terms and in the manner contemplated in this Agreement and in the Offering
Circular.
(e) On or after the date hereof (i) no downgrading shall have
occurred in the rating accorded the Company's debt securities by any "nationally
recognized statistical rating organization", as that term is defined by the
Commission for purposes of Rule 436(g)(2) under the Securities Act, and (ii) no
such organization shall have publicly announced that it has under surveillance
or review, with possible negative implications, its rating of any of the
Company's debt securities.
(f) On or after the date hereof there shall not have occurred any of
the following: (i) a suspension or material limitation in trading in securities
generally on the New York Stock Exchange or on the NASDAQ National Market
("NASDAQ"); (ii) a general moratorium on commercial banking activities declared
by either federal or New York State authorities; or (iii) the outbreak or
escalation of hostilities involving the United States or the declaration by the
United States of a national emergency or war, if the effect of any such event
specified in this clause (iii) in the judgment of the Purchasers makes it
impracticable or inadvisable to proceed with the
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offering of the Securities on the terms and in the manner contemplated hereby
and in the Offering Circular.
(g) The Securities have been designated for trading on PORTAL.
(h) The Company and the Guarantors shall have furnished or caused to
be furnished to you at the Time of Delivery certificates of officers of the
Company and the Guarantors satisfactory to you as to the accuracy of the
representations and warranties of the Company and the Guarantors herein at and
as of such Time of Delivery, as to the performance by the Company and the
Guarantors of all of their respective obligations hereunder to be performed at
or prior to such Time of Delivery, as to the matters set forth in the first
paragraph of this Section 7 and in subsections (d) and (e) of this Section 7 and
as to such other matters as you may reasonably request.
(i) The Company, the Guarantors and the Trustee shall have entered
into the Indenture and the Purchasers shall have received counterparts,
conformed as executed thereof.
(j) The Company, the Guarantors and the Purchasers shall have
entered into the Registration Rights Agreement and the Purchasers shall have
received counterparts, conformed as executed, thereof.
(k) The Company and each other party thereto shall have entered into
the New Bank Credit Facility and the Purchasers shall have received
counterparts, conformed as executed, thereof and of all other documents and
agreements executed in connection therewith.
(l) There shall exist at and as of the Time of Delivery no
conditions that would constitute a default (or an event that with notice or the
lapse of time, or both would constitute a default) under the New Bank Credit
Facility. On the Closing Date, the New Bank Credit Facility shall be in full
force and effect and shall not have been modified.
(m) The Company shall have entered into each of the Acquisition
Documents, the form and substance of each of which shall be reasonably
acceptable to the Purchasers (provided that any Acquisition Document which was
entered into prior to the date of this Agreement shall be deemed acceptable to
the Purchasers in form and substance for purposes of this Section 7), and the
Purchasers shall have received counterparts, conformed as executed, thereof and
of all other documents and agreements entered into in connection therewith. Each
Acquisition Document shall be in full force and effect.
(n) The lenders under the Company's existing credit agreements shall
have delivered letters of satisfaction of discharge to the Company in connection
with the Company's repayment and termination of its existing credit agreements
and the Company shall have delivered such letters to the Purchasers.
(o) Latham & Watkins shall have been furnished with such documents,
in addition to those set forth above, as they may reasonably require for the
purpose of enabling them to review or pass upon the matters referred to in this
Section 7 and in order to evidence the accuracy, completeness or satisfaction in
all material respects of any of the representations, warranties or conditions
herein contained.
(p) Prior to the Closing Date, the Company and the Guarantors shall
have furnished to the Purchasers such further information, certificates and
documents as the Purchasers may reasonably request.
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8. (a) The Company and the Guarantors will, jointly and severally,
indemnify and hold harmless each Purchaser against any losses, claims, damages
or liabilities, joint or several, to which it may become subject, under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in any
Preliminary Offering Circular or the Offering Circular, or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, and will reimburse each Purchaser for any legal or other expenses
reasonably incurred by it in connection with investigating or defending any such
action or claim as such expenses are incurred; provided, however, that neither
the Company nor any of the Guarantors shall be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in the Preliminary Offering Circular or the Offering Circular or
any such amendment or supplement in reliance upon and in conformity with written
information furnished to the Company or any of the Guarantors by or on behalf of
either Purchaser through Goldman, Sachs & Co. expressly for inclusion in the
Preliminary Offering Circular or the Offering Circular.
(b) Each Purchaser will, severally and not jointly, indemnify and
hold harmless the Company and the Guarantors against any losses, claims, damages
or liabilities to which the Company or any of the Guarantors may become subject,
under the Securities Act or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in any
Preliminary Offering Circular or the Offering Circular, or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, in each case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission was made
in the Preliminary Offering Circular or the Offering Circular or any such
amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by or on behalf of such Purchaser expressly
for inclusion in the Preliminary Offering Circular or the Offering Circular and
will reimburse the Company and the Guarantors for any legal or other expenses
reasonably incurred by the Company or the Guarantors in connection with
investigating or defending any such action or claim as such expenses are
incurred.
(c) Promptly after receipt by an indemnified party under subsection
(a) or (b) above of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify the indemnifying party in
writing of the commencement thereof; but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party otherwise than under such subsection. In case any such
action shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it shall wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party (who shall not,
except with the consent of the indemnified party, be counsel to the indemnifying
party), and, after notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof, the indemnifying party shall
not be liable to such indemnified party under such subsection for any legal
expenses of other counsel or any other expenses, in each case subsequently
incurred by such indemnified party, in connection with the defense thereof other
than reasonable costs of investigation. No indemnifying party shall, without the
written consent of the indemnified party, effect the settlement or compromise
of, or consent to the entry of any judgment with respect to, any
21
<PAGE>
pending or threatened action or claim in respect of which indemnification or
contribution may be sought hereunder, unless such settlement, compromise or
judgment (i) includes an unconditional release of the indemnified party from all
liability arising out of such action or claim and (ii) does not include a
statement as to, or an admission of, fault, culpability or a failure to act, by
or on behalf of any indemnified party.
(d) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative benefits received by the Company and the Guarantors on the one hand and
the Purchasers on the other from the offering of the Securities. If, however,
the allocation provided by the immediately preceding sentence is not permitted
by applicable law or if the indemnified party failed to give the notice required
under subsection (c) above, then each indemnifying party shall contribute to
such amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company and the Guarantors on the one hand and Purchasers on the
other in connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities (or actions in respect thereof), as well
as any other relevant equitable considerations. The relative benefits received
by the Company and the Guarantors on the one hand and Purchasers on the other
shall be deemed to be in the same proportion as the total net proceeds from the
Offering of the Securities (before deducting expenses) received by the Company
bear to the total underwriting discounts and commissions received by the
Purchasers, in each case as set forth in the Offering Circular. The relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
and the Guarantors on the one hand or the Purchasers on the other and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Company, the Guarantors and
the Purchasers agree that it would not be just and equitable if contribution
pursuant to this subsection (d) were determined by pro rata allocation (even if
the Purchasers were treated as one entity for such purpose) or by any other
method of allocation which does not take account of the equitable considerations
referred to above in this subsection (d). The amount paid or payable by an
indemnified party as a result of the losses, claims, damages or liabilities (or
actions in respect thereof) referred to above in this subsection (d) shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this subsection (d), no Purchaser
shall be required to contribute any amount in excess of the amount by which the
total underwriting discounts and commissions in respect of the Securities
exceeds the amount of any damages which such Purchaser has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. The Purchasers' obligations in this subsection (d) to
contribute are several in proportion to their respective underwriting
obligations and not joint.
(e) The obligations of the Company and the Guarantors under this
Section 8 shall be in addition to any liability which the Company and the
Guarantors may otherwise have and shall extend, upon the same terms and
conditions, to each person, if any, who controls any Purchaser within the
meaning of the Securities Act; and the obligations of the Purchasers under this
Section 8 shall be in addition to any liability which the respective Purchaser
may otherwise have and shall extend, upon the same terms and conditions, to each
officer and director of the Company and the Guarantors and to each person, if
any, who controls the Company and the
22
<PAGE>
Guarantors within the meaning of the Securities Act. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to indemnification from any person who was not
guilty of such fraudulent misrepresentation.
9. (a) If any Purchaser shall default in its obligation to purchase the
Securities which it has agreed to purchase hereunder, you may in your discretion
arrange for you or another party or other parties to purchase such Securities on
the terms contained herein. If within thirty-six hours after such default by any
Purchaser you do not arrange for the purchase of such Securities, then the
Company shall be entitled to a further period of thirty-six hours within which
to procure another party or other parties satisfactory to you to purchase such
Securities on such terms. In the event that, within the respective prescribed
periods, you notify the Company that you have so arranged for the purchase of
such Securities, or the Company notifies you that it has so arranged for the
purchase of such Securities, you or the Company shall have the right to postpone
the Time of Delivery for a period of not more than seven days, in order to
effect whatever changes may thereby be made necessary in the Offering Circular,
or in any other documents or arrangements, and the Company agrees to prepare
promptly any amendments to the Offering Circular which in your opinion may
thereby be made necessary. The term "Purchaser" as used in this Agreement shall
include any person substituted under this Section with like effect as if such
person had originally been a party to this Agreement with respect to such
Securities.
(b) If, after giving effect to any arrangements for the purchase of
the Securities of a defaulting Purchaser or Purchasers by you and the Company as
provided in subsection (a) above, the aggregate principal amount of such
Securities which remains unpurchased does not exceed one-eleventh of the
aggregate principal amount of all the Securities, then the Company shall have
the right to require each non-defaulting Purchaser to purchase the principal
amount of Securities which such Purchaser agreed to purchase hereunder and, in
addition, to require each non-defaulting Purchaser to purchase its pro rata
share (based on the principal amount of Securities which such Purchaser agreed
to purchase hereunder) of the Securities of such defaulting Purchaser or
Purchasers for which such arrangements have not been made; but nothing herein
shall relieve a defaulting Purchaser from liability for its default.
(c) If, after giving effect to any arrangements for the purchase of
the Securities of a defaulting Purchaser or Purchasers by you and the Company as
provided in subsection (a) above, the aggregate principal amount of Securities
which remains unpurchased exceeds one-eleventh of the aggregate principal amount
of all the Securities, or if the Company shall not exercise the right described
in subsection (b) above to require non-defaulting Purchasers to purchase
Securities of a defaulting Purchaser or Purchasers, then this Agreement shall
thereupon terminate, without liability on the part of any non-defaulting
Purchaser or the Company, except for the expenses to be borne by the Company and
the Purchasers as provided in Section 6 hereof and the indemnity and
contribution agreements in Section 8 hereof; but nothing herein shall relieve a
defaulting Purchaser from liability for its default.
10. The respective indemnities, agreements, representations, warranties
and other statements of the Company and the Guarantors and the Purchasers, as
set forth in this Agreement or made by or on behalf of them, respectively,
pursuant to this Agreement, shall remain in full force and effect, regardless of
any investigation (or any statement as to the results thereof) made by or on
behalf of any Purchaser or any controlling person of any Purchaser, or the
Company or any Guarantor or any officer or director or controlling person of the
Company or any Guarantor, and shall survive delivery of and payment for the
Securities.
23
<PAGE>
11. If this Agreement shall be terminated pursuant to Section 9 hereof,
the Company and the Guarantors shall not then be under any liability to any
Purchaser except as provided in Sections 6 and 8 hereof; but if for any other
reason the Securities are not delivered by or on behalf of the Company and the
Guarantors as provided herein, the Company and the Guarantors will reimburse the
Purchasers for all out-of-pocket expenses, including fees and disbursements of
counsel, reasonably incurred by the Purchasers in making preparations for the
purchase, sale and delivery of the Securities, but the Company and the
Guarantors shall then be under no further liability to any Purchaser except as
provided in Sections 6 and 8 hereof.
12. All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Purchasers shall be delivered or sent by mail, telex or
facsimile transmission to Goldman, Sachs & Co., 85 Broad Street, New York, New
York 10004, Attention: Registration Department; and if to the Company or the
Guarantors shall be delivered or sent by mail, telex or facsimile transmission
to the address of the Company or the Guarantor, as the case may be, set forth in
the Offering Circular, provided, however, that any notice to an Purchaser
pursuant to Section 8(c) hereof shall be delivered or sent by mail, telex or
facsimile transmission to such Purchaser at its address set forth in its
Purchasers' Questionnaire, or telex constituting such Questionnaire, which
address will be supplied to the Company by Goldman, Sachs & Co. upon request.
Any such statements, requests, notices or agreements shall take effect upon
receipt thereof.
13. This Agreement shall be binding upon, and inure solely to the benefit
of, the Purchasers, the Company, the Guarantors and, to the extent provided in
Sections 8 and 10 hereof, the officers and directors of the Company and the
Guarantors and each person who controls the Company, any of the Guarantors or
any Purchaser, and their respective heirs, executors, administrators, successors
and assigns, and no other person shall acquire or have any right under or by
virtue of this Agreement. No purchaser of any of the Securities from any
Purchaser shall be deemed a successor or assign by reason merely of such
purchase.
14. Time shall be of the essence of this Agreement.
15. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York.
16. This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts, each of which shall be deemed to be an
original, but all such respective counterparts shall together constitute one and
the same instrument.
24
<PAGE>
If the foregoing is in accordance with your understanding, please sign and
return to us counterparts hereof, and upon the acceptance hereof, this letter
and such acceptance hereof shall constitute a binding agreement between each of
the Purchasers, the Company and the Guarantors. It is understood that your
acceptance of this letter on behalf of each of the Purchasers is pursuant to the
authority set forth in a form of Agreement among Purchasers, the form of which
shall be submitted to the Company for examination upon request, but without
warranty on your part as to the authority of the signers thereof.
Very truly yours,
Outsourcing Solutions Inc.
By: /s/ Tyler T. Zachem
----------------------------
Name: Tyler T. Zachem
Title: Vice President
CFC Services Corp.
By: /s/ Tyler T. Zachem
----------------------------
Name: Tyler T. Zachem
Title: Vice President
A.M. Miller & Associates, Inc.
By: /s/ Tyler T. Zachem
----------------------------
Name: Tyler T. Zachem
Title: Assistant Secretary
The Continental Alliance, Inc.
By: /s/ Tyler T. Zachem
----------------------------
Name: Tyler T. Zachem
Title: Vice President
Alaska Financial Services, Inc.
By: /s/ Tyler T. Zachem
----------------------------
Name: Tyler T. Zachem
Title: Vice President
25
<PAGE>
Southwest Credit Services, Inc.
By: /s/ David E. King
----------------------------
Name: David E. King
Title: Assistant Secretary
Account Portfolios, Inc.
By: /s/ David E. King
----------------------------
Name: David E. King
Title: Vice President
Account Portfolios G.P., Inc.
By: /s/ David E. King
----------------------------
Name: David E. King
Title: Vice President
Account Portfolios, L.P.
By Account Portfolios G.P.,
Inc., its general partner
By: /s/ David E. King
----------------------------
Name: David E. King
Title: Vice President
Perimeter Credit, L.P.
By Account Portfolios G.P.,
Inc., its general partner
By: /s/ David E. King
----------------------------
Name: David E. King
Title: Vice President
26
<PAGE>
Gulf State Credit, L.P.
By Account Portfolios G.P.,
Inc., its general partner
By: /s/ David E. King
----------------------------
Name: David E. King
Title: Vice President
Accepted as of the date hereof:
Goldman, Sachs & Co.
Chase Securities Inc.
By: /s/ Goldman, Sachs & Co.
------------------------------
(Goldman, Sachs & Co.)
Chase Securities Inc.
By: /s/ Tom Walker
------------------------------
Name: Tom Walker
Title: Managing Director
27
<PAGE>
SCHEDULE I
Principal
Amount of
Securities
to be
Purchasers Purchased
---------
Goldman, Sachs & Co............................................ $ 70,000,000
Chase Securities Inc........................................... $ 30,000,000
Total......................................................... $ 100,000,000
1
<PAGE>
ANNEX I
TERMS AND CONDITIONS OF SALES
UNDER REGULATION S UNDER THE SECURITIES ACT
1. The Securities have not been and will not be registered under the
Securities Act and may not be offered or sold within the United States or to, or
for the account or benefit of, U.S. persons except in accordance with Regulation
S under the Securities Act or pursuant to an exemption from the registration
requirements of the Securities Act. Each Purchaser represents that it has
offered and sold the Securities, and will offer and sell the Securities (i) as
part of their distribution at any time and (ii) otherwise until 40 days after
the later of the commencement of the offering and the Time of Delivery, only in
accordance with Rule 903 of Regulation S or, Rule 144A or pursuant to Paragraph
2 of this Annex I under the Securities Act. Accordingly, each Purchaser agrees
that neither it, its affiliates nor any persons acting on its or their behalf
has engaged or will engage in any directed selling efforts with respect to the
Securities, and it and they have complied and will comply with the offering
restrictions requirement of Regulation S. Each Purchaser agrees that, at or
prior to confirmation of sale of Securities (other than a sale pursuant to Rule
144A) or pursuant to Paragraph 2 of this Annex I, it will have sent to each
distributor, dealer or person receiving a selling concession, fee or other
remuneration that purchases Securities from it during the restricted period a
confirmation or notice to substantially the following effect:
"The Securities covered hereby have not been registered under the U.S.
Securities Act of 1933 (the "Securities Act") and may not be offered and
sold within the United States or to, or for the account or benefit of,
U.S. persons (i) as part of their distribution at any time or (ii)
otherwise until 40 days after the later of the commencement of the
offering and the closing date, except in either case in accordance with
Regulation S (or Rule 144A if available) under the Securities Act. Terms
used above have the meaning given to them by Regulation S."
Terms used in this paragraph have the meanings given to them by Regulation S.
Each Purchaser further agrees that it has not entered and will not enter
into any contractual arrangement with respect to the distribution or delivery of
the Securities, except with its affiliates or with the prior written consent of
the Company.
2. Notwithstanding the foregoing, Securities in registered form may be
offered, sold and delivered by the Purchasers in the United States and to U.S.
persons pursuant to Section 3 of this Agreement without delivery of the written
statement required by paragraph (1) above.
3. Each Purchaser further represents and agrees that (i) it has not
offered or sold, and prior to the date six months after the date of issue of the
Securities will not offer or sell any Securities to persons in the United
Kingdom except to persons whose ordinary activities involve them in acquiring,
holding, managing or disposing of investments (as principal or agent) for the
purposes of their businesses or otherwise in circumstances which have not
resulted and will not result in an offer to the public in the United Kingdom
within the meaning of the Public Offers of Securities Regulations 1995, (ii) it
has complied, and will comply, with all applicable provisions of the Financial
Services Act 1986 of Great Britain with respect to anything done by it in
relation to the Securities in, from or otherwise involving the United Kingdom,
and (iii) it has only issued or passed on, and will only issue or pass on, in
the United Kingdom, any document received by it in connection with the issuance
of the Securities to a person who is of a kind described in Article 11(3) of the
Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1996
of Great Britain or is a person to whom the document may otherwise lawfully be
issued or passed on.
A-1
<PAGE>
4. Each Purchaser agrees that it will not offer, sell or deliver any of
the Securities in any jurisdiction outside the United States except under
circumstances that will result in compliance with the applicable laws thereof,
and that it will take at its own expense whatever action is required to permit
its purchase and resale of the Securities in such jurisdictions. Each Purchaser
understands that no action has been taken to permit a public offering in any
jurisdiction outside the United States where action would be required for such
purpose. Each Purchaser agrees not to cause any advertisement of the Securities
to be published in any newspaper or periodical or posted in any public place and
not to issue any circular relating to the Securities, except in any such case
with Goldman, Sachs & Co.'s express written consent and then only at its own
risk and expense.
A-2
<PAGE>
================================================================================
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
OSI HOLDINGS CORP.,
BOXER ACQUISITION CORP.
AND
PAYCO AMERICAN CORPORATION
Dated as of August 13, 1996
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I THE MERGER AND RELATED MATTERS.......................... 2
1.01 The Merger.............................................. 2
1.02 Conversion of Stock..................................... 3
1.03 Surrender of Certificates............................... 3
1.04 Payment................................................. 4
1.05 No Further Rights of Transfers.......................... 5
1.06 Stock Option and Other Plans............................ 6
1.07 Articles of Incorporation of the Surviving
Corporation............................................ 7
1.08 By-Laws of the Surviving Corporation.................... 7
1.09 Directors and Officers of the Surviving
Corporation............................................ 7
1.10 Closing................................................. 7
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE
COMPANY............................................. 8
2. Representations and Warranties of the
Company................................................ 8
2.01 Due Organization, Good Standing and
Corporate Power........................................ 8
2.02 Authorization and Validity of Agreement................. 8
2.03 Capitalization.......................................... 9
2.04 Subsidiaries and Investments............................ 9
2.05 Consents and Approvals; No Violations................... 10
2.06 Company Reports and Financial Statements................ 11
2.07 Absence of Certain Changes.............................. 12
2.08 Title to Properties; Encumbrances....................... 13
2.09 Compliance with Laws.................................... 13
2.10 Litigation.............................................. 13
2.11 Employee Benefit Plans.................................. 14
2.12 Taxes................................................... 16
2.13 Liabilities............................................. 18
2.14 Licenses; Intellectual Property......................... 18
2.15 Broker's or Finder's Fee................................ 19
2.16 Environmental Laws and Regulations...................... 19
2.17 Real Property; Leases................................... 20
2.18 Material Contracts...................................... 21
(i)
<PAGE>
Page
2.19 Employment Relations.................................... 23
2.20 Customers Relations..................................... 23
2.21 Voting Requirements..................................... 24
2.22 Opinion of Financial Advisor............................ 24
2.23 State Anti-Takeover Statutes............................ 24
ARTICLE III REPRESENTATIONS OF PARENT AND
PURCHASER............................................ 24
3. Representations and Warranties of Parent
and Purchaser........................................... 24
3.01 Due Organization; Good Standing and
Corporate Power....................................... 24
3.02 Authorization and Validity of Agreement................. 24
3.03 Consents and Approvals; No Violations................... 25
3.04 Broker's or Finder's Fee................................ 26
3.05 Ownership of Company's Common Stock..................... 26
ARTICLE IV TRANSACTIONS PRIOR TO CLOSING DATE...................... 26
4.01 Access to Information Concerning
Properties and Records................................ 26
4.02 Confidentiality......................................... 27
4.03 Conduct of the Business of the Company.................. 27
4.04 Proxy Statement......................................... 29
4.05 Stockholder Approval.................................... 29
4.06 Reasonable Best Efforts................................. 29
4.07 No Solicitation of Other Offers......................... 30
4.08 Notification of Certain Matters......................... 32
4.09 HSR Act................................................. 32
4.10 Directors' and Officers' Insurance;
Indemnification....................................... 32
ARTICLE V CONDITIONS PRECEDENT TO OBLIGATIONS OF
THE COMPANY............................................ 34
5. Conditions Precedent to Obligations of the
Company................................................. 34
5.01 Truth of Representations and Warranties................. 34
5.02 Performance of Agreements............................... 34
5.03 Approval of Company's Stockholders...................... 34
5.04 HSR Act................................................. 34
5.05 Injunction.............................................. 34
5.06 Statutes................................................ 35
5.07 Financing............................................... 35
5.08 Third Party Consents; Governmental
Approvals. ........................................... 35
5.09 Certificates............................................ 35
(ii)
<PAGE>
Page
ARTICLE VI CONDITIONS PRECEDENT TO OBLIGATIONS OF
PARENT AND PURCHASER.................................. 35
6. Conditions Precedent to Obligations of Parent
and Purchaser........................................... 35
6.01 Truth of Representations and Warranties................. 35
6.02 Performance of Agreements............................... 36
6.03 No Material Adverse Effect.............................. 36
6.04 Approval of Company's Stockholders...................... 36
6.05 HSR Act................................................. 36
6.06 Injunction.............................................. 36
6.07 Statutes................................................ 36
6.08 Financing............................................... 36
6.09 Third Party Consents; Governmental
Approvals............................................. 37
6.10 Certificates............................................ 37
6.11 Amendment of Stock Plans and Consents to
Cancellation of Options............................... 37
ARTICLE VII TERMINATION AND ABANDONMENT............................ 37
7.01 Termination............................................. 37
7.02 Effect of Termination................................... 39
ARTICLE VIII MISCELLANEOUS..................................... 39
8.01 Fees and Expenses....................................... 39
8.02 Representations and Warranties.......................... 41
8.03 Extension; Waiver....................................... 41
8.04 Public Announcements.................................... 41
8.05 Notices................................................. 41
8.06 Entire Agreement........................................ 43
8.07 Binding Effect; Benefit; Assignment..................... 44
8.08 Amendment and Modification.............................. 44
8.09 Further Actions......................................... 44
8.10 Headings................................................ 44
8.11 Counterparts............................................ 44
8.12 Applicable Law.......................................... 44
8.13 Severability............................................ 45
8.14 Certain Definitions .................................... 45
(iii)
<PAGE>
SCHEDULES
Schedule 2.03 Capitalization
Schedule 2.04 Subsidiaries and Investments
Schedule 2.05 Consents and Approvals
Schedule 2.07 Absence of Certain Changes
Schedule 2.08 Encumbrances
Schedule 2.09 Compliance with Laws
Schedule 2.10 Litigation
Schedule 2.11 Employee Benefit Plans
Schedule 2.12 Taxes
Schedule 2.14 Licenses; Intellectual Property
Schedule 2.16 Environmental Laws and Regulations
Schedule 2.17 Real Property; Leases
Schedule 2.18 Material Contracts
Schedule 2.19 Employment Relations
Schedule 7.01(d) Termination
(iv)
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of August 13, 1996 (this
"Agreement"), by and among OSI HOLDINGS CORP., a Delaware corporation
("Parent"), BOXER ACQUISITION CORP., a Delaware corporation ("Purchaser"), and
PAYCO AMERICAN CORPORATION, a Wisconsin corporation (the "Company").
WHEREAS, the respective Boards of Directors of Parent, Purchaser and
the Company have approved the acquisition of the Company by Parent and
Purchaser;
WHEREAS, to complete such acquisition, the respective Boards of
Directors of Parent, Purchaser and the Company have approved the merger of
Purchaser with and into the Company (the "Merger"), pursuant to and subject to
the terms and conditions of this Agreement;
WHEREAS, the Board of Directors of the Company and the Special
Committee of the Board of Directors of the Company (the "Special Committee") has
each determined that the Merger is fair to, and in the best interests of, the
stockholders of the Company;
WHEREAS, simultaneously with the execution of this Agreement,
Purchaser has entered into an agreement with certain stockholders of the Company
pursuant to which such stockholders agree, subject to certain conditions, to
vote the shares of the Common Stock of the Company owned by them in favor of the
Merger; and
WHEREAS, simultaneously with the execution of this Agreement, and as
required by the Purchaser, the Company has entered into a covenant not to
compete agreement and consulting agreement with Dennis G. Punches, covenant not
to compete agreements and employment agreements with eight other executive
officers of the Company and a covenant not to compete agreement with Joseph T.
Treleven, all of which agreements shall be effective only upon the consummation
of the Merger.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants, representations, warranties and agreements herein contained, the
parties hereto agree as follows:
<PAGE>
ARTICLE I
THE MERGER AND RELATED MATTERS
1.01 The Merger. (a) Subject to the terms and conditions of this
Agreement, at the time of the Closing (as defined in Section 1.10 hereof),
articles of merger (the "Articles of Merger") shall be duly prepared, executed
and acknowledged by the Company in accordance with the Wisconsin Business
Corporation Law (the "WBCL") and a certificate of merger (the "Certificate of
Merger") shall be duly prepared, executed and acknowledged by Purchaser and the
Company in accordance with the Delaware General Corporation Law (the "DGCL") and
shall be filed on the Closing Date (as defined in Section 1.10 hereof). The
Merger shall become effective upon the filing of the Articles of Merger with the
Secretary of State of the State of Wisconsin and the Certificate of Merger with
the Secretary of State of the State of Delaware in accordance with applicable
law. The date and time when the Merger shall become effective is hereinafter
referred to as the "Effective Time."
(b) At the Effective Time, Purchaser shall be merged with and into the
Company and the separate corporate existence of Purchaser shall cease, and the
Company shall continue as the surviving corporation under the laws of the State
of Wisconsin under the name of "Payco American Corporation" (the "Surviving
Corporation").
(c) From and after the Effective Time, the Merger shall have the
effects set forth in the WBCL and the DGCL. Without limiting the generality of
the foregoing, and subject thereto, at the Effective Time, all the properties,
rights, privileges, powers and franchises of the Company and Purchaser shall
vest in the Surviving Corporation, and all debts, liabilities and duties of the
Company and Purchaser shall become the debts, liabilities and duties of the
Surviving Corporation.
(d) If Purchaser so elects, the Merger may alternatively be structured
with Purchaser as the Surviving Corporation. In the event of such an election,
the parties agree to execute an appropriate amendment to this Agreement in order
to reflect such election. If Purchaser elects to structure the Merger so that
Purchaser rather than the Company is the Surviving Corporation, the inaccuracy
of any representation or warranty of the Company which becomes inaccurate solely
as a result of Purchaser becoming the
-2-
<PAGE>
Surviving Corporation, rather than the Company, shall not be deemed to be a
breach of such representation or warranty.
1.02 Conversion of Stock. At the Effective Time:
(a) Each share of common stock, par value $.10 per share, of the
Company (the "Common Stock") then issued and outstanding (other than any shares
of Common Stock which 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 Purchaser), all of which
shall be cancelled and none of which shall receive any payment with respect
thereto) 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 $14.00 (the "Merger Consideration")
payable to the holder thereof less any required withholding taxes; and
(b) Each share of capital stock 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 capital
stock of like tenor of the Surviving Corporation.
1.03 Surrender of Certificates. (a) Prior to the Effective Time,
Parent shall designate a bank or trust company located in the United States,
reasonably satisfactory to Company, 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 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 Purchaser)) 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 I. 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
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Paying Agent shall promptly pay to the Person (as defined in Section 8.14
hereof) entitled thereto the Merger Consideration deliverable in respect
thereof. 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 I. 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 Certificates
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 I,
provided that, the Person to whom the Merger Consideration is paid shall, as a
condition precedent to the payment thereof, give Parent a bond in such sum as it
may direct or otherwise indemnify Parent in a manner satisfactory to it against
any claim that may be made against Parent with respect to the Certificate
claimed to have been lost, stolen or destroyed.
1.04 Payment. Concurrently with or immediately prior to the Effective
Time, Parent or Purchaser shall deposit in trust with the Paying Agent cash in
United States dollars in an aggregate amount equal to the product of (i) the
number of shares of Common Stock outstanding immediately prior to the Effective
Time (other than shares of Common Stock which are held by any subsidiary of the
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
Purchaser)) and (ii) the Merger Consideration (such amount being hereinafter
referred to as the "Pay-
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ment Fund"). The Payment Fund shall be invested by the Paying Agent as directed
by Parent 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 the highest rating of Moody's Investors Services, Inc. or
Standard & Poor's Ratings Group (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 1.02(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 pay to Parent all cash, certificates and
other instruments in its possession that constitute any portion of the Payment
Fund, 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.
1.05 No Further Rights of Transfers. At and after the Effective Time,
each holder of a Certificate shall cease to have any rights as a stockholder of
the Company, except for, in the case of a holder of a Certificate (other than
shares to be cancelled pursuant to Section 1.02(a) hereof), the right to
surrender his or her Certificate in exchange for payment of the Merger
Consideration, 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 I. At the close of business on the day of
the
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Effective Time the stock ledger of the Company with respect to Common Stock
shall be closed.
1.06 Stock Option and Other Plans. (a) Prior to the Effective Time,
the Board of Directors of the Company shall adopt amendments to the stock option
plans of the Company (the "Stock Plans") to provide that in the event of a
merger pursuant to which the stockholders of the Company receive cash for their
shares, the holders of outstanding options to purchase Common Stock (the
"Options") heretofore granted under the Stock Plans shall be entitled, upon
exercise of the Options on or after the effective date of such merger, only to
receive the same cash consideration per share with respect to each share subject
to such Options as received by the stockholders in connection with such merger,
without interest (subject to any applicable withholding taxes, the "Cash
Payment"). Except for any benefits due participants under the Company's Common
Share Equivalent Plan, any then outstanding stock appreciation rights or limited
stock appreciation rights shall be cancelled as of immediately prior to the
Effective Time without any payment therefor. All vested benefits as of the
Effective Time pursuant to the Company's Common Share Equivalent Plan shall be
paid in cash at the Effective Time whether or not payment would otherwise then
be due. As provided herein, the Stock Plans and any other plan, program or
arrangement providing for the issuance or grant of any other interest in respect
of the capital stock of the Company or any subsidiary (collectively with the
Stock Plans, referred to as the "Stock Incentive Plans") shall terminate as of
the Effective Time. The Company will use its reasonable best efforts to obtain
all necessary consents to ensure that upon the Effective Time, the holders of
Options, all of which shall become fully vested as of the Effective Time, shall
surrender the same in cancellation and settlement thereof for a cash
consideration equal to the Cash Payment, less the exercise price of such related
Options.
(b) All Stock Plans shall terminate as of the Effective Time and the
provisions in any other Employee Benefit Plan (as defined in Section 2.11)
providing for the issuance, transfer or grant of any capital stock of the
Company or any interest in respect of any capital stock of the Company shall be
deleted as of the Effective Time, and the Company shall use its best efforts to
ensure that following the Effective Time no holder of an Option or any
participant in any Stock Plans shall have any right
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thereunder to acquire any capital stock of the Company, Parent or the Surviving
Corporation.
1.07 Articles of Incorporation of the Surviving Corporation. The
Articles of Incorporation of the Company, as in effect immediately prior to the
Effective Time, shall be the Articles of Incorporation of the Surviving
Corporation.
1.08 By-Laws of the Surviving Corporation. The By-Laws of the Company,
as in effect immediately prior to the Effective Time, shall be the By-Laws of
the Surviving Corporation.
1.09 Directors and Officers of the Surviving Corporation. At the
Effective Time, the directors of Purchaser 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 Articles of
Incorporation and By-Laws of the Surviving Corporation, until the next annual
stockholders' 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 Company immediately prior to the Effective Time shall,
subject to the applicable provisions of the Articles of Incorporation and
By-Laws of the Surviving Corporation, be the officers of the Surviving
Corporation until their respective successors shall be duly elected or appointed
and qualified.
1.10 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
Articles V and VI hereof is fulfilled or waived (subject to applicable law) but
in no event later than February 12, 1997, or at such other time and place and on
such other date as Parent and the Company shall mutually agree (the "Closing
Date").
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
2. Representations and Warranties of the Company. The Company hereby
represents and warrants to Parent and Purchaser as follows:
2.01 Due Organization, Good Standing and Corporate Power. The Company
is a corporation duly incorporated, validly existing and in good standing under
the laws of the State of Wisconsin. The Company has the requisite corporate
power and authority to own, lease and operate its properties and to carry on its
business as now being conducted. The Company is duly qualified to do business
and is in good standing as a foreign corporation in each jurisdiction in which
the character or location of the properties owned, leased or operated by the
Company or the nature of the business conducted by the Company makes such
qualification necessary, except where the failure to be so duly qualified would
not have a material adverse effect on the business, properties, assets,
liabilities, operations, financial condition, results of operations or prospects
of the Company and its subsidiaries (as hereinafter defined) taken as a whole (a
"Material Adverse Effect").
2.02 Authorization and Validity of Agreement. The Company has full
corporate power and authority to execute and deliver this Agreement, to perform
its obligations hereunder and, subject to requisite approval by the holders of
its Common Stock of this Agreement and the Merger, to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement by the Company, and the consummation by it of the transactions
contemplated hereby, have been duly authorized and approved by its Board of
Directors and the Special Committee and no other corporate action on the part of
the Company is necessary to authorize the execution, delivery and performance of
this Agreement by the Company and the consummation of the transactions
contemplated hereby (other than the approval of this Agreement and the Merger by
the holders of a majority of the shares of Common Stock). This Agreement has
been duly executed and delivered by the Company, and assuming the valid
authorization, execution and delivery of this Agreement by Parent and Purchaser,
is a valid and binding obligation of the Company enforceable against the Company
in accordance with its terms, except to the extent that its enforceability
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may be subject to applicable bankruptcy, insolvency, reorganization, moratorium
and similar laws affecting the enforcement of creditors' rights generally and by
general equitable principles.
2.03 Capitalization. The authorized capital stock of the Company
consists of 50,000,000 shares of Common Stock, $0.10 par value, and 500,000
shares of preferred stock, no par value (the "Preferred Stock"). As of August 9,
1996, (i) 10,155,085 shares of Common Stock were issued and outstanding, (ii)
610,426 shares of Common Stock were reserved for issuance pursuant to
outstanding options granted under the Stock Plans, (iii) no shares of Preferred
Stock were issued and outstanding, and (iv) no shares of Common Stock were held
in the Company's treasury. All issued and outstanding shares of Common 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. Except as set forth in this Section 2.03 or on Schedule 2.03
previously delivered to Parent, (i) there are no shares of capital stock of the
Company authorized, issued or outstanding and (ii) there are not as of the date
hereof, and at the Effective Time there will not be, any outstanding or
authorized options, warrants, rights, subscriptions, claims of any character,
agreements, obligations, convertible or exchangeable securities, or other
commitments, contingent or otherwise, relating to Common Stock or any other
shares of capital stock of the Company, pursuant to which the Company is or may
become obligated to issue shares of Common Stock, any other shares of its
capital stock or any securities convertible into, exchangeable for, or
evidencing the right to subscribe for, any shares of the capital stock of the
Company. The Company has no authorized or outstanding bonds, debentures, notes
or other indebtedness the holders of which have the right to vote (or
convertible or exchangeable into or exercisable for securities having the right
to vote) with the stockholders of the Company or any of its subsidiaries on any
matter.
2.04 Subsidiaries and Investments. Set forth on Schedule 2.04
previously delivered to Parent is a list of each corporation, partnership and
other business entity in which the Company owns, directly or indirectly, any
equity security or other equity interest and which is controlled, directly or
indirectly, by the Company (a "subsidiary"). Except as set forth on Schedule
2.04 each subsidiary is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of
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its incorporation (as set forth on Schedule 2.04), and has all requisite power
to own its property and to carry on its business as now being conducted. Set
forth on Schedule 2.04 is a list of jurisdictions in which each subsidiary is
qualified as a foreign corporation. Such jurisdictions are the only
jurisdictions in which the character or location of the properties owned or
leased by each subsidiary, or the nature of the business conducted by each
subsidiary, makes such qualification necessary, except where the failure to be
so qualified would not have a Material Adverse Effect. All of the outstanding
shares of capital stock and other equity interests of each subsidiary have been
duly authorized and validly issued, are fully paid and nonassessable, and,
except as set forth on Schedule 2.04, are owned, of record and beneficially, by
the Company or a subsidiary, free and clear of all liens, encumbrances,
restrictions and claims of every kind. Except as disclosed on Schedule 2.04, no
shares of capital stock and other equity interests of any subsidiary are
reserved for issuance and there are no outstanding options, warrants, rights,
subscriptions, claims, agreements, obligations, convertible or exchangeable
securities or other commitments, contingent or otherwise, relating to the
capital stock of any subsidiary or pursuant to which any subsidiary is or may
become obligated to issue or exchange any shares of capital stock or other
equity interests. Neither the Company nor any subsidiary owns, directly or
indirectly, any capital stock or other equity or ownership or proprietary
interest in any corporation, partnership, association, trust, joint venture or
other entity except as set forth on Schedule 2.04.
2.05 Consents and Approvals; No Violations. Assuming (i) the filings
required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), are made and the waiting period thereunder has been
terminated or has expired, (ii) the filings required to be made with the
Securities and Exchange Commission (the "Commission") in connection or in
compliance with the Securities Exchange Act of 1934, as amended (the "Exchange
Act") and the rules and regulations of the Commission are made, (iii) such
filings are made and approvals received as may be required pursuant to any
applicable state securities, "blue sky" or anti-takeover laws, (iv) the filing
of the Articles of Merger as required by the WBCL, the filing of the Certificate
of Merger as required by the DGCL and the filing of other appropriate merger
documents is made, (v) the valid authorization, execution and delivery of this
Agreement by Parent and Purchaser and (vi) requisite approval of the Merger by
the holders of Common Stock is received, the
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execution and delivery of this Agreement by the Company and the consummation by
the Company of the transactions contemplated hereby will not: (1) violate any
provision of the Articles of Incorporation or the By-Laws of the Company or any
of its subsidiaries; (2) violate any statute, ordinance, rule, regulation, order
or decree of any court or of any governmental or regulatory body, agency or
authority applicable to the Company or any of its subsidiaries or by which any
of their respective properties or assets may be bound; (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) 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
lien, security interest, charge or encumbrance upon any of the properties or
assets of the Company 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 Company or any of its subsidiaries is a party, or by
which it or any of their respective properties or assets may be bound except for
in the case of clauses (3) and (4) above for such filing, permit, consent or
approval listed on Schedule 2.05 to be delivered to Parent within ten days after
the date of this Agreement, the absence of which, and violations, breaches,
defaults, conflicts and Encumbrances of which, in the aggregate, would not have
a Material Adverse Effect.
2.06 Company Reports and Financial Statements. Since December 31, 1992
the Company has filed all forms, reports and documents with the Commission
required to be filed by it pursuant to the federal securities laws and the
Commission rules and regulations thereunder, and all forms, reports and
documents filed with the Commission have complied in all material respects with
all applicable requirements of the federal securities laws and the Commission
rules and regulations promulgated thereunder. The Company has, prior to the date
of this Agreement, made available to Parent true and complete copies of all
forms, reports, registration statements and other filings filed by the Company
with the Commission since December 31, 1992 (such forms, reports, registration
statements and other filings, together with any exhibits, any amendments thereto
and information incorporated by reference therein, are sometimes collectively
referred to as the "Commission Filings"). As of their respective dates,
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the Commission Filings did not contain any untrue statement of 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. Each of the consolidated balance sheets as of the end of
the fiscal years ended December 31, 1993, December 31, 1994 and December 31,
1995 and the consolidated statements of earnings, consolidated statements of
stockholders' equity and consolidated statements of cash flows for the fiscal
years ended December 31, 1993, December 31, 1994 and December 31, 1995 included
in the Commission Filings, were prepared in accordance with generally accepted
accounting principles (as in effect from time to time) applied on a consistent
basis (except as may be indicated therein or in the notes or schedules thereto)
and fairly present in all material respects the consolidated financial position
of the Company and its consolidated subsidiaries as of the dates thereof and the
results of their operations and cash flows for the periods then ended. The
consolidated balance sheet as of March 31, 1996 and the consolidated statement
of earnings, consolidated statement of stockholders' equity and consolidated
statement of cash flows for the fiscal quarter then ended included in the
Commission Filings were prepared in accordance with generally accepted
accounting principles (except as permitted by Regulation S-X adopted by the
Commission) applied on a consistent basis (except as may be indicated therein or
in the notes thereto) and fairly present in all material respects the
consolidated financial position of the Company and its consolidated subsidiaries
as of March 31, 1996 and the results of operations and cash flows for the fiscal
quarter then ended.
2.07 Absence of Certain Changes. Except as previously disclosed in the
Commission Filings or in Schedule 2.07 previously delivered to Parent, since
December 31, 1995 (i) there has not been any material adverse change in the
business, operations, financial condition or results of operations of the
Company and its subsidiaries taken as a whole; (ii) the businesses of the
Company and each of its subsidiaries have been conducted only in the ordinary
course; (iii) neither the Company nor any of its subsidiaries has, outside the
ordinary course of business, incurred any material liabilities (direct,
contingent or otherwise) or engaged in any material transaction or entered into
any material agreement; (iv) the Company and its subsidiaries have not increased
the compensation of any officer or granted any general salary or benefits
increase to their employees other than in the ordinary course of business; (v)
neither
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the Company nor any of its subsidiaries has taken any action referred to in
Section 4.03 hereof except as permitted or required thereby; (vi) there has been
no declaration, setting aside or payment of any dividend or other distribution
with respect to the capital stock of the Company; and (vii) there has been no
change by the Company in accounting principles, practices or methods.
2.08 Title to Properties; Encumbrances. Except to the extent that any
breach of the representations set forth in this Section could not reasonably be
expected to have a Material Adverse Effect: the Company and each of its
subsidiaries has good title to (i) all its tangible properties and assets (real
and personal), including, without limitation, all the properties and assets
reflected in the consolidated balance sheet as of December 31, 1995 except as
indicated in the notes thereto and except for properties and assets reflected in
the consolidated balance sheet as of December 31, 1995 which have been sold or
otherwise disposed of in the ordinary course of business, and (ii) all the
tangible properties and assets purchased by the Company and any of its
subsidiaries since December 31, 1995 except for such properties and assets which
have been sold or otherwise disposed of in the ordinary course of business, in
each case subject to no encumbrance, lien, charge or other restriction of any
kind or character ("Encumbrances"), except for (a) Encumbrances reflected in the
consolidated balance sheet as of December 31, 1995, (b) Encumbrances for current
taxes, assessments or governmental charges or levies on property not yet due and
delinquent, (c) Encumbrances arising by operation of law and (d) Encumbrances
described on Schedule 2.08 previously delivered to Parent (Encumbrances of the
type described in clauses (a), (b), (c) and (d) above are hereinafter sometimes
referred to as "Permitted Encumbrances").
2.09 Compliance with Laws. Except as set forth on Schedule 2.09
previously delivered to Parent, each of the Company and its subsidiaries is in
compliance with all applicable laws, regulations, orders, judgments and decrees
(including, without limitation, the Fair Debt Collection Practices Act and any
state or local counterpart or equivalent) except for such noncompliances as
could not reasonably be likely to have a Material Adverse Effect.
2.10 Litigation. Except as disclosed in the Commission Filings or as
set forth in Schedule 2.10 previously delivered to Parent, there is no action,
suit, proceeding at
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law or in equity, or any arbitration or any administrative or other proceeding
by or before (or, to the knowledge of the Company, any investigation by) any
governmental or other instrumentality or agency, pending, or, to the knowledge
of the Company, threatened, against or affecting the Company or any of its
subsidiaries, or any of their properties or rights which could materially and
adversely affect the right or ability of the Company or any of its subsidiaries
to carry on its business as now conducted, which could reasonably be likely to
have a Material Adverse Effect or which could reasonably be expected to prevent
or materially delay consummation of the transactions contemplated by this
Agreement, and the Company knows of no valid basis for any such action,
proceeding or investigation. Except as set forth in Schedule 2.10, none of the
Company or any of its subsidiaries is subject to any judgment, order or decree
entered in any lawsuit, proceeding or administrative action in which the Company
or any of its subsidiaries is a party which could reasonably be likely to have a
Material Adverse Effect. There are no such suits, actions, claims, proceedings
or investigations pending or, to the knowledge of the Company, threatened,
seeking to prevent or challenging the transactions contemplated by this
Agreement.
2.11 Employee Benefit Plans.
(a) Schedule 2.11 previously delivered to Parent contains an accurate
and complete list of all domestic and foreign (1) "employee benefit plans,"
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"); (2)
bonus, stock option, stock purchase, restricted stock, incentive,
profit-sharing, pension or retirement, deferred compensation, medical, life,
disability, accident, leave and supplemental retirement benefit plans, programs,
arrangements, commitments and/or practices (whether or not insured); (3)
employment, termination, and severance contracts or agreements; and (4)
consulting agreements in excess of $60,000 or not terminable by the Company upon
less than ninety days' notice; for active, retired or former employees or
directors that have been established, maintained or contributed to since January
1, 1993 (or with respect to which an obligation to contribute has been
undertaken) or with respect to which any potential liability is borne by the
Company and/or any of its subsidiaries (including, for this purpose and for the
purpose of all of the representations in this Section 2.11, any predecessors to
the Company or to any of its subsidiaries and all employers (whether or not
incor-
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porated) that are or were by reason of common control treated together with the
Company and/or any of its subsidiaries as a single employer within the meaning
of Section 414 of the Internal Revenue Code of 1986, as amended, and the rules
and regulations thereunder (the "Code") ("Plans").
(b) Except to the extent that any breach of the representations set
forth in this sentence could not reasonably be expected to have a Material
Adverse Effect: (1) each Plan is in compliance with applicable law and has been
administered and operated in accordance with its terms; (2) each 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,
to the knowledge of the Company, no event has occurred and no condition exists
which could reasonably be expected to result in the revocation of any such
determination; (3) no Plan is subject to Section 412 of the Code or Section 302
or Title IV of ERISA and neither the Company nor any of its subsidiaries has
ever contributed to or had any obligation to contribute to (or borne any
liability with respect to) any "multiemployer plan" (as defined in Section
4001(a)(3) of ERISA); (4) neither the Company nor any of its subsidiaries nor,
to the Company'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 transactions in connection with any Plan
that could reasonably be expected to result in the imposition of a penalty
pursuant to Section 502(i) of ERISA, damages pursuant to Section 409 of ERISA or
a tax pursuant to Section 4975(a) of the Code; and (5) no liability, claim,
action or litigation, has been made, commenced or is expected or, to the
Company's knowledge, threatened with respect to any Plan (other than for
benefits payable in the ordinary course).
(c) The Company has delivered or caused to be delivered to Parent and
its counsel true and complete copies of all material documents in connection
with each Plan, including, without limitation (where applicable): (1) all Plans
as in effect on the date hereof, together with all amendments thereto,
including, in the case of any Plan not set forth in writing, a written
description thereof; (2) all current summary plan descriptions, summaries of
material modifications, and material communications; (3) all current trust
agreements, declarations of trust and other documents establishing other funding
arrangements (and all amendments thereto and the latest financial statements
thereof); (4) the
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most recent Internal Revenue Service determination letter obtained with respect
to each Plan intended to be qualified under Section 401(a) of the Code or exempt
under Section 501(a) of the Code; (5) the most recently filed Internal Revenue
Service Form 5500 for each Plan required to file such Form; (6) the most
recently prepared financial statements; and (7) all material agreements and
contracts relating to each Plan.
2.12 Taxes. (a) Tax Returns. The Company and each of its subsidiaries,
has timely filed or caused to be timely filed with the appropriate taxing
authorities all Federal and other material returns, statements, forms and
reports for Taxes (as hereinafter defined) ("Returns") that are required to be
filed by, or with respect to, the Company and such subsidiaries. The Returns
reflect accurately all material liability for Taxes of the Company 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.
(b) Payment of Taxes. All material Taxes and Tax liabilities of the
Company and its subsidiaries have been timely paid or adequately disclosed and
fully provided for as a liability on the financial statements of the Company and
its subsidiaries in accordance with generally accepted accounting principles.
(c) Other Tax Matters. (i) Schedule 2.12 previously delivered to
Parent sets forth (A) each taxable year or other taxable period of the Company
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 scheduled to be conducted) together with the names of the
respective tax author-
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ities conducting (or scheduled to conduct) such audits or examinations and a
description of the subject matter of such audits or examinations, (B) the most
recent taxable year or other taxable period for which an audit or other
examination relating to Federal income taxes of the Company and its subsidiaries
has been finally completed and the disposition of such audit or examination, (C)
the taxable years or other taxable periods of the Company 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, (D) the amount
of any proposed adjustments (and the principal reason therefor) relating to any
Returns for Tax liability of the Company or any of its subsidiaries which have
been proposed or assessed by any taxing authority and (E) a list of all notices
received by the Company or any of its subsidiaries from any taxing authority
relating to any issue which could affect the Tax liability of the Company or any
of its subsidiaries, which issue has not been finally determined and which, if
determined adversely to the Company or any such subsidiaries, could result in a
material Tax liability.
(ii) Except as provided on Schedule 2.12, neither the Company nor any
of its subsidiaries has been included in any "consolidated," "unitary" or
"combined" Return (other than Returns which include only the Company and any
subsidiaries of the Company) 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.
(iii) All material Taxes which the Company 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.
(iv) Except as previously disclosed to Parent, the Company 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").
(v) There are no tax sharing, allocation, indemnification or similar
agreements or arrangements in effect as between the Company, any subsidiary, or
any predecessor or affiliate thereof and any other party under
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which Parent, Purchaser or the Company (or any of its subsidiaries) could be
liable for any Taxes or other claims of any party other than the Company or any
subsidiary of the Company.
(vi) No indebtedness of the Company or any of its subsidiaries
consists of "corporate acquisition indebtedness" within the meaning of Section
279 of the Code.
(vii) Neither the Company nor any of its subsidiaries has been
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 Company or
any of its subsidiaries, and the Internal Revenue Service has not initiated or
proposed any such adjustment or change in accounting method.
2.13 Liabilities. Neither the Company nor any of its subsidiaries has
outstanding any material claims, liabilities or indebtedness, contingent or
otherwise, except as set forth in the consolidated balance sheet as of December
31, 1995, or referred to in the footnotes thereto, other than liabilities
incurred subsequent to December 31, 1995 in the ordinary course of business.
Neither the Company nor any of its subsidiaries is in default in respect of the
terms and conditions of any indebtedness or other agreement, except for such
defaults which are not likely to result in a Material Adverse Effect.
2.14 Licenses; Intellectual Property. The Company and its subsidiaries
each possess, or own sufficient legal rights to, all licenses, patents, trade
names, trademarks and service marks (each a "License") necessary for the
ownership or use of the Company's and each subsidiary's properties and the
conduct of their businesses as presently conducted, except for which the failure
to own or possess could not reasonably be likely to result in a Material Adverse
Effect. Except as set forth on Schedule 2.14 previously delivered to Parent, all
such Licenses are in full force and effect and, since January 1, 1993, neither
the Company nor any of its subsidiaries has received any written notice of any
event, inquiry, investigation or proceeding threatening the validity of any such
License. To the Company's knowledge, neither the Company nor any of its
subsidiaries has infringed, or is now infringing, on any License or other right
belonging to any other Person.
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2.15 Broker's or Finder's Fee. Except for William Blair & Company,
L.L.C. (whose fees and expenses will be paid by the Company in accordance with
the Company's agreement with such firm, a true and correct copy of which has
been previously delivered to Parent by the Company), no agent, broker, Person or
firm acting on behalf of the Company is, or will be, entitled to any broker's,
finder's or other similar fee from any of the parties hereto, or from any Person
controlling, controlled by, or under common control with any of the parties
hereto, in connection with this Agreement or any of the transactions
contemplated hereby, based upon arrangements made by the Company.
2.16 Environmental Laws and Regulations. Except as set forth on
Schedule 2.16 previously delivered to Parent:
(a) Neither the Company nor any of its subsidiaries has generated,
used, treated or stored any Hazardous Materials (as hereinafter defined) on any
Company Property (as hereinafter defined) and to the Company's knowledge, no
Hazardous Materials have been generated, used, treated or stored on or released
or disposed on any Company Property except in each case where the failure to be
in compliance with Environmental Laws (as hereinafter defined) could not
reasonably be expected to have a Material Adverse Effect.
(b) The Company and its subsidiaries are in compliance with
Environmental Laws and the requirements of permits issued under such
Environmental Laws with respect to any Company Property except where the failure
to be in such compliance could not reasonably be expected to have a Material
Adverse Effect.
(c) There are no pending or, to the Company's knowledge, threatened
Environmental Claims (as hereinafter defined) against the Company or its
subsidiaries or any Company Property.
(d) For purposes of this Section 2.16, the following definitions shall
apply:
"Company Property" means any real property and improvements owned,
leased, used, operated or occupied by the Company and its subsidiaries.
"Hazardous Materials" means (a) any petroleum or petroleum products,
radioactive materials, asbestos in any
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form that is friable, urea formaldehyde foam insulation, transformers or other
equipment that contain dielectric fluid containing levels of polychlorinated
biphenyls, and radon gas; and (b) any chemicals, materials or substances defined
as or included in the definition of "hazardous substances," "hazardous wastes,"
"hazardous materials," "extremely hazardous wastes," "restricted hazardous
wastes," "toxic substances," "toxic pollutants," or words of similar import,
under any applicable Environmental Law.
"Environmental Law" means any federal, state or local statute, law,
rule, regulation, ordinance, code, policy or rule of common law (and in each
case as may have been amended) in effect as of the date of this Agreement, and
any judicial or administrative interpretation thereof as of the date as of this
Agreement, including any judicial or administrative order, consent decree or
judgment, relating to the environment, health, safety or Hazardous Materials,
including the Comprehensive Environmental Response, Compensation, and Liability
Act of 1980, 42 U.S.C. ss. 6901 et seq.; the Resource Conservation and Recovery
Act, 42 U.S.C. ss. 9601 et seq.; the Federal Water Pollution Control Act, 33
U.S.C. ss. 1251 et seq.; the Toxic Substances Control Act, 15 U.S.C. ss. 2601 et
seq.; the Clean Air Act, 42 U.S.C. ss. 7401 et seq.; the Safe Drinking Water
Act, 42 U.S.C. ss. 300f et seq.; the Oil Pollution Act of 1990, 33 U.S.C. ss.
2701 et seq.; and their state and local counterparts and equivalents.
"Environmental Claims" means administrative, regulatory or judicial
actions, suits, demands, demand letters, claims, liens, notices of
non-compliance or violation, investigations or proceedings relating in any way
to any Environmental Law or any permit issued under any such Law (hereafter
"Claims"), including (a) Claims by governmental or regulatory authorities for
enforcement, cleanup, removal, response, remedial or other actions or damages
pursuant to any applicable Environmental Law, and (b) Claims by any third party
seeking damages, contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from Hazardous Materials or arising from alleged
injury or threat of injury to health, safety or the environment.
2.17 Real Property; Leases. Except as set forth on Schedule 2.17
previously delivered to Parent, neither the Company nor any of its subsidiaries
owns any real property. Schedule 2.17 also contains a list of all leases of real
property to which the Company or any subsidiary is a party requiring an annual
aggregate payment of at least $25,000.
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Except as otherwise set on Schedule 2.17, each such lease set forth on Schedule
2.17 is in full force and effect; all rents and additional rents due to date
from the Company and its subsidiaries on each such lease have been paid; neither
the Company nor any of its subsidiaries has received notice that it is in
material default under any such lease; and except as set forth on Schedule 2.17,
there exists, with respect to the Company and its subsidiaries, and to the
Company's knowledge with respect to any party other than the Company or its
subsidiaries, no event, occurrence, condition or act (including the consummation
of the Merger) which, with the giving of notice, the lapse of time or the
happening of any further event or condition, would become a default by the
Company or any of its subsidiaries under such lease, except for such defaults
which could not reasonably be expected to result in a Material Adverse Effect.
2.18 Material Contracts. Except as set forth on Schedule 2.17 and
Schedule 2.18 previously delivered to Parent, neither the Company nor any of its
subsidiaries has or is bound by:
(a) any agreement, contract or commitment that involves the
performance of services by it of an amount or value (as measured by the
revenue derived therefrom during 1995) in excess of $2,000,000 annually,
unless terminable by the Company on not more than 90 days notice,
(b) any material agreement, contract or commitment not in the ordinary
course of business,
(c) 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,
(d) any agreement, contract or commitment to be performed relating to
capital expenditures in excess of $500,000,
(e) any 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 and leases for telephones, copy machines, facsimile machines
and other office equipment),
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(f) 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 or advances against future collections
entered into in the ordinary course of business not in excess of $500,000
to any one client or $2,000,000 in the aggregate), 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 arrangements with employees entered into in the
ordinary course of business consistent with past practice),
(g) 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 Company or any subsidiary),
(h) any management service, consulting or any other similar type of
contract (other than contingent fee agreements with collection attorneys),
involving payments of more than $60,000 annually, unless terminable by the
Company on not more than 90 days notice,
(i) any agreement, contract or commitment limiting the ability of the
Company or any of its subsidiaries to engage in any line of business or to
compete with any Person,
(j) any warranty, guaranty or other similar undertaking with respect
to a contractual performance extended by the Company or any of its
subsidiaries other than in the ordinary course of business, or
(k) any material amendment, modification or supplement in respect of
any of the foregoing.
Except as otherwise set forth on Schedule 2.18, each contract or
agreement set forth on Schedule 2.18 is in full force and effect and there
exists no default or event of default or event, occurrence, condition or act
(including the consummation of the Merger) on the part of the Company or any
subsidiary or, to the knowledge of the Company, on the part of any other Person
which, with the giving of notice,
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the lapse of time or the happening of any other event or condition, would become
a default or event of default thereunder, except for such default or event of
default which could not reasonably be likely to result in a Material Adverse
Effect.
2.19 Employment Relations. Except as set forth on Schedule 2.19
previously delivered to Parent and except for any violations or breaches which,
singly or in the aggregate, could not reasonably be expected to have a Material
Adverse Effect:
(a) The Company and each of its subsidiaries is in compliance with all
Federal, state or other applicable laws, domestic or foreign, 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;
(b) no unfair labor practice complaint against the Company or any of
its subsidiaries is pending before the National Labor Relations Board;
(c) there is no labor strike, dispute, slowdown or stoppage actually
pending or threatened against or involving the Company or any of its
subsidiaries;
(d) neither the Company nor any of its subsidiaries is a party to any
collective bargaining agreement and no collective bargaining agreement is
currently being negotiated by the Company or any of its subsidiaries; and
(e) no claim in respect of the employment of any employee has been
asserted or, to the knowledge of the Company, threatened, against the
Company or any of its subsidiaries.
2.20 Customers Relations. None of the top twenty customers of the
Company (based on the Company's 1995 consolidated revenues) has notified the
Company or any of its subsidiaries that it intends to either (i) terminate or
modify in a manner adverse to the Company or any of its subsidiaries its
contractual arrangements with the Company or any of its subsidiaries or (ii)
substantially curtail the amount of business it currently does with the Company
or any of its subsidiaries.
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2.21 Voting Requirements. The affirmative vote of the holders of a
majority of all the shares of Common Stock entitled to be cast approving this
Agreement is the only vote of the holders of any class or series of the
Company's capital stock necessary to approve this Agreement and the transactions
contemplated by this Agreement. Sections 180.1130-1133 of the WBCL are
inapplicable to the transactions contemplated by this Agreement. This
representation is made in reliance upon, and assumes the accuracy of, the
Parent's and Purchaser's representation made in Section 3.05 of this Agreement.
2.22 Opinion of Financial Advisor. The Company has received the
opinion of William Blair & Company, L.L.C., to the effect that, as of the date
of this Agreement, the consideration to be received in the Merger by the
Company's stockholders is fair to the Company's stockholders from a financial
point of view, and a complete and correct signed and correct signed copy of such
opinion has been, or promptly upon receipt thereof will be, delivered to Parent.
2.23 State Anti-Takeover Statutes. The Company has taken all necessary
action to render Sections 180.1140-1145 and Section 180.1150 of the WBCL
inapplicable to the transactions contemplated by this Agreement.
ARTICLE III
REPRESENTATIONS OF PARENT AND PURCHASER
3. Representations and Warranties of Parent and Purchaser. Each of
Parent and Purchaser represents and warrants to the Company as follows:
3.01 Due Organization; Good Standing and Corporate Power. Each of
Parent and Purchaser is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware.
3.02 Authorization and Validity of Agreement. Each of Parent and
Purchaser has full corporate power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement by Parent and Purchaser, and the consummation by each of them of
the transactions contemplated hereby, have been duly authorized by the Boards of
Directors
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of Parent and Purchaser and, to the extent legally required, by their respective
stockholders. No other corporate action on the part of either of Parent or
Purchaser is necessary to authorize the execution, delivery and performance of
this Agreement by each of Parent and Purchaser and the consummation of the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by each of Parent and Purchaser and is a valid and binding obligation
of each of Parent and Purchaser, enforceable against each of Parent and
Purchaser in accordance with its terms, except that such enforcement may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting creditors' rights generally, and general equitable
principles.
3.03 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) filings required to be made with the Commission
in connection or in compliance with the Exchange Act and the rules and
regulations of the Commission are made, (iii) the filing of the Articles of
Merger as required by the WBCL, the filing of the Certificate of Merger as
required by the DGCL and the filing of other appropriate merger documents, if
any, is made and (iv) the valid authorization, execution and delivery of this
Agreement by the Company, the execution and delivery of this Agreement by Parent
and Purchaser and the consummation by Parent and Purchaser of the transactions
contemplated hereby will not: (1) violate any provision of the Certificate of
Incorporation or By-Laws of Parent or Purchaser; (2) violate any statute,
ordinance, rule, regulation, order or decree of any court or of any governmental
or regulatory body, agency or authority applicable to Parent or Purchaser or by
which either of their respective properties or assets may be bound; (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) 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 or acceleration) under, or result in the creation of any lien,
security interest, charge or encumbrance upon any of the properties or assets of
Parent or Purchaser under, any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, license, franchise, permit, agreement, lease or
other instrument or obligation to which Parent or Purchaser is a party, or by
which they or their respective properties or assets may be bound, except for in
the case of
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clauses (3) and (4) above, such filing, permit, consent, approval or violation
which would not reasonably be expected to prevent or materially delay the
consummation of the transactions contemplated by this Agreement.
3.04 Broker's or Finder's Fee. No agent, broker, Person or firm acting
on behalf of Parent or Purchaser is, or will be, entitled to any fee, commission
or broker's or finder's fees from the Company or any stockholder of the Company
in connection with this Agreement or any of the transactions contemplated
hereby.
3.05 Ownership of Company's Common Stock. Neither Parent nor Purchaser
is a "significant shareholder", as defined in Section 180.1130 of the WBCL, of
the Company and neither Parent nor Purchaser is an affiliate, as defined in
Section 180.0103 of the WBCL, of a significant shareholder of the Company.
ARTICLE IV
TRANSACTIONS PRIOR TO CLOSING DATE
4.01 Access to Information Concerning Properties and Records. During
the period commencing on the date hereof and ending on the Closing Date, the
Company shall, and shall cause each of its subsidiaries to, upon reasonable
notice, afford Parent and Purchaser, and their respective counsel, accountants,
consultants and other authorized representatives, full access during normal
business hours to the employees, properties, books and records of the Company
and its subsidiaries in order that they may have the opportunity to make such
investigations as they shall desire of the affairs of the Company and its
subsidiaries; provided that such investigations shall be conducted so as to
minimize disturbances to the operation of the Company's business. The Company
shall furnish reasonably promptly to Parent and Purchaser (a) a copy of each
report, schedule, registration statement and other document filed by it or its
subsidiaries during such period pursuant to the requirements of Federal or state
securities laws and (b) all other information concerning its or its
subsidiaries' business, properties and personnel as Parent and Purchaser may
reasonably request. The Company agrees to cause its officers and employees to
furnish such additional financial and operating data and other information and
respond to such inquiries as Parent or Purchaser shall from time to time
reasonably request.
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4.02 Confidentiality. Information obtained by Parent and Purchaser
pursuant to Section 4.01 hereof shall be subject to the provisions of the
Confidentiality Agreement between the Company and Account Portfolios, Inc. dated
November 9, 1995 (the "Confidentiality Agreement"), to which Parent made itself
subject pursuant to a letter agreement dated May 3, 1996.
4.03 Conduct of the Business of the Company. During the period from
the date of this Agreement to the Closing Date, the Company shall, and shall
cause each of its subsidiaries to, conduct its operations only according to its
ordinary and usual course of business; use its reasonable efforts to (i)
preserve intact its business organizations, (ii) keep available the services of
its officers and employees and (iii) maintain satisfactory relationships with
licensors, suppliers, distributors, customers, landlords, employees, agents and
others having business relationships with it. Notwithstanding the immediately
preceding sentence, prior to the Closing Date, except as may be first approved
in writing by Parent or as is otherwise permitted or required by this Agreement,
the Company shall, and shall cause each of its subsidiaries to:
(a) maintain its Articles of Incorporation, by-laws and other
organizational documents, as applicable, in its form on the date of this
Agreement,
(b) other than in the ordinary course of business consistent with past
practice, refrain from paying or increasing any bonuses, salaries, or other
compensation to any director, officer, employee or stockholder or entering
into any employment, severance, or similar agreement with any director,
officer, or employee,
(c) refrain from the adopting or, other than in the ordinary course of
business consistent with past practice, increasing of any profit sharing,
bonus, deferred compensation, savings, insurance, pension, retirement, or
other employee benefit plan for or with any of its employees except as
required by law,
(d) refrain from entering into any material contract or commitment
except material contracts and commitments in the ordinary course of
business,
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(e) refrain from increasing its indebtedness for borrowed money except
current borrowings in the ordinary course,
(f) refrain from cancelling or waiving any claim or right of
substantial value which individually or in the aggregate is material,
(g) refrain from declaring or paying any dividends in respect of its
capital stock or redeeming, purchasing or otherwise acquiring any of its
capital stock,
(h) refrain from making any material change in accounting methods or
practices, except as required by law or generally accepted accounting
principles,
(i) refrain from issuing or selling any shares of capital stock or any
other securities except pursuant to outstanding options, or issuing any
securities convertible into, or options, warrants or rights to purchase or
subscribe to, or entering into any arrangement or contract with respect to
the issue and sale of, any shares of its capital stock or any other
securities, or making any other changes in its capital structure,
(j) refrain from selling, leasing or otherwise disposing of any
material asset or property other than sales in the ordinary course of
business consistent with past practice,
(k) refrain from making any capital expenditure or commitment
therefor, except in the ordinary course of business,
(l) refrain from writing off as uncollectible any notes or accounts
receivable, except write-offs in the ordinary course of business consistent
with past practice,
(m) refrain from purchasing or otherwise acquiring portfolios of
loans, notes, accounts receivable, mortgages or other indebtedness, for a
purchase price in excess of $500,000 for any such portfolio, and
(n) refrain from agreeing in writing to do any of the foregoing.
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4.04 Proxy Statement. As promptly as practicable, the Company will
prepare and file a preliminary Proxy Statement with the Commission and will use
its reasonable best efforts to respond to the comments of the Commission 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). The Company will cause the definitive Proxy Statement to be mailed
to the stockholders of the Company and, if necessary, after the definitive Proxy
Statement shall have been so mailed, promptly circulate amended, supplemental or
supplemented proxy material and, if required in connection therewith, resolicit
proxies. The Company will not use any proxy material in connection with the
meeting of its stockholders without Parent's prior approval, which shall not be
unreasonably withheld.
4.05 Stockholder Approval. The Company, acting through its Board of
Directors, shall, in accordance with applicable law, call a special meeting of
the holders of Common Stock for the purpose of voting upon this Agreement and
the Merger and the Company agrees that this Agreement and the Merger shall be
submitted at such special meeting. The Company shall use its reasonable efforts
to solicit from its stockholders proxies, and shall take all other action
necessary and advisable, to secure the vote of stockholders required by
applicable law to obtain the approval for this Agreement. Subject to Section
4.07 of this Agreement, the Company 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.
4.06 Reasonable Best Efforts. Each of the Company, Parent and
Purchaser shall, and the Company shall cause each of its subsidiaries to,
cooperate and use their respective reasonable best efforts to take, or cause to
be taken, all appropriate action, and to make, or cause to be made, all filings
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement,
including, without limitation, their respective reasonable best efforts to
obtain, prior to the Closing Date, all licenses, permits, consents, approvals,
authorizations, qualifications and orders of governmental authorities and
parties to contracts with the Company and its subsidiaries as are necessary for
consummation of the transactions contem-
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plated by this Agreement and to fulfill the conditions to the Merger.
4.07 No Solicitation of Other Offers. (a) Neither the Company nor any
of its subsidiaries shall, directly or indirectly, take (and the Company shall
not authorize or permit its or its subsidiaries' 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 submission of any Acquisition Proposal (as hereinafter defined),
(ii) enter into any agreement with respect to any Acquisition Proposal or (iii)
participate in any way in discussions or negotiations with, or, furnish any
information to, any Person (other than the Company, Parent or Purchaser) 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 that
would make Section 180.1141 of the WBCL inapplicable to an Acquisition Proposal)
that constitutes, or may reasonably be expected to lead to, any Acquisition
Proposal, provided, however, that the Company 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 Company reasonably believes will
result in a Superior Proposal if the Board of Directors determines, in its good
faith judgment (and has been advised by independent legal counsel), that failing
to take such action would constitute a breach of its fiduciary obligations under
applicable law. In addition, neither the Board of Directors of the Company nor
the Special Committee shall withdraw or modify, or propose to withdraw or
modify, in a manner adverse to Parent the approval and recommendation of the
Merger and this Agreement or approve or recommend, or propose to approve or
recommend, any Acquisition Proposal; provided that the Board of Directors of the
Company and the Special Committee may recommend to its shareholders an
Acquisition Proposal and in connection therewith withdraw or modify its approval
or recommendation of this Agreement and the Merger if (i) the Board of Directors
of the Company and the Special Committee have determined that such Acquisition
Proposal is a Superior Proposal, (ii) all the conditions to the Company's right
to terminate this Agreement in accordance with Section 7.01(d) have been
satisfied (including the payment of the amounts required by Section 8.01) and
(iii) this Agreement is terminated in accordance with Section 7.01(d). Any
actions permitted under, and taken in compliance with, this Section
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4.07 shall not be deemed a breach of any covenant or agreement of such party
contained in this Agreement.
"Acquisition Proposal" shall mean any proposed merger or other
business combination, sale or other disposition of any material amount of
assets, sale of shares of capital stock, tender offer or exchange offer or
similar transactions involving the Company or any of its subsidiaries. "Superior
Proposal" shall mean a bona fide proposal made by a third party to acquire not
less than 80% of the outstanding shares of the Company pursuant to a tender
offer, a merger or a sale of all or substantially all of the assets of the
Company on terms which a majority of the members of the Board of Directors of
the Company determines in its good faith judgment to be more favorable to the
Company's stockholders than the transactions contemplated hereby.
(b) In addition to the obligations of the Company set forth in
paragraph (a), on the date of receipt thereof the Company shall advise Parent of
any request for information or of any Acquisition Proposal, or any proposal with
respect to any Acquisition Proposal, the material terms and conditions of such
request or takeover proposal, and the identity of the person making any such
takeover proposal or inquiry. The Company will keep Parent fully informed in all
material respects of the status and details (including amendments or proposed
amendments) of any such request, takeover proposal or inquiry and keep Parent
fully informed in all material respects as to the details of any information
requested of or provided by the Company and as to the details of all discussions
or negotiations with respect to any such request, takeover proposal or inquiry.
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(c) Immediately following the Closing, the Company will request each
person which has heretofore executed a confidentiality agreement in connection
with its consideration of acquiring the Company or any portion thereof to return
all confidential information heretofore furnished to such person by or on behalf
of the Company.
4.08 Notification of Certain Matters. The Company shall give prompt
notice to Parent of: (i) the occurrence, or non-occurrence, of any event known
to the Company, the occurrence, or non-occurrence, of which would reasonably be
expected to cause any representation or warranty of the Company contained in
this Agreement to be untrue or inaccurate in any material respect, (ii) any
failure of the Company to comply with or satisfy any covenants, condition or
agreement to be complied with or satisfied by it hereunder, (iii) any notice of,
or other communication relating to, a material default or event that, with
notice or lapse of time or both, would become a material default, received by
the Company 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
Company or any of its subsidiaries is a party or is subject, and (iv) the
occurrence of any event known to the Company which has resulted in or could
reasonably be expected to result in a Material Adverse Effect. Each of the
Company 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.
4.09 HSR Act. The Company and Parent shall, as soon as practicable,
file Notification and Report Forms under the HSR Act with the Federal Trade
Commission (the "FTC") and the Antitrust Division of the Department of Justice
(the "Antitrust Division") and shall use their reasonable best efforts to
respond as promptly as practicable to all inquiries received from the FTC or the
Antitrust Division for additional information or documentation.
4.10 Directors' and Officers' Insurance; Indemnification. (a) The
Articles of Incorporation and the by-laws of the Surviving Corporation (or
Purchaser if this Agreement shall be amended to provide that Purchaser is the
Surviving Corporation) shall contain the provisions with respect to
indemnification and exculpation from liability set forth in
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the Company's Articles of Incorporation and by-laws on the date of this
Agreement, 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 who on or prior to the
Effective Time were directors, officers, employees or agents of the Company,
unless such modification is required by law.
(b) For three years from the Effective Time, the Surviving Corporation
shall either (x) maintain in effect the Company's current directors' and
officers' liability insurance policy covering those persons who are currently
covered on the date of this Agreement by such policy (a copy of which has been
heretofore delivered to Parent) (the "Indemnified Parties"); provided, however,
that in no event shall the Surviving Corporation be required to expend in any
one year an amount in excess of 150% of the annual premiums currently paid by
the Company for such insurance which the Company represents to be $44,500 for
the twelve month period ended November 25, 1996 (the "Current Premium"); and
provided further, that if the annual premiums of such insurance coverage exceed
150% of the Current Premium, the Surviving Corporation may, at its option,
terminate the existing policy and obtain a policy with the greatest coverage
available for a cost not exceeding 150% of the Current Premium and containing
terms and conditions which are no less advantageous in any material respect to
the Company's current and past directors and officers and provided that said
substitution does not result in any gaps or lapses in coverage with respect to
matters occurring prior to the Effective Time; provided further, that the
Surviving Corporation may substitute for such Company policy a policy with at
least the same coverage containing terms and conditions which are no less
advantageous in any material respect to the Company's current and past directors
and officers and provided that said substitution does not result in any gaps or
lapses in coverage with respect to matters occurring prior to the Effective Time
or (y) cause Parent's directors' and officers' liability insurance then in
effect to cover those persons who are covered on the date of this Agreement by
the Company's directors' and officers' liability insurance policy, but only if
Parent's policy provides at least the same coverage containing terms and
conditions which are no less advantageous in any material respect to the
Company's current and past directors and officers and provided that said
substitution does not result in any gaps
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or lapses in coverage with respect to matters occurring prior to the Effective
Time.
ARTICLE V
CONDITIONS PRECEDENT TO
OBLIGATIONS OF THE COMPANY
5. Conditions Precedent to Obligations of the Company. The obligations
of the Company 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:
5.01 Truth of Representations and Warranties. The representations and
warranties of Parent and Purchaser contained in this Agreement shall be true and
correct in all material respects on and as of the Closing Date with the same
effect as though such representations and warranties had been made on and as of
such date.
5.02 Performance of Agreements. All of the agreements of Parent and
Purchaser to be performed prior to the Closing pursuant to the terms of this
Agreement shall have been duly performed in all material respects.
5.03 Approval of Company's Stockholders. This Agreement and the Merger
shall have been approved and adopted by the holders of the outstanding Common
Stock in accordance with the requirements of the WBCL.
5.04 HSR Act. Any waiting period (and any extension thereof) under the
HSR Act applicable to the Merger shall have expired or been terminated.
5.05 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 other
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.
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5.06 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 consummation of the Merger illegal.
5.07 Financing. Parent shall have received financing necessary to
enable it and Purchaser to consummate the transactions contemplated by this
Agreement in accordance with the terms contained in the "highly confident"
letters dated August 12, 1996 to Parent from Goldman, Sachs & Co. and Chase
Securities Inc. and the commitment letter dated August 7, 1996 to Parent from
Pearl Street L.P., The Chase Manhattan Bank and Chase Securities Inc.
5.08 Third Party Consents; Governmental Approvals. All consents,
approvals or waivers, if any, required in connection with the consummation of
the transactions contemplated by this Agreement shall have been received. All of
the consents, approvals, authorizations, exemptions and waivers from
governmental agencies that shall be required in order to enable Company to
consummate the transactions contemplated hereby shall have been obtained.
5.09 Certificates. The Company shall have received a certificate of
Parent executed on its behalf by an executive officer of Parent to the effect
that the conditions set forth in Sections 5.01, 5.02 and 5.07 hereof have been
satisfied.
ARTICLE VI
CONDITIONS PRECEDENT TO
OBLIGATIONS OF PARENT AND PURCHASER
6. Conditions Precedent to Obligations of Parent and Purchaser. The
obligations of Parent and Purchaser 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:
6.01 Truth of Representations and Warranties. The representations and
warranties of the Company contained in this Agreement shall be true and correct
on and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of such date,
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except where the failure of such representations and warranties to be true and
correct shall not reasonably be expected, individually or in the aggregate, to
have a Material Adverse Effect.
6.02 Performance of Agreements. All of the agreements of the Company
to be performed prior to the Closing pursuant to the terms of this Agreement
shall have been duly performed in all material respects.
6.03 No Material Adverse Effect. Prior to the Closing there shall have
been no Material Adverse Effect.
6.04 Approval of Company's Stockholders. This Agreement and the Merger
shall have been approved and adopted by the holders of the outstanding Common
Stock in accordance with the requirements of the WBCL.
6.05 HSR Act. Any waiting period (and any extension thereof) under the
HSR Act applicable to the Merger shall have expired or been terminated.
6.06 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 other
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.
6.07 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 consummation of the Merger illegal.
6.08 Financing. Parent shall have received financing necessary to
enable it and Purchaser to consummate the transactions contemplated by this
Agreement in accordance with the terms contained in the "highly confident"
letters dated August 12, 1996 to Parent from Goldman, Sachs & Co. and Chase
Securities Inc. and the commitment letter dated
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August 7, 1996 to Parent from Pearl Street L.P., The Chase Manhattan Bank and
Chase Securities Inc.
6.09 Third Party Consents; Governmental Approvals. All consents,
approvals or waivers, if any, required in connection with the consummation of
the transactions contemplated by this Agreement shall have been received. All of
the consents, approvals, authorizations, exemptions and waivers from
governmental agencies that shall be required in order to enable Parent and
Purchaser to consummate the transactions contemplated hereby shall have been
obtained.
6.10 Certificates. Parent and Purchaser shall have received a
certificate of the Company executed on its behalf by an executive officer of the
Company to the effect that the conditions set forth in Sections 6.01 and 6.02
hereof have been satisfied.
6.11 Amendment of Stock Plans and Consents to Cancellation of Options.
The Board of Directors of the Company shall have amended the Stock Plans in
accordance with Section 1.06 hereof, and the Company shall, as provided in such
Section, have obtained all necessary consents to ensure that, upon the Effective
Time, the holders of Options shall surrender the same in cancellation and
settlement thereof for a cash consideration equal to the Cash Payment, less the
exercise price of such related Options. After the Effective Time, the Surviving
Corporation shall have no obligation to issue, transfer or sell any shares of
common stock of the Surviving Corporation pursuant to any Employee Benefit Plan.
ARTICLE VII
TERMINATION AND ABANDONMENT
7.01 Termination. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned, at any time prior to the
Effective Time, whether before or after approval of the Merger by the Company's
stockholders:
(a) by mutual written consent of the Company and Parent;
(b) by either Parent, on the one hand, or the Company, on the other
hand, if any governmental or regulatory agency shall have issued an order,
decree or ruling or taken
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any other action permanently enjoining, restraining or otherwise prohibiting the
consummation of the Merger and such order, decree or ruling or other action
shall have become final and nonappealable;
(c) by either Parent, on the one hand, or the Company, on the other
hand, if the Merger shall not have been consummated by February 12, 1997, or by
the Company if the Merger shall not have been consummated within 60 days after
approval of this Agreement and the Merger by the Company's stockholders, unless
the Merger shall not have been consummated because of an intentional or willful
material breach of any representation or warranty on the part of the Company set
forth in this Agreement or because of a material breach of any covenant or
agreement on the part of the Company set forth in this Agreement which the
Company has failed to cure within ten days after written notice thereof by
Parent to the Company;
(d) by either Parent, on the one hand, or the Company, on the other
hand, if the Board of Directors of the Company and if required the Special
Committee, determines in its good faith judgment that an Acquisition Proposal
will result in a Superior Proposal and the Board determines in its good faith
judgment (and has been advised by independent legal 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 obligations under applicable
law; provided, however the Company may not terminate this Agreement pursuant to
this Section 7.01(d) unless (i) the Company has given reasonably prompt written
notice to Parent of the receipt of such Acquisition Proposal and following such
notification by the Company of Parent of receipt of such Acquisition Proposal
the Company keeps Parent reasonably informed of the terms and conditions of such
Acquisition Proposal (and any modification thereto), and the identity of the
Person making such Proposal, (ii) prior to or simultaneously with such
termination the Company has paid the $4,800,000 amount set forth in Section 8.01
by wire transfer in same day funds to the account identified in Schedule 7.01(d)
previously delivered to the Company and (iii) prior to or simultaneously with
such termination the Company enters into a definitive acquisition, merger or
similar agreement to effect the Superior Proposal;
(e) by Parent if (i) there shall have been a breach of any
representation or warranty on the part of the Company contained in this
Agreement which would reasonably
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be expected to have a Material Adverse Effect, (ii) there shall have been a
material breach of any covenant or agreement on the part of the Company
contained in this Agreement and the Company has failed to cure such breach
within ten days after written notice thereof from Parent, or (iii) the Board of
Directors of the Company or the Special Committee shall have withdrawn or
modified in a manner adverse to Parent its approval or recommendation of this
Agreement or the Merger and shall not have reinstated such approval or
recommendation within three business days thereof or the Company shall have
entered into a definitive acquisition, merger or similar agreement to effect a
Superior Proposal; or
(f) by the Company if (i) any of the representations and warranties of
Parent or Purchaser contained in this Agreement were untrue or incorrect in any
material respect when made or have since become, and at the time of termination
remain, incorrect in any material respect, or (ii) Parent or Purchaser shall
have breached or failed to comply in any material respect with any of their
respective obligations under this Agreement.
7.02 Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 7.01 hereof by Parent, on the one hand, or the
Company, on the other hand, written notice thereof shall forthwith be given to
the other party or parties specifying the provision 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,
Purchaser or the Company, except that Sections 4.02, 8.01 and this Section 7.02
hereof shall survive any termination of this Agreement.
ARTICLE VIII
MISCELLANEOUS
8.01 Fees and Expenses. (a) Except as provided in paragraphs (b) or
(c) 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) (i) If this Agreement is terminated (A) by the Company pursuant to
Section 7.01(c) under circumstances where the conditions to the Company's
obligations set forth in
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Sections 5.01, 5.02 and 5.04 through 5.08, inclusive, have been satisfied and
prior to such termination, the Company shall have notified its stockholders that
a third party has made a Superior Proposal or a third party shall have publicly
announced a proposal which may represent a Superior Proposal, or (B) by Parent
pursuant to Section 7.01(e)(i) or (ii) as a result of an intentional or willful
breach, and within twelve months after such termination, the Company 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, tender offer or exchange offer or similar transaction involving the
Company or any of its subsidiaries (a "Third Party Acquisition"), or a Third
Party Acquisition occurs, involving any party (or any affiliate or associate
thereof) (x) with whom the Company (or its agents) during the term of this
Agreement had any discussions with respect to a Third Party Acquisition, (y) to
whom the Company (or its agents) 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 Company 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 or (ii) if this
Agreement is terminated (A) by the Company in accordance with Section 7.01(d),
or (B) by Parent pursuant to Section 7.01(e)(iii), then the Company shall pay to
Parent in same day funds, within two business days following such termination
(except as required to be earlier paid in accordance with Section 7.01(d)) an
amount (reduced by any amount or reimbursement paid pursuant to Section 8.01(c))
equal to $4,800,000 plus, within two business days of being furnished with
appropriate documentation, reimbursement for the out-of-pocket fees and expenses
reasonably incurred by Parent in connection with the Merger and the transactions
contemplated thereby (not to exceed $1,500,000 in the aggregate).
(c) If Parent terminates this Agreement pursuant to Section 7.01(e)(i)
or (ii) as a result of an intentional or willful breach, then the Company shall
pay to Parent in same day funds, within two business days following such
termination $1,000,000, plus, within two business days of being furnished with
appropriate documentation, reimbursement for the out-of-pocket fees and expenses
reasonably incurred by Parent in connection with the Merger and the transactions
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contemplated thereby (not to exceed $1,500,000 in the
aggregate).
8.02 Representations and Warranties. The respective representations
and warranties of the Company, on the one hand, and Parent and Purchaser, on the
other hand, contained herein or in any certificates or other documents delivered
prior to or at the Closing shall not be deemed waived or otherwise affected by
any investigation made by any party. Each and every such representation and
warranty shall expire with, and be terminated and extinguished as of the
Effective Time and thereafter none of the Company, Parent or Purchaser or their
respective officers, directors, employees and agents shall be under any
liability whatsoever with respect to any such representation or warranty.
8.03 Extension; Waiver. At any time prior to the Effective Time, the
parties hereto, by action taken by or on behalf of the Board of Directors of the
Company and the Special Committee and the Board of Directors of Parent or
Purchaser, may (i) extend the time for the performance of any of the obligations
or other acts of the other parties hereto, (ii) waive any inaccuracies in the
representations and warranties contained herein by any other applicable party or
in any document, certificate or writing delivered pursuant hereto by any other
applicable party or (iii) waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of any party to any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party.
8.04 Public Announcements. The Company, on the one hand, and Parent
and Purchaser, on the other hand, agree to consult promptly with each other
prior to issuing any press release or otherwise making any public statement with
respect to the transactions contemplated hereby, and shall not issue any such
press release or make any such public statement prior to such consultation and
review by the other party of a copy of such release or statement, unless such
party has been advised by counsel that such release or statement is required by
applicable law.
8.05 Notices. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given if delivered in person or
mailed, certified or registered mail with postage prepaid, or sent by telex,
telegram or telecopier, as follows:
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(a) if to the Company, to it at:
Payco American Corporation
180 North Executive Drive
Brookfield, Wisconsin 53005
Attention: Dennis G. Punches
with a copy to:
Hecht & Lentz
333 Bridge, N.W., Suite 330
Grand Rapids, Michigan 49504
Attention: David M. Hecht, Esq.
(b) if to Parent, to it at:
OSI Holdings Corp.
300 Galleria Parkway, Suite 690
Atlanta, Georgia 30339
Attention: David B. Kreiss
with a copy to:
McCown De Leeuw & Co.
101 East 52nd Street
31st Floor
New York, New York 10022
Attention: David E. King
with a further copy to:
White & Case
1155 Avenue of the Americas
New York, New York 10036
Attention: Frank L. Schiff, Esq.
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(c) if to Purchaser, to it at:
c/o OSI Holdings Corp.
300 Galleria Parkway, Suite 690
Atlanta, Georgia 30339
Attention: David B. Kreiss
with a copy to:
McCown De Leeuw & Co.
101 East 52nd Street
31st Floor
New York, New York 10022
Attention: David E. King
with a further copy to:
White & Case
1155 Avenue of the Americas
New York, New York 10036
Attention: Frank L. Schiff, Esq.
or to such other Person or address as any party shall specify by notice in
writing to each of the other parties. All notices, requests, demands, waivers
and communications shall be deemed received as follows; (i) if sent by prepaid
registered or certified mail, return receipt requested, on the earlier of the
date shown on the receipt or three (3) days after being deposited with the U.S.
Postal Service; (ii) if placed for delivery with a recognized overnight courier
service, on the regularly scheduled date for delivery established by such
courier service; (iii) if delivered by hand, when delivered.
8.06 Entire Agreement. This Agreement, the schedules previously
delivered to Parent and the Company, the Confidentiality Agreement and other
documents referred to herein or delivered pursuant hereto, collectively contain
the entire understanding of the parties hereto with respect to the subject
matter contained herein and supersede all prior agreements and understandings,
oral and written, with respect thereto.
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8.07 Binding Effect; Benefit; Assignment. This Agreement shall inure
to the benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns, but neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto without the prior written consent of the other parties. Nothing
in this Agreement, expressed or implied, is intended to confer on any Person
other than the parties hereto or their respective successors and permitted
assigns, any rights, remedies, obligations or liabilities under or by reason of
this Agreement.
8.08 Amendment and Modification. Subject to applicable law, this
Agreement may be amended, modified and supplemented in writing by the parties
hereto in any and all respects before the Effective Time (notwithstanding any
stockholder approval), by action taken by the Board of Directors of the Company
and the Special Committee and the Board of Directors of Parent and Purchaser or
by the respective officers authorized by them; provided, however, that after any
such stockholder approval, no amendment shall be made which by law requires
further approval by such stockholders without such further approval.
8.09 Further Actions. Each of the parties hereto agrees that, subject
to the provisions of this Agreement and to its legal obligations, it will use
its reasonable best efforts to fulfill all conditions precedent specified
herein, to the extent that such conditions are within its control, and to do all
things reasonably necessary to consummate the transactions contemplated hereby.
8.10 Headings. The descriptive headings of the several Articles and
Sections of this Agreement are inserted for convenience only, do not constitute
a part of this Agreement and shall not affect in any way the meaning or
interpretation of this Agreement.
8.11 Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original, and all of which
together shall be deemed to be one and the same instrument.
8.12 Applicable Law. This Agreement and the legal relations between
the parties hereto shall be governed by and construed in accordance with the
laws of the State of Wisconsin, without regard to the conflict of laws rules
thereof.
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8.13 Severability. If any term, provision, covenant or restriction
contained in this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void, unenforceable or against its regulatory
policy, the remainder of the terms, provisions, covenants and restrictions
contained in this Agreement shall remain in full force and effect and shall in
no way be affected, impaired or invalidated.
8.14 Certain Definitions . "Person" shall mean and include an
individual, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization, a group and a government or other department or
agency thereof. "Knowledge of the Company", "known to the Company" or words of
similar import mean the actual knowledge of any executive officer or director of
the Company. "Notice to the Company", "notice received by the Company" or words
of similar import shall mean written notice received by any executive officer or
director of the Company.
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IN WITNESS WHEREOF, each of Parent, Purchaser and the Company have
caused this Agreement to be executed by their respective officers thereunto duly
authorized, all as of the date first above written.
OSI HOLDINGS CORP.
By /s/ David E. King
-------------------------------
Name: David E. King
Title: Secretary and Treasurer
BOXER ACQUISITION CORP.
By /s/ David E. King
-------------------------------
Name: David E. King
Title: President
PAYCO AMERICAN CORPORATION
By /s/ Dennis Punches
-------------------------------
Name: Dennis Punches
Title: Chairman
<PAGE>
================================================================================
PURCHASE AGREEMENT
AMONG
OSI HOLDINGS CORP.,
ACCOUNT PORTFOLIOS, INC.,
ACCOUNT PORTFOLIOS G.P., INC.,
AP MANAGEMENT, INC.,
GSC MANAGEMENT, INC.,
PERIMETER CREDIT MANAGEMENT CORPORATION,
ACCOUNT PORTFOLIOS TRUST ONE
AND
ACCOUNT PORTFOLIOS TRUST TWO
Dated as of September 21, 1995
<PAGE>
TABLE OF CONTENTS
Page
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ARTICLE I DEFINITIONS..................................................... 2
Section 1.1. Definitions.............................................. 2
ARTICLE II SALE OF INTERESTS............................................... 11
Section 2.1. Purchase and Sale of Interests........................... 11
Section 2.2. Purchase Price........................................... 13
Section 2.3. Allocation of Purchase Price............................. 15
Section 2.4. Working Capital Adjustment............................... 15
Section 2.5. Adjustments to Closing Payments.......................... 20
Section 2.6. Operating Expenses....................................... 22
Section 2.7. Acknowledgment of Assumption of
Liabilities......................................... 22
Section 2.8. Cash Distributions....................................... 22
ARTICLE III CLOSING......................................................... 22
Section 3.1. Closing.................................................. 22
Section 3.2. Deliveries by the Sellers at the
Closing............................................. 23
Section 3.3. Deliveries by the Purchaser at
Closing............................................. 23
Section 3.4. Further Assurances....................................... 23
ARTICLE IV REPRESENTATIONS OF THE SELLER................................... 24
Section 4.1. Existence and Good Standing.............................. 24
Section 4.2. Authorization and Validity of this
Agreement........................................... 25
Section 4.3. Subsidiaries and Investments............................. 26
Section 4.4. Financial Statements; No Material
Changes............................................. 26
Section 4.5. Title to Properties; Encumbrances........................ 27
Section 4.6. Real Property............................................ 28
Section 4.7. Leases................................................... 28
Section 4.8. Intellectual Properties.................................. 29
Section 4.9. Material Contracts....................................... 29
Section 4.10. Consents and Approvals; No Violations................... 31
Section 4.11. Litigation.............................................. 32
Section 4.12. Taxes................................................... 33
Section 4.13. Liabilities............................................. 35
(i)
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Page
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Section 4.14. Insurance............................................... 36
Section 4.15. Compliance with Laws.................................... 36
Section 4.16. Employment Relations.................................... 37
Section 4.17. Employee Benefit Plans.................................. 37
Section 4.18. Interests in Customers, Suppliers, etc.................. 44
Section 4.19. Bank Accounts and Powers of Attorney.................... 45
Section 4.20. Conduct of Business..................................... 45
Section 4.21. Operation of Business/Equipment......................... 45
Section 4.22. Loans and Accounts Receivable........................... 45
Section 4.23. Environmental Matters................................... 46
Section 4.24. Acquisition for Investment.............................. 47
Section 4.25. Broker's or Finder's Fees............................... 48
ARTICLE V REPRESENTATIONS OF THE PURCHASER................................ 49
Section 5. Representations of the Purchaser........................... 49
Section 5.1. Existence and Good Standing of the
Purchaser; Power and Authority...................... 49
Section 5.2. Consents and Approvals; No Violations.................... 50
Section 5.3. Capital Stock............................................ 52
Section 5.4 Capitalization............................................ 52
Section 5.5 Absence of Liabilities.................................... 54
Section 5.6 Conduct of Business....................................... 55
Section 5.7 Other Agreements.......................................... 55
Section 5.8. Broker's or Finder's Fees................................ 55
ARTICLE VI TRANSACTIONS PRIOR TO THE CLOSING DATE.......................... 55
Section 6.1. Conduct of Business of the Seller........................ 55
Section 6.2. Exclusive Dealing........................................ 58
Section 6.3. Review of the Seller and Confidentiality................. 58
Section 6.4. Reasonable Best Efforts.................................. 59
ARTICLE VII CONDITIONS TO THE PURCHASERS' OBLIGATIONS....................... 60
Section 7. Conditions to the Purchasers' Obligations.................. 60
Section 7.1. Opinion of the Sellers' Counsel.......................... 60
Section 7.2. Truth of Representations and Warranties.................. 60
Section 7.3. Performance of Agreements................................ 60
Section 7.4. No Material Adverse Change............................... 61
Section 7.5. No Litigation Threatened................................. 61
Section 7.6. Approvals................................................ 61
(ii)
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Page
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Section 7.7. Noncompetition Agreements................................ 61
Section 7.8. Stockholders Agreement................................... 62
Section 7.9. Transfer Documents....................................... 62
Section 7.10. FIRPTA.................................................. 62
Section 7.11. Pre-Closing Transactions................................ 63
Section 7.12. Pledge Agreement........................................ 63
ARTICLE VIII CONDITIONS TO THE SELLERS' OBLIGATIONS.......................... 63
Section 8. Conditions to the Sellers'
Obligations............................................ 63
Section 8.1. Opinion of the Purchaser's Counsel....................... 63
Section 8.2. Truth of Representations and
Warranties......................................... 63
Section 8.3. Performance of Agreements................................ 64
Section 8.4. No Litigation Threatened................................. 64
Section 8.5. Approvals................................................ 64
Section 8.6. Stockholders Agreement................................... 64
Section 8.7. Pre-Closing Transactions................................. 65
Section 8.8. Delivery of Agreements................................... 65
Section 8.9. OSI Holdings Loan........................................ 65
ARTICLE IX OTHER AGREEMENTS................................................ 65
Section 9.1. Transfer Taxes........................................... 65
Section 9.2. Use of Name/Change of Name............................... 66
Section 9.4 Cooperation/Record Keeping................................ 67
Section 9.5. Certain Tax Returns...................................... 68
ARTICLE X SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION.................... 68
Section 10. Survival of Representations............................... 68
Section 10.1. Indemnification......................................... 68
Section 10.2. Indemnification Procedure............................... 70
Section 10.3. Pledge of Shares........................................ 73
ARTICLE XI EVENTS OF TERMINATION........................................... 73
Section 11.1. Events of Termination................................... 73
Section 11.2. Effect of Termination................................... 74
ARTICLE XII MISCELLANEOUS................................................... 75
Section 12.1. Expenses................................................ 75
Section 12.2. Governing Law........................................... 75
Section 12.3. Captions................................................ 76
Section 12.4. Publicity............................................... 76
Section 12.5. Notices................................................. 76
Section 12.6. Parties in Interest..................................... 77
Section 12.7. Counterparts............................................ 78
(iii)
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Page
----
Section 12.8. Entire Agreement........................................ 78
Section 12.9. Amendments.............................................. 78
Section 12.10. Severability........................................... 78
Section 12.11. Third Party Beneficiaries.............................. 78
Section 12.12. Knowledge of a Party................................... 79
Section 12.13. Jurisdiction........................................... 79
(iv)
<PAGE>
Exhibits
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Exhibit A-1 Form of Seller Note (APT-1)
Exhibit A-2 Form of Seller Note (APT-2)
Exhibit B Form of Opinion of Troutman Sanders
Exhibit C Form of Non-Competition Agreement
Exhibit D Form of Opinion of White & Case
Exhibit E Form of OSI Holdings Note
Exhibit F Form of Pledge Agreement
Schedules
- ---------
Schedule 2.3 Allocation of Purchase Price
Schedule 2.4 Estimated Closing Net Working Capital
Statement
Schedule 4.1 Limited Partners, Existence and Good
Standing
Schedule 4.3 Subsidiaries and Investments
Schedule 4.4 Balance Sheet Exceptions to GAAP
Schedule 4.5 Title to Property, Encumbrances
Schedule 4.7 Leases
Schedule 4.8 Intellectual Property
Schedule 4.9 Material Contracts
Schedule 4.10 Sellers' Consents and Approvals
Schedule 4.11 Litigation
Schedule 4.12 Taxes
Schedule 4.14 Insurance
Schedule 4.17 Employee Benefit Plans
Schedule 4.18 Interest in Customers, Suppliers
Schedule 4.19 Bank Accounts, Powers of Attorney
Schedule 4.20 Conduct of Business
Schedule 4.21 Operation of Business
Schedule 4.23 Environmental Matters
Schedule 5.4 OSI Holdings Ownership
Schedule 5.5 Purchasers' Liabilities
Schedule 5.7 Purchasers' Agreements
(v)
<PAGE>
PURCHASE AGREEMENT
PURCHASE AGREEMENT (this "Agreement") dated as of September 21, 1995
among OSI HOLDINGS CORP., a corporation organized under the laws of the State of
Delaware ("OSI Holdings"), ACCOUNT PORTFOLIOS, INC., a corporation organized
under the laws of the State of Delaware ("Newco-1"), ACCOUNT PORTFOLIOS G.P.,
INC., a corporation organized under the laws of the State of Delaware
("Newco-2," and together with OSI Holdings and Newco-1, the "Purchasers," and
each being a "Purchaser"), AP MANAGEMENT, INC., a corporation organized under
the laws of the State of Georgia ("APMI"), GSC MANAGEMENT, INC., a corporation
organized under the laws of the State of Georgia ("GSCMI"), PERIMETER CREDIT
MANAGEMENT CORPORATION, a corporation organized under the laws of the State of
Georgia ("PCMC"), ACCOUNT PORTFOLIOS TRUST ONE, a trust organized under the laws
of the State of Georgia ("APT-1") and ACCOUNT PORTFOLIOS TRUST TWO, a trust
organized under the laws of the Sate of Georgia ("APT-2", and together with
APMI, GSCMI, PCMC and APT-1 the "Sellers," and each a "Seller").
W I T N E S S E T H :
<PAGE>
WHEREAS, the Sellers own all of the Interests (as defined below);
WHEREAS, upon the terms and subject to the conditions set forth in
this Agreement, the Sellers desire to sell the Interests, and the Purchasers
desire to purchase the Interests; and
WHEREAS, it is the intention of the parties hereto that, upon the
consummation of the transactions contemplated by this Agreement, the Purchasers
shall own all of the Interests and be in a position to operate the Partnerships
as a going concern.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1. Definitions. In addition to the terms defined elsewhere
in this Agreement, the following terms shall have the respective meanings
specified therefor below (such meanings to be equally applicable to both the
singular and the plural forms of the terms defined).
"Act" shall have the meaning specified in Section 4.24.
-2-
<PAGE>
"Actual Closing Net Working Capital Amount" shall have the meaning
specified in Section 2.4.
"Actual Closing Net Working Capital Statement" shall have the meaning
specified in Section 2.4.
"Affiliate" shall mean, with respect to any Person, any other Person
which, directly or indirectly, owns, or is owned by, or is under common
ownership with, the specified Person. For purposes of this definition, the term
"own" (including, with correlative meanings, "owned by" and "under common
ownership with") as applied to any corporation, partnership or other entity
means the ownership of 50% or more of the voting securities (or their
equivalent) of that corporation, partnership or other entity.
"Agreement" shall mean this Agreement, as amended, modified or
supplemented from time to time.
"APLP" shall have the meaning specified in Section 2.1.
"APLP Class A LP Interest" shall have the meaning specified in Section
2.1.
"APLP Class B LP Interest" shall have the meaning specified in Section
2.1.
"APMI" shall have the meaning specified in the preamble to this
Agreement.
"APT-1" shall have the meaning specified in the preamble to this
Agreement.
-3-
<PAGE>
"APT-2" shall have the meaning specified in the preamble to this
Agreement.
"Arbitrator" shall have the meaning specified in Section 2.4.
"Balance Sheet" shall have the meaning specified in Section 4.4.
"Business Day" shall mean any day other than a Saturday, or Sunday or
a day on which banks located in New York, New York, or Atlanta, Georgia shall be
authorized or required by law to close.
"Claim" shall have the meaning specified in Section 10.2.
"Closing" shall have the meaning specified in Section 3.1.
"Closing Date" shall have the meaning specified in Section 3.1.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
the regulations promulgated thereunder.
"Confidentiality Agreement" shall have the meaning specified in
Section 6.3.
"Damages" shall have the meaning specified in Section 10.1.
"Employee Benefit Plans" shall have the meaning specified in Section
4.17.
-4-
<PAGE>
"Encumbrances" shall have the meaning specified in Section 4.5.
"Environmental Claims" shall mean administrative, regulatory or
judicial actions, suits, demand letters, claims, liens, notices of
non-compliance or violation or proceedings relating in any way to any
Environmental Law or any permit issued under any such Law (for purposes of this
definition only, referred to as "Claims"), including (i) Claims by governmental
or regulatory authorities for enforcement, cleanup, removal, response, remedial
or other actions or damages pursuant to any applicable Environmental Law, and
(ii) Claims by any third party seeking damages, contribution, indemnification,
cost recovery, compensation or injunctive relief resulting from Hazardous
Materials or arising from alleged injury or threat of injury to health, safety
or the environment.
"Environmental Laws" means any applicable federal, state or local
statute, law, rule, regulation, ordinance, code or rule of common law in effect
and in each case as amended as of the Closing Date, relating to the environment
or Hazardous Materials, including the Comprehensive Environmental Response
Compensation and Liability Act of 1980, as amended, 42 U.S.C. ss. 6901 et seq.;
the Resource Conservation and Recovery Act, as amended, 42 U.S.C. ss. 9601 et
seq.; the Federal Water Pollution Control Act, as amended,
-5-
<PAGE>
33 U.S.C. ss. 1251 et seq.; the Toxic Substances Control Act, 15 U.S.C. ss. 2601
et seq.; the Clean Air Act, 42 U.S.C. ss. 7401 et seq.; the Safe Drinking Water
Act, 42 U.S.C. ss. 300f et seq.; the Oil Pollution Act of 1990, 33 U.S.C. ss.
2701 et seq.; and their state and local counterparts and equivalents.
"Environmental Permits" shall mean all permits, approvals,
identification numbers, registrations, licenses and other authorizations
required under any applicable Environmental Law.
"ERISA" shall have the meaning specified in Section 4.17.
"Estimated Closing Net Working Capital Amount" shall have the meaning
specified in Section 2.4.
"Estimated Closing Net Working Capital Statement" shall have the
meaning specified in Section 2.4.
"GAAP" shall have the meaning specified in Section 4.4.
"GSCLP" shall have the meaning specified in Section 2.1
"GSCMI" shall have the meaning specified in the preamble to this
Agreement.
"Hazardous Material" means (a) any petroleum or petroleum products,
asbestos in a form that is friable and transformers or other equipment that
contain dielectric fluid containing levels of polychlorinated biphenyls of 50
ppm or
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<PAGE>
greater and (b) any chemicals, materials or substances defined as or included in
the definition of "Hazardous substances," "hazardous wastes," "hazardous
materials," "extremely hazardous wastes," "restricted hazardous wastes," "toxic
substances," "toxic pollutants," or words of similar import, under any
applicable Environmental Law.
"HSR Act" shall have the meaning specified in Section 4.26.
"Indemnified Party" shall have the meaning specified in Section
10.2.
"Indemnifying Party" shall have the meaning specified in Section
10.2.
"Intellectual Property" shall have the meaning specified in Section
4.8.
"Interests" shall have the meaning specified in Section 2.1.
"Loans and Accounts Receivable" shall mean all loans, notes and
accounts receivable (and any guarantees thereof) of the Partnerships, including,
without limitation, any indebtedness of any obligor owed to any Partnership
which indebtedness such Partnership has purchased or received from another
Person and has not created from the sale of its own services or goods, and
includes the right to payment of any interest, finance, returned check or late
charges and other obligations of such obligor with respect thereto. Each loan
-7-
<PAGE>
or receivable includes, without limitation, all obligations of the obligor
thereof under any agreement governing or related to such loan or receivable.
Each loan or receivable shall include any increase in the outstanding balance
thereof, whether due to any increase resulting from the accrual of interest or
finance charges or the assessment of late or other similar charges with respect
to such loan or receivable or otherwise.
"Material Adverse Effect" shall have the meaning specified in Section
4.1.
"Newco-1" shall have the meaning specified in the preamble to this
Agreement.
"Newco-2" shall have the meaning specified in the preamble to this
Agreement.
"1993 and 1994 Balance Sheets" shall have the meaning specified in
Section 4.4.
"Notice of Objection" shall have the meaning specified in Section
2.4.
"OSI Holdings" shall have the meaning specified in the preamble to
this Agreement.
"OSI Holdings Common Stock" shall have the meaning specified in
Section 2.2.
"OSI Holdings Preferred Stock" shall have the meaning specified in
Section 2.2.
-8-
<PAGE>
"Partnerships" shall mean, collectively, APLP, GSCLP and PCLP.
"PCLP" shall have the meaning specified in Section 2.1.
"PCMC" shall have the meaning specified in the preamble to this
Agreement.
"Permitted Encumbrances" shall have the meaning specified in Section
4.5.
"Person" shall have the meaning specified in Section 4.9.
"Pre-Closing Period" shall have the same meaning specified in Section
4.12.
"Pre-Closing Transactions" shall have the meaning specified in Section
9.3.
"Purchase Price" shall have the meaning specified in Section 2.2.
"Purchaser" shall have the meaning specified in the preamble to this
Agreement.
"Returns" shall have the meaning specified in Section 4.12.
"Seller" shall have the meaning specified in the preamble to this
Agreement.
"Seller Notes" shall have the meaning specified in Section 2.2.
-9-
<PAGE>
"Seller Security Documents" shall mean, collectively, the following
documents, each dated the date hereof and delivered as security for the
obligations of Newco-1 under the Seller Notes: (i) Loan and Security Agreement
among Newco-1, APT-1 and APT-2, (ii) Pledge Agreement, among Newco-1, APT-1 and
APT-2, (iii) Continuing Guaranty made by Newco-2 in favor of APT-1 and APT-2,
(iv) Security Agreement among Newco-2, APT-1 and APT-2, (v) Continuing Guaranty
made by APLP in favor of APT-1 and APT-2, (vi) Security Agreement among APLP,
APT-1 and APT-2, (vii) Continuing Guaranty made by PCLP in favor of APT-1 and
APT-2, (viii) Security Agreement among PCLP, APT-1 and APT-2, (ix) Continuing
Guaranty made by GSCLP in favor of APT-1 and APT-2, (x) Security Agreement
among GSCLP, APT-1 and APT-2, (xi) Consent for Direct Payments, among Newco-1,
Newco-2, the Partnerships, APT-1 and APT-2 and (xii) Contribution Agreement,
among Newco-1, Newco-2 and the Partnerships.
"Shares" shall mean, collectively, the shares of OSI Holdings Common
Stock and OSI Holdings Preferred Stock issued to APT-1 and APT-2 pursuant to
Section 2.2.
"Tax" shall mean any net income, alternative or add-on minimum tax,
advance corporation, gross income, gross receipts, sales, use, transfer
(excluding Transfer Taxes), gains, ad valorem, franchise, profits, license,
value added, withholding, payroll, employment, excise, stamp, occupation,
-10-
<PAGE>
premium, property, environmental, windfall profit tax, documentary,
registration, severance, custom duty, governmental fee or other like assessment
or charge of any kind whatsoever imposed pursuant to the laws of any federal,
state, local or foreign jurisdiction or by any political subdivision or taxing
authority thereof or therein, together with any interest or any penalty with
respect thereto, and any liability for such amounts as a result either (i) of
being a member of a combined, consolidated, unitary or affiliated group or (ii)
of a contractual obligation to indemnify any person or other entity.
"Transfer Taxes" shall have the meaning specified in Section 9.1.
"Working Capital Assets" shall have the meaning specified in Section
2.4.
"Working Capital Liabilities" shall have the meaning specified in
Section 2.4.
ARTICLE II
SALE OF INTERESTS
Section 2.1. Purchase and Sale of Interests. Upon the terms and
subject to the conditions of this Agreement, the Purchasers agree to purchase
from the Sellers, and the Sellers agree to sell, convey, transfer, assign and
deliver to the Purchasers, on the Closing Date, against the receipt
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<PAGE>
by the Sellers of the consideration specified in Section 2.2, the Interests,
free and clear of any Encumbrances of any kind. The Interests will be sold,
conveyed, transferred, assigned and delivered as follows: (i) OSI Holdings
agrees to purchase from each of APT-1 and APT-2, and each of APT-1 and APT-2
agrees to sell, convey, transfer, assign and deliver to OSI Holdings, its entire
Class A limited partnership interest ("APLP Class A LP Interest") in Account
Portfolios, L.P., a Georgia limited partnership ("APLP"), (ii) Newco-1 agrees to
purchase from each of APT-1 and APT-2, and each of APT-1 and APT-2 agrees to
sell, convey, transfer, assign and deliver to Newco-1, its entire Class B
limited partnership interest in APLP, (the "APLP Class B LP Interest"), and
(iii) Newco-2 agrees to purchase from APMI, GSCMI and PCMC, and APMI, GSCMI and
PCMC each respectively agrees to sell, convey, transfer, assign and deliver to
Newco-2, its general partnership interest in APLP, in the case of APMI, its
general partnership interest in Gulf State Credit, L.P., a Georgia limited
partnership ("GSCLP"), in the case of GSCMI, and its general partnership
interest in Perimeter Credit, L.P., a Georgia limited partnership ("PCLP"), in
the case of PCMC (each of the general partnership interests described in this
clause (iii), together with the APLP Class A LP Interest and the APLP Class B LP
-12-
<PAGE>
Interest, being collectively referred to herein as the "Interests").
Section 2.2. Purchase Price. In full consideration for the sale by the
Sellers of the Interests to the Purchasers, on the Closing Date the Purchasers
shall deliver to the Sellers the following (the "Purchase Price") (subject to
adjustment pursuant to Section 2.5):
(a) to APT-1 from OSI Holdings, (i) 466,667 shares of common stock,
par value $.01 per share, of OSI Holdings (the "OSI Holdings Common
Stock"), made out in the name of APT-1, and (ii) 133,334 shares of
non-voting, cumulative, redeemable, exchangeable preferred stock of OSI
Holdings (the "OSI Holdings Preferred Stock"), made out in the name of
APT-1.
(b) to APT-2 from OSI Holdings, (i) 466,666 shares of OSI Holdings
Common Stock, made out in the name of APT-2, and (ii) 133,333 shares of OSI
Holdings Preferred Stock, made out in the name of APT-2.
(c) to APT-1 from Newco-1, (i) a secured promissory note with an
aggregate principal amount equal to $17,500,000 due September 21, 1998,
issued by Newco-1 in substantially the form attached hereto as Exhibit A-1
and (ii) an amount equal to (A) $14,404,834.10 plus (or minus) (B) one half
of the amount by which the Estimated Closing Net Working Capital Amount
exceeds (or
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<PAGE>
is less than) $0, by wire transfer of immediately available funds to an
account specified by APT-1 at least two Business Days prior to the Closing.
(d) to APT-2 from Newco-1, (i) a secured promissory note with an
aggregate principal amount equal to $17,500,000 due September 21, 1998,
issued by Newco-1 in substantially the form attached hereto as Exhibit A-2
(together with the secured promissory note issued by Newco-1 to APT-1
pursuant to Section 2.2(c), the "Seller Notes") and (ii) an amount equal to
(A) $14,404,834.10 plus (or minus) (B) one half of the amount by which the
Estimated Closing Net Working Capital Amount exceeds (or is less than) $0,
by wire transfer of immediately available funds to an account specified by
APT-2 at least two Business Days prior to the Closing.
(e) to APMI from Newco-2, an amount equal to $795,136.05, by wire
transfer of immediately available funds to an account specified by APMI at
least two Business Days prior to the Closing.
(f) to GSCMI from Newco-2, an amount equal to $106,809.66, by wire
transfer of immediately available funds to an account specified by GSCMI at
least two Business Days prior to the Closing.
(g) to PCMC from Newco-2, an amount equal to $288,386.09, by wire
transfer of immediately available
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<PAGE>
funds to an account specified by PCMC at least two Business Days prior to
the Closing.
Section 2.3. Allocation of Purchase Price. The Sellers and the
Purchasers hereby undertake and agree to file timely any information that may be
required to be filed pursuant to Treasury Regulations promulgated under Section
1060(b) of the Code. The Sellers and the Purchasers agree to allocate the
Purchase Price in accordance with Schedule 2.3. The parties agree that no amount
of the Purchase Price is specifically allocable to interest that has or may have
accrued with respect to Loans or Accounts Receivable. Neither the Sellers nor
the Purchasers shall file any tax return or other document or otherwise take any
position which is inconsistent with the allocation determined pursuant to this
Section 2.3. The parties intend for the transfer of Interests to OSI Holdings to
qualify under Section 351 of the Code and as such intend that the receipt of the
Shares by APT-1 and APT-2 receive tax-free exchange treatment in accordance with
Section 351 of the Code.
Section 2.4. Working Capital Adjustment. (a) Closing Payment
Adjustment. Attached hereto as Schedule 2.4 is an estimated net closing working
capital statement of the Partnerships (the "Estimated Closing Net Working
Capital Statement"). The Estimated Closing Net Working Capital
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<PAGE>
Statement reflects Working Capital Assets, Working Capital Liabilities and the
Estimated Closing Net Working Capital Amount, each as estimated to exist at the
Closing. For purposes hereof, "Working Capital Assets" shall mean the sum of (i)
cash and cash equivalents of the Partnerships that are not distributed to any
Seller prior to Closing, (ii) accounts receivable - miscellaneous, (iii)
accounts receivable Account Portfolios, L.P., (iv) interest receivable, (v)
deposit - South Trust Bank, (vi) deposit - United Parcel Service, (vii) deposit
- - First Southern Investment, (viii) deposit - Salt River Project Utility, (ix)
deposit - Hohokam III Developers, (x) prepaid insurance - Acordia of the South
(commercial umbrella), (xi) prepaid insurance - Acordia of the South (excess
umbrella coverage), (xii) prepaid insurance - Cigna (workers compensations),
(xiii) prepaid insurance - Acordia of the South (fiduciary liability), (xiv)
prepaid insurance - Acordia of the South (commercial crime coverage), (xv)
prepaid insurance - Acordia of the South (combined inland marine), (xvi) prepaid
insurance - Acordia of the South (commercial package), (xvii) prepaid insurance
- -Acordia of the South (simplified commercial package (Texas)), (xviii) prepaid
insurance - Acordia of the South (commercial general liability), and (xix) Texas
workers compensation; "Working Capital Liabilities" shall mean the sum of (i)
accounts payable - NationsBank Trust Accounts, (ii) accounts
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payable - HBR Capital, (iii) garnishments payable, (iv) accounts payable - Bally
Participations, (v) accounts payable - ITT Participations, (vi) accrued expense
- - Danny Darby, (vii) accrued salaries, (viii) accrued vacation expense and (ix)
accrued interest to Cargill Financial; and "Estimated Closing Net Working
Capital Amount" shall mean the excess (or deficiency) of Working Capital Assets
over Working Capital Liabilities estimated as of the Closing.
(b) Closing Working Capital Statement. (i) As soon as practicable (and
in no event later than thirty (30) days after the Closing), the Purchasers shall
prepare and deliver to APT-1 and APT-2 a proposed actual closing net working
capital statement of the Partnerships' as of the Closing (the "Actual Closing
Net Working Capital Statement"). The Actual Closing Net Working Capital
Statement will reflect the Working Capital Assets, the Working Capital
Liabilities and the Actual Closing Net Working Capital Amount immediately prior
to the Closing and will be prepared on a basis consistent with the preparation
of the Estimated Closing Net Working Capital Statement. For purposes hereof,
"Actual Closing Net Working Capital Amount" shall mean the excess of Working
Capital Assets over Working Capital Liabilities as of the Closing.
(ii) If APT-1 and APT-2 do not object to the determination by the
Purchasers of the proposed Actual
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Closing Net Working Capital Amount by written notice of objection (the "Notice
of Objection") delivered to the Purchasers within thirty (30) days after APT-1's
and APT-2's receipt of such statement the proposed Actual Closing Net Working
Capital Amount shall be deemed final and binding.
(iii) If APT-1 and APT-2 deliver a Notice of Objection in respect of
the Actual Closing Net Working Capital Amount, then any dispute shall be
resolved in accordance with paragraph (c) of this Section 2.4.
(c) Resolution of Disputes. (i) If APT-1 and APT-2 object to the
Actual Closing Net Working Capital Statement as determined by the Purchasers,
then APT-1 and APT-2, on the one hand, and the Purchasers, on the other hand,
shall promptly endeavor to agree upon the Actual Closing Net Working Capital
Amount. In the event that a written agreement as to the Actual Closing Net
Working Capital Amount has not been reached within thirty (30) days after the
date of receipt by the Purchasers from APT-1 and APT-2 of their Notice of
Objection thereto, then the determination of the Actual Closing Net Working
Capital Amount shall be submitted to a nationally recognized accounting firm or
other arbitrator mutually acceptable to the Purchasers, on the one hand, and
APT-1 and APT-2, on the other hand, (the "Arbitrator"); provided that if the
Purchasers, on the one hand, and APT-1 and APT-2, on the other hand, cannot
agree on
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<PAGE>
the Arbitrator the Purchasers, on the one hand, and APT-1 and APT-2, on the
other hand, shall each choose a nationally recognized accounting firm which two
firms shall together select a third nationally recognized accounting firm to act
as Arbitrator.
(ii) Within 45 days of the submission of any dispute concerning the
determination of the Actual Closing Net Working Capital Amount to the
Arbitrator, the Arbitrator shall render a decision in accordance with this
paragraph (c) hereof along with a statement of reasons therefor. The decision of
the Arbitrator shall be final and binding upon the parties hereto.
(iii) The fees and expenses of the Arbitrator for any determination
under this paragraph (c) shall be shared as follows: the Purchasers shall bear
that portion thereof equal to the total amount of such fees and expenses
multiplied by a fraction, the denominator of which shall be the difference
between the Actual Closing Net Working Capital Amount as proposed in the
determination by APT-1 and APT-2 and the Actual Closing Net Working Capital
Amount as proposed in the determination by the Purchasers, and the numerator of
which shall be the difference between the Actual Closing Net Working Capital
Amount as determined by the Arbitrator and the Actual Closing Net Working
Capital Amount as proposed by
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<PAGE>
the Purchasers. The Sellers shall bear the remainder of such fees and expenses.
(iv) Nothing herein shall be construed to authorize or permit the
Arbitrator to determine (i) any question or matter whatever under or in
connection with this Agreement except the determinations of what adjustments, if
any, must be made in one or more of the items reflected in the Actual Closing
Net Working Capital Statement delivered by the Purchasers in order for the
Actual Closing Net Working Capital Amount to be determined in accordance with
the provisions of this Agreement, or (ii) an Actual Closing Net Working Capital
Amount that is not equal to one of or between the Actual Closing Net Working
Capital Amount as proposed in the determination by the Sellers and the Actual
Closing Net Working Capital Amount as proposed in the determination by the
Purchasers. Nothing herein shall be construed to require the Arbitrator to
follow any rules or procedures of any arbitration association.
Section 2.5. Adjustments to Closing Payments. (a) Upon the final
determination of the Actual Closing Net Working Capital Amount, the parties
shall make the following adjustments:
(i) If the Actual Closing Net Working Capital Amount is greater than
the Estimated Closing Net Working
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Capital Amount, then the Purchase Price shall be increased by the amount of
such difference.
(ii) If the Actual Closing Net Working Capital Amount is less than the
Estimated Closing Net Working Capital Amount, then the Purchase Price shall
be decreased by the amount of such difference.
(b) Any adjustment to the Purchase Price required under this Section
2.5 shall bear interest from the Closing Date to the date of payment thereof at
a per annum rate equal to the "prime lending rate" as published in The Wall
Street Journal. Any such adjustment payment required pursuant hereto shall be
made by increasing or decreasing the Seller Notes, as appropriate. Such
application shall be made on such of the following dates as may be applicable:
(A) if APT-1 and APT-2 shall have not objected to the preparation of the Actual
Closing Net Working Capital Statement, the earlier of (1) thirty-five (35) days
after delivery to APT-1 and APT-2 of the Actual Closing Net Working Capital
Statement or (2) five (5) days after APT-1 and APT-2 has indicated that they
have no objections to the preparation of the Actual Closing Net Working Capital
Statement, or (B) if APT-1 and APT-2 shall have objected to such preparation,
within five (5) days following final agreement or decision with respect to the
Actual Closing Net Working Capital Statement as provided above.
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<PAGE>
Section 2.6. Operating Expenses. The Purchasers acknowledge that the
Partnerships will be responsible for the payment of the expenses of the
Partnerships incurred as of and after the Closing and the Purchasers shall cause
the Partnerships to reimburse the Sellers for any such expenses so incurred by
the Sellers.
Section 2.7. Acknowledgment of Assumption of Liabilities. The
Purchasers hereby acknowledge and agree that they shall take the Interests
subject to all liabilities of the Partnerships and the liabilities of the
general partners of such Partnerships which result from such Partnership
liabilities; provided however, that the foregoing shall in no way limit the
indemnification obligations of the Sellers contained in Section 10.1.
Section 2.8. Cash Distributions. The parties acknowledge and
understand that the Partnerships will distribute all cash and cash equivalents
held by the Partnerships (other than $518,294.62) to the Sellers immediately
prior to the Closing.
ARTICLE III
CLOSING
Section 3.1. Closing. The closing of the sale referred to in Section
2.1 (the "Closing") shall take place at 10:00 A.M. at the offices of White &
Case, New York, New York on September 21, 1995, or at such other time, date and
place
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as the parties hereto shall by written instrument designate. Such time and date
are herein referred to as the "Closing Date."
Section 3.2. Deliveries by the Sellers at the Closing. At the Closing,
the Sellers shall deliver to the Purchasers each of the documents, instruments
or evidences of satisfaction of conditions required to be delivered by the
Sellers as a condition to the Closing pursuant to Article VII of this Agreement,
in form and substance reasonably satisfactory to the Purchasers and their
counsel.
Section 3.3. Deliveries by the Purchaser at Closing. At the Closing,
the Purchasers shall deliver to the Sellers (a) the cash payments referred to
above in Section 2.2, (b) the Shares, (c) the Seller Notes, (d) the Seller
Security Documents and (e) each of the documents, instruments or evidences of
satisfaction of conditions required to be delivered by the Purchasers as a
condition to Closing pursuant to Article VIII of this Agreement in form and
substance reasonably satisfactory to the Sellers and their counsel.
Section 3.4. Further Assurances. On or after the Closing Date, the
Sellers shall, at the Purchasers' request, from time to time execute and deliver
such further instruments of conveyance, assignment and transfer in addition to
those specified in Section 7.9, and each party shall take, or cause to be taken,
such other actions as either party may
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reasonably request for more effective conveyance, assignment and transfer of the
Interests to the Purchasers.
ARTICLE IV
REPRESENTATIONS OF THE SELLER
Section 4. Each Seller jointly and severally represents, warrants and
agrees, as follows:
Section 4.1. Existence and Good Standing. Each Seller other than APT-1
and APT-2 is a corporation duly organized, validly existing and in good standing
under the laws of the State of Georgia. Each of APT-1 and APT-2 is a trust duly
created under the laws of the State of Georgia. Each of APLP, GSCLP and PCLP is
a limited partnership duly organized, validly existing and in good standing
under the laws of the State of Georgia. The respective general partners of APLP,
GSCLP and PCLP are APMI, GSCMI and PCMC. Each such general partner has full
power and authority to act as general partner of the applicable Partnership. The
limited partners of each Partnership are set forth on Schedule 4.1. Each
Partnership has the requisite partnership power and authority to own, lease and
operate its properties and to carry on its business as now being conducted. Each
Partnership is duly qualified or licensed to do business and is in good standing
in the respective jurisdictions set forth on Schedule 4.1, which are the only
jurisdictions in which
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the character or location of the properties owned, leased or operated by such
Partnership or the nature of the business conducted by such Partnership makes
such qualification or license necessary, except where the failure to be so duly
qualified or licensed would not have a material adverse effect on the business,
operations, financial condition or results of operations of the Partnerships
taken as a whole (a "Material Adverse Effect").
Section 4.2. Authorization and Validity of this Agreement. Each Seller
has the requisite power and authority to execute and deliver this Agreement and
to perform its obligations hereunder. The execution, delivery and performance of
this Agreement by each Seller and the performance of its obligations hereunder
have been duly authorized and approved by such Seller and no other action on the
part of such Seller is necessary to authorize the execution, delivery and
performance of this Agreement by such Seller. This Agreement has been duly
executed and delivered by each Seller and, assuming due execution of this
Agreement by the Purchasers, is a valid and binding obligation of such Seller
enforceable against such Seller in accordance with its terms, except to the
extent that its enforceability may be subject to applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting the
enforcement of creditors' rights generally and by general equitable principles.
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Section 4.3. Subsidiaries and Investments. Except as set forth on
Schedule 4.3, no Partnership owns, directly or indirectly, any capital stock or
other equity or ownership or proprietary interest in any corporation,
partnership, association, trust, joint venture or other entity.
Section 4.4. Financial Statements; No Material Changes. (a) The
Sellers have heretofore furnished the Purchasers with (i) consolidated audited
balance sheets of the Partnerships as of December 31, 1993, and December 31,
1994 (the "1993 and 1994 Balance Sheets"), together with related statements of
operations and partners' capital and cash flows for the years then ended, all
certified by Deloitte & Touche and (ii) an unaudited consolidated balance sheet
(the "Balance Sheet") of the Partnerships as at June 30, 1995, together with
related statements of operations and partners' capital and cash flows for the
six months ended on such date. Except as set forth on Schedule 4.4, the 1993 and
1994 Balance Sheets and the respective related statements of operations and
partners' capital and cash flows have been prepared in accordance with generally
accepted accounting principles ("GAAP") consistently applied by the Partnerships
throughout the periods indicated and fairly present in all material respects the
financial condition of the Partnerships for the periods indicated, and the
results of the operations of the Partnerships and cash flows for the periods
indicated.
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The Balance Sheet and the related statements of operations and partners' capital
and cash flows have been prepared in accordance with accounting principles
consistently applied by the Partnerships throughout the period indicated and
fairly present in all material respects the financial condition of the
Partnerships for the period indicated, and the results of the operations of the
Partnerships and cash flows for the period indicated.
(b) Since December 31, 1994, there has been no (i) material adverse
change in the business, operations, financial condition or results of operations
of the Partnerships or (ii) material damage, destruction or loss to any asset of
the Partnerships which materially affects the ability of any Partnership to
conduct its business.
Section 4.5. Title to Properties; Encumbrances. Except as set forth on
Schedule 4.5 attached hereto and except for such properties and assets which
have been sold or otherwise disposed of in the ordinary course of business, each
Partnership has good title to its material properties and assets (real and
personal, tangible and intangible), including, without limitation, the
properties and assets reflected in the Balance Sheet, subject to no encumbrance,
lien, charge or other restriction of any kind or character ("Encumbrances"),
except for (i) Encumbrances reflected in the Balance Sheet, (ii) Encumbrances
for current taxes,
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assessments or governmental charges or levies on property not yet due and
delinquent, (iii) Encumbrances arising by operation of law and (iv) Encumbrances
described on Schedule 4.5 attached hereto (Encumbrances of the type described in
clauses (i), (ii), (iii) and (iv) above are hereinafter sometimes referred to as
"Permitted Encumbrances").
Section 4.6. Real Property. No Partnership owns any real property.
Section 4.7. Leases. Schedule 4.7 attached hereto contains a list of
all leases or sub-leases to which any Partnership is a party requiring an annual
aggregate payment of at least $25,000. Except as otherwise set forth in Schedule
4.7 attached hereto, each lease or sub-lease set forth in Schedule 4.7 is in
full force and effect; all rents and additional rents due to date from any
Partnership on each such lease or sub-lease have been paid; no Partnership has
received notice that it is in material default under any such lease or
sub-lease; and, to the knowledge of each Seller and Partnership, there exists no
event, occurrence, condition or act (including the consummation of the sale
contemplated hereby) which, with the giving of notice, the lapse of time or the
happening of any further event or condition, would become a material default by
any Seller under such lease or sub-lease.
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Section 4.8. Intellectual Properties. (a) Schedule 4.8 attached hereto
contains a list of all licenses, patents, trade names, trademarks and service
marks (collectively, the "Intellectual Property") possessed by each Partnership
and necessary for the ownership of its assets and the conduct of its business as
presently conducted. All such Intellectual Property is in full force and effect
and no Partnership has received any written notice of any event, inquiry,
investigation or proceeding threatening the validity of such Intellectual
Property.
(b) None of the Intellectual Property is the subject of any action,
suit or proceeding, or written claim that is pending or, to the knowledge of any
Seller or Partnership, threatened which: (i) accuses any Partnership of
infringing or otherwise violating any Intellectual Property of any third party;
(ii) accuses any Partnership of breaching any contract with respect to any
Intellectual Property or (iii) raises any claim that is materially adverse to
the interest of any Partnership in such Intellectual Property.
Section 4.9. Material Contracts. Except as set forth on Schedule 4.5,
Schedule 4.7 and Schedule 4.9 attached hereto, no Partnership has nor is bound
by (a) any agreement, contract or commitment that involves the performance of
services or the delivery of goods and/or materials by such
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Partnership of an amount or value in excess of $25,000, (b) any agreement,
contract or commitment not in the ordinary course of business, (c) any
agreement, contract or other instrument related to Loans and Accounts
Receivable, (d) any agreement, contract or commitment relating to capital
expenditures in excess of $10,000, (e) any agreement, indenture or instrument
relating to indebtedness, liability for borrowed money or the deferred purchase
price of property (excluding payables in the ordinary course of business), (f)
any loan or advance to, or investment in, any individual, partnership, joint
venture, corporation, trust, unincorporated organization, government or other
entity (each a "Person"), 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, (g) any guarantee or other contingent
liability in respect of any indebtedness or obligation of any Person (other than
in the ordinary course of business), (h) any management service, consulting or
any other similar type contract, (i) any agreement, contract or commitment
limiting the ability of any Partnership to engage in any line of business or to
compete with any Person, (j) any warranty, guaranty or other similar undertaking
with respect to contractual performance extended by any Partnership other than
in the ordinary course of business, or (k) any amendment, modification or
supplement in
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respect of any of the foregoing. Except as otherwise set forth on Schedule 4.9,
each contract or agreement set forth on Schedule 4.9 is in full force and effect
and there exists no material default or event of default or, to the knowledge of
any Seller or any Partnership, event, occurrence, condition or act (including
the consummation of the sale contemplated hereby) which, with the giving of
notice, the lapse of time or the happening of any other event or condition,
would become a material default or event of default thereunder.
Section 4.10. Consents and Approvals; No Violations. Except as set
forth in Schedule 4.10 attached hereto, the execution and delivery of this
Agreement by each of the Sellers and the consummation of the transactions
contemplated hereby (a) will not violate or contravene any provision of the
organizational documents of any Seller or any Partnership, (b) will not violate
or contravene any statute, rule, regulation, order or decree of any public body
or authority by which any Seller or any Partnership is bound or by which any of
their assets are bound, (c) will not 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 any other Person; provided that no representation
is being made with respect to filings under the Hart-Scott-Rodino Anti-Trust
Improvements Act of 1976;
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(d) will not 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 Encumbrance upon any of the assets of any Seller or any
Partnership under, any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, license, franchise, permit, agreement (including the
provisions of any right of first refusal contained in any agreement relating to
any Loans and Accounts Receivable acquired by any Partnership), lease, franchise
agreement or any other instrument or obligation to which any Seller or any
Partnership is a party, or by which it or any of their assets may be bound,
excluding from the foregoing clauses (b), (c) and (d) filings, notices, permits,
consents and approvals, the absence of which, and violations, breaches,
defaults, conflicts and Encumbrances of which, in the aggregate, would not have
a Material Adverse Effect.
Section 4.11. Litigation. Except as set forth on Schedule 4.11
attached hereto and except for usual and customary litigation brought by the
Partnerships against account debtors related to the Partnerships' collection of
Loans and Accounts Receivable and counterclaims by account debtors related
thereto, there is no action, suit, proceeding at law or in equity, arbitration
or administrative or other
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proceeding by or before (or to the knowledge of any Seller or any Partnership
any investigation by) any governmental or other instrumentality or agency,
pending, or, to the knowledge of any Seller or any Partnership, threatened,
against or affecting any Seller or any Partnership or any of their assets or
rights which could materially and adversely affect the right or ability of any
Partnership to carry on its business as now conducted, or which could have a
Material Adverse Effect; and no Seller or Partnership knows of a valid basis for
any such action, proceeding or investigation. No Seller or Partnership is
subject to any judgment, order or decree entered in any lawsuit or proceeding
which may have a Material Adverse Effect.
Section 4.12. Taxes. (i) All material returns and reports for Taxes
for all taxable years or periods that end on or before the Closing Date and,
with respect to any taxable year or period beginning before and ending after the
Closing Date, the portion of such taxable year or period ending on and including
the Closing Date ("Pre-Closing Periods") which are required to be filed by or
with respect to any Partnership or any Seller (with respect to its Interest) or
the assets of any Partnership (collectively, the "Returns") have been or will be
filed when due in a timely fashion (including extensions) and such Returns as
filed are or will be accurate in all material respects.
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(ii) All material Taxes owed by or with respect to each Partnership,
each Seller (with respect to its Interests) and with respect to the assets of
each Partnership (whether or not shown on any Return) for all Pre-Closing
Periods have been or will be fully paid in a timely fashion (including
extensions).
(iii) Except as provided in Schedule 4.12 attached hereto, there is no
action now pending or, to the knowledge of any Seller or Partnership, threatened
by any governmental authority regarding any Taxes relating to any Partnership,
any Seller (with respect to its Interests) or the assets of any Partnership for
any Pre-Closing Period.
(iv) No claim has ever been made by any taxing authority in a
jurisdiction where any Seller or Partnership does not file Returns that any
Partnership or any Seller (with respect to its Interest) is or may be subject to
taxation by that jurisdiction.
(v) Except as provided in Schedule 4.12, there are no agreements for
the extension or waiver of the time for assessment of any Taxes relating to any
Partnership or any Seller (with respect to its Interest) or the assets of any
Partnership for any Pre-Closing Period and no Seller or Partnership has been
requested to enter into any such agreement or waiver.
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(vi) Except as provided in Schedule 4.12, no Partnership or Seller
(with respect to its Interest) has been included in any "consolidated",
"combined" or "unitary" Return provided for under the laws of the United States,
any state, locality or foreign country with respect to Taxes for any taxable
period for which the statute of limitations has not expired.
(vii) All Taxes relating to any Partnership or Seller (with respect to
its Interest) or the assets of any Partnership which any Partnership or Seller
is 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.
(viii) No Seller or Partnership is now or has ever been a party to any
Tax allocation, indemnification, sharing or similar agreement that could result
in any Liability to the Purchasers.
Section 4.13. Liabilities. No Partnership has any outstanding claims,
liabilities or indebtedness, contingent or otherwise, except (i) as set forth in
the Balance Sheet or referred to in the footnotes thereto, (ii) for contractual
obligations not required under GAAP to be set forth on the 1994 Balance Sheet or
referred to in the footnotes thereto incurred in the ordinary business which, in
the aggregate, are not material, (iii) other liabilities incurred subsequent
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to December 31, 1994 in the ordinary course of business and (iv) for the matters
set forth in Section 4.11.
Section 4.14. Insurance. Schedule 4.14 contains an accurate and
complete summary description of all policies of property, fire and casualty,
product liability, workers compensation and other forms of insurance owned or
held by each Partnership. No Partnership has received (i) any notice of
cancellation of any policy described in such Schedule or refusal of coverage
thereunder, (ii) any notice that any issuer of such policy has filed for
protection under applicable bankruptcy laws or is otherwise in the process of
liquidating or has been liquidated, or (iii) any other indication that such
policies are no longer in full force or effect or that the issuer of any such
policy is no longer willing or able to perform its obligations thereunder. Since
the most distant renewal date of any policy, there has not been any material
adverse change in any Partnership's relationship with its insurers or in the
premiums payable pursuant to such policies.
Section 4.15. Compliance with Laws. Each Partnership is in compliance
with all applicable laws, regulations, orders, judgments and decrees (including,
without limitation, the Fair Debt Collection Practices Act and any state or
local counterpart or equivalent), except where the failure to so comply would
not have a Material Adverse Effect.
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Section 4.16. Employment Relations. (a) Each Partnership is in
substantial compliance with all Federal, state or other applicable laws,
domestic or foreign, 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;
(b) no unfair labor practice complaint against any Partnership is
pending before the National Labor Relations Board;
(c) there is no labor strike, dispute, slowdown or stoppage actually
pending or threatened against or involving any Partnership; and
(d) No Partnership is a party to a collective bargaining agreement and
no collective bargaining agreement is currently being negotiated by any
Partnership.
Section 4.17. Employee Benefit Plans. (i) List of Plans. Set forth in
Schedule 4.17 attached hereto is an accurate and complete list of all (A)
"employee benefit plans," 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"), (B) bonus, stock option, stock purchase,
restricted stock, incentive, profit-sharing, pension or retirement, deferred
compensation, medi-cal, life, disability, accident, accrued leave, vacation,
sick pay, sick leave, supplemental retirement and unemploy-
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ment benefit plans, programs, arrangements, commitments or practices (whether or
not insured), and (C) employment, consulting, termination, and severance
contracts or agreements, in each case for active, retired or former employees or
directors, whether or not any such plans, programs, arrangements, commitments,
contracts, agreements or practices (referred to in (A), (B) or (C) above) are in
writing or are otherwise exempt from the provisions of ERISA, that have been
established, maintained or contributed to (or with respect to which an
obligation to contribute has been undertaken) or with respect to which any
potential liability is borne by any Partnership (including, for this purpose and
for the purpose of all of the representations in this Section 4.17, any
predecessors to any Partnership and all employers (whether or not incorporated)
that are by reason of common control treated together with any Partnership as a
single employer (1) within the meaning of Section 414 of the Code or (2) as a
result of any Partnership being or having been a general partner of any such
employer) since September 2, 1974 ("Employee Benefit Plans").
(ii) Status of Plans. Each Employee Benefit Plan has at all times been
maintained and operated in substantial compliance with its terms and the
requirements of all applicable laws, including ERISA and the Code. No complete
or partial termination of any Employee Benefit Plan has occurred
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or is expected to occur. Except as disclosed in Schedule 4.17, no Partnership
has any commitment to create, modify or terminate any Employee Benefit Plan. No
condition or circumstance exists that would prevent the amendment or termination
of any Employee Benefit Plan in accordance with applicable law. No event has
occurred and no condition or circumstance has existed that could result in a
material increase in the benefits under or the expense of maintaining any
Employee Benefit Plan from the level of benefits or expense incurred for the
most recent fiscal year ended thereof.
(iii) No Single Employer/Multiemployer Plans. Neither any Partnership
nor any entity required to be aggregated with any Partnership (A) pursuant to
Section 414 of the Code or (B) as a result of any Partnership being or having
been a general partner of any such entity has maintained or contributed to (or
has had an obligation to contribute to) any "single employer plan" (as defined
in Section 4001(a)(15) of ERISA) or any "multiemployer plan" (as defined in
Section 4001(a)(3) of ERISA).
(iv) Liabilities. No Partnership maintains any Employee Benefit Plan
which is a "group health plan" (as such term is defined in Section 5000(b)(1) of
the Code) that has not been administered and operated in all respects in
compliance with the applicable requirements of Section 601 of
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ERISA and Section 4980B(f) of the Code and no Partnership is subject to any
liability, including, without limitation, additional contributions, fines,
penalties or loss of tax deduction as a result of such administration and
operation. No Partnership maintains any Employee Benefit Plan (whether qualified
or nonqualified within the meaning of Section 401(a) of the Code) providing for
retiree health and/or life insurance benefits and having unfunded liabilities.
No Partnership maintains any Employee Benefit Plan which is an "employee welfare
benefit plan" (as such term is defined in Section 3(1) of ERISA) that has
provided any "disqualified benefit" (as such term is defined in Section 4976(b)
of the Code) with respect to which an excise tax could be imposed. No
Partnership has any unfunded liabilities pursuant to any Employee Benefit Plan
that is not intended to be qualified under Section 401(a) of the Code. There are
no actions, suits or claims pending, or, to the knowledge of any Seller or
Partnership, threatened, anticipated or expected to be asserted against any
Employee Benefit Plan or the assets of any such plan (other than routine claims
for benefits and appeals of denied routine claims). No civil or criminal action
brought pursuant to the provisions of Title I, Subtitle B, Part 5 of ERISA is
pending, or to the knowledge of any Seller or any Partnership, threatened,
anticipated, or expected to be asserted against any Partnership or any
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fiduciary of any Employee Benefit Plan, or in any case with respect to any
Employee Benefit Plan. Except as set forth in Schedule 4.17, no Employee Benefit
Plan or any fiduciary thereof has been the direct or indirect subject of an
audit, investigation or examination by any governmental or quasi-governmental
agency.
(v) Contributions. Full payment has been made of all amounts which
each Partnership is required, under applicable law or under any Employee Benefit
Plan or any agreement relating to any Employee Benefit Plan to which any
Partnership is a party, to have paid as contributions thereto, or premiums with
respect thereto, as of the date hereof. All such contributions and premiums have
been fully deducted for income tax purposes and no such deduction has been
challenged or disallowed by any governmental entity, and to the best knowledge
and belief of the Sellers and the Partnerships, no event has occurred and no
condition or circumstance has existed that could give rise to any such challenge
or disallowance. Each Partnership has made adequate provision for reserves to
meet contributions that have not been made because they are not yet due under
the terms of any Employee Benefit Plan or related agreements. Benefits under all
Employee Benefit Plans are as represented and have not been increased, except as
provided for under such Employee Benefit
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Plans, subsequent to the date as of which documents have been provided.
(vi) Tax Qualification. Each Employee Benefit Plan intended to be
qualified under Section 401(a) of the Code has been determined to be so
qualified by the Internal Revenue Service. Each trust established in connection
with any Employee Benefit Plan which is intended to be exempt from Federal
income taxation under Section 501(a) of the Code has been determined to be so
exempt by the Internal Revenue Service. Since the date of each most recent
determination referred to in this paragraph (vi), no event has occurred and no
condition or circumstance has existed that resulted or is likely to result in
the revocation of any such determination or that could adversely affect the
qualified status of any such Employee Benefit Plan or the exempt status of any
such trust.
(vii) Transactions. Neither the Partnerships nor any of their
respective partners, directors, officers, employees or, to the knowledge of any
Seller or any Partnership, other persons who participate in the operation of any
Employee Benefit Plan or related trust or funding vehicle, has engaged in any
transaction with respect to any Employee Benefit Plan or breached any applicable
fiduciary responsibilities or obligations under Title I of ERISA that would
subject any of them to a tax, penalty or liability for prohibited
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transactions under ERISA or the Code or would result in any claim being made
under, by or on behalf of any such Employee Benefit Plan by any party with
standing to make such claim.
(viii) Triggering Events. The execution of this Agreement and the
consummation of the transactions contemplated hereby, do not, by themselves,
constitute a triggering event under any Employee Benefit Plan, policy,
arrangement, statement, commitment or agreement, whether or not legally
enforceable, which (either alone or upon the occurrence of any additional or
subsequent event) will or may result in any payment (whether of severance pay or
otherwise), acceleration, vesting or increase in benefits to any employee or
former employee or director of any Partnership. No Employee Benefit Plan
provides for the payment of severance benefits upon the termination of an
employee's employment.
(ix) Documents. The Sellers have delivered or caused to be delivered
to the Purchasers or their counsel copies of all material documents in
connection with each Employee Benefit Plan, including (where applicable): (A)
all Employee Benefit Plans as in effect on the date hereof, together with all
amendments thereto, including, in the case of any Employee Benefit Plan not set
forth in writing, a written description thereof; (B) all current summary plan
descriptions, summaries of material modifications, and material communications;
(C) all current trust agreements,
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declarations of trust and other documents establishing other funding
arrangements (and all amendments thereto and the latest financial statements
thereof); (D) the most recent Internal Revenue Service determination letter, if
any, obtained with respect to each Employee Benefit Plan intended to be
qualified under Section 401(a) of the Code or exempt under Section 501(a) of the
Code; (E) Form 5500 for each of the last three years for each Employee Benefit
Plan required to file such Form; (F) the most recently prepared financial
statements; and (G) all contracts relating to each Employee Benefit Plan,
including service provider agreements, insurance contracts, annuity contracts,
investment management agreements, subscription agreements, participation
agreements, and recordkeeping agreements.
Section 4.18. Interests in Customers, Suppliers, etc. Except as set
forth on Schedule 4.18 attached hereto, no officer or director of any Seller or
Partnership possesses, directly or indirectly, any financial interest in, or is
a director, officer or employee of, any Person which is a supplier, customer,
lessor, lessee, licensor, developer or competitor of such Partnership. Ownership
of securities of a company whose securities are registered under the Securities
Exchange Act of 1934, as amended, of 5% or less of any class of such securities
shall not be deemed to be a financial interest for purposes of this Section
4.18.
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Section 4.19. Bank Accounts and Powers of Attorney. Set forth on
Schedule 4.19 attached hereto is an accurate and complete list showing (a) the
name and address of each bank in which any Partnership has an account or safe
deposit box, the number of any such account or any such box and the names of all
persons authorized to draw thereon or to have access thereto and (b) the names
of all persons, if any, holding powers of attorney from any Partnership and a
summary statement of the terms thereof.
Section 4.20. Conduct of Business. Except as disclosed on Schedule
4.20 attached hereto and except as expressly contemplated by this Agreement,
since July 31, 1995 no Partnership has taken any action which, if taken
subsequent to the execution of this Agreement and on or prior to the Closing
Date, would constitute a breach of the Sellers' agreements set forth in clauses
(a)-(k) of Section 6.1.
Section 4.21. Operation of Business/Equipment. Except as set forth on
Schedule 4.21, no part of any Partnership's business is operated or conducted by
or through any Person other than the Partnerships.
Section 4.22. Loans and Accounts Receivable. Except as set forth on
Item 2 and Item 4 of Schedule 4.5, each Partnership is the legal and beneficial
owner of the Loans and Accounts Receivable reflected on the Balance Sheet or
acquired since the Balance Sheet Date, and the Part-
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nerships have good title to, such Loan and Accounts Receivable and the
collections with respect thereto, free and clear of any liens and no effective
financing statement or other instrument similar in effect covering all or any
part of such Loan or Receivable or collections with respect thereto will at such
time be on file in any filing or recording office.
Section 4.23. Environmental Matters. Except as set forth in Schedule
4.23, to the knowledge of any Seller or Partnership:
(i) no Hazardous Material has been used, generated, treated, stored or
disposed of by any Partnership, or with respect to each Partnership's
operations, no Hazardous Material has been released, discharged or spilled
at any properties owned, leased or operated by any Partnership or is
present in the fixtures, structures, soil, groundwater or surface water or
on, under, about or emanating from such properties;
(ii) none of the properties owned, leased or operated by any
Partnership contains or has contained any underground or above-ground tanks
for the storage of Hazardous Material;
(iii) each Partnership has disposed of all wastes, including those
containing any Hazardous Material, in compliance in all material respects
with all applicable
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Environmental Laws and Environmental Permits so as not to give rise to any
Environmental Claim against any Partnership;
(iv) there are no facts, circumstances or conditions with respect to
any properties owned, leased or operated by any Partnership or any
operations thereon, or any properties in the vicinity of such properties,
which (A) could subject any of such properties to any restrictions on
ownership, occupancy, use or transferability under any applicable
Environmental Law or Environmental Permit or (B) form the basis of an
Environmental Claim against any Partnership;
(v) each Partnership and each property owned, leased or operated by
such Partnership, and all operations thereon, are in compliance, in all
material respects, with all Environmental Laws; and
(vi) each Partnership has provided the Purchasers or caused the
Purchasers to be provided with accurate and complete copies of any material
written information in the possession of such Partnership which pertains to
the environmental history of all the properties owned, leased or operated
by such Partnership.
Section 4.24. Acquisition for Investment. Each of APT-1 and APT-2 will
acquire the Shares for investment and not with a view toward any resale or
distribution thereof.
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The Shares have not been registered under the Securities Act of 1933, as amended
(the "Act"), or the securities laws of any states and are being offered and sold
in reliance on exemptions from the registration requirements of the Act and such
laws. The Shares are subject to restrictions on transferability and resale and
may not be transferred or resold except as permitted under the Stockholders
Agreement referred to in Sections 7.8 and 8.6 and under the Act and such laws
pursuant to registration or exemption therefrom. Each of APT-1 and APT-2
understands that the Shares are not freely transferable, and that there is no
market to which APT-1 and APT-2 could sell the Shares. Each of APT-1 and APT-2
hereby warrants, represents and acknowledges that it is an "accredited investor"
for purposes of Regulation D and Rule 230.501(a) promulgated under the Act.
Section 4.25. Broker's or Finder's Fees. Except for Goldman, Sachs &
Co., whose fees and expenses will be, except as provided in Section 12.1, paid
by the Sellers, no agent, broker, person or firm acting on behalf of the Sellers
or the Partnerships is, or will be, entitled to any commission or broker's or
finder's fees from any Seller or Partnership, or from any Person controlling,
controlled by or under common control with any Seller or Partnership in
connection with any of the transactions contemplated by this Agreement.
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Section 4.26. APLP Ownership. Account Portfolios, L.P. is the ultimate
parent entity of the acquired person (as defined in the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and the
regulations promulgated thereunder). Account Portfolios, L.P.'s annual net sales
and total assets (each as defined in the HSR Act and the regulations promulgated
thereunder) are less than $100,000,000.
ARTICLE V
REPRESENTATIONS OF THE PURCHASER
Section 5. Representations of the Purchaser. Each Purchaser jointly
and severally represents, warrants and agrees as follows:
Section 5.1. Existence and Good Standing of the Purchaser; Power and
Authority. Each Purchaser is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Delaware. Each Purchaser has
the requisite corporate power and authority to enter into, execute and deliver
this Agreement, the Seller Notes and the Seller Security Documents to which it
is a party and perform its obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby. The execution,
delivery and performance of this Agreement, the Seller Notes and the Seller
Security Documents by each
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Purchaser party to such Seller Note or Seller Security Document and the
consummation by it of the transactions contemplated hereby and thereby have been
duly authorized and approved by the Board of Directors of each Purchaser and no
other corporate action on the part of any Purchaser is necessary to authorize
the execution, delivery and performance of this Agreement by such Purchaser and
the consummation of the transactions contemplated hereby and thereby. This
Agreement, the Seller Notes and Seller Security Documents have been duly
executed and delivered by each Purchaser party to such Seller Note or Seller
Security Document and, assuming due execution of this Agreement, the Seller
Notes and the Seller Security Documents by each party to any such Seller Note or
Seller Security Document (other than the Purchasers), this Agreement, such
Seller Notes and the Seller Security Documents are valid and binding obligations
of each Purchaser a party thereto enforceable against such Purchaser in
accordance with its terms, except to the extent that its enforceability may be
subject to applicable bankruptcy, insolvency, reorganization, moratorium and
similar laws affecting the enforcement of creditors' rights generally and by
general equitable principles.
Section 5.2. Consents and Approvals; No Violations. The execution
and delivery of this Agreement, the Seller Notes and the Seller Security
Documents by each
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Purchaser party to such Seller Note or Seller Security Document and the
consummation of the transactions contemplated hereby and thereby (including,
without limitation, the issuance of the Shares) (a) will not violate or
contravene any provision of the Certificate of Incorporation or By-laws of any
Purchaser, (b) will not violate or contravene any statute, rule, regulation,
order or decree of any public body or authority by which any Purchaser is bound
or by which any of its properties or assets are bound, (c) will not require any
filing with, or permit, consent or approval of, or the giving of any notice to
(including any filings under the HSR Act), any governmental or regulatory body,
agency or authority or any other Person; provided that such representation with
respect to filings required to be made under the HSR Act is made in reliance
upon the Sellers' representation in Section 4.26; and (d) will not 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
Encumbrance upon any of the interests of any Purchaser under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, license,
franchise, permit, agreement, lease, franchise agreement or any other instrument
or obligation to which any Purchaser is a party, or by which any of
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them or any of their properties or assets may be bound, excluding from the
foregoing clauses (b), (c) and (d) filings, notices, permits, consents and
approvals, the absence of which, and violations, breaches, defaults, conflicts
and Encumbrances, which would not prevent such Purchaser from performing its
obligations under this Agreement, any Seller Note or any Seller Security
Document or the consummation of the transactions contemplated hereby and
thereby.
Section 5.3. Capital Stock. The Shares to be received by APT-1 and
APT-2 in accordance with the terms of this Agreement will be duly authorized,
validly issued and fully paid and nonassessable.
Section 5.4 Capitalization. (a) Capitalization of OSI Holdings. The
authorized capital stock of OSI Holdings consists of (i) 5,600,000 shares of OSI
Holdings Common Stock, of which 2,812,000 shares will be duly authorized and
validly issued and outstanding, fully paid and nonassessable after giving effect
to the transactions contemplated by this Agreement, and (ii) 1,000,000 shares of
OSI Holdings Preferred Stock, of which 800,000 shares will be duly authorized
validly issued and outstanding, fully paid and nonassessable after giving effect
to the transactions contemplated by this Agreement. The record ownership of the
outstanding shares of OSI Holdings Common Stock and Preferred
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Stock (after giving effect to the transactions contemplated by this Agreement)
is reflected on Schedule 5.4 attached hereto. Except as set forth on Schedule
5.4 attached hereto, no shares of capital stock of OSI Holdings have been
reserved for any purpose. Except for the OSI Holdings Preferred Stock and for
rights contained in the Stockholders Agreement referred to in Sections 7.8 and
8.6, there are no outstanding securities convertible into or exchangeable for
the capital stock of OSI Holdings and no outstanding options, rights (preemptive
or otherwise), or warrants to purchase or to subscribe for any shares of such
stock or other securities of OSI Holdings. There are no outstanding agreements
affecting or relating to the voting, issuance, purchase, redemption, repurchase
or transfer of any of the securities of OSI Holdings, except for the
Stockholders Agreement referred to in Sections 7.8 and 8.6 or as otherwise
contemplated hereunder. After giving effect to the issuance of the Shares, APT-1
and APT-2 will collectively be the registered holders of 33.19% of outstanding
OSI Holdings Common Stock and 33 1/3% of outstanding OSI Holdings Preferred
Stock.
(b) Capitalization of Newco-1. The authorized capital stock of Newco-1
consists of 100 shares of common stock, $.01 par value per share, of which 100
shares are duly authorized and validly issued and outstanding, fully paid and
nonassessable, all of which are owned of record and
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beneficially by OSI Holdings. No shares of capital stock of Newco-1 have been
reserved for any purpose. There are no outstanding securities convertible into
or exchangeable for the capital stock of Newco-1 and no outstanding options,
rights (preemptive or otherwise), or warrants to purchase or to subscribe for
any shares of such stock or other securities of Newco-1. There are no
outstanding agreements affecting or relating to the voting, issuance, purchase,
redemption, repurchase or transfer of any of the securities of Newco-1.
(c) Capitalization of Newco-2. The authorized capital stock of Newco-2
consists of 100 shares of common stock, $.01 par value per share, of which 100
shares are duly authorized and validly issued and outstanding, fully paid and
nonassessable, all of which are owned of record and beneficially by Newco-1. No
shares of capital stock of Newco-2 have been reserved for any purpose. There are
no outstanding securities convertible into or exchangeable for the capital stock
of Newco-2 and no outstanding options, rights (preemptive or otherwise), or
warrants to purchase or to subscribe for any shares of such stock or other
securities of Newco-2. There are no outstanding agreements affecting or relating
to the voting, issuance, purchase, redemption, repurchase or transfer of any of
the securities of Newco-2.
Section 5.5 Absence of Liabilities. Except as reflected on Schedule
5.5 or as contemplated by this Agreement,
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the Seller Notes and the Seller Security Documents, there exists no liabilities
(whether contingent or absolute, matured or unmatured, known or unknown) of OSI
Holdings or the Purchasers.
Section 5.6 Conduct of Business. No Purchaser has conducted any
business other than that directly related to the transactions contemplated
hereby and by the agreements set forth in Schedule 5.7.
Section 5.7 Other Agreements. Schedule 5.7 sets forth all agreements
(other than the Seller Notes and the Seller Security Documents) to which any
Purchaser is a party and by which any Purchaser is bound at the date hereof.
Section 5.8. Broker's or Finder's Fees. No agent, broker, person or
firm acting on behalf of the Purchasers is, or will be, entitled to any
commission or broker's or finder's fees from the Sellers in connection with any
of the transactions contemplated by this Agreement.
ARTICLE VI
TRANSACTIONS PRIOR TO THE CLOSING DATE
Section 6.1. Conduct of Business of the Seller. During the period from
the date of this Agreement to the Closing Date, the Partnerships shall conduct
their operations in the ordinary course of business; use their reasonable best
efforts to: preserve intact their current business organiza-
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tion, keep available the services of their current officers, employees and
agents, and maintain their relations and good-will with suppliers, customers,
landlords, creditors, licensors, developers, employees, agents and others having
business relationships with them; confer with the Purchasers concerning
operational matters of a material nature; and report periodically to the
Purchasers concerning the status of the business, operations and finances of the
Partnerships. Notwithstanding the immediately preceding sentence, prior to the
Closing Date, except as may be first approved in writing by the Purchasers or as
is otherwise permitted or required by this Agreement, each of the Sellers shall
cause each Partnership to (a) refrain from paying any individual bonus greater
than $5,000 or increasing any salary or other compensation to any director,
officer, employee or stockholder by greater than $5,000 or hiring any employee
with an annual salary of greater than $50,000 or entering into any employment,
severance, or similar agreement with any director, officer, employee or
stockholder except for actions referred to in this clause (a) made in the
ordinary course of business consistent with such Partnership's past practice,
(b) refrain from the adopting or increasing of any profit sharing, deferred
compensation, savings, insurance, pension, retirement, or other employee benefit
plan for or with any employees of such Seller, (c) refrain from entering into
any
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material contract or commitment (other than the contracts and commitments listed
in Schedules 4.3, 4.5, 4.7 or 4.9) except material contracts and commitments in
the ordinary course of business, (d) refrain from incurring any indebtedness for
borrowed money, (e) other than in connection with portfolios of Loans and
Accounts Receivable purchased from third parties in the ordinary course of
business consistent with past practice, refrain from cancelling or waiving any
claim or right of substantial value which individually or in the aggregate is
material to such Partnership, (f) refrain from redeeming, purchasing or
otherwise acquiring any equity interest of such Partnership (except for GSCLP),
(g) refrain from making any material change in accounting methods or practices,
except as required by law or generally accepted accounting principles, (h)
except for the liquidation of investment securities for cash, refrain from
selling, leasing or otherwise disposing of any material asset or property of
such Partnership, (i) make any capital expenditure which individually exceeds
$10,000 or make any capital expenditure commitment which individually or in the
aggregate exceeds $10,000, (j) refrain from writing off as uncollectible any
Loans or Accounts Receivable, except write-offs in the ordinary course of
business consistent with past practice and (k) refrain from agreeing in writing
whether or not to do any of the foregoing.
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Section 6.2. Exclusive Dealing. During the period from the date of
this Agreement to the Closing Date, neither any Seller, nor any representative
thereof, shall take any action to, directly or indirectly, encourage, initiate
or engage in discussions or negotiations with, or provide any information to,
any Person, other than the Purchasers and their representatives, concerning any
purchase of the Interests, any assets of any Partnership or any merger or
similar transaction involving any Partnership.
Section 6.3. Review of the Seller and Confidentiality. The Purchasers
may, prior to the Closing Date, directly or through its representatives, review
the properties, books and records of each Seller and its financial and legal
condition to the extent it reasonably deems necessary or advisable to
familiarize itself with such properties and other matters; such review shall
not, however, affect the representations and warranties made by each Seller in
this Agreement or the remedies of the Purchasers for breaches of those
representations and warranties. Each Seller shall permit the Purchasers and
their representatives to have reasonable access to the premises and to the books
and records of such Seller during normal working hours and to furnish the
Purchasers with such financial and operating data and other information with
respect to the business and properties of such Seller as the Purchasers shall
from time to time reason-
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ably request. The Purchasers shall cooperate fully with each Seller to implement
procedures designed to minimize disruption to such Seller's business while
ensuring access to all relevant information. The parties hereto acknowledge that
McCown De Leeuw & Co. and Affiliates or representatives of the Sellers have
entered into a Confidentiality Agreement dated June 22, 1995 (the
"Confidentiality Agreement") and the Purchasers confirm that they will comply
with their obligations thereunder as if they were parties thereto and that
information obtained during any such review will be subject to the terms of the
Confidentiality Agreement.
Section 6.4. Reasonable Best Efforts. The Sellers and the Purchasers
shall cooperate and use their respective reasonable best efforts to take, or
cause to be taken, all appropriate actions, and to make, or cause to be made,
all filings necessary, proper or advisable under applicable laws and regulations
to consummate and make effective the transactions contemplated by this
Agreement, including, without limitation, their respective reasonable best
efforts to obtain, prior to the Closing Date, all licenses, permits, consents,
approvals, authorizations, qualifications and orders of governmental authorities
and parties to contracts with any of the Partnerships as are necessary for
consummation of the transactions contemplated by the Agreement and to fulfill
the conditions to the sale contemplated hereby.
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ARTICLE VII
CONDITIONS TO THE PURCHASERS' OBLIGATIONS
Section 7. Conditions to the Purchasers' Obligations. The obligations
of the Purchasers to effect the transactions contemplated by this Agreement are
conditioned upon satisfaction, at or prior to the Closing, of the following
conditions:
Section 7.1. Opinion of the Sellers' Counsel. The Purchasers shall
have received an opinion, dated the Closing Date, of Troutman Sanders LLP, to
the effect set forth in Exhibit B attached hereto.
Section 7.2. Truth of Representations and Warranties. The
representations and warranties of the Sellers contained in this Agreement shall
be true and correct in all material respects on and as of the Closing Date with
the same effect as though such representations and warranties had been made on
and as of such date.
Section 7.3. Performance of Agreements. The agreements of the Sellers
to be performed prior to the Closing pursuant to the terms of this Agreement
shall have been duly performed.
Section 7.4. No Material Adverse Change. Prior to the Closing there
shall have been no material adverse change
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in the business, operations, financial condition or results of operations of the
Partnerships.
Section 7.5. No Litigation Threatened. No action or proceedings shall
have been instituted or, to the knowledge of any Seller or any Partnership,
threatened before a court or other government body or by any public authority to
restrain or prohibit any of the transactions contemplated hereby.
Section 7.6. Approvals. All governmental and other consents and
approvals, if any, disclosed on any Schedule attached hereto or otherwise
necessary to permit the consummation of the transactions contemplated by this
Agreement shall have been received.
Section 7.7. Noncompetition Agreements. The Purchasers and each of
Frank J. Hanna III and David G. Hanna shall have entered into a noncompetition
and noninterference agreement in substantially the form of Exhibit C attached
hereto.
Section 7.8. Stockholders Agreement. OSI Holdings, David B. Kreiss,
Gregory M. Shelton, APT-1, APT-2 and Affiliates of McCown De Leeuw & Co. shall
have entered into a stockholders agreement in the form of Exhibit D attached
hereto.
Section 7.9. Transfer Documents. Each Seller shall have executed and
delivered to the Purchasers such
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deeds, transfers in registrable form, endorsements, assurances, conveyances,
releases, discharges, assignments, certificates, or other instruments of
transfer and conveyance, duly executed by such Seller, as the Purchasers shall
reasonably deem necessary to vest in the Purchasers good and marketable title to
the Interests free and clear of any Encumbrance of any kind, and such other
documents as the Purchasers may reasonably request to demonstrate satisfaction
of the conditions and compliance with this Agreement by each Seller.
Section 7.10. FIRPTA. Each Seller shall have furnished to the
Purchasers, on or prior to the Closing Date, a non-foreign person affidavit
required by Section 1445 of the Code.
Section 7.11. Pre-Closing Transactions. The Pre-Closing Transactions
shall have been completed as described in Section 9.3.
Section 7.12. Pledge Agreement. Each of APT-1 and APT-2 shall have
executed and delivered to the Purchasers the Pledge Agreement referred to in
Section 10.3.
ARTICLE VIII
CONDITIONS TO THE SELLERS' OBLIGATIONS
Section 8. Conditions to the Sellers' Obligations. The obligations of
the Sellers to effect the transactions
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contemplated by this Agreement are conditioned upon satisfaction, at or prior to
the Closing, of the following conditions:
Section 8.1. Opinion of the Purchaser's Counsel. The Sellers shall
have received an opinion, dated the Closing Date, of White & Case, to the effect
set forth in Exhibit D attached hereto.
Section 8.2. Truth of Representations and Warranties. The
representations and warranties of the Purchasers contained in this Agreement
shall be true and correct in all material respects on and as of the Closing Date
with the same effect as though such representations and warranties had been made
on and as of such date.
Section 8.3. Performance of Agreements. The agreements of the
Purchasers to be performed prior to the Closing pursuant to the terms of this
Agreement shall have been duly performed.
Section 8.4. No Litigation Threatened. No actions or proceedings shall
have been instituted or, to the knowledge of the Purchasers, threatened before a
court or other government body or by any public authority to restrain or
prohibit any of the transactions contemplated hereby.
Section 8.5. Approvals. All governmental and other consents and
approvals, if any, disclosed on any Schedule attached hereto or otherwise
necessary to permit the
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consummation of the transactions contemplated by this Agreement shall have been
received.
Section 8.6. Stockholders Agreement. OSI Holdings, David B. Kreiss,
Gregory M. Shelton, APT-1, APT-2 and Affiliates of McCown De Leeuw & Co. shall
have entered into a stockholders agreement in substantially the form of Exhibit
D attached hereto.
Section 8.7. Pre-Closing Transactions. The Pre-Closing Transactions
shall have been completed as described in Section 9.3.
Section 8.8. Delivery of Agreements. The Purchasers shall have
delivered the Seller Notes and the Seller Security Documents to the Sellers
executed by each Purchaser party to any such Seller Note or Seller Security
Document. Each Purchaser shall have executed and delivered to the Sellers such
financing statements, pledges, hypothecations, notices and assignments, in each
case in form and substance reasonably satisfactory to Sellers, as the Sellers
shall reasonably deem necessary or desirable to create, preserve, perfect,
confirm or validate the security interests, liens and pledges evidenced by the
Seller Security Documents.
Section 8.9. OSI Holdings Loan. Affiliates of
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McCown De Leeuw & Co. shall have loaned $1,450,000 to OSI Holdings and OSI
Holdings shall have issued a promissory note in the Form of Exhibit E attached
hereto to such Affiliates.
ARTICLE IX
OTHER AGREEMENTS
Section 9.1. Transfer Taxes. All stamp, transfer, documentary, sales,
use, value added, registration and other similar taxes and fees imposed by the
United States or by any political subdivision or taxing authority thereof or
therein (including any penalties and interest) incurred in connection with the
sale of the Interests pursuant to this Agreement (collectively, the "Transfer
Taxes") shall be borne by the Purchasers. Each party will, to the extent
required by law, file on a timely basis all necessary Returns and other
documentation with respect to any Transfer Taxes.
Section 9.2. Use of Name/Change of Name. Each Seller agrees that it
will not, nor will it permit any of its Affiliates to, directly or indirectly,
initiate or support the initiation of any legal proceeding, or take any other
action, the intent or effect of which is to interfere with the Purchasers' use
of the phrases "Account Portfolios," "Gulf State," "Perimeter" or any
derivatives thereof, at any time after the date of this Agreement. No later than
thirty (30) days after the Closing Date, each Seller shall (if
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applicable), and shall cause each of its Affiliates to (if applicable), change
its name to a name not containing the phrases "Account Portfolios," "Gulf
State," "Perimeter" or any derivative thereof.
Section 9.3 Pre-Closing Transactions. Prior to the Closing Date, the
Sellers agree to (i) cause APLP to transfer all of the issued and outstanding
capital stock of PCMC to APMI, APT-1 and APT-2, (ii) amend the partnership
agreement of APLP to provide for the APLP Class A LP Interest (which will
represent a 18.75% interest in APLP) and the APLP Class B LP Interest (which
will represent a 80.25% interest in APLP), to provide that the APLP Class A LP
Interest is freely transferrable and to prohibit transfers of the APLP Class B
LP Interest (excepting from such prohibition the transfer to Newco-1
contemplated by Article II hereof) and (iii) exchange each of APT-1 and APT-2's
APLP limited partnership interest for respective one half interests in the APLP
Class A and APLP Class B LP Interests. The actions described in clauses (i),
(ii) and (iii) of this Section 9.3 are collectively referred to as the
"Pre-Closing Transactions."
Section 9.4 Cooperation/Record Keeping. The Sellers may retain books
and records of the Partnerships relating to Taxes or Returns with respect to any
Pre-Closing Period. After the Closing Date, the Sellers and the
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Purchasers shall furnish or cause to be furnished to the other party or parties
upon request such information relating to Taxes or Returns of the Partnerships
with respect to any Pre-Closing Period (including books and records). With
respect to the foregoing, the Sellers will not allow the destruction or
disposition of any books, records or files relating to the business, properties,
assets of the Partnerships to the extent they pertain to the operations of the
Partnerships with respect to any Pre-Closing Period, without first having
delivered such books, records and files to the Purchasers.
Section 9.5. Certain Tax Returns. Purchasers acknowledge that Sellers
will file Returns with respect to the Partnerships' Pre-Closing Periods on a
"Closing of the Books" method.
ARTICLE X
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
Section 10. Survival of Representations. The representations and
warranties of the Sellers and the Purchasers contained in this Agreement shall
survive for a period of two years following the consummation of the sale
contemplated hereby; provided that the representations and warranties set forth
in Section 4.12 shall survive the con-
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summation of the sale for the relevant statute of limitations period.
Section 10.1. Indemnification. (a) The Sellers hereby agree to jointly
and severally indemnify and hold the Purchasers and their officers, directors,
Affiliates and agents, and any successors thereto, harmless from damages, losses
or expenses (including, without limitation, reasonable attorneys' fees and
expenses) ("Damages") incurred or suffered as a result of or arising out of (i)
the failure of any representation or warranty made by any Seller pursuant to
this Agreement (without regard to any materiality exception contained therein)
to be true and correct as of the Closing Date, or (ii) the breach of any
covenant or agreement made or to be performed by any Seller pursuant to this
Agreement prior to the Closing Date; provided, however, that no Seller shall be
liable under clause (i) of this Section 10.1(a) unless the aggregate amount of
Damages with respect to matters referred to in such clause exceeds $500,000 and
then only to the extent of such excess; provided, further, that solely for
purposes of calculating such $500,000, the amount of the fees and expenses of
Purchasers' counsel incurred in connection with the preparation, prosecution and
enforcement of such indemnification claim shall not constitute Damages;
(b) The Purchasers hereby agree to jointly and severally indemnify and
hold harmless the Sellers and their
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officers, directors, trustees, Affiliates and agents, and any successors
thereto, from any and all Damages incurred or suffered as a result of or arising
out of the (i) failure of any representation or warranty made by the Purchasers
pursuant to this Agreement (without regard to any materiality exception
contained therein) to be true and correct as of the Closing Date or, or (ii) the
breach of any covenant or agreement made or to be performed by the Purchasers
pursuant to this Agreement; provided, however, that the Purchaser shall not be
liable under clause (i) of this Section 10.1(b) unless the aggregate amount of
Damages with respect to matters referred to in such clause exceeds $500,000 and
then only to the extent of such excess; provided, further, that solely for
purposes of calculating such $500,000, the amount of the fees and expenses of
Sellers' counsel incurred in connection with the preparation, prosecution and
enforcement of such indemnification claim shall not constitute Damages.
(c) The foregoing indemnification provision shall be the exclusive
remedy for any breach of the covenants, obligations, representations or
warranties set forth in this Agreement and recourse by the Purchasers for any
indemnification claim made as a result of any breach of any of the Seller's
covenants, obligations, representations or warranties set forth in this
Agreement shall be limited to
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the Shares pledged by the Sellers pursuant to Section 10.3 of this Agreement.
Section 10.2. Indemnification Procedure. (a) Any party seeking
indemnification (the "Indemnified Party") from any other party (the
"Indemnifying Party") with respect to any claim, demand, action, proceeding or
other matter pursuant to this Article X (the "Claim") shall promptly notify the
Indemnifying Party of the existence of the Claim, setting forth in reasonable
detail the facts and circumstances pertaining thereto and the basis for the
Indemnified Party's right to indemnification.
(b) If any third party shall notify any Indemnified Party with respect
to any matter which may give rise to a Claim for indemnification against the
Indemnifying Party under this Agreement, then the Indemnified Party shall
promptly notify each Indemnifying Party thereof; provided, however, that no
delay on the part of the Indemnified Party in notifying any Indemnifying Party
shall relieve the Indemnifying Party from any liability or obligation hereunder
unless (and then solely to the extent) the Indemnifying Party thereby is
materially prejudiced by such failure to give notice. In the event that any
Indemnifying Party notifies the Indemnified Party within 30 days after the
Indemnified Party has given notice of the matter that the Indemnifying Party
would be required to indemnify the Indemnified Party in
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full against any such Claim and is assuming the defense thereof:
(i) the Indemnifying Party will defend the Indemnified Party against
the matter with counsel of its choice reasonably satisfactory to the
Indemnified Party;
(ii) the Indemnified Party may retain separate cocounsel at its sole
cost and expense (except that the Indemnifying Party will be responsible
for the fees and expenses of the separate co-counsel (a) to the extent the
Indemnified Party concludes reasonably based upon advice of counsel that a
conflict of interest exists between the Indemnified Party and Indemnifying
Party or (b) the named parties to any such action (including any impleaded
parties) include both such Indemnified Party and the Indemnifying Party and
such Indemnified Party shall have been advised by counsel that there may be
one or more legal defenses available to the Indemnified Party which are not
available to the Indemnifying Party, or available to the Indemnifying
Party, but the assertion of which would be adverse to the interest of the
Indemnified Party);
(iii) the Indemnified Party will not consent to the entry of any
judgment or enter into any settlement with respect to the matter without
the written consent of the
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Indemnifying Party (not to be withheld unreasonably); and
(iv) the Indemnifying Party will not consent to the entry of any
judgment or enter into any settlement which does not include a provision
whereby the plaintiff or claimant in the matter releases the Indemnified
Party from all liability with respect thereto, without the written consent
of the Indemnified Party (not to be withheld unreasonably).
(c) If no Indemnifying Party notifies the Indemnified Party within 30
days after the Indemnified Party has given notice of the matter that the
Indemnifying Party is assuming the defense thereof, then the Indemnified Party
may defend against, or enter into any settlement with respect to, the matter in
any manner it reasonably may deem appropriate, without prejudice to any of its
rights hereunder.
(d) The Indemnified Party shall be entitled to reimbursement of
reasonable expenses included in Damages with respect to any Claim (including,
without limitation, the cost of defense, preparation and investigation relating
to such Claim) as such expenses are incurred by the Indemnified Party.
Section 10.3. Pledge of Shares. To secure the indemnification
obligations of the Sellers hereunder, each of APT-1 and APT-2 hereby grants to
OSI Holdings a security
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interest in all of APT-1 and APT-2's right, title and interest in and to all of
the Shares and all certificates representing any of such common stock. APT-1 and
APT-2 shall each enter into a pledge agreement with OSI Holdings in the form of
Exhibit F hereto.
ARTICLE XI
EVENTS OF TERMINATION
Section 11.1. Events of Termination. This Agreement may be terminated
(a) by mutual written agreement of the Purchasers and the Sellers or (b) by the
Purchasers by written notice to the Sellers, if the conditions set forth in
Article VII hereof shall not have been complied with or performed on or prior to
the Closing Date in any material respect and no Purchaser shall have materially
breached any of its representations, warranties, covenants or agreements
contained herein, or (c) by the Sellers by written notice to the Purchasers, if
the conditions set forth in Article VIII hereof shall not have been complied
with or performed on or prior to the Closing Date in any material respect and no
Seller shall have materially breached any of its representations, warranties,
covenants or agreements contained herein, and, in either case of clauses (b) or
(c), such noncompliance or nonperformance shall not have been
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cured or eliminated (or by its nature cannot be cured or eliminated) on or
before September 21, 1995.
Section 11.2. Effect of Termination. In the event that this Agreement
shall be terminated pursuant to Section 11.1, all further obligations of the
parties hereto under this Agreement (other than pursuant to Sections 12.1 and
12.4 and as provided with respect to confidentiality in Section 6.3, which shall
continue in full force and effect) shall terminate without further liability or
obligation of any party to the other parties hereunder; provided, however, that
no party shall be released from liability hereunder if this Agreement is
terminated and the transactions abandoned by reason of (i) willful failure of
such party to have performed its obligations hereunder or (ii) any knowing
misrepresentation made by such party of any matter set forth herein.
ARTICLE XII
MISCELLANEOUS
Section 12.1. Expenses. The parties acknowledge that (i) the
Partnerships will bear (a) $750,000 of the Sellers' expenses related to the
transactions contemplated by this Agreement and (b) $750,000 of the Purchaser's
expenses related to the transactions contemplated by this Agreement and (ii) OSI
Holdings will bear $1,600,000 of the Purchasers' expenses related to the
transactions contemplated by this
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Agreement. Such expenses shall include, without limitation, the fees and
expenses of their brokers, finders, agents, representatives (including, without
limitation, Goldman, Sachs & Co. and McCown De Leeuw & Co.), financial
consultants, accountants and counsel. Except as provided in the previous
sentence, the partes hereto shall pay all of their own expenses related to the
transactions contemplated by this Agreement with the payment owed to Mr. James
Paxton as a result of this transaction being deemed to be a Sellers' expense.
Section 12.2. Governing Law. THE INTERPRETATION AND CONSTRUCTION OF
THIS AGREEMENT, AND ALL MATTERS RELATING HERETO, SHALL BE GOVERNED BY THE LAWS
OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED
ENTIRELY WITHIN THE STATE OF NEW YORK.
Section 12.3. Captions. The Article and Section captions used herein
and in the Schedules are for reference purposes only, and shall not in any way
affect the meaning or interpretation of this Agreement.
Section 12.4. Publicity. Except as otherwise required by law or
regulation as advised by counsel, none of the parties hereto shall issue prior
to the closing any press release or make any other public statement, in each
case relating to or connected with or arising out of this Agreement or the
matters contained herein, without obtaining the prior
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approval of the Purchasers, on the one hand, and APT-1 and APT-2 on the other
hand, to the contents and the manner of presentation and publication thereof.
Section 12.5. Notices. Any notice or other communications required or
permitted hereunder shall be sufficiently given if delivered in person or sent
by telecopy or by registered or certified mail, postage prepaid, addressed as
follows: if to any Purchaser to it, c/o McCown De Leeuw & Co., 101 East 52nd
Street, 31st Floor, New York, New York 10022, Telecopy Number (212) 355-6283,
Attention: Mr. David E. King, with a copy to its counsel, White & Case, 1155
Avenue of the America, New York, New York 10036, Telecopy Number (212) 354-8113
Attention: Frank L. Schiff, Esq.; if to any Seller (other than APT-2) to it at
Two Ravinia Drive, Suite 1750, Atlanta, Georgia 30346, Telecopy Number (770)
901-5815, Attention: Mr. Frank J. Hanna III; if to APT-2, at Two Ravinia Drive,
Suite 1750, Atlanta, Georgia 30346, Telecopy Number (770) 901-5815, Attention:
David G. Hanna; with a copy in the case of any notice to any Seller to its
counsel, Robert W. Grout, Esq., Troutman Sanders LLP, Nationsbank Plaza, 600
Peachtree Street, N.E., Atlanta, Georgia 30308, Telecopy Number (404) 885-3900;
or such other address or number as shall be furnished in writing by any such
party, and such notice or communication shall be deemed
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to have been given as of the date so delivered, sent by telecopy or mailed.
Section 12.6. Parties in Interest. This Agreement may not be
transferred, assigned, pledged or hypothecated by any party hereto, other than
by operation of law; provided, however, that each Purchaser may assign or
transfer all or any portion of this Agreement to any one of its wholly-owned
subsidiaries, but any such assignment shall not relieve such Purchaser of any of
its obligations hereunder. This Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and their respective heirs, executors,
administrators, successors and permitted assigns.
Section 12.7. Counterparts. This Agreement may be executed in two or
more counterparts, all of which taken together shall constitute one instrument.
Section 12.8. Entire Agreement. This Agreement, including the
Exhibits, Schedules and other documents referred to herein (including the
Confidentiality Agreement) which form a part hereof, contain the entire
understanding of the parties hereto with respect to the subject matter contained
herein and therein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
Section 12.9. Amendments. This Agreement may not be changed orally,
but only by an agreement in writing signed
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by the parties hereto. Any provision of this Agreement can be waived, amended,
supplemented or modified by written agreement of the parties hereto.
Section 12.10. Severability. In case any provision in this Agreement
shall be held invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions hereof will not in any way be
affected or impaired thereby.
Section 12.11. Third Party Beneficiaries. Each party hereto intends
that this Agreement shall not benefit or create any right or cause of action in
or on behalf of any Person other than the parties hereto.
Section 12.12. Knowledge of a Party. Where any representation or
warranty contained in this Agreement is expressly qualified by reference to the
knowledge of a party hereto, such party confirms that it has made due and
diligent inquiry as to the matters that are the subject of such representations
and warranties.
Section 12.13. Jurisdiction. Any judicial proceeding brought against
any of the parties to this Agreement or any dispute arising out of this
Agreement or any matter related hereto may be brought in the courts of the State
of New York, or in the United States District Court for the Southern District of
New York, and, by execution and delivery of this Agreement, each of the parties
to this
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Agreement accepts the jurisdiction of such courts, and irrevocably agrees to be
bound by any judgment rendered thereby in connection with this Agreement. The
foregoing consent to jurisdiction shall not be deemed to confer rights on any
Person other than the respective partes to this Agreement.
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IN WITNESS WHEREOF, each Purchaser and each Seller has caused its
name to be hereunto subscribed by its officer or trustee, as applicable,
thereunto duly authorized all as of the day and year first above written.
OSI HOLDINGS CORP.
By /s/ David E. King
---------------------------------
Name: David E. King
Title: President
ACCOUNT PORTFOLIOS, INC.
By /s/ David E. King
---------------------------------
Name: David E. King
Title: President
ACCOUNT PORTFOLIOS G.P., INC.
By /s/ David E. King
---------------------------------
Name: David E. King
Title: President
AP MANAGEMENT, INC.
By /s/ David G. Hanna
---------------------------------
Name: David G. Hanna
Title: President
GSC MANAGEMENT, INC.
By /s/ David G. Hanna
---------------------------------
Name: David G. Hanna
Title: President
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PERIMETER CREDIT,
MANAGEMENT CORPORATION
By /s/ David G. Hanna
---------------------------------
Name: David G. Hanna
Title: President
ACCOUNT PORTFOLIOS TRUST ONE
By /s/ Frank J. Hanna III
---------------------------------
Name: Frank J. Hanna III
Title: Trustee
ACCOUNT PORTFOLIOS TRUST TWO
By /s/ David G. Hanna
---------------------------------
Name: David G. Hanna
Title: Trustee
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================================================================================
STOCK PURCHASE AGREEMENT
Dated as of January 10, 1996
By and Among
OSI HOLDINGS CORP.,
OUTSOURCING SOLUTIONS INCORPORATED,
THE CONTINENTAL ALLIANCE, INC.
and
PETER C. ROSVALL
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS..........................................3
ARTICLE II PURCHASE OF STOCK....................................9
ss.2.1 Purchase of Stock....................................9
ss.2.2 Price................................................9
ss.2.3 Working Capital Adjustment......................... 10
ss.2.4 Adjustments to Closing Payments.................... 14
ss.2.5 Closing............................................ 15
ARTICLE III REPRESENTATIONS OF CONTINENTAL..................... 15
ss.3. Representations of Continental..................... 15
ss.3.1 Existence and Good Standing........................ 15
ss.3.2 Capital Stock...................................... 16
ss.3.3 Authorization and Validity of this
Agreement; the Merger Agreements................ 17
ss.3.4 Subsidiaries and Investments....................... 21
ss.3.5 Financial Statements; No Material
Changes......................................... 21
ss.3.6 Books and Records.................................. 22
ss.3.7 Title to Properties; Encumbrances.................. 23
ss.3.8 Real Property...................................... 24
ss.3.9 Intellectual Property.............................. 24
ss.3.10 Leases............................................. 24
ss.3.11 Material Contracts................................. 25
ss.3.12 Consents and Approvals; No Violations.............. 26
ss.3.13 Litigation......................................... 27
ss.3.14 Taxes.............................................. 28
ss.3.15 Liabilities........................................ 31
ss.3.16 Insurance.......................................... 32
ss.3.17 Compliance with Laws............................... 32
ss.3.18 Employment Relations............................... 33
ss.3.19 Employee Benefit Plans............................. 33
ss.3.20 Interests in Customers, Suppliers, etc............. 40
ss.3.21 Environmental Laws and Regulations................. 41
ss.3.22 Bank Accounts, Powers of Attorney.................. 43
ss.3.23 Compensation of Employees.......................... 44
ss.3.24 Conduct of Business................................ 44
ss.3.25 Customer Relations................................. 44
ss.3.26 Condition of Assets................................ 45
ss.3.27 Broker's or Finder's Fees.......................... 45
ARTICLE IV REPRESENTATIONS OF THE SELLER...................... 45
ss.4. Representations of the Seller...................... 45
(i)
<PAGE>
Page
ss.4.1 Ownership of Stock................................. 45
ss.4.2 Authorization and Validity of Agreement............ 46
ss.4.3 Restrictive Documents.............................. 47
ss.4.4 Broker's or Finder's Fees.......................... 47
ARTICLE V REPRESENTATIONS OF THE PURCHASERS.................. 47
ss.5. Representations of the Purchasers.................. 47
ss.5.1 Existence and Good Standing; Power and
Authority....................................... 47
ss.5.2 Restrictive Documents.............................. 50
ss.5.3 Purchase for Investment............................ 50
ss.5.4 Capital Stock...................................... 50
ss.5.5 Capitalization..................................... 51
ss.5.6 Broker's or Finder's Fees.......................... 52
ss.5.7 Financial Statements; No Material
Changes......................................... 52
ss.5.8 Title to Properties; Encumbrances.................. 53
ss.5.9 Consents and Approvals; No Violations.............. 54
ss.5.10 Litigation......................................... 55
ss.5.11 Compliance with Laws............................... 56
ss.5.12 Financing Commitment............................... 56
ARTICLE VI TRANSACTIONS PRIOR TO THE CLOSING DATE;
OTHER AGREEMENTS................................ 56
ss.6.1 Conduct of Business of Continental................. 56
ss.6.2 Exclusive Dealing.................................. 58
ss.6.3 Review of Continental.............................. 59
ss.6.4 Reasonable Efforts................................. 60
ss.6.5 Collection of Certain Receivables.................. 61
ARTICLE VII CONDITIONS TO SOLUTION'S OBLIGATIONS............... 61
ss.7. Conditions to Solution's Obligations............... 61
ss.7.1 Opinions of Counsel................................ 61
ss.7.2 Good Standing and Other Certificates............... 61
ss.7.3 No Material Adverse Change......................... 62
ss.7.4 Truth of Representations and Warranties............ 62
ss.7.5 Performance of Agreements.......................... 63
ss.7.6 No Litigation Threatened........................... 63
ss.7.7 Third Party Consents; Governmental
Approvals....................................... 63
ss.7.8 Repayment of Indebtedness to Third
Parties; Termination of Security
Interests....................................... 64
ss.7.9 Resignations....................................... 64
ss.7.10 Financing.......................................... 64
ss.7.11 Employment Arrangement............................. 64
(ii)
<PAGE>
Page
ss.7.12 Non-Competition Agreements......................... 65
ss.7.13 Stockholders Agreement............................. 65
ss.7.14 Related Merger Agreements.......................... 65
ss.7.15 FIRPTA............................................. 65
ARTICLE VIII CONDITIONS TO CONTINENTAL'S AND THE
SELLER'S OBLIGATIONS............................ 65
ss.8. Conditions to Continental's and the
Seller's Obligations............................ 65
ss.8.1 Opinions of Purchasers' Counsel.................... 65
ss.8.2 Truth of Representations and Warranties............ 66
ss.8.3 Third Party Consents; Governmental
Approvals....................................... 66
ss.8.4 Performance of Agreements.......................... 66
ss.8.5 No Litigation Threatened........................... 67
ss.8.6 Employment Arrangements............................ 67
ss.8.7 Stockholders Agreement............................. 67
ARTICLE IX TAX MATTERS........................................ 68
ss.9.1 Tax Returns........................................ 68
ss.9.2 Controversies...................................... 69
ss.9.3 Transfer Taxes; Certain State Taxes................ 72
ss.9.4 Amended Returns.................................... 72
ss.9.5 Non-foreign Person Affidavit....................... 72
ss.9.6 Indemnification.................................... 73
ss.9.7 Section 338 Election............................... 74
ss.9.8 Valuation and Allocation........................... 75
ARTICLE X SURVIVAL OF REPRESENTATIONS;
INDEMNIFICATION................................. 76
ss.10.1 Survival of Representations........................ 76
ss.10.2 Indemnification.................................... 76
ss.10.3 Indemnification Procedure.......................... 80
ARTICLE XI TERMINATION........................................ 83
ss.11.1 Termination........................................ 83
ss.11.2 Effect of Termination.............................. 84
ARTICLE XII MISCELLANEOUS...................................... 85
ss.12.1 Knowledge of the Companies......................... 85
ss.12.2 Expenses........................................... 85
ss.12.3 Governing Law...................................... 86
ss.12.4 Captions........................................... 86
ss.12.5 Publicity.......................................... 86
ss.12.6 Notices............................................ 86
ss.12.7 Parties in Interest................................ 87
(iii)
<PAGE>
Page
ss.12.8 Counterparts....................................... 88
ss.12.9 Entire Agreement................................... 88
ss.12.10 Amendments......................................... 88
ss.12.11 Severability....................................... 88
ss.12.12 Third Party Beneficiaries.......................... 88
ss.12.13 Arbitration........................................ 89
EXHIBITS
Exhibit A Form of Seller Note
Exhibit B Form of Opinion of Perkins Coie
Exhibit C Form of Peter C. Rosvall Employment Agreement
Exhibit D Form of Peter C. Rosvall Non-competition
Agreement
Exhibit E Form of Opinion of White & Case
Exhibit F Form of Non-foreign Person Affidavit
Exhibit G Fair Market Value of Certain Assets
SCHEDULES
Schedule 3.1 Existence and Good Standing
Schedule 3.5 Financial Statements
Schedule 3.7 Title to Properties, Encumbrances
Schedule 3.8 Real Property
Schedule 3.9 Licenses; Intellectual Property
Schedule 3.10 Leases
Schedule 3.11 Material Contracts
Schedule 3.12 Consents and Approvals
Schedule 3.13 Litigation
Schedule 3.14 Tax Matters
Schedule 3.15 Liabilities
Schedule 3.16 Insurance
Schedule 3.17 Compliance with Laws
Schedule 3.18 Employment Relations
Schedule 3.19 Employee Benefits
Schedule 3.20 Interest in Customers, Suppliers, etc.
Schedule 3.21 Environmental Matters
Schedule 3.22 Bank Accounts, Powers of Attorney
Schedule 3.24 Conduct of Business
Schedule 5.5 Capitalization of Holdings
Schedule 5.8 Title to Properties, Encumbrances
Schedule 5.9 Consents and Approvals
Schedule 5.10 Litigation
Schedule 6.1 Conduct of Business until Closing
Schedule 6.5 Receivables
(iv)
<PAGE>
Schedule 7.7 Third Party Consents; Government Approvals
Schedule 7.8 Indebtedness
(v)
<PAGE>
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (this "Agreement") dated as of January 10, 1996 by
and among OSI HOLDINGS CORP., a Delaware corporation ("Holdings"), OUTSOURCING
SOLUTIONS INCORPORATED, a Delaware corporation ("Solutions") (each of Holdings
and Solutions, a "Purchaser", and collectively, the "Purchasers"), THE
CONTINENTAL ALLIANCE, INC., doing business as Continental Credit Services, a
Washington corporation ("Continental") and PETER C. ROSVALL (the "Seller").
W I T N E S S E T H :
WHEREAS, the Seller owns 3,466.66 shares of common stock of Continental
(collectively the "Stock"), such shares of the Seller being all of the
outstanding shares of the capital stock of Continental;
WHEREAS, the Seller desires to sell, and Solutions desire to purchase, the
Stock pursuant to this Agreement; and
WHEREAS, it is the intention of the parties hereto that, upon consummation
of the purchase and sale of the Stock pursuant to this Agreement, Solutions
shall collectively own all of the outstanding shares of capital stock of
Continental;
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WHEREAS, pursuant to an Agreement and Plan of Merger (the "Alaska Merger
Agreement"), dated as of the date hereof, by and among Alaska Financial
Services, Inc. ("AFSI"), Holdings and OSI Alaska Acquisition Corp. ("OSI
Alaska"), OSI Alaska shall be merged with and into AFSI contemporaneously with
the purchase and sale of Stock contemplated by this Agreement;
WHEREAS, pursuant to an Agreement and Plan of Merger (the "Southwest Merger
Agreement"), dated as of the date hereof, by and among Southwest Credit
Services, Inc. ("SFSI"), Holdings and OSI Southwest Acquisition Corp. ("OSI
Southwest"), OSI Southwest shall be merged with and into SFSI contemporaneously
with the purchase and sale of Stock contemplated by this Agreement;
WHEREAS, pursuant to an Agreement and Plan of Merger (the "Central Merger
Agreement") (each of the Alaska Merger Agreement, the Southwest Merger Agreement
and the Central Merger Agreement, a "Merger Agreement, and collectively, the
"Merger Agreements"), dated as of the date hereof, by and among Central Credit
Services, Inc. ("CCSI") (each of Continental, AFSI, SFSI and CCSI, a "Company",
and collectively, the "Companies"), Holdings and OSI Central Acquisition Corp.
("OSI Central"), OSI Central shall be merged with and into CCSI
contemporaneously with the purchase and sale of Stock contemplated by this
Agreement;
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NOW, THEREFORE, IT IS AGREED:
ARTICLE I
DEFINITIONS
ss.1.1 Definitions. In addition to the terms defined elsewhere in this
Agreement, the following terms shall have the respective meanings specified
therefor below (such meanings to be equally applicable to both the singular and
plural forms of the terms defined).
"AFSI" shall have the meaning specified in the preamble to this Agreement.
"Agreement" shall mean this Agreement, as amended, modified or supplemented
from time to time.
"Alaska Merger Agreement" shall have the meaning specified in the preamble
to this Agreement.
"Arbitrator" shall have the meaning specified in Section 12.13.
"Audited Statements" shall have the meaning specified in Section 3.5.
"Balance Sheet" shall have the meaning specified in Section 3.5.
"Balance Sheet Date" shall have the meaning specified in Section 3.5.
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"Business Day" shall mean any day other than a Saturday, a Sunday or a day
on which banks located in New York, New York or Seattle, Washington shall be
authorized or required by law or executive order to close.
"CCSI" shall have the meaning specified in the preamble to this Agreement.
"Central Merger Agreement" shall have the meaning specified in the preamble
to this Agreement.
"Claim" shall have the meaning specified in Section 10.3
"Closing" shall have the meaning specified in Section 2.5.
"Closing Date" shall have the meaning specified in Section 2.5.
"Closing Net Working Capital Amount" shall have the meaning specified in
Section 2.3.
"Closing Net Working Capital Statement" shall have the meaning specified in
Section 2.3.
"Code" shall have the meaning specified in Section 3.14.
"Common Stock" shall mean the common stock of
Continental, par value $1.00 per share.
"Company" shall have the meaning specified in the preamble to this
Agreement.
"Company Property" shall have the meaning specified in Section 3.21.
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"Compiled Statements" shall have the meaning specified in Section 3.5(a).
"Confidentiality Agreement" shall have the meaning specified in Section
6.3.
"Continental" shall have the meaning specified in the preamble to this
Agreement.
"Damages" shall have the meaning specified in Section 10.2.
"Employee Benefit Plans" shall have the meaning specified in Section 3.19.
"Encumbrances" shall have the meaning specified in Section 3.7.
"Environmental Claims" shall have the meaning specified in Section 3.21.
"ERISA" shall have the meaning specified in Section 3.19.
"Environmental Law" shall have the meaning specified in Section 3.21.
"GAAP" shall have the meaning specified in Section 3.5.
"Hazardous Materials" shall have the meaning specified in Section 3.21.
"Holdings" shall have the meaning specified in the preamble to this
Agreement.
"Holdings Balance Sheet" shall have the meaning specified in Section 5.7.
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"Income Taxes" shall mean all income, profits and gains Taxes and all
franchise or other Taxes calculated by or with reference to income, and all
withholding required with respect to the foregoing Taxes.
"Indemnified Party" shall have the meaning specified in Section 10.3.
"Indemnifying Party" shall have the meaning specified in Section 10.3.
"Intellectual Property" shall have the meaning specified in Section 3.9.
"MADSP" shall have the meaning specified in Section 9.8.
"Material Adverse Effect" shall have the meaning specified in Section 3.1.
"Merger Agreement" shall have the meaning specified in the preamble to this
Agreement.
"Notice of Objection" shall have the meaning specified in Section 2.3.
"OSI Alaska" shall have the meaning specified in the preamble to this
Agreement.
"OSI Central" shall have the meaning specified in the preamble to this
Agreement.
"OSI Southwest" shall have the meaning specified in the preamble to this
Agreement.
"Overlap Period" shall have the meaning specified in Section 9.2.
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"Permitted Encumbrances" shall have the meaning specified in Section 3.7.
"Person" shall have the meaning specified in Section 3.11.
"Pre-Closing Period" shall have the meaning specified in Section 3.14.
"Purchase Price" shall have the meaning specified in Section 2.2.
"Purchasers" shall have the meaning specified in the preamble to this
Agreement.
"Returns" shall have the meaning specified in Section 3.14.
"Seller" shall have the meaning specified in the preamble to this
Agreement.
"Seller Note" shall have the meaning specified in Section 2.2.
"Seller's Representative" shall have the meaning specified in Section 9.2.
"SFSI" shall have the meaning specified in the preamble to this Agreement.
"Solutions" shall have the meaning specified in the preamble in this
Agreement.
"Southwest Merger Agreement" shall have the meaning specified in the
preamble to this Agreement.
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"Stock" shall have the meaning specified in the preamble to this Agreement.
"Stockholders Agreement" shall have the meaning specified in Section 5.5.
"Tax Matter" shall have the meaning specified in Section 9.2.
"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.
"Working Capital Arbitrator" shall have the meaning specified in Section
2.3.
"Working Capital Assets" shall have the meaning specified in Section 2.3.
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<PAGE>
"Working Capital Liabilities" shall have the meaning specified in Section
2.3.
ARTICLE II
PURCHASE OF STOCK
ss.2.1 Purchase of Stock. Subject to the terms and conditions set forth in
this Agreement, Solutions agrees to purchase from the Seller on the Closing Date
and the Seller agrees to sell, assign, transfer and deliver to Solutions on the
Closing Date, the shares of Stock so owned by the Seller. The certificates
representing the Stock shall be duly endorsed in blank, or accompanied by stock
powers duly executed in blank, by the Seller transferring the same to Solutions
with all necessary transfer tax and other revenue stamps affixed and cancelled.
The Seller agrees to cure any deficiencies with respect to the endorsement of
the certificates representing the Stock owned by the Seller or with respect to
the stock power accompanying any such certificates.
ss.2.2 Price. In full consideration for the sale by the Seller of the Stock
to Solutions, Solutions shall deliver to the Seller the following (the "Purchase
Price") (subject to adjustment pursuant to Section 2.4):
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(a) $10,000,000 by wire transfer of immediately available funds to the
account specified by the Seller at least two business days prior to the Closing,
and
(b) a 10% unsecured subordinated promissory note of Solutions in an
aggregate principal amount equal to $3,000,000 due July 10, 2001, substantially
in the form attached hereto as Exhibit A (the "Seller Note").
ss.2.3 Working Capital Adjustment. (a) Closing Working Capital Statement.
(i) As soon as practicable (and in no event later than ninety (90) days after
the Closing), the Purchasers shall prepare and deliver to the Seller a proposed
closing net working capital statement of the Companies on a combined basis as of
the Closing (the "Closing Net Working Capital Statement"). The Closing Net
Working Capital Statement will reflect the Working Capital Assets, the Working
Capital Liabilities and the Closing Net Working Capital Amount immediately prior
to the Closing and will be prepared on a basis consistent with the preparation
of the Balance Sheet. For purposes hereof, "Working Capital Assets" shall mean
the current assets of the Companies less (i) accounts receivable from related
parties and (ii) loans secured by real estate, on a combined basis determined in
accordance with GAAP and in a manner consistent with the policies and principles
used in connection with the preparation of the Balance Sheet; "Working Capital
Liabilities"
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shall mean the current liabilities of the Companies less (i) accounts payable to
related parties, (ii) notes payable and (iii) the current portion of long-term
debt, on a combined basis determined in accordance with GAAP and in a manner
consistent with the policies and principles used in connection with the
preparation of the Balance Sheet; and "Closing Net Working Capital Amount" shall
mean the excess (or deficiency) of Working Capital Assets over Working Capital
Liabilities as of the Closing.
(ii) If the Seller does not object to the determination by the
Purchasers of the proposed Closing Net Working Capital Amount by written notice
of objection (the "Notice of Objection") delivered to the Purchasers within
twenty (20) days after the Seller's receipt of such statement, such Notice of
Objection to describe in reasonable detail the Seller's proposed adjustments to
the Closing Net Working Capital Amount, the proposed Closing Net Working Capital
Amount shall be deemed final and binding.
(iii) If the Seller delivers a Notice of Objection in respect of the
Closing Net Working Capital Amount, then any dispute shall be resolved in
accordance with paragraph (b) of this Section 2.3.
(b) Resolution of Disputes. (i) If the Seller objects to the Closing Net
Working Capital Statement as determined by the Purchasers, then the Seller, on
the one hand, and the
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Purchasers, on the other hand, shall promptly endeavor to agree upon the Closing
Net Working Capital Amount. In the event that a written agreement as to the
Closing Net Working Capital Amount has not been reached within twenty (20) days
after the date of receipt by the Purchasers from the Seller of his Notice of
Objection thereto, then the determination of the Closing Net Working Capital
Amount shall be submitted to Arthur Andersen LLP or another nationally
recognized accounting firm mutually acceptable to the Purchasers, on the one
hand, and the Seller, on the other hand, (the "Working Capital Arbitrator").
(ii) Within 45 days of the submission of any dispute concerning the
determination of the Closing Net Working Capital Amount to the Working Capital
Arbitrator, the Working Capital Arbitrator shall render a decision in accordance
with this paragraph (b) hereof along with a statement of reasons therefor. The
decision of the Working Capital Arbitrator shall be final and binding upon the
parties hereto.
(iii) The fees and expenses of the Working Capital Arbitrator for any
determination under this paragraph (b) shall be shared as follows: the
Purchasers shall bear that portion thereof equal to the total amount of such
fees and expenses multiplied by a fraction, the denominator of which shall be
the difference between the Closing Net Working Capital Amount as proposed in the
determination by the Seller
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and the Closing Net Working Capital Amount as proposed in the determination by
the Purchasers, and the numerator of which shall be the difference between the
Closing Net Working Capital Amount as determined by the Working Capital
Arbitrator and the Closing Net Working Capital Amount as proposed by the
Purchasers. The Seller shall bear the remainder of such fees and expenses.
(iv) Nothing herein shall be construed to authorize or permit the
Working Capital Arbitrator to determine (i) any question or matter whatever
under or in connection with this Agreement except the determinations of what
adjustments, if any, must be made in one or more of the items reflected in the
Closing Net Working Capital Statement delivered by the Purchasers in order for
the Closing Net Working Capital Amount to be determined in accordance with the
provisions of this Agreement, or (ii) a Closing Net Working Capital Amount that
is not equal to one of or between the Closing Net Working Capital Amount as
proposed in the determination by the Seller and the Closing Net Working Capital
Amount as proposed in the determination by the Purchasers. Nothing herein shall
be construed to require the Working Capital Arbitrator to follow any rules or
procedures of any arbitration association.
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ss.2.4 Adjustments to Closing Payments. (a) Upon the final determination of
the Closing Net Working Capital Amount, the parties shall make the following
adjustments:
(i) If the Closing Net Working Capital Amount is greater than
$139,285, then the Purchase Price shall be increased by the amount of such
difference.
(ii) If the Closing Net Working Capital Amount is less than $139,285,
then the Purchase Price shall be decreased by the amount of such difference.
(b) Any adjustment to the Purchase Price required under this Section 2.4
shall bear interest from the Closing Date to the date of payment thereof at a
per annum rate equal to the "prime lending rate" as published in The Wall Street
Journal. Any such adjustment payment required pursuant hereto shall be made by
wire transfer in immediately available funds. Such payment shall be made on such
of the following dates as may be applicable: (A) if the Seller shall have not
objected to the preparation of the Closing Net Working Capital Statement, the
earlier of (1) twenty-five (25) days after delivery to the Seller of the Closing
Net Working Capital Statement or (2) five (5) days after the Seller has
indicated that he has no objections to the preparation of the Closing Net
Working Capital Statement, or (B) if the Seller shall have objected to such
preparation, within five (5) days following final
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agreement or decision with respect to the Closing Net Working Capital Statement
as provided above.
ss.2.5 Closing. The purchase and sale referred to in Section 2.1 (the
"Closing") shall take place at 10:00 A.M. at the offices of White & Case, New
York, New York on January 10, 1996, or at such other time and date (not later
than January 20, 1996) as the parties hereto shall designate in writing. Such
date is herein referred to as the "Closing Date".
ARTICLE III
REPRESENTATIONS OF CONTINENTAL
ss.3. Representations of Continental. Continental hereby represents and
warrants to the Purchasers as follows:
ss.3.1 Existence and Good Standing. Each of the Companies is a corporation
duly organized, validly existing and in good standing under the laws of its
respective jurisdiction of incorporation and each of the Companies has the
requisite corporate power and authority to own, lease and operate its respective
properties and to carry on its respective business as now being conducted.
Except as set forth on Schedule 3.1 attached hereto, each of the Companies is
duly qualified or licensed to do business and is in good standing in each
jurisdiction in which the character or location of the properties owned, leased
or operated by such Company or
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the nature of the business conducted by such Company makes such qualification or
license necessary, except where the failure to be so duly qualified or licensed
would not have a material adverse effect on the business, operations, financial
condition or results of operations of the Companies taken as a whole (a
"Material Adverse Effect").
ss.3.2 Capital Stock. (a) Continental has an authorized capitalization
consisting of 50,000 shares of common stock, par value $1.00 per share, of which
3,466.66 shares are issued and outstanding. All outstanding shares of capital
stock of Continental have been duly authorized and validly issued and are fully
paid and nonassessable. There are no outstanding subscriptions, options,
warrants, rights, calls, commitments, conversion rights, rights of exchange,
plans or other agreements of any character providing for the purchase, issuance
or sale of any shares of the capital stock of Continental.
(b) AFSI has an authorized capitalization consisting of 50,000 shares of
common stock, without par value, of which 15,000 shares are issued and
outstanding. All outstanding shares of capital stock of AFSI have been duly
authorized and validly issued and are fully paid and nonassessable. There are no
outstanding subscriptions, options, warrants, rights, calls, commitments,
conversion rights, rights of exchange, plans or other agreements of any
character providing for the
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purchase, issuance or sale of any shares of the capital stock of AFSI.
(c) SFSI has an authorized capitalization consisting of 15,000 shares of
common stock, par value $1.00 per share, of which 15,000 shares are issued and
outstanding. All outstanding shares of capital stock of SFSI have been duly
authorized and validly issued and are fully paid and non-assessable. There are
no outstanding subscriptions, options, warrants, rights, calls, commitments,
conversion rights, rights of exchange, plans or other agreements of any
character providing for the purchase, issuance or sale of any shares of the
capital stock of SFSI.
(d) CCSI has an authorized capitalization consisting of 50,000 shares of
common stock, without par value, of which 7,500 shares are issued and
outstanding. All outstanding shares of capital stock of CCSI have been duly
authorized and validly issued and are fully paid and nonassessable. There are no
outstanding subscriptions, options, warrants, rights, calls, commitments,
conversion rights, rights of exchange, plans or other agreements of any
character providing for the purchase, issuance or sale of any shares of the
capital stock of CCSI.
ss.3.3 Authorization and Validity of this Agreement; the Merger Agreements.
(a) Continental has the requisite corporate power and authority to execute and
deliver this
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Agreement and to perform its obligations hereunder. The execution, delivery and
performance of this Agreement by Continental and the performance of its
obligations hereunder have been duly authorized and approved by its Board of
Directors and by the holders of a requisite amount of the Stock and no other
corporate action on the part of Continental or action by the stockholders of
Continental is necessary to authorize the execution, delivery and performance of
this Agreement by Continental. This Agreement has been duly executed and
delivered by Continental and, assuming due execution of this Agreement by the
Purchasers, is a valid and binding obligation of Continental enforceable against
Continental in accordance with its terms, except to the extent that its
enforceability may be subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles.
(b) AFSI has the requisite corporate power and authority to execute and
deliver the Alaska Merger Agreement and to perform its obligations thereunder.
The execution, delivery and performance of the Alaska Merger Agreement by AFSI
and the performance of its obligations thereunder have been duly authorized and
approved by its Board of Directors and by the holders of a requisite amount of
the capital stock of AFSI and no other corporate action on the part of AFSI or
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action by the stockholders of AFSI is necessary to authorize the execution,
delivery and performance of the Alaska Merger Agreement by AFSI. The Alaska
Merger Agreement has been duly executed and delivered by AFSI and, assuming due
execution of the Alaska Merger Agreement by Holdings and OSI Alaska, is a valid
and binding obligation of AFSI enforceable against AFSI in accordance with its
terms, except to the extent that its enforceability may be subject to applicable
bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
the enforcement of creditors' rights generally and by general equitable
principles.
(c) SFSI has the requisite corporate power and authority to execute and
deliver the Southwest Merger Agreement and to perform its obligations
thereunder. The execution, delivery and performance of the Southwest Merger
Agreement by SFSI and the performance of its obligations thereunder have been
duly authorized and approved by its Board of Directors and by the holders of a
requisite amount of the capital stock of SFSI and no other corporate action on
the part of SFSI or action by the stockholders of SFSI is necessary to authorize
the execution, delivery and performance of the Southwest Merger Agreement by
SFSI. The Southwest Merger Agreement has been duly executed and delivered by
SFSI and, assuming due execution of the Southwest Merger Agreement by Holdings
and OSI Southwest, is
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a valid and binding obligation of SFSI enforceable against SFSI in accordance
with its terms, except to the extent that its enforceability may be subject to
applicable bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting the enforcement of creditors' rights generally and by general
equitable principles.
(d) CCSI has the requisite corporate power and authority to execute and
deliver the Central Merger Agreement and to perform its obligations thereunder.
The execution, delivery and performance of the Central Merger Agreement by CCSI
and the performance of its obligations thereunder have been duly authorized and
approved by its Board of Directors and by the holders of a requisite amount of
the capital stock of CCSI and no other corporate action on the part of CCSI or
action by the stockholders of CCSI is necessary to authorize the execution,
delivery and performance of the Central Merger Agreement by CCSI. The Central
Merger Agreement has been duly executed and delivered by CCSI and, assuming due
execution of the Central Merger Agreement by Holdings and OSI Central, is a
valid and binding obligation of CCSI enforceable against CCSI in accordance with
its terms, except to the extent that its enforceability may be subject to
applicable bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting the enforcement of creditors' rights generally and by general
equitable principles.
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ss.3.4 Subsidiaries and Investments. None of the Companies owns any capital
stock or other equity or ownership or proprietary interest in any corporation,
partnership, association, trust, joint venture or other entity.
ss.3.5 Financial Statements; No Material Changes. (a) Continental has
heretofore furnished the Purchasers with balance sheets of the various Companies
as of September 30, 1993 and September 30, 1994, together with (unless otherwise
noted on Schedule 3.5 attached hereto) related consolidated statements of
operation, stockholders' equity and cash flows for the periods then ended, all
as set forth on Schedule 3.5 attached hereto (collectively, the "Compiled
Statements"). The Compiled Statements, including, where prepared, the footnotes
thereto, have been prepared in a manner consistent with the Audited Statements
and fairly present in all material respects the financial position of the
Companies at the respective dates thereof, and the results of the operations and
cash flows of the Companies for the respective periods indicated.
(b) The Purchasers have been furnished with a combined balance sheet of the
Companies as of September 30, 1995, together with related combined statements of
operations and cash flows for the fiscal year then ended, together with the
audit report of Deloitte & Touche, LLP (collectively, the "Audited Statements").
The Audited Statements, including the
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footnotes thereto, have been prepared in accordance with generally accepted
accounting principles consistently applied throughout the period indicated
("GAAP") and fairly present in all material respects the financial position of
the Companies at its date thereof, and the results of the operations and cash
flows of the Companies for the period indicated. The audited balance sheet of
the Companies dated September 30, 1995 is hereinafter referred to as the
"Balance Sheet" and September 30, 1995 is hereinafter referred to as the
"Balance Sheet Date."
(c) Since September 30, 1995, there has been no (i) material adverse change
in the business, operations, financial condition or results of operations of the
Companies taken as a whole or (ii) material damage, destruction or loss to any
asset or property, tangible or intangible, of any Company which materially
affects the ability of such Company to conduct its business.
ss.3.6 Books and Records. The minute books of each of the Companies, as
previously made available to the Purchasers and their representatives, contain
materially accurate records of all meetings of, and corporate actions taken by
(including action taken by written consent), the respective shareholders and
Board of Directors of each Company. At Closing all of the books and records of
the Companies will be in the possession of the Companies.
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ss.3.7 Title to Properties; Encumbrances. Except as set forth on Schedule
3.7 attached hereto and except for such properties and assets which have been
sold or otherwise disposed of in the ordinary course of business, each of the
Companies has good title to its respective material properties and assets (real
and personal, tangible and intangible), including, without limitation, the
material properties and assets reflected in the Balance Sheet, subject to no
material encumbrance, lien, charge or other restriction of any kind or character
("Encumbrances"), except for (i) Encumbrances reflected in the Balance Sheet,
(ii) Encumbrances for current taxes, assessments or governmental charges or
levies on property not yet due and delinquent, (iii) Encumbrances arising by
operation of law including, without limitation, municipal and zoning ordinances,
building and use restrictions and covenants, imperfections, irregularities and
defects incurred in the ordinary course of business, obligations not yet due to
carriers, warehousemen, laborers, materialmen and the like and liens for real
and personal property taxes, assessments or like governmental charges not yet
delinquent and payable without penalty, and (iv) Encumbrances described on
Schedule 3.7 attached hereto. (Encumbrances of the type described in clauses
(i), (ii), (iii) and (iv) above are hereinafter sometimes referred to as
"Permitted Encumbrances").
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ss.3.8 Real Property. Except as set forth on Schedule 3.8, none of the
Companies owns any real property.
ss.3.9 Intellectual Property. Each of the Companies possesses all licenses,
patents, trade names, trademarks and service marks (collectively, the
"Intellectual Property") necessary for the ownership of its properties and the
conduct of its business as presently conducted. All Intellectual Property of
each of the Companies are set forth on Schedule 3.9 attached hereto. All such
Intellectual Property is in full force and effect and none of the Companies has
received any written notice of any event, inquiry, investigation or proceeding
threatening the validity of any such Intellectual Property.
ss.3.10 Leases. Schedule 3.10 attached hereto contains a list of all leases
or sub-leases to which any Company is a party requiring an annual aggregate
payment of at least $10,000. Except as otherwise set forth in Schedule 3.10
attached hereto, each lease or sub-lease set forth in Schedule 3.10 is in full
force and effect; all rents and additional rents due to date from any such
Company on each such lease or sub-lease have been paid; no such Company has
received notice that it is in material default under any such lease or
sub-lease; and, to the knowledge of the Companies, there exists no event,
occurrence, condition or act (including the consummation of the transactions
contemplated by this
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Agreement and the Merger Agreements) which, with the giving of notice, the lapse
of time or the happening of any further event or condition, would become a
material default by any of the Companies under such lease or sub-lease.
ss.3.11 Material Contracts. Except as set forth on Schedule 3.10 and
Schedule 3.11 attached hereto, none of the Companies has nor is bound by (a) any
agreements, contracts or commitments not in the ordinary course of business
which in the aggregate exceed $20,000, (b) 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, (c) any agreement,
contract or commitment relating to capital expenditures in excess of $20,000,
(d) any agreements, indentures or instruments relating to indebtedness,
liability for borrowed money or the deferred purchase price of property
(excluding trade payables in the ordinary course of business) which in the
aggregate exceed $20,000, (e) any loan or advance to, or investment in, any
individual, partnership, joint venture, corporation, trust, unincorporated
organization, government or other entity (each a "Person"), 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, (f) any guarantee or other contingent liability in respect of any
indebtedness or obligation of any Person
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(other than in the ordinary course of business), (g) any management service,
consulting or any other similar type of contract, (h) any agreement, contract or
commitment limiting the ability of such Company to engage in any line of
business or to compete with any Person, (i) any warranty, guaranty or other
similar undertaking with respect to a contractual performance extended by such
Company other than in the ordinary course of business, or (j) any amendment,
modification or supplement in respect of any of the foregoing. Also set forth on
Schedule 3.11 is a list of agreements, contracts or commitments relating to the
Companies' (taken as a whole) top fifteen customers (based upon 1995 revenues
and other criteria agreed upon by the parties). Except as otherwise set forth on
Schedule 3.11, each contract or agreement set forth on Schedule 3.11 is in full
force and effect and none of the Companies (and to the knowledge of the
Companies, no other Person) is in material default thereunder or to the
knowledge of the Companies, there exists no event, occurrence, condition or act
(including the consummation of the transactions contemplated hereby) which, with
the giving of notice, the lapse of time or the happening of any other event or
condition, would become a material default or event of default thereunder.
ss.3.12 Consents and Approvals; No Violations. Except as set forth in
Schedule 3.12 attached hereto, the execution and
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delivery of this Agreement by Continental, the execution and delivery by the
other Companies of the Merger Agreements and the consummation of the
transactions contemplated hereby and thereby (a) will not violate or contravene
any provision of the Articles of Incorporation or Bylaws of any of the
Companies, (b) to the knowledge of the Companies, will not violate or contravene
any statute, rule, regulation, order or decree of any public body or authority
by which any of the Companies is bound, (c) to the knowledge of the Companies,
will not 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 any other Person and (d) will not 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 Encumbrance upon any of
the properties or assets of any of the Companies under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, license,
franchise, permit, agreement, lease, franchise agreement or any other instrument
or obligation to which any of the Companies is a party, or by which it or any of
its properties or assets may be bound.
ss.3.13 Litigation. Except as set forth on Schedule 3.13 attached hereto,
there is no action, suit, proceeding at law
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or in equity, arbitration or administrative or other proceeding by or before (or
to the knowledge of the Companies any investigation by) any governmental or
other instrumentality or agency, pending, or, to the knowledge of the Companies,
threatened, against or affecting the Companies or their respective properties or
rights which could materially and adversely affect the right or ability of any
Company to carry on its business as now conducted, or which could have a
Material Adverse Effect; and the Companies know of no valid basis for any such
action, proceeding or investigation. None of the Companies is subject to any
judgment, order or decree entered in any lawsuit or proceeding in which any of
the Companies were a party which may have a Material Adverse Effect.
ss.3.14 Taxes. (a) Tax Returns. Each of the Companies has timely filed or
caused to be timely filed or will timely file or cause to be timely filed with
the appropriate taxing authorities all returns, statements, forms and reports
for Taxes ("Returns") that are required to be filed by, or with respect to, such
Company on or prior to the Closing Date. The Returns of each of the Companies
have accurately reflected and will accurately reflect all liability for Taxes of
such Company for the periods covered thereby.
(b) Payment of Taxes. All Taxes and Tax liabilities of each Company for all
taxable years or periods that end on or
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before the Closing Date and, with respect to any taxable year or period
beginning before and ending after the Closing Date, the portion of such taxable
year or period ending on and including the Closing Date ("Pre-Closing Period")
have been timely paid or accrued and adequately disclosed and fully provided for
on the books and records of such Company.
(c) Other Tax Matters. (i) Except as set forth on Schedule 3.14, none of
the Companies has been the subject of an audit or other examination of Taxes by
the tax authorities of any nation, state or locality nor has any Company
received any notices from any taxing authority relating to any issue which could
affect the Tax liability of such Company.
(ii) Except as set forth on Schedule 3.14, neither the Seller nor any
Company has, as of the Closing Date, (A) entered into an agreement or waiver or
been requested to enter into an agreement or waiver extending any statute of
limitations relating to the payment or collection of Taxes of any Company or (B)
is presently contesting the Tax liability of any of the Companies before any
court, tribunal or agency.
(iii) None of the Companies has been included in any "consolidated,"
"unitary" or "combined" Return 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.
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(iv) All Taxes which each of the Companies 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.
(v) None of the Companies is a "United States real property holding
corporation" within the meaning of Section 897(c)(2) of the Internal Revenue
Code of 1986, as amended, and the rules and regulations promulgated thereunder
(the "Code").
(vi) There are no tax sharing, allocation, indemnification or similar
agreements in effect as between any of the Companies or any predecessor or
affiliate thereof and any other party (including the Seller and any predecessors
or affiliates thereof) under which the Purchasers or any of the Companies could
be liable for any Taxes or other claims of any party.
(vii) None of the Companies has applied for, been granted, or agreed
to any accounting method change for which it will be required to take into
account any adjustment under Section 481 of the Code or any similar provision of
the Code or the corresponding tax laws of any nation, state or locality.
(viii) No election under Section 341(f) of the Code has been made or
shall be made prior to the Closing Date
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to treat any Company as a consenting corporation, as defined in Section 341 of
the Code.
(ix) None of the Companies is a party to any agreement (other than
this 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
Code.
(x) Each of Continental and AFSI has made a valid S election under
Section 1361 of the Code. With respect to Continental, such election was made on
December 29, 1986 and was effective as of the year commencing October 1, 1987.
With respect to AFSI, such election was made prior to August 5, 1991 and was
effective as of the year commencing October 1, 1991. Each of Continental and
AFSI has also made all such elections required under any analogous provisions of
state or local law. Each of Continental and AFSI will continue to be a valid S
corporation through the day immediately preceding the Closing Date and
Continental shall be eligible to file an election under Treasury Regulation
ss.1.338(h)(10)-1(d) with respect to the sale of the Stock.
ss.3.15 Liabilities. Except as set forth on Schedule 3.15, none of the
Companies has any outstanding material claims, liabilities or indebtedness,
contingent or otherwise, except as reflected in the Balance Sheet or referred to
in the footnotes thereto, other than liabilities incurred sub-
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sequent to the Balance Sheet Date in the ordinary course of business.
ss.3.16 Insurance. Schedule 3.16 contains an accurate summary description
of all policies of property, fire and casualty, product liability, workers
compensation and other forms of insurance owned or held by each of the
Companies. None of the Companies has received (i) any notice of cancellation of
any policy described in such Schedule or refusal of coverage thereunder, (ii)
any notice that any issuer of such policy has filed for protection under
applicable bankruptcy laws or is otherwise in the process of liquidating or has
been liquidated, or (iii) any other indication that such policies are no longer
in full force or effect or that the issuer of any such policy is no longer
willing or able to perform its obligations thereunder. Since the last renewal
date of any insurance policy, there has not been any material adverse change in
the relationship of any of the Companies with its insurers or in the premiums
payable pursuant to such policies.
ss.3.17 Compliance with Laws. Except as set forth on Schedule 3.17, each of
the Companies is in compliance with all applicable laws, regulations, orders,
judgments and decrees (including, without limitation, the Fair Debt Collection
Practices Act and any state or local counterpart or equivalent).
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ss.3.18 Employment Relations. (a) Except as set forth on Schedule 3.18,
each of the Companies is in compliance with all Federal, state or other
applicable laws, domestic or foreign, 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;
(b) no unfair labor practice complaint against any of the Companies is
pending before the National Labor Relations Board;
(c) there is no labor strike, dispute, slowdown or stoppage actually
pending or threatened against or involving any of the Companies;
(d) none of the Companies is a party to any collective bargaining agreement
and no collective bargaining agreement is currently being negotiated by any of
the Companies; and
(e) except as provided on Schedule 3.18, no claim in respect of the
employment of any employee has been asserted or, to the knowledge of the
Companies, threatened, against any of the Companies.
ss.3.19 Employee Benefit Plans. Employee Benefit Plans. (a) List of Plans.
Set forth in Schedule 3.19 attached hereto is an accurate and complete list of
all domestic and foreign (i) "employee benefit plans," within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended,
and the rules and regulations thereunder
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("ERISA"), (ii) bonus, stock option, stock purchase, restricted stock,
incentive, profit-sharing, pension or retirement, deferred compensation,
medical, life, disability, accident, accrued leave, vacation, sick pay, sick
leave, supplemental retirement and unemployment benefit plans, programs,
arrangements, commitments or practices (whether or not insured), and (iii)
employment, consulting, termination, and severance contracts or agreements, in
each case for active, retired or former employees or directors, whether or not
any such plans, programs, arrangements, commitments, contracts, agreements or
practices (referred to in (i), (ii) or (iii) above) are in writing or are
otherwise exempt from the provisions of ERISA, that have been established,
maintained or contributed to (or with respect to which an obligation to
contribute has been undertaken) or with respect to which any potential liability
is borne by any of the Companies (including, for this purpose and for the
purpose of all of the representations in this Section 3.19, any predecessors to
the Companies and all employers (whether or not incorporated) that are by reason
of common control treated together with any of the Companies as a single
employer (i) within the meaning of Section 414 of the Code or (ii) as a result
of any of the Companies being or having been a general partner of any such
employer since September 2, 1974 ("Employee Benefit Plans").
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(b) Status of Plans. Each Employee Benefit Plan has at all times been
maintained and operated in compliance in all material respects with its terms
and the requirements of all applicable laws, including, without limitation,
ERISA and the Code. None of the Companies has any commitment, intention or
understanding to create, modify or terminate any Employee Benefit Plan. Except
as required by applicable law, no condition or circumstance exists that would
prevent the amendment or termination of any Employee Benefit Plan. No event has
occurred and no condition or circumstance has existed that could result in a
material increase in the benefits under or the expense of maintaining any
Employee Benefit Plan from the level of benefits or expense incurred for the
most recent fiscal year ended thereof.
(c) No Pension Plans. Except as disclosed on Schedule 3.19, no Employee
Benefit Plan is an "employee pension benefit plan" within the meaning of Section
3(2) of ERISA.
(d) Liabilities. None of the Companies maintains any Employee Benefit Plan
which is a "group health plan" (as such term is defined in Section 5000(b)(1) of
the Code) that has not been administered and operated in all material respects
in compliance with the applicable requirements of Section 601 of ERISA and
Section 4980B(f) of the Code and none of the Companies is subject to any
material liability, including,
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without limitation, additional contributions, fines, penalties or loss of tax
deduction as a result of such administration and operation. Except as set forth
in Schedule 3.19, none of the Companies maintains any Employee Benefit Plan
providing for retiree health and/or life benefits and having unfunded
liabilities except for benefits and employee benefit plans mandated by
applicable law, such as COBRA. None of the Companies maintains any Employee
Benefit Plan which is an "employee welfare benefit plan" (as such term is
defined in Section 3(1) of ERISA) that has provided any "disqualified benefit"
(as such term is defined in Section 4976(b) of the Code) with respect to which
an excise tax could be imposed.
None of the Companies has any material unfunded liabilities pursuant to any
Employee Benefit Plan that is not intended to be qualified under Section 401(a)
of the Code. None of the Companies has incurred any material liability for any
tax or excise tax arising under Section 4977 or 4980B of the Code, and no event
has occurred and no condition or circumstance has existed that could give rise
to any such liability.
There are no actions, suits or claims pending, or, to the knowledge of the
Companies, threatened, anticipated or expected to be asserted against any
Employee Benefit Plan or the assets of any such plan (other than routine claims
for benefits and appeals of denied routine claims). No civil or
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criminal action brought pursuant to the provisions of Title I, Subtitle B, Part
5 of ERISA is pending, or, to the knowledge of the Companies, threatened,
anticipated, or expected to be asserted against any of the Companies or any
fiduciary of any Employee Benefit Plan, or in any case with respect to any
Employee Benefit Plan. No Employee Benefit Plan or any fiduciary thereof has
been the direct or indirect subject of an audit, investigation or examination by
any governmental or quasi-governmental agency.
(e) Contributions. Except as set forth on Schedule 3.19, full payment has
been made of all amounts which each Company is required, under applicable law or
under any Employee Benefit Plan or any agreement relating to any Employee
Benefit Plan to which such Company is a party, to have paid as contributions or
premiums thereto as of the last day of the most recent fiscal year of such
Employee Benefit Plan ended prior to the date hereof. All such contributions
and/or premiums have been fully deducted for income tax purposes and no such
deduction has been challenged or disallowed by any governmental entity, and to
the best knowledge of the Companies, no event has occurred and no condition or
circumstance has existed that could give rise to any such challenge or
disallowance. Each of the Companies has made adequate provision for reserves to
meet contributions and premiums that have not been made because they are not yet
due under
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the terms of any Employee Benefit Plan or related agreements. Benefits under all
Employee Benefit Plans are as represented and none of the Companies has taken
any action to increase such benefits subsequent to the date as of which
documents have been provided.
(f) Tax Qualifications. Each Employee Benefit Plan intended to be qualified
under Section 401(a) of the Code has been determined to be so qualified by the
Internal Revenue Service. Each trust established in connection with an Employee
Benefit Plan which is intended to be exempt from Federal income taxation under
Section 501(a) of the Code has been determined to be so exempt by the Internal
Revenue Service. Since the date of each most recent determination referred to in
this paragraph (f), no event has occurred and no condition or circumstance has
existed that resulted or is likely to result in the revocation of any such
determination or that could adversely affect the qualified status of any such
Employee Benefit Plan or the exempt status of any such trust.
(g) Transactions. None of the Companies nor any of their directors,
officers, employees or, to the knowledge of the Companies, other persons who
participate in the operation of any Employee Benefit Plan or related trust or
funding vehicle, has engaged in any transaction with respect to any Employee
Benefit Plan or breached any applicable fiduciary
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responsibilities or obligations under Title I of ERISA that would subject any of
them to a material tax, penalty or liability for prohibited transactions under
ERISA or the Code or would result in any material claim being made under, by or
on behalf of any such Employee Benefit Plan by any party with standing to make
such claim (other than routine claims for benefits).
(g) Triggering Events. The execution of this Agreement and the Merger
Agreements and the consummation of the transactions contemplated hereby and
thereby do not constitute a triggering event under any Employee Benefit Plan,
policy, arrangement, statement, commitment or agreement, whether or not legally
enforceable, which (either alone or upon the occurrence of any additional or
subsequent event) will or may result in any material payment (whether of
severance pay or otherwise), acceleration, vesting or increase in benefits to
any employee or former employee or director of any of the Companies. No Employee
Benefit Plan provides for the payment of severance benefits upon the termination
of an employee's employment.
(h) Documents. Each of the Companies has delivered or caused to be
delivered to the Purchasers and their counsel true and complete copies of all
material documents in connection with each Employee Benefit Plan, including,
without limitation (where applicable): (i) all Employee Benefit Plans
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as in effect on the date hereof, together with all amendments thereto,
including, in the case of any Employee Benefit Plan not set forth in writing, a
written description thereof; (ii) all current summary plan descriptions,
summaries of material modifications, and material communications; (iii) all
current trust agreements, declarations of trust and other documents establishing
other funding arrangements (and all amendments thereto and the latest financial
statements thereof); (iv) the most recent Internal Revenue Service determination
letter obtained with respect to each Employee Benefit Plan intended to be
qualified under Section 401(a) of the Code; (v) Form 5500 for each of the last
three years for each Employee Benefit Plan required to file such Form; (vi) the
most recently prepared financial statements; and (vii) all contracts relating to
each Employee Benefit Plan, including, without limitation, service provider
agreements, insurance contracts, annuity contracts, investment management
agreements, subscription agreements, participation agreements, and
record-keeping agreements.
ss.3.20 Interests in Customers, Suppliers, etc. Except as set forth on
Schedule 3.20 attached hereto, neither the Seller nor any officer or director of
any of the Companies possesses, directly or indirectly, any ownership interest
in, or is a director, officer or employee of, any Person which is a supplier,
customer, lessor, lessee, licensor, developer,
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competitor or potential competitor of any of the Companies. Ownership of
securities of a company whose securities are registered under the Securities
Exchange Act of 1934 of 5% or less of any class of such securities shall not be
deemed to be a financial interest for purposes of this Section 3.20.
ss.3.21 Environmental Laws and Regulations. Except as set forth on Schedule
3.21:
(a) Hazardous Materials (as hereinafter defined) have not been generated,
treated or stored on or released or disposed on any Company Property (as
hereinafter defined).
(b) Each of the Companies is in compliance in all material respects with
Environmental Laws (as hereinafter defined) and the requirements of permits
issued under such Environmental Laws with respect to any Company Property.
(c) There are no pending or, to the knowledge of the Companies, threatened
Environmental Claims (as hereinafter defined) against any of the Companies or
any Company Property.
(d) For purposes of this Section 3.21 the following definitions shall
apply:
"Company Property" means any real property and improvements owned,
leased, operated or occupied by any of the Companies.
"Hazardous Materials" means (a) any petroleum or petroleum products,
radioactive materials, asbestos in any
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form that is friable, urea formaldehyde foam insulation, transformers or other
equipment that contain dielectric fluid containing levels of polychlorinated
biphenyls, and radon gas; and (b) any chemicals, materials or substances defined
as or included in the definition of "hazardous substances," "hazardous wastes,"
"hazardous materials," "extremely hazardous wastes," "restricted hazardous
wastes," "toxic substances," "toxic pollutants," or words of similar import,
under any applicable Environmental Law.
"Environmental Law" means any federal, state or local statute, law,
rule, regulation, ordinance, code, policy or rule of common law in effect and in
each case as amended as of the Closing Date, and any judicial or administrative
interpretation thereof as of the Closing Date, including any judicial or
administrative order, consent decree or judgment, relating to the environment,
health, safety or Hazardous Materials, including the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended, 42 U.S.C. ss.
6901 et seq.; the Resource Conservation and Recovery Act, as amended, 42 U.S.C.
ss. 9601 et seq.; the Federal Water Pollution Control Act, as amended, 33 U.S.C.
ss. 1251 et seq.; the Toxic Substances Control Act, 15 U.S.C. ss. 2601 et seq.;
the Clean Air Act, 42 U.S.C. ss. 7401 et seq.; the Safe Drinking Water Act, 42
U.S.C. ss. 300f et seq.; the Oil Pollution Act of 1990, 33 U.S.C. ss. 2701 et
seq.; the
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Occupational Safety and Health Act of 1970, as amended, 29 U.S.C. ss.651 et
seq.; and their state and local counterparts and equivalents.
"Environmental Claims" means administrative, regulatory or judicial
actions, suits, demands, demand letters, claims, liens, notices of
non-compliance or violation, investigations or proceedings relating in any way
to any Environmental Law or any permit issued under any such Law, including (a)
Environmental Claims by governmental or regulatory authorities for enforcement,
cleanup, removal, response, remedial or other actions or damages pursuant to any
applicable Environmental Law, and (b) Environmental Claims by any third party
seeking damages, contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from Hazardous Materials or arising from alleged
injury or threat of injury to health, safety or the environment.
ss.3.22 Bank Accounts, Powers of Attorney. Set forth on Schedule 3.22
attached hereto is an accurate and complete list showing (a) the name and
address of each bank in which each of the Companies has a material account or
safe deposit box, the number of any such account or any such box and the names
of all persons authorized to draw thereon or to have access thereto and (b) the
names of all persons, if any, holding powers of attorney from any of the
Companies.
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ss.3.23 Compensation of Employees. Continental has previously provided the
Purchasers with an accurate and complete list for fiscal year 1995 showing the
names of all persons employed by any of the Companies who received more than
$50,000 in 1995 cash compensation (including, without limitation, salary,
commission and bonus) and who are expected to be employed by any of the
Companies on the Closing Date. Such list sets forth the present salary or hourly
wage, total expected calendar 1995 cash compensation (including, without
limitation, salary, commission and bonus) and fringe benefits, of each such
person.
ss.3.24 Conduct of Business. Except as disclosed on Schedule 3.24 attached
hereto and except as expressly contemplated by this Agreement, since September
30, 1995, none of the Companies has taken any action which, if taken subsequent
to the execution of this Agreement and on or prior to the Closing Date, would
constitute a breach of any of the Companies agreements set forth in Section 6.1
of this Agreement or the like Section set forth in any of the Merger Agreements.
ss.3.25 Customer Relations. There has not been, and the Companies do not
currently believe that there will be, any change in relations with customers of
any of the Companies as a result of the transactions contemplated by this
Agreement
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or the Merger Agreement which is reasonably expected to have a Material Adverse
Effect.
ss.3.26 Condition of Assets. The assets and properties utilized in and
material to the conduct of the businesses of the Companies, whether owned or
leased, are, to the knowledge of the Companies, in the aggregate in good
operating condition and repair (normal wear and tear excepted) and are suitable
for the purposes for which they are presently being used.
ss.3.27 Broker's or Finder's Fees. Except for Global Ventures, Inc., whose
fees and expenses will be paid for by the Seller, no agent, broker, person or
firm acting on behalf of any of the Companies or the Seller, is, or will be,
entitled to any commission or broker's or finder's fees from any of the parties
hereto, or from any Person controlling, controlled by or under common control
with any of the parties hereto, in connection with any of the transactions
contemplated by this Agreement.
ARTICLE IV
REPRESENTATIONS OF THE SELLER
ss.4. Representations of the Seller. The Seller represents and warrants to
the Purchasers as follows:
ss.4.1 Ownership of Stock. The Seller is the lawful owner of 3,466.66
shares of Stock, free and clear of all
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liens, encumbrances, restrictions and claims of every kind. The Seller has the
full legal right, power and authority to enter into this Agreement and to sell,
assign, transfer and convey the shares of Stock so owned by the Seller pursuant
to this Agreement, and the delivery to the Purchasers of the Stock pursuant to
the provisions of this Agreement will transfer to the Purchasers good title
thereto, free and clear of all Encumbrances. The Seller is the lawful owner of
all of the outstanding shares of capital stock of each of AFSI, SFSI and CCSI,
free and clear of all liens, encumbrances, restrictions and claims (which
survive the Closing) of every kind.
ss.4.2 Authorization and Validity of Agreement. The Seller has the
requisite power and authority to execute and deliver this Agreement, to perform
his obligations hereunder and to consummate the transactions contemplated to be
performed by him hereby. This Agreement has been duly executed and delivered by
the Seller and, assuming the due execution of this Agreement by the Purchasers
and the Company, is a valid and binding obligation of the Seller, enforceable
against the Seller in accordance with its terms, except to the extent that its
enforceability may be subject to applicable bankruptcy, insolvency,
reorganization and similar laws affecting the enforcement of creditors' rights
generally and to general equitable principles.
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ss.4.3 Restrictive Documents. The Seller is not subject to any mortgage,
lien, lease, agreement, instrument, order, law, rule, regulation, judgment or
decree, or any other restriction of any kind or character which would prevent
consummation by the Seller of the transactions contemplated by this Agreement.
ss.4.4 Broker's or Finder's Fees. Except for Global Ventures, Inc., whose
fees and expenses will be paid for by the Seller, no agent, broker, person or
firm acting on behalf of the Seller is, or will be, entitled to any commission
or broker's or finder's fees from any of the parties hereto, or from any Person
controlling, controlled by or under common control with any of the parties
hereto, in connection with any of the transactions contemplated by this
Agreement.
ARTICLE V
REPRESENTATIONS OF THE PURCHASERS
ss.5. Representations of the Purchasers. The Purchasers, jointly and
severally, represent and warrant to Continental and the Seller as follows:
ss.5.1 Existence and Good Standing; Power and Authority. (a) Each of
Holdings and OSI Alaska, OSI Central and OSI Southwest is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Each of Holdings and OSI Alaska, OSI Central and OSI
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Southwest has the requisite corporate power and authority to enter into, execute
and deliver, as applicable, this Agreement and the Merger Agreements and perform
its respective obligations hereunder and thereunder. Holdings has the requisite
corporate power and authority to own, operate and lease its properties and carry
on its business as now being conducted, and is duly qualified and in good
standing in each jurisdiction in which the character or location of properties
owned, leased or operated by Holdings or the nature of the business conducted by
Holdings makes such qualification necessary, except where the failure to be so
qualified would not have a material adverse effect on the business, operations,
financial condition or results of operations of Holdings and its subsidiaries
taken as a whole. This Agreement has been duly authorized, approved and executed
by Holdings and, assuming the due execution of this Agreement by Continental and
the Seller, is a valid and binding obligation of Holdings enforceable against it
in accordance with its terms, except to the extent that its enforceability may
be subject to applicable bankruptcy, insolvency, reorganization, moratorium and
other similar laws affecting the enforcement of creditors' rights generally and
by general equitable principles. Each of the Merger Agreements have been duly
authorized, approved and executed by OSI Alaska, OSI Central and OSI Southwest,
as applicable, and, assuming the due execution
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of such Merger Agreements by the other parties thereto, is a valid and binding
obligation of OSI Alaska, OSI Central and OSI Southwest, as applicable,
enforceable against it in accordance with its terms, except to the extent that
its enforceability may be subject to applicable bankruptcy, insolvency,
reorganization, moratorium and other similar laws effecting the enforcement of
creditors' rights generally and by general equitable principles.
(b) Solutions is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. Solutions has the requisite
corporate power and authority to enter into, execute and deliver this Agreement
and the Seller Note, and perform its obligations hereunder and thereunder.
Solutions has the requisite corporate power and authority to own, operate and
lease its properties and carry on its business as now being conducted, and is
duly qualified and in good standing in each jurisdiction in which the character
or location of properties owned, leased or operated by Solutions or the nature
of the business conducted by Solutions makes such qualification necessary,
except where the failure to be so qualified would not have a material adverse
effect on the business, operations, financial condition or results of operations
of Solutions and its subsidiaries taken as a whole. This Agreement and the
Seller Note have been duly authorized, approved and executed by Solu-
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tions, and, assuming the due execution of this Agreement by Continental and the
Seller, are valid and binding obligations of Solutions enforceable against it in
accordance with their terms, except to the extent that their enforceability may
be subject to applicable bankruptcy, insolvency, reorganization, moratorium and
other similar laws affecting the enforcement of creditors' rights generally and
by general equitable principles.
ss.5.2 Restrictive Documents. Neither any Purchaser nor OSI Alaska, OSI
Central or OSI Southwest is subject to any mortgage, lien, lease, agreement,
instrument, order, law, rule, regulation, judgment or decree, or any other
restriction of any kind or character which would prevent consummation by it of
the transactions contemplated by this Agreement or the Merger Agreements.
ss.5.3 Purchase for Investment. Each Purchaser will acquire the Stock for
its own account for investment and not with a view toward any resale or
distribution thereof within the meaning of the Securities Act of 1933, as
amended; provided, however, that the disposition of such Purchaser's property
shall at all times remain within the sole control of such Purchaser.
ss.5.4 Capital Stock. The shares of stock of Holdings to be received by the
Seller in accordance with the terms of this Agreement and as a result of the
consummation of the
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transactions contemplated by the Merger Agreements will be duly authorized,
validly issued, fully paid and non-assessable.
ss.5.5 Capitalization of Holdings. The authorized capital stock of Holdings
consists of (i) 15,000,000 shares of Holdings Common Stock, of which
4,608,866.93 shares will be duly authorized and validly issued and outstanding,
fully paid and nonassessable after giving effect to the transactions
contemplated by this Agreement and the Merger Agreements, and (ii) 1,000,000
shares of Holdings Preferred Stock, of which 800,000 shares will be duly
authorized validly issued and outstanding, fully paid and nonassessable after
giving effect to the transactions contemplated by this Agreement and the Merger
Agreements. The record ownership of the outstanding shares of Holdings Common
Stock and Preferred Stock (after giving effect to the transactions contemplated
by this Agreement and the Merger Agreements) is reflected on Schedule 5.5
attached hereto. Except as set forth on Schedule 5.5 attached hereto, no shares
of capital stock of Holdings have been reserved for any purpose. Except for the
Holdings Preferred Stock, for rights contained in that certain Amended and
Restated Stockholders Agreement dated as of the date hereof, by and among
Holdings and certain stockholders of Holdings (the "Stockholders Agreement"),
for options to be granted under Holdings' 1995 Stock Option and
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Stock Award Plan and for warrants to be granted to Resurgens Capital in
connection with transactions contemplated hereby, there are no outstanding
securities convertible into or exchangeable for the capital stock of Holdings
and no outstanding options, rights (preemptive or otherwise), or warrants to
purchase or to subscribe for any shares of such stock or other securities of
Holdings. There are no outstanding agreements affecting or relating to the
voting, issuance, purchase, redemption, repurchase or transfer of any of the
securities of Holdings, except for the Stockholders Agreement referred to above
or as otherwise contemplated hereunder.
ss.5.6 Broker's or Finder's Fees. No agent, broker, person or firm acting
on behalf of the Purchasers is, or will be, entitled to any commission or
broker's or finder's fees from the Seller in connection with any of the
transactions contemplated by this Agreement or the Merger Agreements.
ss.5.7 Financial Statements; No Material Changes. (a) Holdings has
heretofore furnished the Seller with an unaudited consolidated balance sheet
(the "Holdings Balance Sheet") of Holdings and its subsidiaries as of September
21, 1995, together with related unaudited consolidated statements of operation
and cash flows for the period then ended. Such financial statements fairly
present in all material respects the financial position of Holdings and its
subsidiaries at the date thereof, and the results of the operations and cash
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flows of Holdings and its subsidiaries for the period indicated.
(b) Since September 21, 1995, there has been no (i) material adverse change
in the business, operations, financial condition or results of operations of
Holdings and its subsidiaries or (ii) material damage, destruction or loss to
any asset or property, tangible or intangible, of Holdings which materially
affects the ability of Holdings to conduct its business.
ss.5.8 Title to Properties; Encumbrances. Except as set forth on Schedule
5.8 attached hereto and except for such properties and assets which have been
sold or otherwise disposed of in the ordinary course of business, Holdings has
good title to its respective material properties and assets (real and personal,
tangible and intangible), including, without limitation, the material properties
and assets reflected in the Holdings Balance Sheet, subject to no material
Encumbrances except for (i) Encumbrances reflected in the Holdings Balance
Sheet, (ii) Encumbrances for current taxes, assessments or governmental charges
or levies on property not yet due and delinquent, (iii) Encumbrances arising by
operation of law including, without limitation, municipal and zoning ordinances,
building and use restrictions and covenants, imperfections, irregularities and
defects incurred in the ordinary course of business, obligations not yet due to
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carriers, warehousemen, laborers, materialmen and the like and liens for real
and personal property taxes, assessments or like governmental charges not yet
delinquent and payable without penalty, and (iv) Encumbrances described on
Schedule 5.8 attached hereto.
ss.5.9 Consents and Approvals; No Violations. Except as set forth in
Schedule 5.9 attached hereto, the execution and delivery of this Agreement and
the Merger Agreements by the Purchasers and OSI Alaska, OSI Central and OSI
Southwest, as applicable, and the consummation of the transactions contemplated
hereby and thereby (a) will not violate or contravene any provision of the
Certificate of Incorporation or Bylaws of any such entity, (b) will not violate
or contravene any statute, rule, regulation, order or decree of any public body
or authority by which any such entity is bound, (c) will not 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 any other Person and
(d) will not 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 Encumbrance upon any of the properties or assets of any of
any such entity under, any of the terms, conditions or provisions of any note,
bond, mortgage, in-
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denture, license, franchise, permit, agreement, lease, franchise agreement or
any other instrument or obligation to which any such entity is a party, or by
which any such entity or any of its properties or assets may be bound.
ss.5.10 Litigation. Except as set forth on Schedule 5.10 attached hereto,
there is no action, suit, proceeding at law or in equity, arbitration or
administrative or other proceeding by or before (or to the knowledge of Holdings
any investigation by) any governmental or other instrumentality or agency,
pending, or, to the knowledge of Holdings, threatened, against or affecting
Holdings or their respective properties or rights which could materially and
adversely affect the right or ability of Holdings to carry on its business as
now conducted, or which could have a material adverse effect on the business,
operations, financial condition or results of operations of Holdings and its
subsidiaries taken as a whole; and Holdings knows of no valid basis for any such
action, proceeding or investigation. None of Holdings is subject to any
judgment, order or decree entered in any lawsuit or proceeding which may have a
material adverse effect on the business, operation, financial condition or
results of operations of Holdings and its subsidiaries taken as a whole.
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ss.5.11 Compliance with Laws. Holdings is in compliance with all applicable
laws, regulations, orders, judgments and decrees.
ss.5.12 Financing Commitment. The Purchasers have previously made available
to Continental and the Seller copies of the Commitment Letters dated December
13, 1995 and December 14, 1995, respectively, from National Westminster Bank plc
and Heller Financial, Inc. whereby such lenders have committed, subject to the
terms and conditions of such letters, to provide financing for the acquisition
of the Companies by the Purchasers.
ARTICLE VI
TRANSACTIONS PRIOR TO THE CLOSING DATE; OTHER AGREEMENTS
ss.6.1 Conduct of Business of Continental. During the period from the date
of this Agreement to the Closing Date, Continental shall conduct its operations
only according to its ordinary and usual course of business; use its reasonable
efforts to preserve intact its business organizations, keep available the
services of its officers and employees and maintain its relationships and
goodwill with licensors, suppliers, distributors, customers, landlords,
employees, agents and others having business relationships with it; confer with
the Purchasers concerning operational matters of a material nature and report
periodically to the Purchasers concerning
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the business, operations and finances of such Company. Notwithstanding the
immediately preceding sentence, prior to the Closing Date, except as set forth
as Schedule 6.1 or as may be first approved in writing by the Purchasers or as
is otherwise permitted or required by this Agreement, Continental shall, (a)
refrain from amending or modifying its Articles of Incorporation or Bylaws from
its form on the date of this Agreement, (b) refrain from paying or increasing
any bonuses, salaries, or other compensation to any director, officer, employee
or stockholder or entering into any employment, severance, or similar agreement
with any director, officer, or employee other than, in each case, in the
ordinary course of business consistent with past practice, (c) refrain from the
adopting or increasing of any profit sharing, bonus, deferred compensation,
savings, insurance, pension, retirement, or other employee benefit plan for or
with any of its employees, (d) refrain from entering into any material contract
or commitment except material contracts and commitments in the ordinary course
of business consistent with past practice, (e) refrain from increasing its
indebtedness for borrowed money, except current borrowings in the ordinary
course of business, (f) refrain from cancelling or waiving any claim or right of
substantial value which individually or in the aggregate is material, (g)
refrain from declaring or paying any dividends in respect of its capital
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stock or redeeming, purchasing or otherwise acquiring any of its capital stock,
(h) refrain from making any material change in accounting methods or practices,
except as required by law or generally accepted accounting principles, (i)
refrain from issuing or selling any shares of capital stock or any other
securities, or issuing any securities convertible into, or options, warrants or
rights to purchase or subscribe to, or entering into any arrangement or contract
with respect to the issue and sale of, any shares of its capital stock or any
other securities, or making any other changes in its capital structure, (j)
refrain from selling, leasing or otherwise disposing of any material asset or
property except in the ordinary course of business consistent with past
practice, (k) refrain from making any capital expenditure or commitment
therefor, except in the ordinary course of business consistent with past
practice, (l) refrain from writing off as uncollectible any notes or accounts
receivable, except write-offs in the ordinary course of business charged to
applicable reserves, none of which individually or in the aggregate is material
and (m) refrain from agreeing in writing to do any of the foregoing.
ss.6.2 Exclusive Dealing. During the period from the date of this Agreement
to the Closing Date, none of the Seller, Continental or any officer or director
of Continental shall take any action to, directly or indirectly, encourage,
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initiate or engage in discussions or negotiations with, or provide any
information to, any Person, other than the Purchasers, concerning any purchase
of any capital stock of Continental or any merger, sale of substantial assets or
similar transaction involving Continental.
ss.6.3 Review of Continental. The Purchasers may, prior to the Closing
Date, directly or through their representatives, review the properties, books
and records of Continental and their respective financial and legal conditions
to the extent they deem necessary or advisable to familiarize themselves with
such properties and other matters; such review shall not, however, affect the
representations and warranties made by Continental in this Agreement or the
remedies of the Purchasers for breaches of those representations and warranties.
Continental shall permit the Purchasers and their representatives to have, after
the date of execution of this Agreement, full access to the premises and to all
the books and records of Continental and to cause the officers of Continental to
furnish the Purchasers with such financial and operating data and other
information with respect to the business and properties of Continental as the
Purchasers shall from time to time reasonably request. Continental shall deliver
or cause to be delivered to the Purchasers such additional instruments,
documents, certificates and opinions as the Purchasers may reasonably request
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without material cost to Continental or to the Seller for the purpose of (a)
verifying the information set forth in this Agreement or on any Schedule
attached hereto and (b) consummating or evidencing the transactions contemplated
by this Agreement. The parties hereto acknowledge that McCown De Leeuw & Co.,
Continental and the Seller have entered into a Confidentiality Agreement (the
"Confidentiality Agreement") and the Purchasers confirm that they will comply
with their obligations thereunder as if they were parties thereto and that
information obtained during any such review will be subject to the terms of the
Confidentiality Agreement.
ss.6.4 Reasonable Efforts. Each of Continental, the Seller and the
Purchasers shall cooperate and use their respective commercially reasonable
efforts to take, or cause to be taken, all appropriate actions, and to make, or
cause to be made, all filings necessary, proper or advisable under applicable
laws and regulations to consummate and make effective the transactions
contemplated by this Agreement and the Merger Agreements, including, without
limitation, their respective commercially reasonable efforts to obtain, prior to
the Closing Date, all licenses, permits, consents, approvals, authorizations,
qualifications and orders of governmental authorities and parties to contracts
with the Companies as are necessary for consummation of the transactions
contemplated by this Agreement and the Merger Agreements and
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to fulfill the conditions to the sale contemplated hereby and thereby.
ss.6.5 Collection of Certain Receivables. Each of Continental and the
Seller agree that Continental shall use its reasonable efforts to collect all
receivables owed to the Companies by U.S. West Resources, Inc. which are more
than 180 days old on the date hereof. To the extent that any of the receivables
identified at Schedule 6.5 attached hereto shall not have been collected by the
Companies on or prior to December 31, 1996, then the Seller Note shall be
decreased on a dollar-for-dollar basis by the amount of such receivables which
have not been collected on or prior to such date.
ARTICLE VII
CONDITIONS TO SOLUTION'S OBLIGATIONS
ss.7. Conditions to Solution's Obligations. The obligations of Solutions to
purchase the Stock contemplated by this Agreement are conditioned upon
satisfaction, at or prior to the Closing, of the following conditions:
ss.7.1 Opinions of Counsel. Continental shall have furnished the Purchasers
with an opinion, dated the Closing Date, of Perkins Coie, to the effect set
forth in Exhibit B hereto.
ss.7.2 Good Standing and Other Certificates. The Purchasers shall have
received (a) copies of the charter, including all amendments thereto, in each
case certified by
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the Secretary of State or other appropriate official of the jurisdiction of
incorporation of each of the Companies, (b) a certificate from the Secretary of
State or other appropriate official of the jurisdiction of incorporation of each
of the Companies to the effect that such Company is in good standing and listing
all charter documents of such Company on file, (c) a certificate from the
Secretary of State or other appropriate official in each State in which each of
the Companies is qualified to do business to the effect that such Company is in
good standing in such State, (d) to the extent available, a certificate as to
the tax status of each of the Companies from the appropriate official in its
jurisdiction of incorporation and each state in which such Company is qualified
to do business and (e) a copy of the Bylaws of each of the Companies certified
by the Secretary of such Company as being true and correct and in effect on the
Closing Date.
ss.7.3 No Material Adverse Change. Prior to the Closing there shall have
been no material adverse change in the business, operations, financial
condition, results of operations or prospects of the Companies taken as a whole
and Continental shall have delivered to the Purchasers an officer's certificate,
dated the Closing Date, to such effect.
ss.7.4 Truth of Representations and Warranties. The representations and
warranties of Continental contained in this Agreement and the representations
and warranties of the
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Seller contained in this Agreement shall be true and correct on and as of the
Closing Date with the same effect as though such representations and warranties
had been made on and as of such date, and Continental and the Seller shall have
each delivered to the Purchasers a certificate, dated the Closing Date, to such
effect.
ss.7.5 Performance of Agreements. All of the obligations, covenants and
agreements of the Companies and the Seller to be performed prior to the Closing
pursuant to the terms of this Agreement and the Merger Agreements shall have
been duly performed in all material respects, and the Companies and the Seller
shall have each delivered to the Purchasers a certificate, dated the Closing
Date, to such effect.
ss.7.6 No Litigation Threatened. No action or proceedings shall have been
instituted or, to the knowledge of the Companies or the Seller, threatened
before a court or other government body or by any public authority to restrain
or prohibit any of the transactions contemplated by this Agreement or the Merger
Agreements.
ss.7.7 Third Party Consents; Governmental Approvals. All consents,
approvals or waivers, if any, set forth on Schedule 7.7 attached hereto in
connection with the consummation of the transactions contemplated by this
Agreement and the Merger Agreements shall have been received. All of the con-
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sents, approvals, authorizations, exemptions and waivers from governmental
agencies set forth as Schedule 7.7 attached hereto that shall be required in
order to enable the Purchasers to consummate the transactions contemplated by
this Agreement and the Merger Agreements shall have been obtained.
ss.7.8 Repayment of Indebtedness to Third Parties; Termination of Security
Interests. All indebtedness for borrowed money of each of the Companies shall
have been repaid in full, without penalty, and cancelled. All security
interests, liens, mortgages, claims or other encumbrances of any kind securing
such indebtedness shall be released. Such indebtedness is listed on Schedule 7.8
attached hereto.
ss.7.9 Resignations. All members of the respective Boards of Directors of
each of the Companies shall have tendered their resignation from such positions
effective at the Closing.
ss.7.10 Financing. The Purchasers shall have received debt financing on
substantially the same terms and conditions as set forth in the financing
commitment letters referred to in Section 6.11.
ss.7.11 Employment Arrangement. The Seller shall have executed an
employment agreement with the Companies in substantially the form of Exhibit C
hereto.
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ss.7.12 Non-Competition Agreements. The Seller shall have entered into a
non-competition and non-interference agreement in substantially the form of
Exhibit D attached hereto.
ss.7.13 Stockholders Agreement. The Seller shall have executed the
Stockholders Agreement.
ss.7.14 Related Merger Agreements. The transactions contemplated by (i) the
Alaska Merger Agreement, (ii) the Central Merger Agreement, and (iii) the
Southwest Merger Agreement, shall have been consummated simultaneously with the
transactions contemplated hereby.
ss.7.15 FIRPTA. The Seller shall have furnished to the Purchasers, on or
prior to the Closing Date, a non-foreign person affidavit required by Section
1445 of the Code.
ARTICLE VIII
CONDITIONS TO CONTINENTAL'S AND THE SELLER'S OBLIGATIONS
ss.8. Conditions to Continental's and the Seller's Obligations. The
obligations of Continental and the Seller to effect the transactions
contemplated by this Agreement on the Closing Date are conditioned upon
satisfaction or waiver, at or prior to the Closing, of the following conditions:
ss.8.1 Opinions of Purchasers' Counsel. The Purchasers shall have furnished
the Companies with an opinion, dated the
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Closing Date, of White & Case, to the effect set forth in Exhibit E hereto.
ss.8.2 Truth of Representations and Warranties. The representations and
warranties of the Purchasers contained in this Agreement shall be true and
correct on and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of such date, and the
Purchasers shall have delivered to the Seller an officer's certificate, dated
the Closing Date, to such effect.
ss.8.3 Third Party Consents; Governmental Approvals. All consents,
approvals or waivers, if any, set forth on Schedule 7.7 in connection with the
consummation of the transactions contemplated by this Agreement and the Merger
Agreements shall have been received. All of the consents, approvals,
authorizations, exemptions and waivers from government agencies set forth on
Schedule 7.7 attached hereto that shall be required in order to permit the
consummation of the transactions contemplated by this Agreement and the Merger
Agreements shall have been obtained.
ss.8.4 Performance of Agreements. All of the obligations, covenants and
agreements of the Purchasers, OSI Alaska, OSI Central and OSI Southwest to be
performed prior to the Closing pursuant to the terms of this Agreement and the
Merger Agreements shall have been duly performed in all
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material respects, and the Purchasers shall have delivered to the Seller an
officer's certificate, dated the Closing Date, to such effect.
ss.8.5 No Litigation Threatened. No action or proceeding shall be
instituted or, to the knowledge of the Purchasers, threatened before a court or
other government body or any public authority to restrain or prohibit any of the
transactions contemplated by this Agreement or the Merger Agreements, and the
Purchasers shall have delivered to the Seller an officer's certificate, dated
the Closing Date, to such effect.
ss.8.6 Employment Arrangements. The Seller shall have executed an
employment agreement with the Companies in substantially the form of Exhibit C
hereto.
ss.8.7 Stockholders Agreement. Holdings and the Seller shall have executed
the Stockholders Agreement.
ss.8.8 Related Merger Agreements. The transactions contemplated by (i) the
Alaska Merger Agreement, (ii) the Central Merger Agreement, and (iii) the
Southwest Merger Agreement, shall have been consummated simultaneously with the
transactions contemplated hereby.
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ARTICLE IX
TAX MATTERS
ss.9.1 Tax Returns. (a) The Seller shall have the exclusive authority and
obligation to prepare and timely file, or cause to be prepared and timely filed,
all Returns not yet filed with respect to federal, state and local income taxes
of Continental that are due with respect to any taxable year or other taxable
period ending on or prior to the Closing Date. Such authority shall include, but
not be limited to, the determination of the manner in which any items of income,
gain, deduction, loss or credit arising out of the income, properties and
operations of Continental shall be reported or disclosed in such Returns;
provided, however, that such Returns shall be prepared by treating items on such
Returns in a manner consistent with the past practices with respect to such
items or, with the consent of the Purchasers, which consent shall not be
unreasonably withheld, in any manner permissible under applicable law. The
Purchasers agree that following the Closing Date, Seller and Seller's
Representative shall have reasonable access, during normal business hours, to
the books and records of Continental to the extent they relate to a period prior
to the Closing Date, and shall cause the officers and employees of Continental
to furnish to Seller or Seller's Representative all information, with respect to
Pre-Closing Periods, reasonably requested by,
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and otherwise cooperate with, the Seller and Seller's Representative with
respect to Continental in connection with regulatory compliance, indemnification
claim verification, pending or threatened litigation, financial reporting and
tax matters (including financial and tax audits and tax contests) and other
similar business purposes with respect to PreClosing Periods.
(b) Except as provided in Section 9.1(a), the Purchasers shall have the
exclusive authority and obligation to prepare and timely file, or cause to be
prepared and timely filed, all Returns of Continental; provided, however, with
respect to Returns to be filed by the Purchasers pursuant to this Section 9.1
for taxable periods beginning before the Closing Date and ending after the
Closing Date, items set forth on such Returns shall be treated in a manner
consistent with the past practices with respect to such items or, with the
consent of the Seller, which consent shall not be unreasonably withheld, in any
manner permissible under applicable law. Such authority shall include, but not
be limited to, the determination of the manner in which any items of income,
gain, deduction, loss or credit arising out of the income, properties and
operations of Continental shall be reported or disclosed on such Returns.
ss.9.2 Controversies. The Purchasers shall promptly notify the Seller in
writing upon receipt by the Purchasers
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or any affiliate of the Purchasers (including Continental after the Closing
Date) of written notice of any inquiries, claims, assessments, audits or similar
events with respect to Taxes relating to a taxable period ending on or prior to
the Closing Date for which the Seller may be liable under this Agreement (any
such inquiry, claim, assessment, audit or similar event, a "Tax Matter"). The
Seller, or his duly appointed representative (the "Seller's Representative"), at
his sole expense, shall have the authority to represent the interests of
Continental with respect to any Tax Matter before the Internal Revenue Service,
any other taxing authority, any other governmental agency or authority or any
court and shall have the sole right to control the defense, compromise or other
resolution of any Tax Matter, including responding to inquiries, filing Returns
and settling audits; provided, however, that neither the Seller nor any of his
affiliates shall enter into any settlement of or otherwise compromise any Tax
Matter that affects or may affect the Tax liability of the Purchasers,
Continental or any affiliate of the foregoing for any period ending after the
Closing Date, including the portion of a period beginning before the Closing
Date and ending after the Closing Date (the "Overlap Period") that is after the
Closing Date, without the prior written consent of the Purchasers, which consent
shall not be unreasonably withheld. The Seller or the Seller's Represen-
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tative shall keep the Purchasers fully and timely informed with respect to the
commencement, status and nature of any Tax Matter. The Seller shall, in good
faith, allow the Purchasers to make comments to the Seller or the Seller's
Representative, regarding the conduct of or positions taken in any such
proceeding.
Except as otherwise provided in this Section 9.2, the Purchasers shall have
the sole right to control any audit or examination by any taxing authority,
initiate any claim for refund or amend any Return, and contest, resolve and
defend against any assessment for additional Taxes, notice of Tax deficiency or
other adjustment of Taxes of, or relating to, the income, assets or operations
of Continental for all taxable periods; provided, however, that the Purchasers
shall not, and shall cause its affiliates (including Continental) not to, enter
into any settlement of any contest or otherwise compromise any issue that
affects or may affect the Tax liability of the Seller for any period ending on
or prior to the Closing Date without the prior written consent of the Seller,
which consent shall not be unreasonably withheld. The Purchasers shall keep the
Seller or the Seller's Representative fully and timely informed with respect to
any written notice of any inquiries, claims, assessments, audits or similar
events that affect or may affect the Tax liability of the Seller for any period
ending on or prior to the
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Closing Date. The Purchasers shall, in good faith, allow the Seller or the
Seller's Representative to make comments to the Purchasers regarding the conduct
of or positions taken in any such proceeding.
ss.9.3 Transfer Taxes; Certain State Taxes. (a) All transfer, sales and
use, registration, stamp and similar Taxes imposed in connection with the sale
of the Stock or any other transaction that occurs pursuant to this Agreement
shall be borne equally by the Purchasers, on the one hand, and the Seller, on
the other hand.
(b) All state or local Income Taxes imposed on the Purchasers or
Continental as a result of the elections under Section 338(h)(10) of the Code
(or the analogous provisions of state income tax law) to treat the sale of stock
pursuant to this Agreement as an asset sale for Federal, state or local income
tax purposes shall be borne equally by Continental and the Seller.
ss.9.4 Amended Returns. Neither the Seller nor Continental shall file or
cause to be filed any amended Return without the prior written consent of the
Purchasers, which consent shall not be unreasonably withheld.
ss.9.5 Non-foreign Person Affidavit. The Seller shall furnish to the
Purchasers on or before the Closing Date a non-foreign person affidavit as
required by Section 1445 of the Code in substantially the Form of Exhibit F
hereto.
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ss.9.6 Indemnification. The Seller agrees to indemnify, defend and hold
harmless the Purchasers, their affiliates (including Continental, AFSI, SFSI and
CCSI) and the successors to the foregoing (and their respective shareholders,
officers, directors, employees and agents) on an after-tax basis against (i) all
Income Taxes (and losses, claims and expenses related thereto) resulting from,
arising out of, or incurred with respect to, any claims that may be asserted by
any party based upon, attributable to, or resulting from the failure of any
representation or warranty made pursuant to Section 3.14 to be true and correct
as of the Closing Date; (ii) all Income Taxes imposed on or asserted against the
properties, income or operations of the Companies for all Pre-Closing Periods
(other than any liability accrual or reserve included in the Closing Net Working
Capital Amount); and (iii) all Income Taxes imposed on the Companies, or for
which any Company may be liable, as a result of any transaction contemplated by
this Agreement or the Merger Agreements, including any Income Taxes imposed on
the Purchasers or Continental as a result of the elections under Section
338(h)(10) of the Code to treat the sale of stock pursuant to this Agreement as
an asset sale for Federal income tax purposes, but excluding all taxes allocated
by Section 9.3. The Purchasers shall promptly give the Seller or his
representative written notice of all Income Taxes, losses, claims
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and expenses which the Purchasers have reasonably determined may give rise to a
right of indemnification under this Section 9.6, including a computation of the
amount of the required indemnification with sufficient detail and particularity
to enable the Seller to reasonably determine the amount of such required
indemnification.
ss.9.7 Section 338 Election. The Seller and the Purchasers shall jointly
complete and make an election under Section 338(h)(10) (with respect to
Continental) of the Code on Form 8023-A or in such other manner as may be
required by rule or regulation of the Internal Revenue Service, and shall
jointly make an election in the manner required under any analogous provisions
of state or local law as the Purchasers shall designate or as shall be required,
concerning the transactions contemplated by this Agreement. After the
computation of the MADSP (as hereinafter defined) under this Section 9.7,
Purchasers shall, with the assistance and cooperation of the Seller, prepare all
such Section 338(h)(10) forms required as attachments to Form 8023-A (and all
forms under analogous provisions of state or local law) in accordance with
applicable Tax laws, and the Purchasers shall deliver such forms and related
documents to the Seller at least 60 days prior to the due date of filing. The
Seller shall deliver to the Purchasers at least 45 days prior to the due date of
filing the completed forms and related documents
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provided by Purchasers to the Seller pursuant to the preceding sentence.
ss.9.8 Valuation and Allocation. (a) The parties agree that the fair market
value of the fixed assets of Continental will be as set forth on Exhibit G
attached hereto, unless the parties otherwise agree.
(b) The Purchasers and the Seller shall use their best efforts to agree, as
soon as practicable after Closing but in no event later than 90 days following
the Closing Date, on the computation of the modified aggregate deemed sale price
("MADSP") (as defined under Treasury Regulations) (which shall be prepared on a
basis consistent with Section 9.8(a)) and the allocation of the MADSP among the
assets as of the Closing Date. The Seller and the Purchasers agree that the
Purchasers shall perform or cause to be performed an initial valuation of assets
and allocation of purchase price of Continental for purposes of Section 338 of
the Code. The Purchasers shall provide the Seller with drafts of such valuation
of assets and allocation of MADSP within 60 days after the Closing Date and
access (during normal working hours) for Seller and his representatives to the
books and records supporting such valuation and allocation. The Seller shall
have 15 days to provide the Purchasers with any objections to such drafts. If
the Seller shall object to the computation or allocation by the Purchasers of
such amounts, and
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the Purchasers and the Seller shall not reach agreement on the computation or
allocation within 15 days after notification by the Seller of his objection, the
Purchasers and the Seller shall submit the issue to arbitration by a nationally
recognized accounting firm as shall be mutually acceptable to the Purchasers and
the Seller for resolution of the disagreement within 30 days, it being agreed
that the Purchasers and the Seller will jointly share the fees and expenses of
such accounting firm. The valuations and allocations determined pursuant to this
Section 9.8 shall be used for purposes of all relevant Tax Returns, reports and
filings.
ARTICLE X
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
ss.10.1 Survival of Representations. The respective representations and
warranties of Continental, the Seller and the Purchasers contained in this
Agreement shall survive the Closing until April 30, 1997 except for the
representations and warranties of Continental contained in Section 3.14 with
respect to Taxes which shall survive for the applicable statute of limitations
period and the representations and warranties of the Seller in Article IV which
shall survive indefinitely.
ss.10.2 Indemnification. (a) Prior to the Closing, Continental, and
thereafter, the Seller hereby agrees to
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indemnify and hold the Purchasers and their officers, directors, affiliates
(including, without limitation, Continental, AFSI, SFSI and CCSI) and agents,
and any successors thereto, harmless from damages, losses, costs or expenses
(including, without limitation, reasonable attorneys' fees and expenses)
("Damages") incurred or suffered as a result of or arising out of (i) the
failure of any representation or warranty made by Continental in this Agreement
(without regard to any "materiality" or any "material adverse effect" exception
contained therein) to be true and correct as of the Closing Date (other than a
breach of Section 3.14 with respect to Income Taxes which shall be governed by
Section 9.6), or (ii) the breach of any covenant or agreement made or to be
performed by the Seller or Continental pursuant to this Agreement; provided,
however, that neither Continental nor the Seller shall be liable under clause
(i) of this Section (except for the representation contained in Section 3.27
which shall be indemnified against from the first dollar and except for the
representations contained in Section 3.19 which shall be indemnified against
from the first dollar in accordance with the next succeeding proviso) unless the
aggregate amount of Damages exceeds $200,000 (counting for purposes of
determining such amount the amount of Damages for which the Purchasers shall be
liable under the sharing arrangement set forth in the next
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succeeding proviso) (the "Deductible") and then only to the extent of such
excess; provided further that the Purchasers, on the one hand, and the Seller,
on the other hand, shall share equally in the first $400,000 of Damages from the
first dollar incurred or suffered as a result of or arising out of the failure
of any representation or warranty contained in Section 3.19 to be true and
correct as of the Closing Date, provided that the Purchasers shall not be liable
for Damages under such sharing arrangement in excess of an amount equal to
$200,000 less the amount of indemnifiable claims which have either been
previously made or which could have been made but for the Deductible; provided
further, that neither Continental nor the Seller shall be liable under clause
(i) of this Section for Damages in excess of $1,800,000; provided further, that
neither Continental nor the Seller shall be liable under clause (i) of this
Section for Damages in excess of $600,000 incurred or suffered as a result of or
arising out of the failure of any representation or warranty made by Continental
in this Agreement relating to AFSI (without regard to any "materiality" or
"material adverse effect" exception contained therein) to be true and correct as
of the Closing Date (other than a breach of Section 3.14 with respect to Income
Taxes which shall be governed by Section 9.6); and provided further, that
recourse by the Purchasers for any indemnification claims made under clause (i)
of this
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Section shall be limited to a set off of such claims against the Seller Note.
(b) The Seller hereby agrees to indemnify and hold the Purchasers and their
officers, directors, affiliates (including without limitation, the Companies)
and agents, and any successors thereto, harmless from Damages incurred or
suffered as a result of or arising out of the failure of any representation or
warranty made by the Seller in this Agreement to be true and correct as of the
Closing Date.
(c) The Purchasers hereby agrees to indemnify and hold the Seller harmless
from Damages incurred or suffered as a result of or arising out of (i) the
failure of any representation or warranty made by the Purchasers in this
Agreement to be true and correct as of the Closing Date or (ii) the breach of
any covenant or agreement made or to be performed by the Purchasers pursuant to
this Agreement; provided, however, that the Purchasers shall not be liable under
clause (i) of this Section (except for the representation contained in Section
5.6 which shall be indemnified against from the first dollar) unless the
aggregate amount of Damages exceeds $200,000 and then only to the extent of such
excess; and provided further that the Purchasers shall not be liable under
clause (i) of this Section for Damages in excess of $1,800,000.
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(d) The amount of any Claim shall be reduced to the extent of any (i)
insurance proceeds received by the Indemnified Party in respect of the
indemnified matter to which such Claim relates and (ii) tax savings resulting
from the indemnified matter to which such Claim relates which are actually
realized by the Indemnified Party in the year which the indemnity payment
relating to such Claim is made.
(e) The foregoing indemnification provision and the indemnification for
Income Taxes provided in Section 9.6 shall be the exclusive remedy for any
breach of the covenants, obligations, representations or warranties set forth in
this Agreement; provided, however, that the provisions of this Section 10.2(e)
shall not prevent the Seller or the Purchasers from seeking the remedies of
specific performance or injunctive relief in connection with a breach of a
covenant or agreement of any party contained herein.
ss.10.3 Indemnification Procedure. (a) Any party seeking indemnification
(the "Indemnified Party") from any other party (the "Indemnifying Party") with
respect to any claim, demand, action, proceeding or other matter pursuant to
this Agreement (the "Claim") shall promptly notify the Indemnifying Party of the
existence of the Claim, setting forth in reasonable detail the facts and
circumstances pertaining thereto and the basis for the Indemnified Party's right
to indemnification.
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(b) If any third party shall notify any Indemnified Party with respect to
any matter which may give rise to a Claim for indemnification against the
Indemnifying Party under this Agreement, then the Indemnified Party shall
promptly notify each Indemnifying Party thereof; provided, however, that no
delay on the part of the Indemnified Party in notifying any Indemnifying Party
shall relieve the Indemnifying Party from any liability or obligation hereunder
unless (and then solely to the extent) the Indemnifying Party thereby is
materially prejudiced by such failure to give notice. In the event that any
Indemnifying Party notifies the Indemnified Party within 30 days after the
Indemnified Party has given notice of the matter that the Indemnifying Party
would be required to indemnify the Indemnified Party in full against any such
Claim and is assuming the defense thereof:
(i) the Indemnifying Party will defend the Indemnified Party against
the matter with counsel of its choice reasonably satisfactory to the Indemnified
Party;
(ii) the Indemnified Party may retain separate co-counsel at its sole
cost and expense (except that the Indemnifying Party will be responsible for the
fees and expenses of the separate co-counsel (a) to the extent the Indemnified
Party concludes reasonably based upon advice of counsel that a conflict of
interest exists between the
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Indemnified Party and Indemnifying Party or (b) the named parties to any such
action (including any impleaded parties) include both such Indemnified Party and
the Indemnifying Party and such Indemnified Party shall have been advised by
counsel that there may be one or more legal defenses available to the
Indemnified Party which are not available to the Indemnifying Party, or
available to the Indemnifying Party, but the assertion of which would be adverse
to the interest of the Indemnified Party);
(iii) the Indemnified Party will not consent to the entry of any
judgment or enter into any settlement with respect to the matter without the
written consent of the Indemnifying Party (not to be withheld unreasonably); and
(iv) the Indemnifying Party will not consent to the entry of any
judgment or enter into any settlement which does not include a provision whereby
the plaintiff or claimant in the matter releases the Indemnified Party from all
liability with respect thereto, without the written consent of the Indemnified
Party (not to be withheld unreasonably).
(c) If no Indemnifying Party notifies the Indemnified Party within 30 days
after the Indemnified Party has given notice of the matter that the Indemnifying
Party is assuming the defense thereof, then the Indemnified Party may defend
against, or enter into any settlement with respect to, the
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matter in any manner it reasonably may deem appropriate, without prejudice to
any of its rights hereunder.
(d) The Indemnified Party shall be entitled to reimbursement of reasonable
expenses included in Damages with respect to any Claim (including, without
limitation, the cost of defense, preparation and investigation relating to such
Claim) as such expenses are incurred by the Indemnified Party.
ARTICLE XI
TERMINATION
ss.11.1 Termination. This Agreement may be terminated at any time prior to
the Closing:
(a) by the mutual written consent of the Purchasers, on the one hand, and
the Seller, on the other hand;
(b) by the Purchasers, if there has been a material violation or breach by
Continental or the Seller of any covenant, representation or warranty contained
in this Agreement which has prevented the satisfaction of any condition to the
obligations of the Purchasers at the Closing and such violation or breach has
not been waived by the Purchasers or, in the case of a covenant breach, cured by
Continental or the Seller within the earlier of ten days after written notice
thereof from the Purchasers or the Closing Date;
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(c) by the Seller, if there has been a material violation or breach by the
Purchasers of any covenant, representation or warranty contained in this
Agreement which has prevented the satisfaction of any condition to the
obligation of Continental at the Closing and such violation or breach has not
been waived by the Seller or, with respect to a covenant breach, cured by the
Purchasers within the earlier of ten days after written notice thereof by
Continental or the Closing Date; or
(d) by either the Purchasers, on the one hand, or the Seller, on the other
hand, if the transactions contemplated hereby have not been consummated by
January 20, 1996; provided, however, that (i) neither the Purchasers nor the
Seller shall be entitled to terminate this Agreement pursuant to this Section
11.1(d) if such Person's breach of this Agreement has prevented the consummation
of the transactions contemplated hereby.
ss.11.2 Effect of Termination. In the event that this Agreement shall be
terminated pursuant to Section 11.1, all further obligations of the parties
hereto under this Agreement (other than pursuant to Sections 12.2 and 12.5,
which shall continue in full force and effect) shall terminate without further
liability or obligation of either party to the other party hereunder; provided,
however, that no party shall be released from liability hereunder if this
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Agreement is terminated and the transactions abandoned by reason of (i) willful
failure of such party to have performed its obligations hereunder or (ii) any
knowing misrepresentation made by such party of any matter set forth herein.
ARTICLE XII
MISCELLANEOUS
ss.12.1 Knowledge of the Companies. Where any representation or warranty
made by Continental contained in this Agreement is expressly qualified by
reference to the knowledge of the Companies, such knowledge shall be deemed to
exist if the matter is within the knowledge of the Seller and/or the executive
officers of the Companies; provided that for purposes of the representation
contained in Section 3.12, such knowledge shall be after reasonable inquiry with
respect to the matters contained therein.
ss.12.2 Expenses. The parties hereto shall pay their own expenses relating
to the transactions contemplated by this Agreement, including, without
limitation, the fees and expenses of their respective counsel and financial
advisers, it being understood that all expenses of the Companies incurred in
connection with the transactions contemplated by this Agreement and the Merger
Agreements shall be paid by the Seller prior to the Closing Date.
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ss.12.3 Governing Law. THE INTERPRETATION AND CONSTRUCTION OF THIS
AGREEMENT, AND ALL MATTERS RELATING HERETO, SHALL BE GOVERNED BY THE LAWS OF THE
STATE OF DELAWARE APPLICABLE TO AGREEMENTS EXECUTED AND TO BE PERFORMED SOLELY
WITHIN SUCH STATE.
ss.12.4 Captions. The Article and Section captions used herein are for
reference purposes only, and shall not in any way affect the meaning or
interpretation of this Agreement.
ss.12.5 Publicity. Except as otherwise required by law, none of the parties
hereto shall issue, prior to the Closing, any press release or make any other
public statement, in each case relating to, connected with or arising out of
this Agreement or the Merger Agreements or the matters contained herein or
therein, without obtaining the prior approval of the Seller, on the one hand,
and the Purchasers, on the other hand, to the contents and the manner of
presentation and publication thereof. Except as otherwise required by law, after
the Closing the Seller shall not issue any press release or make any other
public statement, in each case relating to, connected with or arising out of
this Agreement or the Merger Agreements or the matters contained herein or
therein, without obtaining the prior approval of the Purchasers.
ss.12.6 Notices. Any notice or other communication required or permitted
under this Agreement shall be suffi-
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ciently given if delivered in person or sent by telecopy or by registered or
certified mail, postage prepaid, addressed as follows: if to the Purchasers, to
Outsourcing Solutions Incorporated, c/o McCown De Leeuw & Co.,, 101 East 52nd
Street, 31st Floor, New York, New York, 10022 (Facsimile Number (212) 355-6283)
Attention: David B. Kreiss, with a copy to, McCown De Leeuw & Co., 101 East 52nd
Street, 31st Floor, New York, New York 10022 (Facsimile Number (212) 355-6283),
Attention: David E. King, with a copy to its counsel, White & Case, 1155 Avenue
of the Americas, New York, New York 10036 (Facsimile Number (212) 354-8113),
Attention: Frank L. Schiff, Esq.; and if to the Seller, to Peter C. Rosvall,
13661 62nd Avenue, N.E., Kirkland, WA 98034, with a copy to his counsel, Perkins
Coie, 1201 Third Ave., 40th Floor, Seattle, WA 98101 (Facsimile Number (206)
583-8500), Attention: Stewart M. Landefeld, Esq., or such other address or
number as shall be furnished in writing by any such party, and such notice or
communication shall be deemed to have been given as of the date so delivered,
sent by facsimile or mailed.
ss.12.7 Parties in Interest. This Agreement may not be transferred,
assigned, pledged or hypothecated by any party hereto, other than by operation
of law. This Agreement shall be binding upon and shall inure to the benefit of
the parties
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hereto and their respective heirs, executors, administrators, successors and
permitted assigns.
ss.12.8 Counterparts. This Agreement may be executed in two or more
counterparts, all of which taken together shall constitute one instrument.
ss.12.9 Entire Agreement. This Agreement, including the other documents
referred to herein and therein which form a part hereof and thereof, contain the
entire understanding of the parties hereto with respect to the subject matter
contained herein and therein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
ss.12.10 Amendments. This Agreement may not be changed orally, but only by
an agreement in writing signed by the Purchasers, Continental and the Seller.
ss.12.11 Severability. In case any provision in this Agreement shall be
held invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions hereof will not in any way be
affected or impaired thereby.
ss.12.12 Third Party Beneficiaries. Each party hereto intends that this
Agreement shall not benefit or create any right or cause of action in or on
behalf of any Person other than the parties hereto.
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ss.12.13 Arbitration. (a) Except as expressly provided herein, all disputes
arising from or related to this Agreement shall be finally settled by
arbitration according to the provisions of this Section 12.13 and the applicable
rules of the American Arbitration Association by a single arbitrator selected in
accordance with Section 12.13(b).
(b) An arbitration shall be conducted before a single arbitrator jointly
appointed by the Purchasers, on the one hand, and the Seller, on the other hand
(the "Arbitrator"). The Arbitrator shall be a former federal judge. In the event
that the Purchasers and the Seller fail to mutually agree upon an Arbitrator,
then, upon the joint request of the Purchasers and the Seller, the President of
the California Bar Association shall appoint the Arbitrator within 30 days of
such request. In the event that the President of the California Bar Association
shall fail to appoint the Arbitrator within 30 days of the request, the American
Arbitration Association shall appoint the Arbitrator. The parties hereby agree
to and acquiesce in any appointment of an Arbitrator that may be made by the
applicable appointing authority.
(c) The place of arbitration shall be Los Angeles, California, unless
otherwise agreed by the parties or unless the Arbitrator designates some other
location.
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(d) The findings of the Arbitrator shall be final and binding. All costs of
arbitration including, without limitation, legal fees and witness expenses shall
be awarded to the prevailing party. Judgment on the award may be entered in any
court with jurisdiction thereof.
(e) The Arbitrator shall: (1) have sole authority to decide procedural
matters; (2) limit discovery requested by the parties to a reasonable minimum;
(3) limit the number of witnesses and the length of their testimony to a
reasonable number/time; (4) require simultaneous submission of briefs; (5) limit
the number of briefs to one initial brief and one rejoinder brief unless the
parties agree otherwise; and (6) permit each party within five days of the
conclusion of the hearing to submit a proposed award and/or brief final
comments. The Arbitrator shall issue a written award stating the reasons upon
which the award is based within thirty days of the conclusion of the hearing and
shall sign the award.
(f) The parties agree that the United States District Court for the Central
District of California shall have jurisdiction over an action brought to compel
arbitration under this Agreement and enforce any award and each of the parties
hereto irrevocably submits to the jurisdiction of such courts.
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IN WITNESS WHEREOF, Continental and each of the Purchasers have caused
their corporate names to be hereunto subscribed by their respective officers
thereunto duly authorized and the Seller has signed this Agreement, all as of
the day and year first above written.
OSI HOLDINGS CORP.
By: /s/ David E. King
-------------------------------------
Name: David E. King
Title: Secretary
OUTSOURCING SOLUTIONS INCORPORATED
By: /s/ David E. King
-------------------------------------
Name: David E. King
Title: Vice President
THE CONTINENTAL ALLIANCE, INC.
By: /s/ Peter C. Rosvall
-------------------------------------
Name: Peter C. Rosvall
Title: President
/s/ Peter C. Rosvall
-------------------------------------
PETER C. ROSVALL
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================================================================================
STOCK PURCHASE AGREEMENT
Dated as of December 13, 1995
By and Among
OSI HOLDINGS CORP.,
OUTSOURCING SOLUTIONS INCORPORATED,
A.M. MILLER & ASSOCIATES, INC.
and
ALAN M. MILLER
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
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ARTICLE I DEFINITIONS............................................. 2
ss.1.1 Definitions............................................. 2
ARTICLE II PURCHASE OF STOCK....................................... 7
ss.2.1 Purchase of Stock....................................... 7
ss.2.2 Price................................................... 8
ss.2.3 Working Capital Adjustment.............................. 9
ss.2.4 Adjustments to Closing Payments......................... 14
ss.2.5 Closing................................................. 15
ss.2.6 Liquidated Damages...................................... 16
ARTICLE III REPRESENTATIONS OF THE COMPANY.......................... 17
ss.3. Representations of the Company.......................... 17
ss.3.1 Existence and Good Standing............................. 17
ss.3.2 Capital Stock........................................... 18
ss.3.3 Authorization and Validity of this
Agreement............................................. 18
ss.3.4 Subsidiaries and Investments............................ 19
ss.3.5 Financial Statements; No Material Changes............... 19
ss.3.6 Books and Records....................................... 21
ss.3.7 Title to Properties; Encumbrances....................... 21
ss.3.8 Real Property........................................... 22
ss.3.9 Intellectual Property................................... 22
ss.3.10 Leases.................................................. 22
ss.3.11 Material Contracts...................................... 23
ss.3.12 Consents and Approvals; No Violations................... 24
ss.3.13 Litigation.............................................. 25
ss.3.14 Taxes................................................... 26
ss.3.15 Liabilities............................................. 29
ss.3.16 Insurance............................................... 29
ss.3.17 Compliance with Laws.................................... 30
ss.3.18 Employment Relations.................................... 30
ss.3.19 Employee Benefit Plans.................................. 31
ss.3.20 Interests in Customers, Suppliers, etc.................. 38
ss.3.21 Environmental Laws and Regulations...................... 38
ss.3.22 Bank Accounts, Powers of Attorney....................... 41
ss.3.23 Compensation of Employees............................... 41
ss.3.24 Conduct of Business..................................... 42
ss.3.25 Customer Relations...................................... 42
ss.3.26 Condition of Assets..................................... 42
ss.3.27 Broker's or Finder's Fees............................... 43
ARTICLE IV REPRESENTATIONS OF THE SELLER........................... 43
(i)
<PAGE>
Page
----
ss.4. Representations of the Seller........................... 43
ss.4.1 Ownership of Stock...................................... 43
ss.4.2 Authorization and Validity of Agreement................. 44
ss.4.3 Restrictive Documents................................... 44
ss.4.4 Broker's or Finder's Fees............................... 44
ARTICLE V REPRESENTATIONS OF THE PURCHASERS....................... 45
ss.5. Representations of the Purchasers....................... 45
ss.5.1 Existence and Good Standing; Power and
Authority............................................. 45
ss.5.2 Restrictive Documents................................... 46
ss.5.3 Purchase for Investment................................. 46
ss.5.4 Capital Stock........................................... 47
ss.5.5 Capitalization of Holdings.............................. 47
ss.5.6 Broker's or Finder's Fees............................... 48
ARTICLE VI TRANSACTIONS PRIOR TO THE CLOSING DATE;
OTHER AGREEMENTS...................................... 48
ss.6.1 Conduct of Business of the Company...................... 48
ss.6.2 Exclusive Dealing....................................... 51
ss.6.3 Review of the Company................................... 51
ss.6.4 Reasonable Efforts...................................... 52
ss.6.5 Company and Seller Records.............................. 53
ss.6.6 Payment of Accrued Bonuses.............................. 55
ss.6.7 Removal of the Seller from Personal
Guarantees............................................ 55
ss.6.8 Payment Due Seller Upon Occurrence of
Certain Event......................................... 56
ARTICLE VII CONDITIONS TO THE PURCHASERS'
OBLIGATIONS........................................... 57
ss.7. Conditions to the Purchasers' Obligations............... 57
ss.7.1 Opinions of Counsel..................................... 57
ss.7.2 Good Standing and Other Certificates.................... 57
ss.7.3 No Material Adverse Effect.............................. 58
ss.7.4 Truth of Representations and Warranties................. 58
ss.7.5 Performance of Agreements............................... 58
ss.7.6 No Litigation Threatened................................ 58
ss.7.7 Third Party Consents; Governmental
Approvals............................................. 59
ss.7.8 Repayment of Indebtedness to Third Parties;
Termination of Security Interests..................... 59
ss.7.9 Resignations............................................ 59
ss.7.10 Employment Arrangements................................. 60
ss.7.11 Non-Competition Agreements.............................. 60
ss.7.12 Stockholders Agreement.................................. 60
(ii)
<PAGE>
Page
----
ss.7.13 FIRPTA.................................................. 60
ss.7.14 Weinberg Stock Appreciation Right....................... 60
ss.7.15 Pledge Agreement........................................ 60
ARTICLE VIII CONDITIONS TO THE COMPANY'S AND
THE SELLER'S OBLIGATIONS.............................. 60
ss.8. Conditions to the Company's and the
Seller's Obligations.................................. 60
ss.8.1 Opinions of Purchasers' Counsel......................... 61
ss.8.2 Truth of Representations and Warranties................. 61
ss.8.3 Third Party Consents; Governmental
Approvals............................................. 61
ss.8.4 Performance of Agreements............................... 61
ss.8.5 No Litigation Threatened................................ 62
ss.8.6 Employment Arrangements................................. 62
ss.8.7 Co-Invest Opportunity................................... 62
ss.8.8 Other Agreements........................................ 63
ARTICLE IX TAX MATTERS............................................. 63
ss.9.1 Tax Returns............................................. 63
ss.9.2 Controversies........................................... 64
ss.9.3 Transfer Taxes.......................................... 66
ss.9.4 Amended Returns......................................... 66
ss.9.5 Non-foreign Person Affidavit............................ 66
ss.9.6 Indemnification......................................... 67
ss.9.7 Section 338 Election.................................... 69
ss.9.8 Valuation and Allocation................................ 70
ss.9.9 Post-Closing Access and Cooperation..................... 71
ARTICLE X SURVIVAL OF REPRESENTATIONS;
INDEMNIFICATION....................................... 71
ss.10.1 Survival of Representations............................. 71
ss.10.2 Indemnification......................................... 72
ss.10.3 Indemnification Procedure............................... 75
ARTICLE XI TERMINATION............................................. 77
ss.11.1 Termination............................................. 77
ss.11.2 Effect of Termination................................... 79
ARTICLE XII MISCELLANEOUS........................................... 79
ss.12.1 Knowledge of the Company................................ 79
ss.12.2 Expenses................................................ 80
ss.12.3 Governing Law........................................... 80
ss.12.4 Captions................................................ 80
ss.12.5 Publicity............................................... 80
ss.12.6 Notices................................................. 81
(iii)
<PAGE>
Page
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ss.12.7 Parties in Interest..................................... 82
ss.12.8 Counterparts............................................ 82
ss.12.9 Entire Agreement........................................ 82
ss.12.10 Amendments.............................................. 82
ss.12.11 Severability............................................ 83
ss.12.12 Third Party Beneficiaries............................... 83
ss.12.13 Arbitration............................................. 83
EXHIBITS
Exhibit A Form of Seller Note
Exhibit B Assets to be Purchased by
the Seller from the Company
Exhibit C Form of Opinion of Briggs and Morgan
Exhibit D Form of Alan M. Miller Employment Agreement
Exhibit E Form of Alan M. Miller Non-competition Agreement
Exhibit F Form of Pledge Agreement
Exhibit G Form of Opinion of White & Case
Exhibit H Form of Gerald Weinberg/Steven Berg/
David Burton Employment Agreements
Exhibit I Valuation
SCHEDULES
Schedule 3.5(a) Audited Statements
Schedule 3.5(b) Unaudited Statements
Schedule 3.7 Title to Properties, Encumbrances
Schedule 3.9 Licenses; Intellectual Property
Schedule 3.10 Leases
Schedule 3.11 Material Contracts
Schedule 3.12 Consents and Approvals
Schedule 3.13 Litigation
Schedule 3.14 Tax Matters
Schedule 3.15 Liabilities
Schedule 3.16 Insurance
Schedule 3.18 Employment Relations
Schedule 3.19 Employee Benefits
Schedule 3.20 Interests in Customers, Suppliers, etc.
Schedule 3.21 Environmental Matters
Schedule 3.22 Bank Accounts, Powers of Attorney
Schedule 3.23 Compensation of Employees
Schedule 3.24 Conduct of Business
Schedule 5.5 Capitalization of Holdings
Schedule 6.1 Conduct of Business until Closing
Schedule 6.7 Removal of Seller from Personal
(iv)
<PAGE>
Guarantees
Schedule 7.7 Third Party Consents; Governmental
Approvals
Schedule 7.8 Indebtedness
(v)
<PAGE>
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (this "Agreement") dated as of December 13, 1995
by and among OSI HOLDINGS CORP., a Delaware corporation ("Holdings"),
OUTSOURCING SOLUTIONS INCORPORATED, a Delaware corporation ("Solutions") (each
of Holdings and Solutions, a "Purchaser", and collectively, the "Purchasers"),
A.M. MILLER & ASSOCIATES, INC., a Minnesota corporation (the "Company") and ALAN
M. MILLER (the "Seller").
W I T N E S S E T H :
WHEREAS, the Seller owns 100 shares of common stock of the Company
(collectively the "Stock"), such shares of the Seller being all of the
outstanding shares of the capital stock of the Company;
WHEREAS, the Seller desires to sell, and the Purchasers desire to purchase,
the Stock pursuant to this Agreement; and
WHEREAS, it is the intention of the parties hereto that, upon consummation
of the purchase and sale of the Stock pursuant to this Agreement, the Purchasers
shall collectively own all of the outstanding shares of capital stock of the
Company.
NOW, THEREFORE, IT IS AGREED:
<PAGE>
ARTICLE I
DEFINITIONS
ss.1.1 Definitions. In addition to the terms defined elsewhere in this
Agreement, the following terms shall have the respective meanings specified
therefor below (such meanings to be equally applicable to both the singular and
plural forms of the terms defined).
"Actual Closing Net Working Capital Amount" shall have the meaning
specified in Section 2.3.
"Actual Closing Net Working Capital Statement" shall have the meaning
specified in Section 2.3.
"Agreement" shall mean this Agreement, as amended, modified or supplemented
from time to time.
"Arbitrator" shall have the meaning specified in Section 12.13.
"Audited Statements" shall have the meaning specified in Section 3.5.
"Balance Sheet" shall have the meaning specified in Section 3.5.
"Balance Sheet Date" shall have the meaning specified in Section 3.5.
"Business Day" shall mean any day other than a Saturday, a Sunday or a day
on which banks located in New York, New York or Minneapolis, Minnesota shall be
authorized or required by law or executive order to close.
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"Claim" shall have the meaning specified in Section 10.3
"Closing" shall have the meaning specified in Section 2.5.
"Closing Date" shall have the meaning specified in Section 2.5.
"Code" shall have the meaning specified in Section 3.14.
"Common Stock" shall mean the common stock of the Company, par value $1.00
per share.
"Company" shall have the meaning specified in the preamble to this
Agreement.
"Company Property" shall have the meaning specified in Section 3.21.
"Confidentiality Agreement" shall have the meaning specified in Section
6.3.
"Damages" shall have the meaning specified in Section 10.2.
"Employee Benefit Plans" shall have the meaning specified in Section 3.19.
"Encumbrances" shall have the meaning specified in Section 3.7.
"Environmental Claims" shall have the meaning specified in Section 3.21.
"ERISA" shall have the meaning specified in Section 3.19.
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"Environmental Law" shall have the meaning specified in Section 3.21.
"Estimated Closing Net Working Capital Amount" shall have the meaning
specified in Section 2.3.
"Estimated Closing Net Working Capital Statement" shall have the meaning
specified in Section 2.3.
"GAAP" shall have the meaning specified in Section 3.5.
"Hazardous Materials" shall have the meaning specified in Section 3.21.
"Holdings" shall have the meaning specified in the preamble to this
Agreement.
"Indemnified Party" shall have the meaning specified in Section 10.3.
"Indemnified Party Tax Benefits" shall have the meaning specified in
Section 10.2.
"Indemnifying Party" shall have the meaning specified in Section 10.3.
"Intellectual Property" shall have the meaning specified in Section 3.9.
"knowledge" shall have the meaning specified in Section 12.1.
"Liquidated Damages" shall have the meaning specified in Section 2.6.
"MADSP" shall have the meaning specified in Section 9.7.
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"Material Adverse Effect" shall mean any change or undisclosed condition,
as the context requires, that is both material and adverse with respect to the
business, condition (financial or otherwise) or results of operations of the
Company taken as a whole.
"Notice of Objection" shall have the meaning specified in Section 2.3.
"Overlap Period" shall have the meaning specified in Section 9.2.
"Permitted Encumbrances" shall have the meaning specified in Section 3.7.
"Person" shall have the meaning specified in Section 3.11.
"Pre-Closing Period" shall have the meaning specified in Section 3.14.
"Purchase Price" shall have the meaning specified in Section 2.2.
"Purchasers" shall have the meaning specified in the preamble to this
Agreement.
"Purchaser's Arbitrator" shall have the meaning specified in Section 12.13.
"Returns" shall have the meaning specified in Section 3.14.
"Rules" shall have the meaning specified in Section 12.13.
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"Seller" shall have the meaning specified in the preamble to this
Agreement.
"Seller Note" shall have the meaning specified in Section 2.2.
"Seller's Arbitrator" shall have the meaning specified in Section 12.13.
"Seller's Representative" shall have the meaning specified in Section 9.2.
"Solutions" shall have the meaning specified in the preamble in this
Agreement.
"Stock" shall have the meaning specified in the preamble to this Agreement.
"Stockholders Agreement" shall have the meaning specified in Section 5.5.
"Tax Benefits" shall have the meaning specified in Section 9.6.
"Tax Matter" shall have the meaning specified in Section 9.2.
"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,
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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.
"Unaudited Statements" shall have the meaning specified in Section 3.5.
"Working Capital Arbitrator" shall have the meaning specified in Section
2.3.
"Working Capital Assets" shall have the meaning specified in Section 2.3.
"Working Capital Liabilities" shall have the meaning specified in Section
2.3.
ARTICLE II
PURCHASE OF STOCK
ss.2.1 Purchase of Stock. Subject to the terms and conditions set forth in
this Agreement, the Purchasers agree to purchase from the Seller on the Closing
Date and the Seller agrees to sell, assign, transfer and deliver to the
Purchasers on the Closing Date, the shares of Stock so owned by the Seller as
follows: (i) Holdings agrees to purchase
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from the Seller, and the Seller agrees to sell, convey, transfer, assign and
deliver to Holdings, 3.33 shares of Stock, and (ii) Solutions agrees to purchase
from the Seller, and the Seller agrees to sell, convey, transfer, assign and
deliver to Solutions, 96.67 shares of Stock. The certificates representing the
Stock shall be duly endorsed in blank, or accompanied by stock powers duly
executed in blank, by the Seller transferring the same to the Purchasers with
all necessary transfer tax and other revenue stamps, acquired at the Seller's
expense, affixed and cancelled. The Seller agrees to cure any deficiencies with
respect to the endorsement of the certificates representing the Stock owned by
the Seller or with respect to the stock power accompanying any such
certificates.
ss.2.2 Price. In full consideration for the sale by the Seller of the Stock
to the Purchasers, the Purchasers shall deliver to the Seller the following (the
"Purchase Price") (subject to adjustment pursuant to Section 2.4):
(a) to the Seller from Holdings on the Closing Date, 80,000 shares of
common stock of Holdings ($12.50 per share for $1 million);
(b) to the Seller from Solutions on the Closing Date, (A) $23,736,122, plus
(or minus) (B) the amount by which the Estimated Closing Net Working Capital
Amount exceeds (or is less than) $550,644, by wire transfer of immediately
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<PAGE>
available funds to the account specified by the Seller at least two business
days prior to the Closing; and
(c) to the Seller from Solutions on the Closing Date, a 9% unsecured
subordinated promissory note of Solutions, dated the Closing Date, payable
quarterly on the basis of a 365 day year, in an aggregate principal amount equal
to $5,000,000 due July 9, 2001, substantially in the form attached hereto as
Exhibit A (the "Seller Note").
ss.2.3 Working Capital Adjustment. (a) Closing Working Capital Statements.
(i) The parties shall cooperate with one another to prepare prior to the Closing
an estimated closing net working capital statement of the Company as of the
Closing Date (the "Estimated Closing Net Working Capital Statement"). The
Estimated Closing Net Working Capital Statement shall be mutually agreed by the
parties and shall reflect the Working Capital Assets, the Working Capital
Liabilities and the Estimated Closing Net Working Capital Amount, each as
estimated to exist as of the Closing Date. For purposes hereof, "Working Capital
Assets" shall mean the current assets of the Company determined in accordance
with GAAP and in a manner consistent with the policies and principles used in
connection with the preparation of the Balance Sheet, it being understood that
$704,178 will be deducted from such Working Capital Assets; "Working Capital
Liabilities" shall mean the current liabilities of the
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Company determined in accordance with GAAP and in a manner consistent with the
policies and principles used in connection with the preparation of the Balance
Sheet, it being understood that Working Capital Liabilities will not include
notes payable and the current portion of long-term debt (other than the current
portion of long-term debt attributable to the capitalized lease collateralized
by computer equipment); and "Estimated Closing Net Working Capital Amount" shall
mean the excess (or deficiency) of Working Capital Assets over Working Capital
Liabilities estimated to exist as of the Closing Date.
(ii) As soon as practicable (and in no event later than sixty (60)
days after the Closing) the Purchasers shall prepare and deliver to the Seller a
proposed actual closing net working capital statement of the Company as of the
Closing Date (the "Actual Closing Net Working Capital Statement"). The Actual
Closing Net Working Capital Statement will reflect the Working Capital Assets,
the Working Capital Liabilities and the Actual Closing Net Working Capital
Amount as of the Closing Date and will be prepared on a basis consistent with
the preparation of the Estimated Closing Net Working Capital Statement. For
purposes hereof, "Actual Closing Net Working Capital Amount" shall mean the
excess of Working Capital Assets over Working Capital Liabilities as of the
Closing Date.
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(iii) If the Seller does not object to the determination by the
Purchasers of the proposed Actual Closing Net Working Capital Amount by written
notice of objection (the "Notice of Objection") delivered to the Purchasers
within twenty (20) days after the Seller's receipt of such statement, such
Notice of Objection to describe in reasonable detail the Seller's proposed
adjustments to the Actual Closing Net Working Capital Amount, the proposed
Actual Closing Net Working Capital Amount shall be deemed final and binding.
(iv) If the Seller delivers a Notice of Objection in respect of the
Actual Closing Net Working Capital Amount, then any dispute shall be resolved in
accordance with paragraph (b) of this Section 2.3.
(v) The Seller and its representatives shall have reasonable access
during normal business hours to (i) the Company's premises and the books and
records used to prepare or germane to the preparation of the Actual Closing Net
Working Capital Statement, (ii) the Company's employees, as employed by the
Purchaser, to assist in document retrieval and assistance in reviewing and
accessing documents and data, and (iii) Purchasers' financial and accounting
advisors, both internal and external, and workpapers of such advisors for review
and explanation with respect to any aspect of the procedures and analysis
utilized and applied which lead to
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the preparation of the Actual Closing Net Working Capital Statement. In
furtherance of the foregoing, and during the period that the Purchasers'
advisors and personnel are conducting their review, and subsequent to issuance
of the Actual Closing Net Working Capital Statement, the Seller and its
representatives shall have reasonable access during normal business hours to the
workpapers, schedules, memoranda, and all of the documents prepared or reviewed
by the Purchasers or their representatives related to or arising in connection
with the Actual Closing Net Working Capital Statement. The Purchasers agree in
good faith to use all commercially reasonable efforts to provide such
information and access.
(b) Resolution of Disputes. (i) If the Seller objects to the Actual
Closing Net Working Capital Statement as determined by the Purchasers, then the
Seller, on the one hand, and the Purchasers, on the other hand, shall promptly
endeavor to agree upon the Actual Closing Net Working Capital Amount. In the
event that a written agreement as to the Actual Closing Net Working Capital
Amount has not been reached within twenty (20) days after the date of receipt by
the Purchasers from the Seller of his Notice of Objection thereto, then the
determination of the Actual Closing Net Working Capital Amount shall be
submitted to Arthur Andersen LLP, Chicago, Illinois (the "Working Capital
Arbitrator").
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(ii) Within 45 days of the submission of any dispute concerning the
determination of the Actual Closing Net Working Capital Amount to the Working
Capital Arbitrator, the Working Capital Arbitrator shall render a decision in
accordance with this paragraph (b) hereof along with a statement of reasons
therefor. The decision of the Working Capital Arbitrator shall be final and
binding upon the parties hereto.
(iii) The fees and expenses of the Working Capital Arbitrator for any
determination under this paragraph (b) shall be shared as follows: the
Purchasers shall bear that portion thereof equal to the total amount of such
fees and expenses multiplied by a fraction, the denominator of which shall be
the difference between the Actual Closing Net Working Capital Amount as proposed
in the determination by the Seller and the Actual Closing Net Working Capital
Amount as proposed in the determination by the Purchasers, and the numerator of
which shall be the difference between the Actual Closing Net Working Capital
Amount as determined by the Working Capital Arbitrator and the Actual Closing
Net Working Capital Amount as proposed by the Purchasers. The Seller shall bear
the remainder of such fees and expenses.
(iv) Nothing herein shall be construed to authorize or permit the
Working Capital Arbitrator to determine (i) any question or matter whatever
under or in connection with
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this Agreement except the determinations of what adjustments, if any, must be
made in one or more of the items reflected in the Actual Closing Net Working
Capital Statement delivered by the Purchasers in order for the Actual Closing
Net Working Capital Amount to be determined in accordance with the provisions of
this Agreement, or (ii) an Actual Closing Net Working Capital Amount that is not
equal to one of or between the Actual Closing Net Working Capital Amount as
proposed in the determination by the Seller and the Actual Closing Net Working
Capital Amount as proposed in the determination by the Purchasers. Nothing
herein shall be construed to require the Working Capital Arbitrator to follow
any rules or procedures of any arbitration association.
ss.2.4 Adjustments to Closing Payments. (a) Upon the final
determination of the Actual Closing Net Working Capital Amount, the parties
shall make the following adjustments:
(i) If the Actual Closing Net Working Capital Amount is greater than
the Estimated Closing Net Working Capital Amount, then the Purchase Price shall
be increased by the amount of such difference.
(ii) If the Actual Closing Net Working Capital Amount is less than the
Estimated Closing Net Working Capital Amount, then the Purchase Price shall be
decreased by the amount of such difference.
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(b) Any adjustment to the Purchase Price required under this Section 2.4
shall bear interest from the Closing Date to the date of payment thereof at a
per annum rate equal to the "prime lending rate" as published in The Wall Street
Journal. Any such adjustment required pursuant hereto shall be made by
increasing or decreasing the principal amount of the Seller Note, as applicable.
Such application shall be made on such of the following dates as may be
applicable: (A) if the Seller shall have not objected to the preparation of the
Actual Closing Net Working Capital Statement, the earlier of (1) twenty-five
(25) days after delivery to the Seller of the Actual Closing Net Working Capital
Statement or (2) five (5) days after the Seller has indicated that he has no
objections to the preparation of the Actual Closing Net Working Capital
Statement, or (B) if the Seller shall have objected to such preparation, within
five (5) days following final agreement or decision with respect to the Actual
Closing Net Working Capital Statement as provided above.
ss.2.5 Closing. The purchase and sale referred to in Section 2.1 (the
"Closing") shall take place at 10:00 A.M. at the offices of White & Case, New
York, New York on January 9, 1996, or at such other time and date as the parties
hereto shall designate in writing. Such date is herein referred to as the
"Closing Date".
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ss.2.6 Liquidated Damages. In the event that the transaction described
herein is not closed on or before January 9, 1996, and no written agreement to
extend such date has been agreed to by the parties, and the conditions to the
Purchasers' obligations under this Agreement as set forth in Sections 7.1, 7.2,
7.3, 7.4 (but only to the extent that the failure to meet such condition would
have a Material Adverse Effect), 7.5 (but only to the extent that the failure to
meet such condition would effectively preclude the Purchasers from consummating
the transactions contemplated by this Agreement), 7.6 (but only to the extent
that there is not in place an actual restraint or prohibition to the
transactions contemplated by this Agreement), 7.8, 7.9, 7.10, 7.11, 7.12, 7.13,
7.14 and 7.15 have been met (or the Seller is in a position to meet) by such
date, then the Seller shall be entitled to an aggregate of $5 million dollars
payable, jointly and severally, by the Purchasers to the Seller as liquidated
damages, and not as a penalty (the "Liquidated Damages"), within five (5)
Business Days after January 9, 1996. It is the desire and intent of the parties
that the provisions of this Section 2.6 shall be enforced to the fullest extent
permissible under the laws and public policies applied in the jurisdiction in
which enforcement is sought. If any particular provision or portion of this
Section 2.6 shall be adjudicated to be invalid or unenforceable, this
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Section 2.6 shall be deemed amended to delete therefrom such provision or
portion adjudicated to be invalid or unenforceable, and the parties hereby
specifically authorize the tribunal making such determination to replace the
invalid or unenforceable provision and, as to the amount of liquidated damages,
if the amount above is deemed invalid or unenforceable, to enforce the highest
amount under $5 million found to be enforceable.
ARTICLE III
REPRESENTATIONS OF THE COMPANY
ss.3. Representations of the Company. The Company hereby represents and
warrants to the Purchasers as follows:
ss.3.1 Existence and Good Standing. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Minnesota. The Company has the requisite corporate power and authority to own,
lease and operate its properties and to carry on its business as now being
conducted. The Company is duly qualified or licensed to do business and is in
good standing in each jurisdiction in which the character or location of the
properties owned, leased or operated by the Company or the nature of the
business conducted by the Company makes such qualification or license necessary,
except where the failure
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to be so duly qualified or licensed would not have a Material Adverse Effect.
ss.3.2 Capital Stock. The Company has an authorized capitalization
consisting of 25,000 shares of common stock, par value $1.00 per share (the
"Common Stock"), of which 100 shares are issued and outstanding. All outstanding
shares of capital stock of the Company have been duly authorized and validly
issued and are fully paid and nonassessable. There are no outstanding
subscriptions, options, warrants, rights, calls, commitments, conversion rights,
rights of exchange, plans or other agreements of any character providing for the
purchase, issuance or sale of any shares of the capital stock of the Company.
ss.3.3 Authorization and Validity of this Agreement. The Company has the
requisite corporate power and authority to execute and deliver this Agreement
and to perform its obligations hereunder. The execution, delivery and
performance of this Agreement by the Company and the performance of its
obligations hereunder have been duly authorized and approved by its Board of
Directors and by the holders of a requisite amount of the Stock and no other
corporate action on the part of the Company or action by the stockholders of the
Company is necessary to authorize the execution, delivery and performance of
this Agreement by the Company. This Agreement has been duly executed and
delivered
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by the Company and, assuming due execution of this Agreement by the Purchasers,
is a valid and binding obligation of the Company enforceable against the Company
in accordance with its terms, except to the extent that its enforceability may
be subject to applicable bankruptcy, insolvency, reorganization, moratorium and
similar laws affecting the enforcement of creditors' rights generally and by
general equitable principles.
ss.3.4 Subsidiaries and Investments. The Company does not own any capital
stock or other equity or ownership or proprietary interest in any corporation,
partnership, association, trust, joint venture or other entity.
ss.3.5 Financial Statements; No Material Changes. (a) The audited balance
sheets of the Company as of December 31, 1993 and December 31, 1994, together
with related consolidated statements of operation, stockholders' equity and cash
flows for the fiscal years then ended, together with the report of Weinberg &
Associates, Ltd. with respect to the year ending December 31, 1993, and the
report of Schweitzer Rubin Karon & Bremer with respect to the year ending
December 31, 1994 (collectively, the "Audited Statements") are attached hereto
as Schedule 3.5(a). The Audited Statements, including the footnotes thereto,
have been prepared in accordance with generally accepted accounting principles
consistently applied by the Company throughout the periods indicated ("GAAP")
and
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fairly present in all material respects the financial position of the Company at
the respective dates thereof, and the results of the operations and cash flows
of the Company for the respective periods indicated.
(b) The unaudited balance sheet of the Company as of September 30, 1995,
together with related consolidated statements of operations and stockholders'
equity and cash flows for the nine months then ended (collectively, the
"Unaudited Statements") are attached hereto as Schedule 3.5(b). The Unaudited
Statements have been prepared in accordance with GAAP (except that the Unaudited
Statements may not contain all notes and may not contain prior period
comparative data that are required to be prepared in accordance with GAAP)
consistently with the Audited Statements and reflect all adjustments (exclusive
of normal year-end adjustments) necessary to a fair statement of the financial
position of the Company at its date thereof, and the results of the operations
and cash flows of the Company for the interim period presented. The unaudited
balance sheet of the Company dated September 30, 1995 is hereinafter referred to
as the "Balance Sheet" and September 30, 1995 is hereinafter referred to as the
"Balance Sheet Date."
(c) Since December 31, 1994, there has been no (i) Material Adverse Effect
or (ii) damage, destruction or loss
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to any asset or property, tangible or intangible, of the Company which has
resulted in a Material Adverse Effect.
ss.3.6 Books and Records. The minute books of the Company, as previously
made available to the Purchasers and their representatives, contain materially
accurate records of all meetings of, and corporate actions taken by (including
action taken by written consent), the respective shareholders and Board of
Directors of the Company. At Closing all of the books and records of the Company
will be in the possession of the Company.
ss.3.7 Title to Properties; Encumbrances. Except as set forth on Schedule
3.7 attached hereto and except for such properties and assets which have been
sold or otherwise disposed of in the ordinary course of business, or transferred
to the Seller in accordance with the last sentence of Section 6.1 of this
Agreement, the Company has good title to its material properties and assets
(real and personal, tangible and intangible), including, without limitation, the
material properties and assets reflected in the Balance Sheet, subject to no
encumbrance, lien, charge or other restriction of any kind or character
("Encumbrances"), except for (i) Encumbrances reflected in the Balance Sheet,
(ii) Encumbrances for current taxes, assessments or governmental charges or
levies on property not yet due and delinquent, (iii) Encumbrances arising by
operation of law and (iv)
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Encumbrances described on Schedule 3.7 attached hereto (Encumbrances of the type
described in clauses (i), (ii), (iii) and (iv) above are hereinafter sometimes
referred to as "Permitted Encumbrances").
ss.3.8 Real Property. The Company owns no real property.
ss.3.9 Intellectual Property. The Company possesses all licenses, patents,
trade names, trademarks and service marks (collectively, the "Intellectual
Property") necessary for the ownership of its properties and the conduct of its
business as presently conducted. All Intellectual Property of the Company are
set forth on Schedule 3.9 attached hereto. All such Intellectual Property is in
full force and effect and the Company has received no written notice of any
event, inquiry, investigation or proceeding threatening the validity of any such
Intellectual Property.
ss.3.10 Leases. Schedule 3.10 attached hereto contains a list of all leases
or sub-leases to which the Company is a party requiring an annual aggregate
payment of at least $10,000. Except as otherwise set forth in Schedule 3.10
attached hereto, each lease or sub-lease set forth in Schedule 3.10 is in full
force and effect; all rents and additional rents due to date from the Company on
each such lease or sub-lease have been paid; the Company has not received notice
that it is in material default under any such lease or sub-lease; and, to the
knowledge of the Company,
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there exists no event, occurrence, condition or act (including the consummation
of the transactions contemplated by this Agreement) which, with the giving of
notice, the lapse of time or the happening of any further event or condition,
would become a material default by the Company under such lease or sub-lease.
ss.3.11 Material Contracts. Except as set forth on Schedule 3.10 and
Schedule 3.11 attached hereto, the Company neither has nor is bound by (a) any
agreement, contract or commitment that involves the performance of services or
the delivery of goods and/or materials by it of an amount or value in excess of
$10,000, (b) any agreement, contract or commitment not in the ordinary course of
business, (c) 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, (d) any agreement, contract or commitment relating
to capital expenditures in excess of $10,000, (e) any agreement, indenture or
instrument relating to indebtedness, liability for borrowed money or the
deferred purchase price of property (excluding trade payables in the ordinary
course of business), (f) any loan or advance to, or investment in, any
individual, partnership, joint venture, corporation, trust, unincorporated
organization, government or other entity (each a "Person"), any agreement,
contract or commitment relating
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to the making of any such loan, advance or investment or any agreement, contract
or commitment involving a sharing of profits, (g) any guarantee or other
contingent liability in respect of any indebtedness or obligation of any Person
(other than in the ordinary course of business), (h) any management service,
consulting or any other similar type of contract, (i) any agreement, contract or
commitment limiting the ability of the Company to engage in any line of business
or to compete with any Person, (j) any warranty, guaranty or other similar
undertaking with respect to a contractual performance extended by the Company
other than in the ordinary course of business, or (k) any amendment,
modification or supplement in respect of any of the foregoing. Except as
otherwise set forth on Schedule 3.11, each contract or agreement set forth on
Schedule 3.11 is in full force and effect and there exists no material default
or event of default or to the knowledge of the Company, event, occurrence,
condition or act (including the consummation of the transactions contemplated
hereby) which, with the giving of notice, the lapse of time or the happening of
any other event or condition, would become a material default or event of
default thereunder.
ss.3.12 Consents and Approvals; No Violations. Except as set forth in
Schedule 3.12 attached hereto, the execution and delivery of this Agreement by
the Company and the
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consummation of the transactions contemplated hereby (a) will not violate or
contravene any provision of the Articles of Incorporation or By-laws of the
Company, (b) will not violate or contravene any statute, rule, regulation, order
or decree of any public body or authority by which the Company is bound or by
which any of its respective properties or assets are bound that would have a
Material Adverse Effect, (c) will not 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 any other Person and (d) will not
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 Encumbrance upon any of the properties or assets of the Company
under, any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, license, franchise, permit, agreement, lease, franchise agreement or
any other instrument or obligation to which the Company is a party, or by which
it or any of their respective properties or assets may be bound.
ss.3.13 Litigation. Except as set forth on Schedule 3.13 attached hereto,
there is no action, suit, proceeding at law or in equity, arbitration or
administrative or other proceeding by or before (or to the knowledge of the
Company
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any investigation by) any governmental or other instrumentality or agency,
pending, or, to the knowledge of the Company, threatened, against or affecting
the Company or its properties or rights which could materially and adversely
affect the right or ability of the Company to carry on its business as now
conducted, or which could have a Material Adverse Effect; and the Company knows
of no valid basis for any such action, proceeding or investigation. The Company
is subject to no judgment, order or decree entered in any lawsuit or proceeding
which may have a Material Adverse Effect.
ss.3.14 Taxes. (a) Tax Returns. The Company has timely filed or caused to
be timely filed or will timely file or cause to be timely filed with the
appropriate taxing authorities all returns, statements, forms and reports for
Taxes ("Returns") that are required to be filed by, or with respect to, the
Company on or prior to the Closing Date. The Returns have accurately reflected
and will, to the Company's knowledge, accurately reflect all liability for Taxes
of the Company for the periods covered thereby.
(b) Payment of Taxes. All Taxes and Tax liabilities of the Company for all
taxable years or periods that end on or before the Closing Date and, with
respect to any taxable year or period beginning before and ending after the
Closing Date, the portion of such taxable year or period ending on and
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including the Closing Date ("Pre-Closing Period") have been timely paid or
accrued and adequately disclosed and fully provided for on the books and records
of the Company in accordance with GAAP.
(c) Other Tax Matters. (i) Except as set forth on Schedule 3.14, the
Company has not been the subject of an audit or other examination of Taxes by
the tax authorities of any nation, state or locality nor has the Company
received any notices from any taxing authority relating to any issue which could
affect the Tax liability of the Company.
(ii) Except as set forth on Schedule 3.14, neither the Seller nor the
Company have, as of the Closing Date, (A) entered into an agreement or waiver or
been requested to enter into an agreement or waiver extending any statute of
limitations relating to the payment or collection of Taxes of the Company or (B)
is presently contesting the Tax liability of the Company before any court,
tribunal or agency.
(iii) The Company has not been included in any "consolidated,"
"unitary" or "combined" Return 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.
(iv) All Taxes which the Company is (or was) required by law to
withhold or collect have been duly with-
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held or collected, and have been timely paid over to the proper authorities to
the extent due and payable.
(v) The Company is not a "United States real property holding
corporation" within the meaning of Section 897(c)(2) of the Internal Revenue
Code of 1986, as amended, and the rules and regulations promulgated thereunder
(the "Code").
(vi) There are no tax sharing, allocation, indemnification or similar
agreements in effect as between the Company or any predecessor or affiliate
thereof and any other party (including the Seller and any predecessors or
affiliates thereof) under which the Purchasers or the Company could be liable
for any Taxes or other claims of any party.
(vii) The Company has not applied for, been granted, or agreed to any
accounting method change for which it will be required to take into account any
adjustment under Section 481 of the Code or any similar provision of the Code or
the corresponding tax laws of any nation, state or locality.
(viii) No election under Section 341(f) of the Code has been made or
shall be made prior to the Closing Date to treat the Company as a consenting
corporation, as defined in Section 341 of the Code.
(ix) The Company is not a party to any agreement that would require it
to make any payment that would
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constitute an "excess parachute payment" for purposes of Sections 280G and 4999
of the Code.
(x) The Company has made a valid S election under Section 1361 of the
Code. With respect to the Company, such election was made on December 30, 1988
and was effective as of the year commencing February 1, 1989. The Company has
also made all such elections required under any analogous provisions of state or
local law. The Company will continue to be a valid S corporation through the day
immediately preceding the Closing Date and will satisfy the requirements for an
election under Treasury Regulation ss.1.338(h)(10)-1(d) with respect to the
purchase of the Stock.
ss.3.15 Liabilities. Except as set forth on Schedule 3.15, the Company has
no outstanding claims, liabilities or indebtedness, contingent or otherwise,
except as set forth in the Balance Sheet or referred to in the footnotes
thereto, other than liabilities incurred subsequent to the Balance Sheet Date in
the ordinary course of business.
ss.3.16 Insurance. Schedule 3.16 contains an accurate and complete summary
description of all policies of property, fire and casualty, product liability,
workers compensation and other forms of insurance owned or held by the Company.
The Company has not received (i) any notice of cancellation of any policy
described in such Schedule or refusal of coverage thereunder, (ii) any notice
that any issuer of such
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policy has filed for protection under applicable bankruptcy laws or is otherwise
in the process of liquidating or has been liquidated, or (iii) any other
indication that such policies are no longer in full force or effect or that the
issuer of any such policy is no longer willing or able to perform its
obligations thereunder. Since the last renewal date of any insurance policy,
there has not been any material adverse change in the relationship of the
Company with its insurers or in the premiums payable pursuant to such policies.
ss.3.17 Compliance with Laws. The Company is in compliance with the
material provisions of all applicable laws, regulations, orders, judgments and
decrees (including, without limitation, the Fair Debt Collection Practices Act
and any state or local counterpart or equivalent).
ss.3.18 Employment Relations. Except as set forth on Schedule 3.18: (a) The
Company is in compliance with all Federal, state or other applicable laws,
domestic or foreign, 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;
(b) no unfair labor practice complaint against the Company is pending
before the National Labor Relations Board;
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(c) there is no labor strike, dispute, slowdown or stoppage actually
pending or threatened against or involving the Company;
(d) the Company is not a party to any collective bargaining agreement and
no collective bargaining agreement is currently being negotiated by the Company;
and
(e) no claim in respect of the employment of any employee has been asserted
or, to the knowledge of the Company, threatened, against the Company.
ss.3.19 Employee Benefit Plans. Employee Benefit Plans. (a) List of Plans.
Set forth in Schedule 3.19 attached hereto is an accurate and complete list of
all domestic and foreign (i) "employee benefit plans," 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"), and (ii) all employment,
consulting, golden parachute, compensation, termination, and severance contracts
and agreements and all plans, programs, understandings, commitments and/or
arrangements (including established working practices) and employment practices
and policies, in each case for active, retired or former employees or directors,
whether or not any such plans, programs, arrangements, commitments, contracts,
agreements or practices (referred to in (i) or (ii) above) are in writing or are
otherwise exempt from the provisions of ERISA, that have been
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established, maintained or contributed to (or with respect to which an
obligation to contribute has been undertaken) or with respect to which any
potential liability is borne by the Company (including, for this purpose and for
the purpose of all of the representations in this Section 3.19, any predecessors
to the Company and all employers (whether or not incorporated) that are by
reason of common control treated together with the Company as a single employer
(i) within the meaning of Section 414 of the Code or (ii) as a result of the
Company being or having been a general partner of any such employer), since
September 2, 1974 ("Employee Benefit Plans").
(b) Status of Plans. Except as set forth in Schedule 3.19 attached hereto,
each Employee Benefit Plan has at all times been maintained and operated in
substantial compliance with its terms and the requirements of all applicable
laws, including, without limitation, ERISA and the Code. No complete or partial
termination of any Employee Benefit Plan has occurred or is expected to occur.
The Company has no commitment, intention or understanding to create, modify or
terminate any Employee Benefit Plan. Except as required by applicable law, no
condition or circumstance exists that would prevent the amendment or termination
of any Employee Benefit Plan. Other than the sale of Stock under this Agreement
which will trigger the payment of benefits under
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the Company's stock appreciation rights plan as described in Schedule 3.19
attached hereto, no event has occurred and no condition or circumstance has
existed that could result in a material increase in the benefits under or the
expense of maintaining any Employee Benefit Plan from the level of benefits or
expense incurred for the most recent fiscal year ended thereof.
(c) Pension Plans. Other than the Company's 401(k) Plan, no Employee
Benefit Plan is an "employee pension benefit plan" within the meaning of Section
3(2) of ERISA.
(d) Liabilities. The Company does not maintain any Employee Benefit Plan
which is a "group health plan" (as such term is defined in Section 5000(b)(1) of
the Code) that has not been administered and operated in all material respects
in compliance with the applicable requirements of Section 601 of ERISA and
Section 4980B(f) of the Code and the Company is not subject to any liability,
including, without limitation, additional contributions, fines, penalties or
loss of tax deduction as a result of such administration and operation. Except
as set forth in Schedule 3.19, the Company maintains no Employee Benefit Plan
providing for retiree health and/or life benefits and having unfunded
liabilities. The Company maintains no Employee Benefit Plan which is an
"employee welfare benefit plan" (as such term is defined in Section 3(1) of
ERISA) that has provided any "disqualified benefit"
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(as such term is defined in Section 4976(b) of the Code) with respect to which
an excise tax could be imposed.
The Company has no unfunded liabilities pursuant to any Employee Benefit
Plan that is not intended to be qualified under Section 401(a) of the Code. The
Company has not incurred any liability for any tax or excise tax arising under
Section 4977 or 4980B of the Code, and no event has occurred and no condition or
circumstance has existed that could give rise to any such liability.
There are no actions, suits or claims pending, or, to the best knowledge of
the Company and the Seller, threatened, anticipated or expected to be asserted
against any Employee Benefit Plan or the assets of any such plan (other than
routine claims for benefits and appeals of denied routine claims). No civil or
criminal action brought pursuant to the provisions of Title I, Subtitle B, Part
5 of ERISA is pending, threatened, anticipated, or expected to be asserted
against the Company or any fiduciary of any Employee Benefit Plan, or in any
case with respect to any Employee Benefit Plan. Within the previous five years,
no Employee Benefit Plan or any fiduciary thereof has been the direct or
indirect subject of an audit, investigation or examination by any governmental
or quasi-governmental agency which has given rise to any penalty, liability or
additional tax.
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(e) Contributions. Except as set forth on Schedule 3.19, full payment has
been made of all amounts which the Company is required, under applicable law or
under any Employee Benefit Plan or any agreement relating to any Employee
Benefit Plan to which the Company is a party, to have paid as contributions or
premiums thereto as of the last day of the most recent fiscal year of such
Employee Benefit Plan ended prior to the date hereof. All such contributions
and/or premiums have been fully deducted for income tax purposes and no such
deduction has been challenged or disallowed by any governmental entity, and to
the best knowledge of the Company and the Seller, no event has occurred and no
condition or circumstance has existed that could give rise to any such challenge
or disallowance. The Company and has made adequate provision for reserves to
meet contributions and premiums that have not been made because they are not yet
due under the terms of any Employee Benefit Plan or related agreements. Benefits
under all Employee Benefit Plans are as represented and have not been increased
subsequent to the date as of which documents have been provided.
(f) Transactions. Neither the Company nor any of its directors, officers,
employees or, to the best knowledge of the Company and the Seller, other persons
who participate in the operation of any Employee Benefit Plan or related trust
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or funding vehicle, has engaged in any transaction with respect to any Employee
Benefit Plan or breached any applicable fiduciary responsibilities or
obligations under Title I of ERISA that would subject any of them to a tax,
penalty or liability for prohibited transactions under ERISA or the Code or
would result in any claim being made under, by or on behalf of any such Employee
Benefit Plan by any party with standing to make such claim.
(g) Triggering Events. Other than with respect to the Company's stock
appreciation rights plan, the execution of this Agreement and the consummation
of the transactions contemplated hereby, do not constitute a triggering event
under any Employee Benefit Plan, policy, arrangement, statement, commitment or
agreement, whether or not legally enforceable, which (either alone or upon the
occurrence of any additional or subsequent event) will or may result in any
payment (whether of severance pay or otherwise), acceleration, vesting or
increase in benefits to any employee or former employee or director of the
Company. Other than with respect to the Company's stock appreciation rights
plan, no Employee Benefit Plan provides for the payment of severance benefits
upon the termination of an employee's employment.
(h) Documents. The Company has delivered or caused to be delivered to the
Purchasers and their counsel true and complete copies of all material documents
in connection with
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each Employee Benefit Plan, including, without limitation (where applicable):
(i) all Employee Benefit Plans as in effect on the date hereof, together with
all amendments thereto, including, in the case of any Employee Benefit Plan not
set forth in writing, a written description thereof; (ii) all current summary
plan descriptions, summaries of material modifications, and material
communications; (iii) all current trust agreements, declarations of trust and
other documents establishing other funding arrangements (and all amendments
thereto and the latest financial statements thereof); (iv) the most recent
Internal Revenue Service determination letter obtained with respect to each
Employee Benefit Plan intended to be qualified under Section 401(a) of the Code;
(v) Form 5500 for each of the last three years for each Employee Benefit Plan
required to file such Form; (vi) the most recently prepared financial
statements; and (vii) all contracts relating to each Employee Benefit Plan,
including, without limitation, service provider agreements, insurance contracts,
annuity contracts, investment management agreements, subscription agreements,
participation agreements, and recordkeeping agreements.
(i) Tax Qualification. Each Employee Benefit Plan intended to be qualified
under Section 401(a) of the Code has been determined to be so qualified by the
Internal Revenue Service. Each trust established in connection with any
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Employee Benefit Plan which is intended to be exempt from Federal income
taxation under Section 501(a) of the Code has been determined to be so exempt by
the Internal Revenue Service. Since the date of each most recent determination
referred to in this paragraph (f), no event has occurred and no condition or
circumstance has existed that resulted or is likely to result in the revocation
of any such determination or that could adversely affect the qualified status of
any such Employee Benefit Plan or the exempt status of any such trust.
ss.3.20 Interests in Customers, Suppliers, etc. Except as set forth on
Schedule 3.20 attached hereto, neither the Seller nor any officer or director of
the Company possesses, directly or indirectly, any ownership interest in, or is
a director, officer or employee of, any Person which is a supplier, customer,
lessor, lessee, licensor, developer, competitor or potential competitor of the
Company. Ownership of securities of a company whose securities are registered
under the Securities Exchange Act of 1934 of 5% or less of any class of such
securities shall not be deemed to be a financial interest for purposes of this
Section 3.20.
ss.3.21 Environmental Laws and Regulations. Except as set forth on Schedule
3.21:
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(a) Hazardous Materials (as hereinafter defined) have not been generated,
used, treated or stored on or released or disposed on any Company Property (as
hereinafter defined).
(b) The Company is in compliance in all material respects with
Environmental Laws (as hereinafter defined) and the requirements of permits
issued under such Environmental Laws with respect to any Company Property.
(c) There are no pending or, to the knowledge of the Company, threatened
Environmental Claims (as hereinafter defined) against the Company or any Company
Property.
(d) For purposes of this Section 3.21 the following definitions shall
apply:
"Company Property" means any real property and improvements owned,
leased, used, operated or occupied by the Company.
"Hazardous Materials" means (a) any petroleum or petroleum products,
radioactive materials, asbestos in any form that is friable, urea formaldehyde
foam insulation, transformers or other equipment that contain dielectric fluid
containing levels of polychlorinated biphenyls, and radon gas; and (b) any
chemicals, materials or substances defined as or included in the definition of
"hazardous substances," "hazardous wastes," "hazardous materials," "extremely
hazardous wastes," "restricted hazardous wastes," "toxic
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substances," "toxic pollutants," or words of similar import, under any
applicable Environmental Law.
"Environmental Law" means any federal, state or local statute, law,
rule, regulation, ordinance, code, policy or rule of common law in effect and in
each case as amended as of the Closing Date, and any judicial or administrative
interpretation thereof as of the Closing Date, including any judicial or
administrative order, consent decree or judgment, relating to the environment,
health, safety or Hazardous Materials, including the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended, 42 U.S.C. ss.
6901 et seq.; the Resource Conservation and Recovery Act, as amended, 42 U.S.C.
ss. 9601 et seq.; the Federal Water Pollution Control Act, as amended, 33 U.S.C.
ss. 1251 et seq.; the Toxic Substances Control Act, 15 U.S.C. ss. 2601 et seq.;
the Clean Air Act, 42 U.S.C. ss. 7401 et seq.; the Safe Drinking Water Act, 42
U.S.C. ss. 300f et seq.; the Oil Pollution Act of 1990, 33 U.S.C. ss. 2701 et
seq.; the Occupational Safety and Health Act of 1970, as amended, 29 U.S.C.
ss.651 et seq.; and their state and local counterparts and equivalents.
"Environmental Claims" means administrative, regulatory or judicial
actions, suits, demands, demand letters, claims, liens, notices of
non-compliance or violation, investigations or proceedings relating in any way
to
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any Environmental Law or any permit issued under any such Law, including (a)
Environmental Claims by governmental or regulatory authorities for enforcement,
cleanup, removal, response, remedial or other actions or damages pursuant to any
applicable Environmental Law, and (b) Environmental Claims by any third party
seeking damages, contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from Hazardous Materials or arising from alleged
injury or threat of injury to health, safety or the environment.
ss.3.22 Bank Accounts, Powers of Attorney. Set forth on Schedule 3.22
attached hereto is an accurate and complete list showing (a) the name and
address of each bank in which the Company has a material account or safe deposit
box, the number of any such account or any such box and the names of all persons
authorized to draw thereon or to have access thereto and (b) the names of all
persons, if any, holding powers of attorney from the Company.
ss.3.23 Compensation of Employees. Schedule 3.23 sets forth an accurate and
complete list for 1995 showing the names of all persons employed by the Company
who are expected to receive more than $50,000 in 1995 cash compensation
(including, without limitation, salary, commission and bonus) and who are
expected to be employed by the Company on the Closing Date. Such list sets forth
the present salary or
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hourly wage, expected 1995 cash compensation (including, without limitation,
salary, commission and bonus) and fringe benefits, of each such person.
ss.3.24 Conduct of Business. Except as disclosed on Schedule 3.24 attached
hereto and except as expressly contemplated by this Agreement, since September
30, 1995, the Company has taken no action which, if taken subsequent to the
execution of this Agreement and on or prior to the Closing Date, would
constitute a breach of the Company's agreements set forth in Section 6.1
ss.3.25 Customer Relations. To the Company's knowledge, there has not been
any change in relations with customers of the Company as a result of the
transactions contemplated by this Agreement which has resulted in a Material
Adverse Effect. To the knowledge of the Company, no customer (or customers)
contributing more than $1,000,000 in the aggregate to the Company's 1995
revenues has (or have) notified the Company that it (or they) intends (or
intend) to either (i) terminate its (or their) contractual arrangements with the
Company or (ii) substantially curtail the amount of business it (or they)
currently does (or do) with the Company.
ss.3.26 Condition of Assets. The assets and properties utilized in and
material to the conduct of the Company's business, whether owned or leased, are,
to the Company's knowledge, in the aggregate in good operating condition and
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repair (normal wear and tear excepted) and are suitable for the purposes for
which they are presently being used.
ss.3.27 Broker's or Finder's Fees. Except for Piper Jaffray Inc., whose
fees and expenses will be paid by the Seller, no agent, broker, person or firm
acting on behalf of the Company, is, or will be, entitled to any commission or
broker's or finder's fees from any of the parties hereto, or from any Person
controlling, controlled by or under common control with any of the parties
hereto, in connection with any of the transactions contemplated by this
Agreement.
ARTICLE IV
REPRESENTATIONS OF THE SELLER
ss.4. Representations of the Seller. The Seller represents and warrants to
the Purchasers as follows:
ss.4.1 Ownership of Stock. The Seller is the lawful owner of 100 shares of
Stock, free and clear of all liens, encumbrances, restrictions and claims of
every kind. The Seller has the full legal right, power and authority to enter
into this Agreement and to sell, assign, transfer and convey the shares of Stock
so owned by the Seller pursuant to this Agreement, and the delivery to the
Purchasers of the Stock pursuant to the provisions of this Agreement will
transfer to the Purchasers good title thereto, free and clear of all
Encumbrances.
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ss.4.2 Authorization and Validity of Agreement. The Seller has the
requisite power and authority to execute and deliver this Agreement, to perform
his obligations hereunder and to consummate the transactions contemplated to be
performed by him hereby. This Agreement has been duly executed and delivered by
the Seller and, assuming the due execution of this Agreement by the Purchasers
and the Company, is a valid and binding obligation of the Seller, enforceable
against the Seller in accordance with its terms, except to the extent that its
enforceability may be subject to applicable bankruptcy, insolvency,
reorganization and similar laws affecting the enforcement of creditors' rights
generally and to general equitable principles.
ss.4.3 Restrictive Documents. The Seller is not subject to any mortgage,
lien, lease, agreement, instrument, order, law, rule, regulation, judgment or
decree, or any other restriction of any kind or character which would prevent
consummation by the Seller of the transactions contemplated by this Agreement.
ss.4.4 Broker's or Finder's Fees. Except for Piper Jaffray Inc., whose fees
and expenses will be paid by the Seller, no agent, broker, person or firm acting
on behalf of the Seller is, or will be, entitled to any commission or broker's
or finder's fees from any of the parties hereto, or from any Person controlling,
controlled by or under common
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control with any of the parties hereto, in connection with any of the
transactions contemplated by this Agreement.
ARTICLE V
REPRESENTATIONS OF THE PURCHASERS
ss.5. Representations of the Purchasers. The Purchasers, jointly and
severally, represent and warrant to the Company and the Seller as follows:
ss.5.1 Existence and Good Standing; Power and Authority. (a) Holdings is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. Holdings has the requisite corporate power and
authority to enter into, execute and deliver this Agreement and perform its
obligations hereunder. This Agreement has been duly authorized and approved by
Holdings and, assuming the due execution of this Agreement by the Company, the
Seller and Solutions, is a valid and binding obligation of Holdings enforceable
against it in accordance with its terms, except to the extent that its
enforceability may be subject to applicable bankruptcy, insolvency,
reorganization, moratorium and other similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles.
(b) Solutions is a corporation duly organized, validly existing and in good
standing under the laws of the State of
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Delaware. Solutions has the requisite corporate power and authority to enter
into, execute and deliver this Agreement and the Seller Note, and perform its
obligations hereunder and thereunder. This Agreement and the Seller Note have
been duly authorized and approved by Solutions, and, assuming the due execution
of this Agreement by the Company, the Seller and Holdings, are valid and binding
obligations of Solutions enforceable against it in accordance with their terms,
except to the extent that their enforceability may be subject to applicable
bankruptcy, insolvency, reorganization, moratorium and other similar laws
affecting the enforcement of creditors' rights generally and by general
equitable principles.
ss.5.2 Restrictive Documents. Neither Purchaser is subject to any mortgage,
lien, lease, agreement, instrument, order, law, rule, regulation, judgment or
decree, or any other restriction of any kind or character which would prevent
consummation by it of the transactions contemplated by this Agreement.
ss.5.3 Purchase for Investment. Each Purchaser will acquire the Stock for
its own account for investment and not with a view toward any resale or
distribution thereof; provided, however, that the disposition of such
Purchaser's property shall at all times remain within the sole control of such
Purchaser.
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ss.5.4 Capital Stock. The shares of stock of Holdings to be received by the
Seller in accordance with the terms of this Agreement will be duly authorized,
validly issued, fully paid and nonassessable.
ss.5.5 Capitalization of Holdings. The authorized capital stock of Holdings
consists of (i) 5,600,000 shares of Holdings Common Stock, of which 2,812,000
shares are duly authorized and validly issued and outstanding, fully paid and
nonassessable on the date hereof, and (ii) 1,000,000 shares of Holdings
Preferred Stock, of which 800,000 shares will be duly authorized validly issued
and outstanding, fully paid and nonassessable after giving effect to the
transactions contemplated by this Agreement. The record ownership of the
outstanding shares of Holdings Common Stock and Preferred Stock (after giving
effect to the transactions contemplated by this Agreement) is reflected on
Schedule 5.5 attached hereto. Except as set forth on Schedule 5.5 attached
hereto, no shares of capital stock of Holdings have been reserved for any
purpose. Except for the Holdings Preferred Stock, for rights contained in that
certain Stockholders Agreement dated as of September 21, 1995, by and among
Holdings and certain stockholders of Holdings (the "Stockholders Agreement") and
for options to be granted under Holdings' 1995 Stock Option and Stock Award
Plan, there are no outstanding securities convertible into or exchangeable for
the capital stock of
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Holdings and no outstanding options, rights (preemptive or otherwise), or
warrants to purchase or to subscribe for any shares of such stock or other
securities of Holdings. There are no outstanding agreements affecting or
relating to the voting, issuance, purchase, redemption, repurchase or transfer
of any of the securities of Holdings, except for the Stockholders Agreement
referred to above or as otherwise contemplated hereunder.
ss.5.6 Broker's or Finder's Fees. No agent, broker, person or firm acting
on behalf of the Purchasers is, or will be, entitled to any commission or
broker's or finder's fees from the Seller in connection with any of the
transactions contemplated by this Agreement.
ARTICLE VI
TRANSACTIONS PRIOR TO THE CLOSING DATE; OTHER AGREEMENTS
ss.6.1 Conduct of Business of the Company. During the period from the date
of this Agreement to the Closing Date, the Company shall conduct its operations
only according to its ordinary and usual course of business; use its reasonable
efforts to preserve intact its business organizations, keep available the
services of its officers and employees and maintain its relationships and
goodwill with licensors, suppliers, distributors, customers, landlords,
employees, agents and others having business relationships with it;
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confer with the Purchasers concerning operational matters of a material nature
and report periodically to the Purchasers concerning the business, operations
and finances of the Company. Notwithstanding the immediately preceding sentence,
prior to the Closing Date, except as set forth on Schedule 6.1, as may be first
approved in writing by the Purchasers (and as set forth in a Schedule to this
Agreement) or as is otherwise permitted or required by this Agreement, the
Company shall, (a) refrain from amending or modifying its Articles of
Incorporation or By-Laws from its form on the date of this Agreement, (b)
refrain from paying (other than in the ordinary course of business consistent
with past practice) or increasing any bonuses, salaries, or other compensation
to any director, officer, employee or stockholder or entering into any
employment, severance, or similar agreement with any director, officer, or
employee, (c) refrain from the adopting or increasing of any profit sharing,
bonus, deferred compensation, savings, insurance, pension, retirement, or other
employee benefit plan for or with any of its employees, (d) refrain from
entering into any material contract or commitment except material contracts and
commitments in the ordinary course of business consistent with past practice,
(e) refrain from increasing its indebtedness for borrowed money, except current
borrowings in the ordinary course of business, (f) except as may be
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determined to be in the best interest of the Company and in the ordinary course
of business, refrain from cancelling or waiving any claim or right of
substantial value which individually or in the aggregate is material, (g)
refrain from redeeming, purchasing or otherwise acquiring any of its capital
stock, (h) refrain from making any material change in accounting methods or
practices, except as required by law or GAAP, (i) refrain from issuing or
selling any shares of capital stock or any other securities, or issuing any
securities convertible into, or options, warrants or rights to purchase or
subscribe to, or entering into any arrangement or contract with respect to the
issue and sale of, any shares of its capital stock or any other securities, or
making any other changes in its capital structure, (j) refrain from selling,
leasing or otherwise disposing of any material asset or property, (k) refrain
from making any capital expenditure or commitment therefor, except in the
ordinary course of business consistent with past practice, (l) refrain from
writing off as uncollectible any notes or accounts receivable, except write-offs
in the ordinary course of business charged to applicable reserves, none of which
individually or in the aggregate is material and (m) refrain from agreeing in
writing to do any of the foregoing. Notwithstanding the foregoing, the parties
acknowledge and agree that (i) the assets set forth on Exhibit B hereto shall
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be sold by the Company to the Seller prior to the Closing Date, at $367,358 (the
fair market value of such assets), and (ii) that certain three party note in a
principal amount of $61,000 shall be written off and cancelled by the Company
prior to the Closing Date.
ss.6.2 Exclusive Dealing. During the period from the date of this Agreement
to the Closing Date, none of the Seller, the Company or any officer or director
of the Company shall take any action to, directly or indirectly, encourage,
initiate or engage in discussions or negotiations with, or provide any
information to, any Person, other than the Purchasers, concerning any purchase
of any capital stock of the Company or any merger, sale of substantial assets or
similar transaction involving the Company.
ss.6.3 Review of the Company. The Purchasers may, prior to the Closing
Date, directly or through their representatives, review the properties, books
and records of the Company and its financial and legal condition to the extent
they deem necessary or advisable to familiarize themselves with such properties
and other matters; such review shall not, however, affect the representations
and warranties (as modified by the Schedules) made by the Company in this
Agreement or the remedies of the Purchasers for breaches of those
representations and warranties. The Company shall permit the Purchasers and
their representatives to have,
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after the date of execution of this Agreement, full access to the premises and
to all the books and records of the Company and to cause the officers of the
Company to furnish the Purchasers with such financial and operating data and
other information with respect to the business and properties of the Company as
the Purchasers shall from time to time reasonably request. The Company shall
deliver or cause to be delivered to the Purchasers such additional instruments,
documents, certificates and opinions as the Purchasers may reasonably request
for the purpose of (a) verifying the information set forth in this Agreement or
on any Schedule attached hereto and (b) consummating or evidencing the
transactions contemplated by this Agreement. The parties hereto acknowledge that
McCown De Leeuw & Co., the Company and the Seller have entered into a
Confidentiality Agreement (the "Confidentiality Agreement") and the Purchasers
confirm that they will comply with their obligations thereunder as if they were
parties thereto and that information obtained during any such review will be
subject to the terms of the Confidentiality Agreement.
ss.6.4 Reasonable Efforts. Each of the Company, the Seller and the
Purchasers shall cooperate and use their respective reasonable commercial
efforts to take, or cause to be taken, all appropriate actions, and to make, or
cause to be made, all filings necessary, proper or advisable under
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applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement, including, without limitation,
their respective reasonable commercial efforts to obtain, prior to the Closing
Date, all licenses, permits, consents, approvals, authorizations, qualifications
and orders of governmental authorities and parties to contracts with the Company
as are necessary for consummation of the transactions contemplated by the
Agreement and to fulfill the conditions to the sale contemplated hereby.
ss.6.5 Company and Seller Records. With respect to all materials and
documents related to the Company and Seller transferred hereunder, the
Purchasers hereby covenant as follows:
(i) Purchasers acknowledge and agree that the Seller may, at his option and
expense (subject to the Purchasers' right to retain originals thereof), upon the
Closing take copies of certain permanent records of the Company, to the extent
that such records relate to periods ending on or prior to the Closing Date,
which records shall include but not be limited to, articles and certificates of
incorporation, by-laws, minute books and resolutions, shareholder records,
financial statements and records, general ledgers, journal entries, tax returns
(state and federal), payroll and payroll tax reporting forms (state and
federal), W-2 employee
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earnings records, workers' compensation reports, retirement pension and other
benefit plan documents and records and department records. The Purchasers shall
cause the Company and its employees, at no charge, to provide reasonable
assistance to Seller in the location of and information relating to such
records, to the extent that such records relate to periods ending on or prior to
the Closing Date, for three (3) years from the Closing Date, or until the
expiration of applicable statutes of limitations as to Tax Matters.
(ii) from and after the Closing, the Purchasers shall cause the Company to
store and safeguard for at least three years, at no charge to the Seller, the
following Company records relating to periods ending on or prior to the Closing
Date for access by the Seller for the time periods set forth below: (a) employee
earnings records (payroll registers, commission reports, etc.); (b) all other
payroll records (except forms 940 and 941 and W-2 reports); (c) all corporate
and accounting records; and (d) all informational matters related to litigation
and claims arising from the Company's operation of its businesses to and
including the Closing Date. The Purchasers and the Company shall, at no charge
(other than out-of-pocket expenses) to the Seller, provide the assistance of its
executives and employees in connection with investigation and other proceedings
and other matters
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arising from and in connection with such litigation and claims, provided that
such assistance is scheduled as to not materially interfere with the employment
responsibilities and duties of such executives and employees.
(iii) After expiration of the three year period referred to above, in the
event the Purchasers determine to destroy or otherwise dispose of any of the
Company or Seller's records or materials, the Purchaser will notify the Seller
in writing and allow the Seller the opportunity to take custody of such records
and materials; provided, however, that if the Seller does not notify the
Purchasers in writing of its desire to take custody of such records within 90
days after receipt of such written notice from the Purchasers, the Purchasers
may destroy or otherwise dispose of such records.
ss.6.6 Payment of Accrued Bonuses. The Company shall pay all bonuses
accrued on the Actual Closing Net Working Capital Statement to its employees,
independent contractors and directors on or before March 15, 1996, in accordance
with the Company's past practice.
ss.6.7 Removal of the Seller from Personal Guarantees. The Purchasers will
use all commercially reasonable efforts to obtain the release of the Seller from
all personal guarantees of Company obligations, including, without limitation,
those guarantees described on Schedule 6.7
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attached hereto. Pending such removal as described above, the Company agrees to
indemnify and hold the Seller harmless from damages, costs and expenses
(including, without limitation, reasonable attorneys' fees and expenses)
incurred or suffered as a result of liabilities under such personal guarantees.
ss.6.8 Payment Due Seller Upon Occurrence of Certain Event. In the event
that either, or both, of Mr. Berg and Mr. Burton shall not be entitled to
payments under the Company's stock appreciation rights plan for any reason,
including, without limitation, because of a failure to fulfill any service
requirement thereunder, Solutions shall pay to the Seller an amount equal to
$131,939 plus accrued interest thereon at 9% per annum from the Closing Date to
the date of payment therefor for each individual who shall not be entitled to
such stock appreciation right payment. Any such payment due under this Section
6.8 shall be due and payable within 20 Business Days after the event giving rise
to the payment obligation.
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ARTICLE VII
CONDITIONS TO THE PURCHASERS' OBLIGATIONS
ss.7. Conditions to the Purchasers' Obligations. The obligations of the
Purchasers to purchase the Stock contemplated by this Agreement are conditioned
upon satisfaction, at or prior to the Closing, of the following conditions:
ss.7.1 Opinions of Counsel. The Company shall have furnished the Purchasers
with an opinion, dated the Closing Date, of Briggs and Morgan, Professional
Association, to the effect set forth in Exhibit C hereto.
ss.7.2 Good Standing and Other Certificates. The Purchasers shall have
received (a) copies of the Articles of Incorporation, including all amendments
thereto, in each case certified by the Secretary of State or other appropriate
official of the jurisdiction of incorporation of the Company, (b) a certificate
from the Secretary of State or other appropriate official of the jurisdiction of
incorporation of the Company to the effect that the Company is in good standing
and listing all charter documents of the Company on file, (c) a certificate from
the Secretary of State or other appropriate official in each State in which the
Company is qualified to do business to the effect that the Company is in good
standing in such State and (d) a copy of the By-Laws of
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the Company certified by the Secretary of the Company as being true and correct
and in effect on the Closing Date.
ss.7.3 No Material Adverse Effect. Prior to the Closing there shall have
been no Material Adverse Effect and the Company shall have delivered to the
Purchasers an officer's certificate, dated the Closing Date, to such effect.
ss.7.4 Truth of Representations and Warranties. The representations and
warranties of the Company contained in this Agreement and the representations
and warranties of the Seller contained in this Agreement shall be true and
correct on and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of such date, and the
Company and the Seller shall have each delivered to the Purchasers a
certificate, dated the Closing Date, to such effect.
ss.7.5 Performance of Agreements. All of the agreements of the Company and
the Seller to be performed prior to the Closing pursuant to the terms of this
Agreement shall have been duly performed in all material respects, and the
Company and the Seller shall have each delivered to the Purchasers a
certificate, dated the Closing Date, to such effect.
ss.7.6 No Litigation Threatened. No action or proceedings shall have been
instituted or, to the knowledge of the Company or the Seller, threatened before
a court or other
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government body or by any public authority to restrain or prohibit any of the
transactions contemplated hereby.
ss.7.7 Third Party Consents; Governmental Approvals. All consents,
approvals or waivers, if any, disclosed on Schedule 7.7 attached hereto or
required in connection with the consummation of the transactions contemplated by
this Agreement shall have been received. All of the consents, approvals,
authorizations, exemptions and waivers from governmental agencies that shall be
required in order to enable the Purchasers to consummate the transactions
contemplated hereby shall have been obtained.
ss.7.8 Repayment of Indebtedness to Third Parties; Termination of Security
Interests. All indebtedness for borrowed money of the Company shall have been
repaid in full, without penalty, and cancelled. For purposes above, indebtedness
for borrowed money shall not include purchase money indebtedness or capitalized
lease obligations. All security interests, liens, mortgages, claims or other
encumbrances of any kind securing such indebtedness shall be released. Such
indebtedness is listed on Schedule 7.8 attached hereto.
ss.7.9 Resignations. All members of the Board of Directors of the Company
shall have tendered their resignation from such positions effective at the
Closing.
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ss.7.10 Employment Arrangements. The Seller shall have executed an
employment agreement with the Company in substantially the form of Exhibit D
attached hereto.
ss.7.11 Non-Competition Agreements. The Seller shall have entered into a
non-competition and non-interference agreement in substantially the form of
Exhibit E attached hereto.
ss.7.12 Stockholders Agreement. The Seller shall have executed the
Stockholders Agreement.
ss.7.13 FIRPTA. The Seller shall have furnished to the Purchasers, on or
prior to the Closing Date, a non-foreign person affidavit required by Section
1445 of the Code.
ss.7.14 Weinberg Stock Appreciation Right. The Company's obligations to
Gerald M. Weinberg under his stock appreciation right shall have been fulfilled
and such stock appreciation right cancelled.
ss.7.15 Pledge Agreement. The Seller shall have executed a pledge agreement
in substantially the form of Exhibit F attached hereto.
ARTICLE VIII
CONDITIONS TO THE COMPANY'S AND THE SELLER'S OBLIGATIONS
ss.8. Conditions to the Company's and the Seller's Obligations. The
obligations of the Company and the Seller to effect the transactions
contemplated by this Agreement on
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the Closing Date are conditioned upon satisfaction or waiver, at or prior to the
Closing, of the following conditions:
ss.8.1 Opinions of Purchasers' Counsel. The Purchasers shall have furnished
the Seller with an opinion, dated the Closing Date, of White & Case, to the
effect set forth in Exhibit G hereto.
ss.8.2 Truth of Representations and Warranties. The representations and
warranties of the Purchasers contained in this Agreement shall be true and
correct on and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of such date, and the
Purchasers shall have delivered to the Seller an officer's certificate, dated
the Closing Date, to such effect.
ss.8.3 Third Party Consents; Governmental Approvals. All consents,
approvals or waivers, if any, required in connection with the consummation of
the transactions contemplated by this Agreement shall have been received. All of
the consents, approvals, authorizations, exemptions and waivers from government
agencies that shall be required in order to permit the consummation of the
transactions contemplated hereby shall have been obtained.
ss.8.4 Performance of Agreements. All of the agreements of the Purchasers
to be performed prior to the Closing pursuant to the terms of this Agreement
shall have been duly
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performed in all material respects, and the Purchasers shall have delivered to
the Seller an officer's certificate, dated the Closing Date, to such effect.
ss.8.5 No Litigation Threatened. No action or proceeding shall be
instituted or, to the knowledge of the Purchasers, threatened before a court or
other government body or any public authority to restrain or prohibit any of the
transactions contemplated hereby, and the Purchasers shall have delivered to the
Seller an officer's certificate, dated the Closing Date, to such effect.
ss.8.6 Employment Arrangements. The Seller shall have executed an
employment agreement with the Company in substantially the form of Exhibit D
hereto. Each of Gerald M. Weinberg, Steven L. Berg, David M. Burton shall have
been offered employment with the Company on the terms and conditions outlined in
the employment agreement substantially the form of Exhibit H hereto.
ss.8.7 Co-Invest Opportunity. Each of Gerald M. Weinberg, Steven L. Berg,
David M. Burton, R. Hunt Greene and Lawrence T. Hofmann shall have been provided
an opportunity to purchase at or prior to Closing common stock of Holdings in an
aggregate amount up to 40,000 shares at the same price as the Seller under this
Agreement along with execution of the Stockholders Agreement.
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ss.8.8 Other Agreements. The Purchasers and the Company shall have complied
with their obligations under the last sentence of Section 6.1 of this Agreement.
ARTICLE IX
TAX MATTERS
ss.9.1 Tax Returns. (a) The Seller shall have the exclusive authority and
obligation to prepare, execute on behalf of the Company and timely file, or
cause to be prepared and timely filed, all Returns of the Company that are due
with respect to any taxable year or other taxable period ending prior to or
ending on and including the Closing Date. Such authority shall include, but not
be limited to, the determination of the manner in which any items of income,
gain, deduction, loss or credit arising out of the income, properties and
operations of the Company shall be reported or disclosed in such Returns;
provided, however, that such Returns shall be prepared by treating items on such
Returns in a manner consistent with the past practices with respect to such
items.
(b) Except as provided in Section 9.1(a), the Purchasers shall have the
exclusive authority and obligation to prepare and timely file, or cause to be
prepared and timely filed, all Returns of the Company; provided, however, with
respect to Returns to be filed by the Purchasers
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pursuant to this Section 9.1 for taxable periods beginning before the Closing
Date and ending after the Closing Date, items set forth on such Returns shall be
treated in a manner consistent with the past practices with respect to such
items. Such authority shall include, but not be limited to, the determination of
the manner in which any items of income, gain, deduction, loss or credit arising
out of the income, properties and operations of the Company shall be reported or
disclosed on such Returns.
ss.9.2 Controversies. The Purchasers shall promptly notify the Seller in
writing upon receipt by the Purchasers or any affiliate of the Purchasers
(including the Company after the Closing Date) of written notice of any
inquiries, claims, assessments, audits or similar events with respect to Taxes
relating to a taxable period ending prior to or ending on and including the
Closing Date for which the Seller may be liable under this Agreement (any such
inquiry, claim, assessment, audit or similar event, a "Tax Matter"). The Seller,
or his duly appointed representative (the "Seller's Representative"), at his
sole expense, shall have the authority to represent the interests of the Company
with respect to any Tax Matter before the Internal Revenue Service, any other
taxing authority, any other governmental agency or authority or any court and
shall have the sole right to control the defense, compromise or other resolution
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of any Tax Matter, including responding to inquiries, filing Returns and
contesting, defending against and resolving any assessment for additional Taxes
or notice of Tax deficiency or other adjustment of Taxes of, or relating to, a
Tax Matter; provided, however, that neither the Seller nor any of his affiliates
shall enter into any settlement of or otherwise compromise any Tax Matter that
affects or may affect the Tax liability of the Purchasers, the Company or any
affiliate of the foregoing for any period ending after the Closing Date,
including the portion of a period beginning before the Closing Date and ending
after the Closing Date (the "Overlap Period") that is after the Closing Date,
without the prior written consent of the Purchasers, which consent shall not be
unreasonably withheld. The Seller or the Seller's Representative shall keep the
Purchasers fully and timely informed with respect to the commencement, status
and nature of any Tax Matter. The Seller shall, in good faith, allow the
Purchasers, at their sole expense, to make comments to the Seller or the
Seller's Representative, regarding the conduct of or positions taken in any such
proceeding.
Except as otherwise provided in this Section 9.2, the Purchasers shall have
the sole right to control any audit or examination by any taxing authority,
initiate any claim for refund or amend any Return, and contest, resolve and
defend
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against any assessment for additional Taxes, notice of Tax deficiency or other
adjustment of Taxes of, or relating to, the income, assets or operations of the
Company for all taxable periods; provided, however, that the Purchasers shall
not, and shall cause its affiliates (including the Company) not to, enter into
any settlement of any contest or otherwise compromise any issue with respect to
the portion of the Overlap Period ending on or prior to the Closing Date without
the prior written consent of the Seller, which consent shall not be unreasonably
withheld.
ss.9.3 Transfer Taxes. All transfer, sales and use, registration, stamp and
similar Taxes imposed in connection with the sale of the Stock or any other
transaction that occurs pursuant to this Agreement shall be borne solely by the
Seller.
ss.9.4 Amended Returns. Neither the Seller nor the Company shall file or
cause to be filed any amended Return or claims for refund without the prior
written consent of the Purchasers, which consent shall not be unreasonably
withheld, delayed or conditioned, except for such amended Returns or claims for
refund filed in connection with the resolution of any Tax Matter in accordance
with Section 9.2.
ss.9.5 Non-foreign Person Affidavit. The Seller shall furnish to the
Purchasers on or before the Closing Date a
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non-foreign person affidavit as required by Section 1445 of the Code.
ss.9.6 Indemnification. (a) The Seller agrees to indemnify, defend and hold
harmless the Purchasers, their affiliates (including the Company) and the
successors to the foregoing (and their respective shareholders, officers,
directors, employees and agents) on an after-tax basis against (i) all Taxes,
losses, claims and expenses resulting from, arising out of, or incurred with
respect to, any claims that may be asserted by any party based upon,
attributable to, or resulting from the failure of any representation or warranty
made pursuant to Section 3.14 to be true and correct as of the Closing Date;
(ii) all Taxes imposed on or asserted against the properties, income or
operations of the Company for all Pre-Closing Periods to the extent such Taxes
have not been fully reserved for on the Actual Closing Net Working Capital
Statement; and (iii) all Taxes imposed on the Company, or for which the Company
may be liable, as a result of any transaction contemplated by this Agreement,
including any Taxes imposed on the Purchasers or the Company pursuant to Section
1374 of the Code and any comparable provision of state law or otherwise as a
result of the joint election under Section 338(h)(10) of the Code to treat the
sale of stock pursuant to this Agreement as an asset sale for Federal income tax
purposes, and any analogous provisions of state
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and local law. The Purchasers shall promptly give the Seller or his
representative written notice of all Taxes, losses, claims and expenses which
the Purchasers have reasonably determined may give rise to a right of
indemnification under this Section 9.6, including a computation of the amount of
the claimed indemnification with sufficient detail and particularity to enable
the Seller to reasonably determine the amount of such required indemnification.
The computation set forth in such notice shall take into account any reductions
in or refunds of Taxes realized by the Purchasers or the Company with respect to
subsequent taxable years as a result of the incurrence of such Taxes, losses,
claims and expenses ("Tax Benefits"). At the option of the Purchasers, such Tax
Benefits shall be taken into account either (i) by reducing the amount of the
required indemnification by the present value of the future Tax Benefits or (ii)
through a reimbursement of such Tax Benefits to the Seller as and when such Tax
Benefits are actually realized.
(b) In the event that the Purchasers fail to notify the Seller with respect
to a Tax Matter in accordance with the provisions of Section 9.2, the Seller
shall not be obligated to indemnify the Purchaser under Section 9.6(a) to the
extent that such failure to notify the Seller has a material adverse effect on
the Seller's ability to defend against such Tax Matter.
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ss.9.7 Section 338 Election. The Seller and the Purchasers shall jointly
complete and make an election under Section 338(h)(10) (with respect to the
Company) of the Code on Form 8023-A or in such other manner as may be required
by rule or regulation of the Internal Revenue Service, and shall jointly make an
election in the manner required under any analogous provisions of state or local
law as the Purchasers shall designate or as shall be required, concerning the
transactions contemplated by this Agreement. Purchasers shall, with the
assistance and cooperation of the Seller, prepare all such Section 338(h)(10)
forms required as attachments to Form 8023-A (and all forms under analogous
provisions of state or local law) in accordance with applicable Tax laws, and
the Purchasers shall deliver such forms and related documents to the Seller at
least 60 days prior to the due date of filing. The Seller shall deliver to the
Purchasers at least 45 days prior to the due date of filing such completed forms
as are required to be filed under Section 338(h)(10) of the Code (and analogous
provisions of state or local law). The Purchasers and the Seller shall use their
best efforts to agree, as soon as practicable after Closing but in no event
later than 120 days following the Closing Date, on the computation of the
modified aggregate deemed sale price ("MADSP") (as defined under Treasury
Regulations).
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ss.9.8 Valuation and Allocation. (a) The parties agree that the fair market
value of the fixed assets will be as set forth on Exhibit I attached hereto,
unless prior to the Closing Date, the parties mutually agree that an adjustment
to such valuation is necessary to reflect any valuation changes after the date
hereof.
(b) The Seller and the Purchasers agree that the Purchasers shall perform
or cause to be performed an initial valuation of assets and allocation of
purchase price of the Company for purposes of Section 338 of the Code. The
Purchasers shall provide the Seller with drafts of such valuation of assets and
allocation of MADSP (which shall be prepared on a basis consistent with Section
9.8(a)) within 120 days after the Closing Date. The Seller shall have 45 days to
provide the Purchasers with any objections to such drafts. If the Seller shall
object to the computation or allocation by the Purchasers of such amounts, and
the Purchasers and the Seller shall not reach agreement on the computation or
allocation within 30 Business Days after notification by the Seller of his
objection, the Purchasers and the Seller shall submit the issue to arbitration
by a nationally recognized accounting firm as shall be mutually acceptable to
the Purchasers and the Seller for resolution of the disagreement within ten
days, it being agreed that the Purchasers and the Seller will jointly share the
fees and
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expenses of such accounting firm. The valuations and allocations determined
pursuant to this Section 9.8 shall be used for purposes of all relevant Tax
Returns, reports and filings.
ss.9.9 Post-Closing Access and Cooperation. From and after the Closing
Date, the Purchasers agree, and agree to cause the Company, to permit the Seller
or the Seller's Representative to have reasonable access, during normal business
hours, to the Company's books and records, to the extent that such books and
records relate to a Pre-Closing Period, and personnel, for the purpose of
enabling Seller to: (i) prepare the Returns specified in Section 9.1(a); (ii)
investigate or contest any Tax Matter which the Seller has the authority to
conduct under Section 9.2; and (iii) evaluate any claim for indemnification
under Section 9.6.
ARTICLE X
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
ss.10.1 Survival of Representations. The respective representations and
warranties of the Company, the Seller and the Purchasers contained in this
Agreement shall survive the Closing for a period of eighteen months except for
the representations and warranties of the Company contained in Section 3.14 with
respect to Taxes which shall survive for the applicable statute of limitations
period and the
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representations and warranties of the Seller in Article IV which shall survive
indefinitely.
ss.10.2 Indemnification. (a) Prior to the Closing, the Company, and
thereafter, the Seller hereby agrees to indemnify and hold the Purchasers and
their officers, directors, affiliates (including, without limitation, the
Company) and agents, and any successors thereto, harmless from damages, losses,
costs or expenses (including, without limitation, reasonable attorneys' fees and
expenses) ("Damages") incurred or suffered as a result of or arising out of (i)
the failure of any representation or warranty made by the Company in this
Agreement (without regard to any "materiality" or any "material adverse effect"
exception contained therein) to be true and correct as of the Closing Date,
(other than a breach of Section 3.14 with respect to Taxes which shall be
governed by Section 9.6), or (ii) the breach of any covenant or agreement made
or to be performed by the Seller or the Company pursuant to this Agreement;
provided, however, that neither the Company nor the Seller shall be liable under
clause (i) of this Section (except for the representation contained in Section
3.27 which shall be indemnified against from the first dollar) unless the
aggregate amount of Damages exceeds $250,000 and then only to the extent of such
excess; and provided further that neither
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the Company nor the Seller shall be liable under this Section for Damages in
excess of the Purchase Price.
(b) The Seller hereby agrees to indemnify and hold the Purchasers and their
officers, directors, affiliates (including without limitation, the Company) and
agents, and any successors thereto, harmless from Damages incurred or suffered
as a result of or arising out of the failure of any representation or warranty
made by the Seller in this Agreement to be true and correct as of the Closing
Date.
(c) The Purchasers hereby agree, jointly and severally, to indemnify and
hold the Seller harmless from Damages incurred or suffered as a result of or
arising out of (i) the failure of any representation or warranty made by the
Purchasers in this Agreement to be true and correct as of the Closing Date or
(ii) the breach of any covenant or agreement made or to be performed by the
Purchasers pursuant to this Agreement.
(d) The amount of any Claim shall be reduced to the extent of any insurance
proceeds received by the Indemnified Party in respect of the indemnified matter
to which such Claim relates. The amount of any Damages shall take into account
any reductions in or refunds of Taxes realized by the Indemnified Party
resulting from the indemnified matter to which such Damages relates
("Indemnified Party Tax Benefits"). At the option of the Indemnified Party, such
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Indemnified Party Tax Benefits shall be taken into account either (i) by
reducing the amount of the required indemnification by the present value of the
future Indemnified Party Tax Benefits or (ii) through a reimbursement of such
Indemnified Party Tax Benefits to the Indemnifying Party as and when such
Indemnified Party Tax Benefits are actually realized.
(e) Absent fraud, the foregoing indemnification provision and the
indemnification for Taxes provided in Section 9.6 shall be the exclusive remedy
for any breach of the covenants, obligations, representations or warranties set
forth in this Agreement and the Purchasers shall not be entitled to rescind this
Agreement; provided, however, that the provisions of this Section 10.2(e) shall
not prevent the Seller or the Purchasers from seeking the remedies of specific
performance or injunctive relief in connection with a breach of a covenant or
agreement of any party contained herein.
(f) Absent fraud, there shall be excluded from the sale, transfer,
conveyance and assignment hereunder, and the Company's assets shall not include,
any debt, liability or obligation of, or claim against, the Seller except to the
extent that the same is allowed by this Agreement (including the indemnification
obligations of the Seller contained herein) or is reflected on the Balance
Sheet.
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ss.10.3 Indemnification Procedure. (a) Any party seeking indemnification
(the "Indemnified Party") from any other party (the "Indemnifying Party") with
respect to any claim, demand, action, proceeding or other matter pursuant to
this Agreement (the "Claim") shall promptly notify the Indemnifying Party of the
existence of the Claim, setting forth in reasonable detail the facts and
circumstances pertaining thereto and the basis for the Indemnified Party's right
to indemnification.
(b) If any third party shall notify any Indemnified Party with respect to
any matter which may give rise to a Claim for indemnification against the
Indemnifying Party under this Agreement, then the Indemnified Party shall
promptly notify each Indemnifying Party thereof; provided, however, that no
delay on the part of the Indemnified Party in notifying any Indemnifying Party
shall relieve the Indemnifying Party from any liability or obligation hereunder
unless (and then solely to the extent) the Indemnifying Party thereby is
materially prejudiced by such failure to give notice. In the event that any
Indemnifying Party notifies the Indemnified Party within 30 days after the
Indemnified Party has given notice of the matter that the Indemnifying Party
would be required to indemnify the Indemnified Party in full against any such
Claim and is assuming the defense thereof:
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(i) the Indemnifying Party will defend the Indemnified Party against
the matter with counsel of its choice reasonably satisfactory to the Indemnified
Party;
(ii) the Indemnified Party may retain separate co-counsel at its sole
cost and expense (except that the Indemnifying Party will be responsible for the
fees and expenses of the separate co-counsel (a) to the extent the Indemnified
Party concludes reasonably based upon advice of counsel that a conflict of
interest exists between the Indemnified Party and Indemnifying Party or (b) the
named parties to any such action (including any impleaded parties) include both
such Indemnified Party and the Indemnifying Party and such Indemnified Party
shall have been advised by counsel that there may be one or more legal defenses
available to the Indemnified Party which are not available to the Indemnifying
Party, or available to the Indemnifying Party, but the assertion of which would
be adverse to the interest of the Indemnified Party);
(iii) the Indemnified Party will not consent to the entry of any
judgment or enter into any settlement with respect to the matter without the
written consent of the Indemnifying Party (not to be withheld unreasonably); and
(iv) the Indemnifying Party will not consent to the entry of any
judgment or enter into any settlement which does not include a provision whereby
the plaintiff or
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claimant in the matter releases the Indemnified Party from all liability with
respect thereto, without the written consent of the Indemnified Party (not to be
withheld unreasonably).
(c) If no Indemnifying Party notifies the Indemnified Party within 30 days
after the Indemnified Party has given notice of the matter that the Indemnifying
Party is assuming the defense thereof, then the Indemnified Party may defend
against, or enter into any settlement with respect to, the matter in any manner
it reasonably may deem appropriate, without prejudice to any of its rights
hereunder.
(d) The Indemnified Party shall be entitled to reimbursement of reasonable
expenses included in Damages with respect to any Claim (including, without
limitation, the cost of defense, preparation and investigation relating to such
Claim) as such expenses are incurred by the Indemnified Party.
ARTICLE XI
TERMINATION
ss.11.1 Termination. This Agreement may be terminated at any time prior to
the Closing:
(a) by the mutual written consent of the Purchasers, on the one hand, and
the Seller, on the other hand;
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(b) by the Purchasers, if there has been a material violation or breach by
the Company or the Seller of any covenant, representation or warranty contained
in this Agreement which has prevented the satisfaction of any condition to the
obligations of the Purchasers at the Closing and such violation or breach has
not been waived by the Purchasers or, in the case of a covenant breach, cured by
the Company or the Seller within the earlier of ten days after written notice
thereof from the Purchasers or the Closing Date;
(c) by the Seller, if there has been a material violation or breach by the
Purchasers of any covenant, representation or warranty contained in this
Agreement which has prevented the satisfaction of any condition to the
obligation of the Company at the Closing and such violation or breach has not
been waived by the Seller or, with respect to a covenant breach, cured by the
Purchasers within the earlier of ten days after written notice thereof by the
Company or the Closing Date; or
(d) by either the Purchasers, on the one hand, or the Seller, on the other
hand, if the transactions contemplated hereby have not been consummated by
January 9, 1996; provided, however, that (i) neither the Purchasers nor the
Seller shall be entitled to terminate this Agreement pursuant to this Section
11.1(d) if such Person's breach of this
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Agreement has prevented the consummation of the transactions contemplated
hereby.
ss.11.2 Effect of Termination. In the event that this Agreement shall be
terminated pursuant to Section 11.1, all further obligations of the parties
hereto under this Agreement (other than (i) pursuant to Sections 12.2 and 12.5,
which shall continue in full force and effect, and (ii) the extent that
Liquidated Damages may be applicable pursuant to Section 2.6 of this Agreement)
shall terminate without further liability or obligation of either party to the
other party hereunder; provided, however, that no party shall be released from
liability hereunder if this Agreement is terminated and the transactions
abandoned by reason of (i) willful failure of such party to have performed its
obligations hereunder or (ii) any knowing misrepresentation made by such party
of any matter set forth herein.
ARTICLE XII
MISCELLANEOUS
ss.12.1 Knowledge of the Company. Where any representation or warranty made
by the Company contained in this Agreement is expressly qualified by reference
to its knowledge, such knowledge shall be deemed to exist if the matter is
within the actual knowledge of the Seller and/or the executive officers of the
Company, without the Seller or
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the executive officers conducting, or being under an obligation to conduct or
causing to be conducted, an independent investigation with respect to the
applicable subject matter. The executive officers of the Company are defined for
purposes of this Agreement to be Gerald M. Weinberg, Steven L. Berg and David M.
Burton.
ss.12.2 Expenses. The parties hereto shall pay their own expenses relating
to the transactions contemplated by this Agreement, including, without
limitation, the fees and expenses of their respective counsel and financial
advisers, it being understood that all expenses of the Company incurred in
connection with the transactions contemplated by this Agreement shall be paid by
the Seller prior to the Closing Date.
ss.12.3 Governing Law. THE INTERPRETATION AND CONSTRUCTION OF THIS
AGREEMENT, AND ALL MATTERS RELATING HERETO, SHALL BE GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK APPLICABLE TO AGREEMENTS EXECUTED AND TO BE PERFORMED SOLELY
WITHIN SUCH STATE.
ss.12.4 Captions. The Article and Section captions used herein are for
reference purposes only, and shall not in any way affect the meaning or
interpretation of this Agreement.
ss.12.5 Publicity. Except as otherwise required by law, none of the parties
hereto shall issue, prior to the Closing, any press release or make any other
public statement, in each
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case relating to, connected with or arising out of this Agreement or the matters
contained herein, without obtaining the prior approval of the Seller, on the one
hand, and the Purchasers, on the other hand, to the contents and the manner of
presentation and publication thereof. Except as otherwise required by law, after
the Closing the Seller shall not issue any press release or make any other
public statement, in each case relating to, connected with or arising out of
this Agreement or the matters contained herein, without obtaining the prior
approval of the Purchasers.
ss.12.6 Notices. Any notice or other communication required or permitted
under this Agreement shall be sufficiently given if delivered in person or sent
by telecopy or by registered or certified mail, postage prepaid, addressed as
follows: if to the Purchasers, to Outsourcing Solutions Incorporated, c/o McCown
De Leeuw & Co., 101 East 52nd Street, 31st Floor, New York, New York 10022,
Attention: David B. Kreiss, with a copy to, McCown De Leeuw & Co., 101 East 52nd
Street, 31st Floor, New York, New York 10022 (Facsimile Number (212) 355-6283),
Attention: David E. King, with a further copy to, White & Case, 1155 Avenue of
the Americas, New York, New York 10036 (Facsimile Number (212) 354-8113),
Attention: Frank L. Schiff, Esq.; and if to the Seller : Alan M. Miller, 16502
Ringer Road, Wayzata, MN 55391, with a copy to, Briggs and Morgan, P.A., 2400
IDS
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Center, 80 South 8th Street, Minneapolis, MN 55402 (Facsimile Number (612)
334-8650), Attention: Stephen Winnick, Esq., or such other address or number as
shall be furnished in writing by any such party, and such notice or
communication shall be deemed to have been given as of the date so delivered,
sent by facsimile or mailed.
ss.12.7 Parties in Interest. This Agreement may not be transferred,
assigned, pledged or hypothecated by any party hereto, other than by operation
of law. This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective heirs, executors, administrators,
successors and permitted assigns.
ss.12.8 Counterparts. This Agreement may be executed in two or more
counterparts, all of which taken together shall constitute one instrument.
ss.12.9 Entire Agreement. This Agreement, including the other documents
referred to herein and therein which form a part hereof and thereof, contain the
entire understanding of the parties hereto with respect to the subject matter
contained herein and therein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
ss.12.10 Amendments. This Agreement may not be changed orally, but only by
an agreement in writing signed by the Purchasers, the Company and the Seller.
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ss.12.11 Severability. In case any provision in this Agreement shall be
held invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions hereof will not in any way be
affected or impaired thereby.
ss.12.12 Third Party Beneficiaries. Each party hereto intends that this
Agreement shall not benefit or create any right or cause of action in or on
behalf of any Person other than the parties hereto.
ss.12.13 Arbitration. (a) Except as expressly provided herein, any and all
disputes arising out of or in connection with the interpretation, performance or
nonperformance of this Agreement or any and all disputes arising out of or in
connection with transactions in any way related to this Agreement (including,
but not limited to, the validity, scope and enforceability of this arbitration
provision, or disputes) shall be finally and completely resolved by arbitration
pursuant to the arbitration laws of the United States of America as codified in
Title 9 of the United States Code, ss.ss. 1-14, under the Rules of Commercial
Arbitration of the American Arbitration Association (the "Rules") by a majority
vote of a panel of three arbitrators. One such arbitrator shall be selected by
the Seller (the "Seller's Arbitrator"). One arbitrator will be selected by the
Purchasers (the "Purchasers' Arbitrator"). These arbitrators
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shall be selected by the respective parties within ten business days after
receipt by either Seller or Purchasers of a written notification from the other
party of a decision to arbitrate a dispute pursuant to this Agreement. Should
either Seller or Purchasers fail to select an arbitrator within said ten-day
period, the party who so fails to select an arbitrator will have its arbitrator
selected by the American Arbitration Association upon the application of the
other party. The third arbitrator shall be a former Delaware state or federal
judge. Such third arbitrator shall be the chairperson of the panel. The third
arbitrator shall be selected by the Seller's Arbitrator and the Purchasers'
Arbitrator. If said arbitrators cannot agree upon a third arbitrator within
thirty days from the date of appointment of the last selected arbitrator, then
either the Seller's Arbitrator or the Purchasers' Arbitrator may apply to the
American Arbitration Association to appoint said third arbitrator pursuant to
the criteria set forth herein. The arbitration panel shall promptly conduct
proceedings to resolve the dispute in question pursuant to the then existing
Rules. To the extent any provisions of the Rules conflict with any provision of
this Section 12.13, the provisions of this Section 12.13 shall control.
(b) The Seller and the Purchasers agree to facilitate the arbitration by
each paying to the American Arbitration
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Association one-half of the required deposit before commencement of the
proceedings. In any final award and/or order, the arbitration panel shall
apportion the costs (other than attorney's fees which shall be borne by the
party incurring such fees and other costs specifically provided for herein)
incurred in conducting the arbitration in accordance with what the arbitration
panel deems just and equitable under the circumstances. The fee of the Seller's
Arbitrator shall be paid by the Seller and the fees of the Purchasers'
Arbitrator shall be paid by the Purchasers.
(c) The Seller and the Purchasers agree to facilitate the arbitration
proceedings by making available to one another and to the arbitration panel, for
inspection and photocopying, all documents, books and records, if determined by
the arbitration panel to be relevant to the dispute, and by making available to
one another and to the arbitration panel personnel directly or indirectly under
their control, for testimony during hearings and prehearing proceedings if
determined by the arbitration panel to be relevant to the dispute. The Seller
and the Purchasers agree, unless undue hardship exists, to agree to conduct
arbitration hearings to the greatest extent possible on consecutive business
days and to strictly observe time periods established by the Rules or by the
arbitration panel for the submission of evidence and of briefs. Unless otherwise
agreed to by the Seller and the
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Purchasers, a stenographic record of the arbitration proceedings shall be made
and a transcript thereof shall be ordered for each party, with each party paying
one-half of the total cost of such recording and transcription. The stenographer
shall be State-Certified, if certification is made by the State, and the party
to whom it is most convenient shall be responsible for securing and notifying
such stenographer of the time and place of arbitration hearings.
(d) Except as limited hereby, the arbitration panel shall have all powers
of law and equity, which it can lawfully assume, necessary to resolve the issues
in dispute including, without limiting the generality of the foregoing, making
awards of compensatory damages, issuing both prohibitory and mandatory orders in
the nature of injunctions and compelling the production of documents and
witnesses for pre-arbitration discovery and/or presentation at the arbitration
hearing on the merits of the case. The decision of the arbitration panel shall
be in written form and shall include findings of fact and conclusions of law.
The statutory, case law and common law of the State of New York shall govern in
interpreting their respective rights, obligations and liabilities arising out of
or related to the transactions provided for or contemplated by this Agreement,
including without limitation, the validity, construction and
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performance of all or any portion of this Agreement, and the applicable remedy
for any liability established thereunder, and the amount or method of
computation of damages which may be awarded, but such governing law shall not
include the law pertaining to conflicts or choice of laws of the State of New
York.
(e) Should any term or provision of this Section 12.13 be held invalid, the
remainder of this Section shall be valid and enforceable. In the event
arbitration cannot be administered by the American Arbitration Association under
the Rules, or the American Arbitration Association shall fail to accept
administration of the arbitration proceedings, then this arbitration shall be
conducted as an arbitration proceeding under the Delaware Uniform Arbitration
Act and the Rules for such proceeding shall be determined by the arbitration
panel. The decision of a majority of the arbitrators on such panel shall be
deemed the decision of the panel. In the event the arbitration proceeding is not
administered by the American Arbitration Association or pursuant to the Rules,
any party may seek enforcement of this Section by application to the District
Court of Wilmington, Delaware, for such relief as shall be necessary or
reasonably required to implement the provisions of this Section 12.13.
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(f) Unless the parties otherwise agree, the venue of arbitration
proceedings conducted pursuant to this Section 12.13 shall be Wilmington,
Delaware.
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IN WITNESS WHEREOF, the Company and each of the Purchasers have caused
their corporate names to be hereunto subscribed by their respective officers
thereunto duly authorized and the Seller has signed this Agreement, all as of
the day and year first above written.
OSI HOLDINGS CORP.
By: /s/ David E. King
-------------------------------------
Name: David E. King
Title: Secretary
OUTSOURCING SOLUTIONS INCORPORATED
By: /s/ David E. King
-------------------------------------
Name: David E. King
Title: Vice President
A.M. MILLER & ASSOCIATES, INC.
By: /s/ Alan M. Miller
-------------------------------------
Name: Alan M. Miller
Title: President
/s/ Alan M. Miller
-------------------------------------
ALAN M. MILLER
<PAGE>
================================================================================
PURCHASE AND INDUCEMENT AGREEMENT
Dated as of May 17, 1996
By and Among
OSI HOLDINGS CORP.
ACCOUNT PORTFOLIOS, INC.
ACCOUNT PORTFOLIOS, L.P.
GULF STATE CREDIT, L.P.
PERIMETER CREDIT, L.P.
MLQ INVESTORS, L.P.
AND
GOLDMAN, SACHS & CO.
================================================================================
<PAGE>
PURCHASE AND INDUCEMENT AGREEMENT
PURCHASE AND INDUCEMENT AGREEMENT dated as of May 17, 1996 by and among OSI
HOLDINGS CORP., a corporation organized under the laws of the State of Delaware
("OSI Holdings"), ACCOUNT PORTFOLIOS, INC., a corporation organized under the
laws of the State of Delaware ("API"), ACCOUNT PORTFOLIOS, L.P., a limited
partnership organized under the laws of the State of Georgia ("APLP"), GULF
STATE CREDIT, L.P., a limited partnership organized under the laws of the State
of Georgia ("Gulf State"), PERIMETER CREDIT, L.P., a limited partnership
organized under the laws of the State of Georgia ("Perimeter", and together with
OSI Holdings, API, APLP and Gulf State, the "Purchasers"), MTGLQ INVESTORS, L.P.
("MTGLQ") and MLQ INVESTORS, L.P. ("MLQ"), each a limited partnership organized
under the laws of the State of Delaware (collectively, the "Seller") and
GOLDMAN, SACHS & CO., a partnership organized under the laws of the State of New
York ("Goldman Sachs").
WHEREAS, the Seller owns all of the Interests (as defined below),
which are owned by MTGLQ and MLQ as indicated on Schedule I hereto;
WHEREAS, upon the terms and subject to the conditions set forth in
this Agreement, the Seller desires to sell the Interests, and the Purchasers
desire to purchase the Interests;
WHEREAS, as a further inducement to enter into this Agreement, the
Purchasers and Goldman Sachs have made further agreements as set forth herein;
and
WHEREAS, it is the intention of the parties hereto that, upon the
consummation of the transactions contemplated by this Agreement, the Purchasers
shall own all of the Interests.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
ss.1.1. Definitions. In addition to the terms defined elsewhere in
this Agreement, the following terms shall have the respective meanings specified
therefor
<PAGE>
below (such meanings to be equally applicable to both the singular and the
plural forms of the terms defined).
"Agreement" shall mean this Agreement, as amended, modified or
supplemented from time to time.
"API" shall have the meaning specified in the preamble to this
Agreement.
"APLP" shall have the meaning specified in the preamble to this
Agreement.
"Charged-Off Loans" shall mean consumer loans, consumer receivables,
retail installment sales contracts or other like consumer assets including
deficiency claims against borrowers following foreclosure on home mortgage loans
(but otherwise excluding mortgage loans): (i) the full face amount of which has
been charged off by the seller and (ii) which are capable of being purchased at
less than 15% of their original face amount.
"Charged-Off Loan Portfolio" shall mean a portfolio of loans 75% of
which (by value) are Charged-Off Loans.
"Closing" shall have the meaning specified in Section 3.1.
"Closing Date" shall have the meaning specified in Section 3.1.
"Encumbrances" shall mean any encumbrance, lien, charge, security
interest or other restriction of any kind or character.
"Goldman Sachs" shall have the meaning specified in the preamble to
this Agreement.
"GS-Sourced Portfolio" shall mean each Charged-Off Loan Portfolio for
which the Goldman Sachs Mortgage Securities Department shall give API written
notice of a purchasing opportunity in accordance with Section 7.1(b) unless API
shall have, prior, or contemporaneously with, receiving such notice from Goldman
Sachs, notified the Goldman Sachs Mortgage Securities Department in writing that
it has received such opportunity from another source.
"Gulf State" shall have the meaning specified in the preamble to this
Agreement.
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"Interests" shall mean collectively the undivided interests owned by
the Seller in each of the portfolios of loans, consumer receivables, retail
installment sales contracts or other assets set forth on Schedule I attached
hereto.
"Material Adverse Change" means, with respect to any Person, a
material adverse change in such Person's business, assets, liabilities,
financial condition, operations or business prospects.
"Material Adverse Effect" means, with respect to any Person, a
material adverse effect upon such Person's business, assets, liabilities,
financial condition, operations or business prospects.
"Note" shall have the meaning specified in Section 2.2.
"OSI Holdings" shall have the meaning specified in the preamble to
this Agreement.
"Perimeter" shall have the meaning specified in the preamble to this
Agreement.
"Person" means an individual, a partnership, a corporation, an
association, a limited liability company, a joint stock company, a trust, a
joint venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"Purchase Price" shall have the meaning specified in Section 2.2.
"Purchasers" shall have the meaning specified in the preamble to this
Agreement.
"Seller" shall have the meaning specified in the preamble to this
Agreement.
"Shares" shall have the meaning specified in Section 2.2.
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ARTICLE II
PURCHASE OF INTERESTS
ss.2.1 Purchase and Sale of Interests. Upon the terms and subject to the
conditions set forth in this Agreement, OSI Holdings and API agree to purchase
from MTGLQ and MLQ, and MTGLQ and MLQ agree to sell, convey, transfer, assign
and deliver to OSI Holdings and API, as applicable, on the Closing Date, against
the receipt by MTGLQ and MLQ of the consideration specified in Section 2.2 (an
aggregate value of $14,772,771.18, $8,000,000 of which is being purchased by OSI
Holdings from MLQ and $6,772,771.18 of which is being purchased by API from
MTGLQ and MLQ), the Interests, free and clear of any Encumbrances of any kind.
ss.2.2. Purchase Price. In consideration for the sale by MTGLQ and MLQ of
the Interests to OSI Holdings and API, on the Closing Date, OSI Holdings and
API, as applicable, shall deliver to MTGLQ and MLQ, as applicable, the following
(the "Purchase Price"):
(a) from OSI Holdings to MLQ, 640,000 shares of Class C Non-Voting
Common Stock, par value $.01 per share, of OSI Holdings (the "Shares"),
made out in the name of MLQ (an aggregate value of $8,000,000);
(b) from API, (i) an unsecured promissory note in an aggregate
principal amount of $3,500,000 due September 1, 2000, issued by API to
MTGLQ in the form attached hereto as Exhibit I (the "Note") and (ii) to
MLQ, an amount equal to $3,272,771.18, by wire transfer of immediately
available funds to an account specified by MLQ;
(c) from OSI Holdings the letter agreement in the form attached as
Exhibit II;
(d) from OSI Holdings a subordinated guarantee of the Note in the form
attached as Exhibit III.
ARTICLE III.
CLOSING
ss.3.1 Closing. The closing of the sale referred to in Section 2.1 (the
"Closing") shall take place at 10:00 A.M. at the offices of White & Case, New
York, New York on the date hereof, or at such other time, date and place as the
parties hereto shall by
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written instrument designate. Such time and date are herein referred to as the
"Closing Date."
ss.3.2. Deliveries by the Seller at the Closing. At the Closing, the Seller
shall deliver to OSI Holdings and API such documents, instruments and evidences
of transfer and conveyance, duly executed by the Seller, as the Purchasers shall
reasonably deem necessary to vest in OSI Holdings and API, as applicable, valid
title to the Interests free and clear of any Encumbrance of any kind, and such
other documents as the Purchasers may reasonably request to demonstrate
compliance with this Agreement by the Seller and Goldman Sachs.
ss.3.3. Deliveries by the Purchasers at Closing. At the Closing, OSI
Holdings and API, as applicable, shall deliver to the Seller (a) the cash
payments referred to above in Section 2.2, (b) the Shares, (c) the Note and (d)
such documents, instruments and other evidences as shall be reasonably required
by the Seller.
ss.3.4. Further Assurances. On or after the Closing Date, the Seller shall,
at the Purchasers' reasonable request, from time to time execute and deliver
such further instruments of conveyance, assignment and transfer, or cause to be
taken, such other actions as the Purchasers may reasonably request for the more
effective conveyance, assignment and transfer of the Interests to OSI Holdings
and API, respectively.
ARTICLE IV
REPRESENTATIONS OF THE SELLER
ss.4. Representations of the Seller. The Seller represents, warrants and
agrees with the Purchasers as follows:
ss.4.1. Existence in Good Standing. The Seller is a limited partnership
duly organized, validly existing and in good standing under the laws of the
State of Delaware.
ss.4.2 Authorization and Validity of Agreement. The Seller has the
requisite power and authority to enter into this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement by the Seller and the performance
of its obligations hereunder have been duly authorized and approved by the
Seller and no other action on the part of the Seller is necessary to authorize
the execution, delivery and performance of this Agreement by the Seller. This
Agreement has been duly executed and delivered by the Seller and is a valid and
binding obligation of the Seller, enforceable against the Seller
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in accordance with its terms, except to the extent that enforceability may be
subject to applicable bankruptcy, insolvency, reorganization, moratorium and
similar laws affecting the enforcement of creditors' rights generally and to
general equitable principles.
ss.4.3 No Conflicts. The execution, delivery and performance of this
Agreement by the Seller will not (a) violate or contravene any provision of the
organizational documents of the Seller, (b) result in a violation of any law,
rule, ordinance, regulation, order, judgment or decree by which the Seller is
bound (c) 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 any other Person, or (d) conflict with or result in a breach of or
default under any mortgage, lien, lease, license, permit, agreement, contract or
instrument to which the Seller is a party or by which the Seller is bound, which
conflict, breach or default would have a material adverse effect on the ability
of the Seller to perform its obligations under this Agreement or to consummate
the transactions contemplated hereby.
ss.4.4 Ownership of Interests. The Seller is the lawful owner of the
Interests, free and clear of all Encumbrances of every kind.
ss.4.5 Restrictions on Shares; Shares Subject to Stockholders Agreement.
The Seller acknowledges that the Shares to be delivered to the Seller as part of
the Purchase Price hereunder have not been registered under the Securities Act
of 1933 and are subject to various restrictions (including restrictions on
transfer) contained in that Amended and Restated Stockholders Agreement, dated
as of February 16, 1996, and attached hereto as Exhibit IV. The Seller hereby
makes the representations and warranties contained in Section 4.1 of the
Stockholders Agreement.
ARTICLE V
REPRESENTATIONS OF GOLDMAN SACHS
ss.5. Representations of Goldman Sachs. Goldman Sachs represents, warrants
and agrees with the Purchasers as follows:
ss.5.1. Existence in Good Standing. Goldman Sachs is a partnership duly
organized, validly existing and in good standing under the laws of the State of
New York.
ss.5.2 Authorization and Validity of Agreement. Goldman Sachs has the
requisite power and authority to enter into this Agreement and to perform its
obligations
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hereunder. The execution and delivery of this Agreement by Goldman Sachs and the
performance of its obligations hereunder have been duly authorized and approved
by Goldman Sachs and no other action on the part of Goldman Sachs is necessary
to authorize the execution, delivery and performance of this Agreement by
Goldman Sachs. This Agreement has been duly executed and delivered by Goldman
Sachs and is a valid and binding obligation of Goldman Sachs enforceable against
Goldman Sachs in accordance with its terms, except to the extent that
enforceability may be subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting the enforcement of
creditors' rights generally and to general equitable principles.
ss.5.3 No Conflicts. The execution, delivery and performance of this
Agreement by Goldman Sachs will not (a) violate or contravene any provision of
the organizational documents of Goldman Sachs, (b) result in a violation of any
law, rule, ordinance, regulation, order, judgment or decree by which Goldman
Sachs is bound (c) 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 any other Person, or (d) conflict with or result in a breach of or
default under any mortgage, lien, lease, license, permit, agreement, contract or
instrument to which Goldman Sachs is a party or by which Goldman Sachs is bound,
which conflict, breach or default would have a material adverse effect on the
ability of Goldman Sachs to perform its obligations under this Agreement.
ARTICLE VI
REPRESENTATIONS OF THE PURCHASERS
ss.6. Representations of the Purchasers. The Purchasers, jointly and
severally, represent, warrant and agree with the Seller and Goldman Sachs as
follows:
ss.6.1. Existence in Good Standing. Each of the Purchasers is a corporation
or limited partnership, as the case may be, duly organized, validly existing and
in good standing under the laws of the State of its respective jurisdiction of
organization.
ss.6.2 Authorization and Validity of Agreement. Each of the Purchasers has
the requisite power and authority to perform its respective obligations
hereunder and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement by the Purchasers (including in the case of API,
the execution and delivery of the Note) and the performance of their respective
obligations hereunder have been duly authorized and approved by the Purchasers
and no other action on the part of the Purchasers is necessary to authorize the
execution, delivery and performance of this
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Agreement by the Purchasers (including in the case of API, the Note). This
Agreement (and in the case of API, the Note) has been duly executed and
delivered by the Purchasers and is a valid and binding obligation of such
Purchasers, enforceable against such Purchasers in accordance with its terms,
except to the extent that enforceability may be subject to applicable
bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
the enforcement of creditors' rights generally and to general equitable
principles.
ss.6.3 No Conflicts. The execution, delivery and performance of this
Agreement (and in the case of API, the Note) by the Purchasers will not (a)
violate or contravene any provision of the organizational documents of the
Purchasers, (b) result in a violation of any law, rule, ordinance, regulation,
order, judgment or decree by which the Purchasers are bound, (c) 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 any other Person,
or (d) conflict with or result in a breach of or default under any mortgage,
lien, lease, license, permit, agreement, contract or instrument to which any of
the Purchasers are a party or by which the Purchasers are bound, which conflict,
breach or default would have a material adverse effect on the ability of the
Purchasers to perform their respective obligations under this Agreement or to
consummate the transactions contemplated hereby.
ss.6.4 Capital Stock. The authorized capital stock of OSI Holdings consists
of 1,000,000 shares of Preferred Stock, no par value (the "Preferred Stock"),
7,500,00 shares of Voting Common Stock, par value $.01 per share (the "Voting
Common Stock"), 7,500,000 shares of Class A Non-Voting Common Stock, par value
$.01 per share (the "Class A Non-Voting Common Stock"), 500,000 shares of Class
B NonVoting Stock, par value $.01 per share (the "Class B Non-Voting Common
Stock") and 1,500,000 shares of Class C Non-Voting Common Stock, par value $.01
per share (the "Class C Non-Voting Common Stock") of which 800,000 shares of
Preferred Stock, 3,417,134.01 shares of Voting Common Stock, 391,740.58 shares
of Class A NonVoting Common Stock, 400,000 shares of Class B Non-Voting Common
Stock and 400,000 shares of Class C Non-Voting Common Stock are outstanding. All
of the issued shares of capital stock of OSI Holdings have been duly and validly
authorized and issued and are fully paid and non-assessable. Except for warrants
to purchase 46,089 shares of Common Stock of OSI Holdings at a strike price of
$12.50 per share and except for OSI Holdings' 1995 Stock Option and Stock Award
Plan under which 294,182 shares of Common Stock of OSI Holdings has been
reserved for issuance, there are no options, warrants, conversion or other
rights, agreements or commitments of any kind obligating OSI Holdings,
contingently or otherwise, to issue or sell any shares of OSI Holdings capital
stock or any securities convertible into or exchangeable for any such shares.
All of the issued shares of capital stock of each subsidiary of OSI Holdings
have been duly and validly authorized and issued, are fully paid and non-
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assessable and are owned directly or indirectly by OSI Holdings, free and clear
of all liens, encumbrances, equities or claim. The Shares to be received by the
Seller in accordance with the terms of this Agreement will, upon issuance and
sale to Seller in accordance with this Agreement, be duly authorized, validly
issued and fully paid and nonassessable.
ss.6.5. Financial Statements. Purchasers have furnished or caused to
be furnished to Goldman Sachs copies of the unaudited balance sheet of OSI
Holdings as of September 21, 1995, the audited balance sheet of Continental
Credit Services Inc. and related companies as of September 30, 1995 and the
unaudited balance sheet of A.M. Miller & Associates Inc. as of September 30,
1995, and the related statements of income and cash flow for the periods covered
thereby. Such balance sheets and statements present fairly in all material
respects, and in the case of OSI Holdings and Continental Credit Services Inc.
in accordance with generally accepted accounting principles ("GAAP")
consistently applied throughout the periods involved, the consolidated financial
position of OSI Holdings and of A.M. Miller & Associates Inc. and Continental
Credit Services Inc. as at their respective dates and the results of operations
and the cash flow of such companies for such periods. Except as disclosed in
such balance sheets or statements, OSI Holdings and its subsidiaries (taken as a
whole) have no material liabilities, contingent or otherwise, nor were there any
material unrealized or anticipated losses of OSI Holdings and its subsidiaries
(taken as a whole) as of the date hereof. Since the date of such financial
statements, there has been no Material Adverse Change for OSI Holdings and its
subsidiaries, taken as a whole.
ss.6.6 No Violations. None of the Purchasers nor any of their
respective subsidiaries is in violation of its Certificate of Incorporation or
By-laws or in default in the performance or observance of any obligation,
agreement, covenant or condition contained in any indenture, mortgage, deed of
trust, loan agreement, lease or other agreement or instrument to which it is a
party or by which it or any of its properties may be bound except for such
defaults as would not individually or in the aggregate have a Material Adverse
Effect upon OSI Holdings and its subsidiaries taken as a whole.
ss.6.7 Litigation. There are no legal or governmental proceedings
pending to which any of the Purchasers or any of their respective subsidiaries
is a party or of which any property of any of the Purchasers or any of their
respective subsidiaries is the subject which, if determined adversely to any of
the Purchasers or any of their respective subsidiaries, would individually or in
the aggregate have a Material Adverse Effect on OSI Holdings and its
subsidiaries taken as a whole; and, to the best of each Purchaser's knowledge,
no such proceedings are threatened or contemplated by governmental authorities
or threatened by others.
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ss.6.8 Accuracy and Completeness of Information. All written
information, reports and other papers and data furnished to Goldman Sachs by, on
behalf of, or at the direction of, any Purchaser or any subsidiary thereof were,
at the time the same were so furnished, complete and correct in all material
respects, to the extent necessary to give Goldman Sachs a true and accurate
knowledge of the subject matter. No document furnished or written statement made
to Goldman Sachs in connection with the negotiation, preparation of execution of
this Agreement contains or will contain any untrue statement of a fact material
to any Purchasers or omits or will omit to state a material fact necessary, in
light of the circumstances under which they were given, in order to make the
statements contained therein not misleading.
ss.6.9 Investment Company Act. None of the Purchasers is and, after
giving effect to the transactions contemplated hereby, none of the Purchasers
will be an "investment company" or an entity "controlled" by an "investment
company", as such terms are defined in the Investment Company Act of 1940, as
amended.
ARTICLE VII
OTHER AGREEMENTS
ss.7.1 Devotion of Resources. Exclusive Right to Purchase Portfolios. (a)
For a period of three years from the date hereof and so long as no event
specified in Schedule II attached hereto shall have occurred and be continuing,
Goldman Sachs agrees that it will cause its Mortgage Securities Department to
use its reasonable best efforts to find opportunities to purchase Charged Off
Loan Portfolios from consumer finance companies, banks, thrifts and retailers
that are in the business of providing consumer credit in order to assist API and
its affiliates in sourcing Charged-Off Loan Portfolio purchasing opportunities.
(b) In addition, for a period of three years from the date hereof and
so long as no event specified in Schedule II attached hereto shall have occurred
and be continuing, Goldman Sachs will provide API and its affiliates with the
exclusive opportunity, on not less than 15 days written notice, to purchase any
portfolios of Charged-Off Loans sourced, directly or indirectly, by Goldman
Sachs Mortgage Securities Department, except that such opportunity shall be
non-exclusive on no less favorable terms than may be offered to other customers
of the Goldman Sachs Mortgage Securities Department if Goldman Sachs is acting
as financial advisor to the seller of such Charged-Off Loan Portfolio or
otherwise may be deemed to have a legal duty to such seller to offer such
opportunities to others. For purposes of this Section 7.1(b), API shall be
deemed to have received the exclusive opportunity to purchase a Charged-Off Loan
Portfolio if it shall have received written notice of such opportunity
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at least 15 days before the Goldman Sachs Mortgage Securities Department shall
make such opportunity known to any of its other clients. Purchasers understand
and agree, however, that nothing herein shall obligate Goldman Sachs to cause
any prospective seller of a Charged-Off Loan Portfolio to make such opportunity
available to API on an exclusive basis for any period of time nor shall Goldman
Sachs be obligated to prevent any seller from independently offering such
opportunity to other prospective purchasers, including prospective purchasers
who may be customers or clients of Goldman Sachs.
ss.7.2 Participation Rights. In consideration of the transactions
contemplated hereby, API and its affiliates will, for a period of three years
from the date hereof and so long as Goldman Sachs shall be obligated to perform
the services contemplated by Section 7.1, provide the Seller with the
opportunity to purchase, on the same terms and conditions as API on not less
than 30 days prior written notice, up to a 25% participation interest in all
GS-Sourced Portfolio purchases by API or its affiliates in excess of $5,000,000
per year; provided that it is understood that any portfolio of Charged-Off Loans
purchased by API or its affiliates from Bally's Health and Tennis Corporation
shall not be deemed to be GS-Sourced Portfolios and therefore would not be
counted in calculating the $5,000,000 of GS-Sourced Portfolio purchases. Such
participations will be offered pursuant to, and in the form of, a participation
agreement along with a related servicing agreement and collateral assignments,
each in the form attached hereto as Exhibits V, VI, VII and VIII, respectively.
Without limiting the generality of the foregoing, the parties understand and
agree that (i) Goldman Sachs's right to a 25% participation interest shall apply
to each dollar of GS-Sourced Portfolios that API and its affiliates purchase in
any year in excess of the $5,000,000 threshold so that, for instance, if API
purchases a $2,000,000 GS-Sourced Portfolio, having previously purchased in such
year $4,000,000 of GS-Sourced Portfolios, Goldman Sachs shall be entitled to
purchase a $250,000 undivided participation interest in such $2,000,000
portfolio and (ii) "per year" means in each of the one-year periods ending on
each of the first three anniversaries of the date of this Agreement.
ss.7.3 Termination of Letter Agreement Obligations. In consideration of the
transactions contemplated hereby, each of APLP and Goldman Sachs agree that the
obligations of each such party pursuant to each of the respective Letter
Agreements dated June 29, 1994 and September 8, 1994 (collectively the "Letter
Agreements") between such parties shall be terminated and shall be of no further
force and effect.
ss.7.4 Release of Claims. Each party hereto hereby releases and discharges
every other party hereto and all of such other party's officers, directors,
employees, agents, affiliates, successors and assigns from any and all claims,
causes of action and liabilities, known or unknown which any of them ever had or
now have, arising out of or resulting from the Interests or the Letter
Agreements, except with respect to the
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representations, warranties, covenants, agreements and other terms and
conditions of this Agreement.
ARTICLE VIII
MISCELLANEOUS
ss.8.1 Survival of Representations and Warranties. The representations and
warranties of the parties contained herein shall survive the consummation of the
transactions contemplated by this Agreement.
ss.8.2 Expenses. Each of the parties hereto shall pay their own expenses
relating to the transactions contemplated by this Agreement, including, without
limitation, the fees and expenses of their respective counsel.
ss.8.3 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
ss.8.4 Jurisdiction. The Seller and the Purchasers each hereby irrevocably:
(a) submits to the non-exclusive jurisdiction of any court of the State of New
York sitting in Manhattan and the federal courts of the United States of America
for the Southern District of New York for the purpose of any action or
proceeding relating to this Agreement; (b) waives, to the fullest extent
permitted by law, the defense of an inconvenient forum in any action or
proceeding in any such New York State or federal court; (c) agrees that a final
judgment in any action or proceeding in any such court shall be conclusive and
may be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law; (d) consents to service of process upon it by mailing a
copy thereof by certified or registered mail addressed to it as provided for
notices hereunder; and (e) to the extent that it or its properties have or
hereafter may acquire immunity (sovereign or otherwise) from jurisdiction of any
court or from any legal process (whether through service or notice, attachment
prior to judgment, attachment in aide of execution, execution or otherwise),
waives such immunity in respect of its obligations under this Agreement.
ss.8.5 Notices. All notices pursuant to this Agreement shall be given in
writing hand-delivered or mailed or sent by facsimile transmission to the
address or facsimile number (as the case may be) specified for the intended
recipient on Schedule III attached hereto, or to such other address or number as
the intended recipient may have designated by notice to the other party. All
such notices shall be effective upon receipt.
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ss.8.6 Captions. The Article and Section captions used herein are for
reference purposes only, and shall not in any way affect the meaning or
interpretation of this Agreement.
ss.8.7 Parties in Interest. This Agreement may not be transferred,
assigned, pledged or hypothecated by any party hereto, other than by operation
of law. This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective heirs, executors, administrators,
successors and permitted assigns.
ss.8.8 Counterparts. This Agreement may be executed in two or more
counterparts, all of which taken together shall constitute one instrument.
ss.8.9 Entire Agreement. This Agreement, including the other documents
referred to herein or which form a part hereof, contains the entire
understanding of the parties hereto with respect to the subject matter contained
herein and therein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
ss.8.10 Amendments. This Agreement may not be changed orally, but only by
an agreement in writing signed by the parties hereto.
ss.8.11 Severability. In case any provision in this Agreement shall be held
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions hereof will not in any way be affected or impaired
thereby.
ss.8.12 Third Party Beneficiaries. Each party hereto intends that this
Agreement shall not benefit or create any right or cause of action in or on
behalf of any Person other than the parties hereto.
ss.8.13 Transfer Taxes. All sales, value added, use, transfer,
registration, stamp, documentary and similar taxes imposed in connection with
the sale of the Interests or any other transaction which occurs pursuant to this
Agreement shall be borne equally by the Purchasers, on the one hand, and by the
Seller, on the other hand.
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<PAGE>
IN WITNESS WHEREOF, each of the parties have duly executed this Agreement,
all as of the day and year first above written.
OSI HOLDINGS CORP.
By: /s/ David E. King
------------------------------
Name: David E. King
Title: President
ACCOUNT PORTFOLIOS, INC.
By: /s/ David E. King
------------------------------
Name: David E. King
Title: President
ACCOUNT PORTFOLIOS, L.P.
By: Account Portfolios G.P., Inc.,
its general partner
By: /s/ David E. King
------------------------------
Name: David E. King
Title: President
GULF STATE CREDIT, L.P.
By: Account Portfolios G.P., Inc.,
its general partner
By: /s/ David E. King
------------------------------
Name: David E. King
Title: President
PERIMETER CREDIT, L.P.
By: Account Portfolios G.P., Inc.,
its general partner
By: /s/ David E. King
------------------------------
Name: David E. King
Title: President
<PAGE>
MLQ INVESTORS, L.P.
By: MLQ, INC.
By: /s/ Peter T. Cirenza
------------------------------
Name: Peter T. Cirenza
Title: Vice President
MTGLQ INVESTORS, L.P.
By: MTGLQ INC.
By: /s/ Peter T. Cirenza
------------------------------
Name: Peter T. Cirenza
Title: Vice President
<PAGE>
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
OUTSOURCING SOLUTIONS INC.
FIRST: The name of the Corporation is:
Outsourcing Solutions Inc.
SECOND: The registered office of the Corporation in the State of Delaware
is 1013 Centre Road, Wilmington, Delaware 19805, County of New Castle.
The name of its registered agent in the State of Delaware at such address
is The Prentice-Hall Corporation System, Inc.
THIRD: The purpose of the Corporation is to engage, directly or indirectly,
in any lawful act or activity for which corporations may be organized under the
General Corporation Law of the State of Delaware as from time to time in effect.
FOURTH: The total number of shares which the Corporation shall have the
authority to issue is 18,000,000 shares of capital stock as follows: 1,000,000
shares of Preferred Stock, no par value (the "Preferred Stock"), 7,500,000
shares of Voting Common Stock, par value $.01 per share (the "Voting Common
Stock"), 7,500,000 shares of Class A Non-Voting Common Stock, par value $.01 per
share (the "Class A Non-Voting Common Stock"), 500,000 shares of Class B
Non-Voting Stock, par value $.01 per share (the "Class B Non-Voting Common
Stock") and 1,500,000 shares of Class C Non-Voting Common Stock, par value $.01
per share (the "Class C Non-Voting Common Stock", and together with the Class A
Non-Voting Common Stock and the Class B Non-Voting Common Stock, the "Non-Voting
Common Stock", and the Non-Voting Common Stock, together with the Voting Common
Stock, the "Common Stock"). The Preferred Stock shall be designated "8%
Non-Voting Cumulative Redeemable Exchangeable Preferred Stock." Each share of
Preferred Stock is hereafter referred to as a "Preferred Share" and collectively
as "Preferred Shares". Each share of Voting Common Stock is hereafter referred
to as a "Voting Common Share" and collectively as "Voting Common Shares". Each
share of Class A Non-Voting Common Stock is hereafter referred to as a "Class A
Non-
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Voting Common Share" and collectively as "Class A Non-Voting Common Shares".
Each share of Class B Non-Voting Common Stock is hereafter referred to as a
"Class B Non-Voting Common Share" and collectively as "Class B Non-Voting Common
Shares". Each share of Class C Non-Voting Common Stock is hereafter referred to
as a "Class C Non-Voting Common Share" and collectively as "Class C Non-Voting
Common Shares". Each share of Non-Voting Common Stock is hereafter referred to
as a "Non-Voting Common Share" and collectively as "Non-Voting Common Shares".
The Voting Common Shares and Non-Voting Common Shares are hereafter collectively
referred to as "Common Shares". The voting powers, designations, preferences and
relative participating, optional or other special rights, and qualifications, or
restrictions thereof, of each of the above classes of capital stock are as
follows:
A. Preferred Stock.
1. Voting Rights
The record holders of the issued and outstanding shares of Preferred
Stock shall have no voting rights, unless (and then only to the extent)
otherwise expressly provided by law.
2. Dividend Rights
(a) The record holders shall be entitled to receive in preference to
all other shareholders, when, as and if declared by the Corporation's Board of
Directors or a duly authorized committee thereof, out of funds legally available
for the payment thereof, fully cumulative dividends at the annual rate of eight
percent (8%) of the Liquidation Preference (as defined below in Section 3), such
dividends to be payable in equal semi-annual installments of Fifty Cents ($.50)
per Preferred Share on the day immediately succeeding the last day of a Payment
Period (as such term is defined below in paragraph (e) of this Section 2)
(except that if any such date is a Saturday, Sunday or legal holiday, then such
dividends shall be payable on the next day that is not a Saturday, Sunday or
legal holiday) (each a "Dividend Payment Date"); provided, however, the
Corporation may, at its sole option, pay any dividends due on each Dividend
Payment Date in additional shares of Preferred Stock (such dividends paid in
kind being herein referred to as "PIK Dividends").
(b) PIK Dividends shall be paid by delivering to the record holders of
Preferred Stock a number of shares of Preferred Stock determined by dividing the
amount of the PIK
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Dividend Payment which otherwise would be payable on the Dividend Payment Date
to each respective holder in cash (rounded to the nearest whole cent) by the
Liquidation Preference per share. The issuance of any such PIK Dividend in such
amount shall constitute full payment of such dividend. Fractional shares of
Preferred Stock payable as PIK Dividends shall be paid in cash by the
Corporation. Any additional shares of Preferred Stock issued pursuant to this
section shall be subject in all respects, except as to issue date and the date
from which dividends accrue and cumulate as set forth below, to the same terms
as the shares of Preferred Stock originally issued hereunder.
(c) Dividends shall accrue (whether or not declared by the Board of
Directors) during each Payment Period and be fully cumulative from the first day
of each Payment Period to the last day of such Payment Period. In the case of
Preferred Shares issued and/or accumulated as a PIK Dividend, dividends shall
accrue (whether or not declared by the Board of Directors) and be fully
cumulative from the Dividend Payment Date in respect of which such shares were
issued as a dividend. Dividends shall be paid to the holders of record of
Preferred Shares at the close of business on the date specified by the Board of
Directors of the Corporation or a duly authorized committee thereof at the time
such dividend is declared in accordance with the Delaware General Corporation
Law (each of such dates being a "Record Date"). A Record Date shall not be more
than sixty (60) days prior to the applicable Dividend Payment Date. All
dividends (whether payable in cash or in whole or in part in PIK Dividends) paid
pursuant to this paragraph shall be paid in equal pro rata proportions of such
cash and/or PIK Dividends to the holders entitled thereto, except with respect
to cash payable in lieu of PIK Dividends otherwise payable in fractional shares
as described above.
(d) The Corporation shall not (i) declare, pay or set aside for
payment any dividend or other distribution in respect of its Junior Stock (as
defined below), or (ii) call for redemption, redeem, purchase or otherwise
acquire for any consideration any shares of its Junior Stock, unless, so long as
any Preferred Shares are outstanding, all dividends accrued and unpaid with
respect to the Preferred Shares for all Dividend Payment Periods ending on or
prior to the date of payment of such dividends or other distributions on or
redemptions of Junior Stock shall have been authorized, declared and paid and
all obligations of the Corporation to purchase Preferred Shares pursuant to this
paragraph have been fully satisfied. "Junior Stock" means Common Stock and
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any other series of preferred stock of the Corporation which ranks junior to or
on a parity with the Preferred Shares.
(e) The term "Payment Period" shall mean the six-month period
commencing on September 21, 1995 and each six-month period thereafter during
which any Preferred Shares are issued and outstanding.
3. Rights on Liquidation and Ranking
In the event of the liquidation, dissolution or winding-up of the
Corporation, whether voluntary or involuntary (each a "Liquidation"), each
holder of a Preferred Share shall be entitled to receive with respect to such
Preferred Share, before any distribution is made to or set aside for the holders
of Junior Stock out of the assets of the Corporation, whether such assets are
stated capital or surplus of any nature, an amount equal to Twelve Dollars and
Fifty Cents ($12.50) per Preferred Share (the "Liquidation Preference"), plus
all dividends accrued and unpaid on such Preferred Share on the date of final
distribution to such holder, whether or not authorized or declared, before any
assets shall be distributed to the holders of Junior Stock. If the assets of the
Corporation available for distribution to holders shall be insufficient to
permit the payment in full of the amount due the holders pursuant to this
Paragraph 3, all assets of the Corporation available for distribution to holders
shall be distributed pari passu among the holders. The fair market value of any
assets of the Corporation and the proportion of cash and other assets
distributed by the Corporation to the holders shall be reasonably determined in
good faith by a vote of the Board of Directors of the Corporation. Except as
provided in this paragraph, the holders of Preferred Shares shall not be
entitled to any distribution in the event of a Liquidation. For the purposes of
this paragraph, neither the consolidation or merger of the Corporation into or
with another corporation, nor the sale of all or substantially all of the assets
of the Corporation to another corporation or any other entity shall be deemed a
liquidation, dissolution or winding-up of the affairs of the Corporation.
4. Redemption Rights
(a) To the extent that the Corporation shall have funds legally
available therefor, the Corporation may, at its option, at any time and from
time to time, redeem all or any portion of the outstanding Preferred Shares
(each a
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"Redemption") for a sum equal to Twelve Dollars and Fifty Cents ($12.50) per
Preferred Share plus an amount in cash equal to all accrued and unpaid dividends
on such shares through the date fixed by the Board of Directors for such
redemption (a "Redemption Date"), whether or not authorized and declared (such
sum being referred to as the "Redemption Price").
(b) Notice of Redemption. Not more than sixty (60) nor less than ten
(10) days prior to the Redemption Date, the Corporation shall give written
notice ("Redemption Notice") of a Redemption specifying the date of such
Redemption, to each holder of Preferred Shares to be redeemed at its address as
it appears on the stock records of the Corporation by deposit thereof in first
class U.S. mail, postage prepaid. The Corporation shall transfer to an account
designated by each holder of a Preferred Share to be redeemed the Redemption
Price thereof by wire transfer in immediately available funds upon receipt by
the Corporation at its principal office of a certificate representing the
applicable Preferred Share (or, at the option of such holder, an affidavit of
lost certificate and indemnity therefor) duly endorsed in blank for transfer to
the Corporation.
(c) Selection of Shares. The Corporation shall select the Preferred
Shares to be redeemed in any Redemption in which not all Preferred Shares are
able to be redeemed pursuant to this paragraph so that the Preferred Shares of
each holder selected for Redemption shall bear the same proportion to the total
Preferred Shares owned by that holder as the proportion of all Preferred Shares
selected for Redemption bears to the total of all then outstanding Preferred
Shares, but adjusted as determined by the Board of Directors to avoid the
redemption of fractional Preferred Shares. Notice having been given as provided
above, if, on the date fixed for Redemption, funds necessary for the redemption
shall be available therefor and shall have been irrevocably deposited or set
aside in trust for the holders of the Preferred Shares, then, notwithstanding
that the certificates representing any shares so called for redemption shall not
have been surrendered, dividends with respect to the shares so called shall
cease to accrue after the date fixed for redemption, such shares will no longer
be deemed outstanding, the holders thereof shall cease to be stockholders of the
Corporation and all rights whatsoever with respect to the shares so called for
redemption (except the right of the holders to receive the Redemption Price
without interest upon surrender of their certificates therefor) shall terminate.
If funds legally available for
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<PAGE>
such purpose are not sufficient for redemption of the Preferred Shares to be
redeemed pursuant to a Redemption, then the certificates representing such
shares shall be deemed not to be surrendered, such shares shall remain
outstanding and the rights of holders of shares of Preferred Stock thereafter
shall continue to be only those of a holder of Preferred Shares. Should any
Preferred Shares required to be redeemed under the terms of any redemption not
be redeemed solely by reason of limitations imposed by law, the applicable
Preferred Shares shall be redeemed on the earliest possible date thereafter that
the applicable Preferred Shares may be redeemed to the maximum extent permitted
by law. Except as set forth above, the Board of Directors shall prescribe the
manner in which any Redemption shall be effected.
5. Exchange of Preferred Stock.
(a) Each holder of Preferred Shares shall have the right, at its
option, at any time after September 20, 1996, to exchange any or all of the
Preferred Shares held by them for the same number of Common Shares. Each
exchange of Preferred Shares for Common Shares shall be effected by the
surrender of the certificates representing the shares to be exchanged at the
principal office of the Corporation at any time during normal business hours,
together with a written notice by the holder of such Preferred Shares, stating
that such holder desires to exchange the Preferred Shares, or a stated number of
Preferred Shares, represented by such certificate or certificates into Common
Shares. Such exchange will be deemed to have been effected as of the close of
business on the date on which the certificate or certificates representing the
Preferred Shares to be exchanged have been surrendered at the principal office
of the Corporation, and at such time the rights of the holders of the exchanged
Preferred Shares will cease and the person or persons in whose name or names the
certificate or certificates for Common Shares are to be issued upon such
exchange will be deemed to have become the holder or holders of record of the
shares of Common Stock represented thereby. Promptly after such surrender and
the receipt of such written notice, the Corporation will issue and deliver in
accordance with the surrendering holder's instructions (a) the certificate or
certificates for the Common Shares issuable upon such exchange and (b) a
certificate representing any Preferred Shares which were represented by the
certificate or certificates delivered to the Corporation in connection with such
exchange but which were not exchanged.
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(b) The Corporation shall at all times reserve and keep available, out
of its authorized but unissued capital stock, solely for the purpose of
effecting the exchange of the Preferred Stock, a full number of shares of Common
Stock then issuable upon the exchange of all outstanding Preferred Stock. Upon
the exchange of any Preferred Shares, such Preferred Shares shall be retired and
shall not be reissued.
6. Ranking of Stock of the Corporation. Any stock of any class or
classes of the Corporation shall be deemed to rank:
(a) On a parity with the Preferred Shares, either as to dividends
or upon liquidation, whether or not the dividend rates, dividend
payment dates or redemption or liquidation prices per share or sinking
fund provisions, if any, are different from those of the Preferred
Shares, if the holders of such stock shall be entitled to the receipt
of dividends or of amounts distributable upon Liquidation in
proportion to their respective dividend rates or liquidation prices,
without preference or priority, one over the other, as between the
holders of such stock and the holders of the Preferred Stock; and
(b) Junior to the Preferred Shares, either as to dividends or
upon liquidation, if such class shall be Common Stock or if the
holders of the Preferred Stock shall be entitled to receipt of
dividends or of amounts distributable upon Liquidation or upon
redemption, as the case may be, in preference or priority to the
holders of shares of such class or classes.
7. Transfers of Preferred Shares. The Preferred Shares may not be
sold, assigned or transferred by the holders without the prior written consent
of the Corporation and each holder of Preferred Shares, and by acceptance of any
Preferred Shares, the holder agrees not to sell, assign or transfer such shares
without such consent.
B. Common Stock.
1. Dividend Rights. Subject to the preferential rights of the
Preferred Shares, the Board of Directors of the Corporation may, in its
discretion, out of funds legally available for the payment of dividends and at
such times and in such manner as determined by the Board of Directors, declare
and pay dividends on the Common Shares of the Corporation.
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<PAGE>
No dividend (other than a dividend in capital stock ranking on a
parity with the Common Shares or cash in lieu of fractional shares with respect
to such stock dividend) shall be declared or paid on any share or shares of any
class of stock or series thereof ranking on a parity with the Common Shares in
respect of payment of dividends for any dividend period unless there shall have
been declared, for the same dividend period, like proportionate dividends on all
shares of Common Shares then outstanding.
As and when dividends are declared or paid thereon, whether in cash,
property or securities of the Corporation, the holders of the Voting Common
Shares and of the Non-Voting Common Shares will be entitled to share ratably, on
a share for share basis, in such dividends, provided, that (i) if dividends are
declared which are payable in Voting Common Shares or Non-Voting Common Shares,
dividends will be declared which are payable at the same rate on both classes of
stock and the dividends payable in Voting Common Shares will be payable to
holders of such shares and the dividends payable in Non-Voting Common Shares
will be payable to holders of such shares and (ii) if the dividends consist of
other voting securities of the Corporation, (a) the Corporation will make
available to each holder of Class A Non-Voting Common Shares, at such holder's
request, dividends consisting of non-voting securities of the Corporation which
are otherwise identical to the voting securities and which are convertible into
or exchangeable for such voting securities on the same terms as the Class A
Non-Voting Common Shares are convertible into Voting Common Shares, (b) the
Corporation will make available to each holder of Class B Non-Voting Common
Shares, at such holder's request, dividends consisting of non-voting securities
of the Corporation which are otherwise identical to the voting securities and
which are convertible into or exchangeable for such voting securities on the
same terms as the Class B Non-Voting Common Shares are convertible into Voting
Common Shares, and (c) the Corporation will make available to each holder of
Class C Non-Voting Common Shares, at such holder's request, dividends consisting
of non-voting securities of the Corporation which are otherwise identical to the
voting securities and which are convertible into or exchangeable for such voting
securities on the same terms as the Class C Non-Voting Common Shares are
convertible into Voting Common Shares.
2. Rights on Liquidation. In the event of any liquidation,
dissolution, distribution of assets or winding up of the Corporation, whether
voluntary or involuntary (collectively, a "Liquidation"), after payment or
provision
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for payment of the debts and other liabilities of the Corporation and the
setting aside for payment of any preferential amount due to the holders of any
other class or series of stock (including, without limitation, the holders of
Preferred Shares), the holders of Common Shares (including, without limitation,
the Voting Common Shares and the Non-Voting Common Shares) and any other class
of stock or series thereof ranking on a parity with the Common Shares in respect
of distributions on Liquidation shall be entitled to receive ratably on a share
for share basis, any or all assets remaining to be paid or distributed.
3. Voting Rights. Except as may be otherwise required by law, all
voting rights shall be vested in the Voting Common Shares and each holder of
Voting Common Shares shall have one vote in respect of each Voting Common Share
held by such holder on all matters to be voted upon by the stockholders of the
Corporation. The holders of the NonVoting Shares will have no right to vote on
any matters to be voted on by the stockholders of the Corporation; provided,
that the holders of the Non-Voting Common Shares shall have the right to vote as
a separate class on (i) any merger, consolidation, recapitalization or
reconsolidation of the Corporation that would adversely affect the rights and
preferences of the Non-Voting Common Shares in a manner which does not affect
all holders of Common Shares equally, (ii) any amendment to this Amended and
Restated Certificate of Incorporation or the By-Laws of this Corporation, as
such may be amended from time to time, that would adversely affect the rights
and preferences of the holders of Non-Voting Common Shares in a manner which
does not affect all holders of Common Shares equally and (iii) any other matter
on which the Non-Voting Common Shares are required to vote as a class pursuant
to the General Corporation Law of the State of Delaware.
4. Conversion.
(a) Conversion of Class A Non-Voting Common Shares; Voting Common Shares.
Each record holder of Voting Common Shares is entitled to convert any or all of
such holder's Voting Common Shares into the same number of Non-Voting Common
Shares and each record holder of Class A Non-Voting Common Shares is entitled to
convert any or all of such holder's Class A Non-Voting Common Shares into the
same number of Voting Common Shares or other Non-Voting Common Shares, in each
case upon one (1) business day's written notice to the Corporation by any such
record holder specifying the number of Class A Non-Voting Common Shares to
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be so converted. Upon receipt of such notice, the Corporation shall take all
such action as is necessary to effect such conversion in a timely manner.
Notwithstanding the failure of the Corporation to take any action required by
the preceding sentence, the conversion shall be deemed effective at 5:00 p.m.
Atlanta, Georgia time on the business day following the giving of such notice
and the Voting Shares or Class A Non-Voting Shares so converted will be deemed
to be in all respects Non-Voting Shares or Voting Shares, as the case may be, of
the Corporation with all privileges appurtenant thereto.
(b) Conversion of Class B Non-Voting Stock.
(i) In connection with the occurrence (or the expected occurrence) of any
Class B Conversion Event (as defined below), each holder of Class B Non-Voting
Common Shares shall be entitled to convert into an equal number of shares of
Voting Common Shares any or all of the shares of such holder's Class B
Non-Voting Common Shares being distributed, disposed of or sold by such holder
in such Class B Conversion Event.
(ii) For purposes of this Section 4(b), "Class B Conversion Event" shall
mean (A) any public offering or public sale of the Common Stock of the
Corporation (including a public offering registered under the Securities Act of
1933 (the "1933 Act") or a public sale pursuant to Rule 144 of the Securities
and Exchange Commission or any similar rule then in force); (B) any sale of
Class B Non-Voting Common Shares to a person or a group of persons (within the
meaning of the Securities Exchange Act of 1934, as amended (the "1934 Act") or
the Bank Holding Company Act of 1956, as amended (the "BHC Act")), provided that
(1) such sale does not constitute more than two percent (2%) of any class of
voting securities of the Corporation and (2) such person or group of persons
does not own, control or have the right to acquire five percent (5%) or more of
any class of voting securities of the Corporation as a result of such sale; (C)
any sale of Class B Non-Voting Shares to a person or group of persons by a
holder of Class B Non-Voting Common Shares if such person or group of persons
already owns or has negotiated to purchase at least a majority of the Common
Stock without reliance on such sale; or (D) a sale of the securities of the
Corporation by the MDC Entities (as such term is defined below) pursuant to the
provisions of Section 2.3 of the Amended and Restated Stockholders Agreement,
dated as of February 16, 1996, by and among the Corporation and the stockholders
party thereto. Notwithstanding anything in the foregoing to the contrary, no
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sale which would otherwise constitute a Class B Conversion Event pursuant to
this clause (D) shall constitute a Class B Conversion Event if such sale is to
the MDC Entities and their Related Persons or if any sale of the Class B
NonVoting Shares in connection with such sale violates any applicable laws or
regulations, including, without limitation, Section 4 of the BHC Act and any
regulations or orders issued by the Board of Governors of the Federal Reserve
System thereunder. For purposes of this paragraph, the term (1) "MDC Entities"
shall mean, collectively, McCown De Leeuw & Co. III, L.P., a California limited
partnership, McCown De Leeuw & Co. Offshore (Europe) III, L.P., a Bermuda
limited partnership, McCown De Leeuw & Co. III (Asia), L.P., a Bermuda limited
partnership, and Gamma Fund, LLC, a California limited liability company, (2)
"Related Person" shall mean with respect to any person which is a partnership,
any partnership with the same controlling general partner as such person and any
of the partners of such person which receive capital stock of the Corporation
upon a distribution to any such partners by any such person, and with respect to
any person which is a corporation or limited liability company, any Affiliate of
such person so long as such Affiliate is a partnership, a corporation, a limited
liability company or a trust and (3) "Affiliate" shall mean, with respect to any
person, any other person directly or indirectly controlling or controlled by or
under direct or indirect common control with such specified person.
(iii) Each holder of Class B Non-Voting Common Shares shall be entitled to
convert shares of Class B Non-Voting Common Stock into an equal number of shares
of Voting Common Stock in connection with any Class B Conversion Event if such
holder reasonably believes that such Class B Conversion Event shall be
consummated, and a written request for conversion from any holder of Class B
Non-Voting Common Shares to the Corporation stating such holder's reasonable
belief that a Class B Conversion Event shall occur shall be conclusive and shall
obligate the Corporation to effect such conversion in a timely manner so as to
enable each such holder to participate in such Class B Conversion Event. The
Corporation shall not cancel the Class B Non-Voting Common Shares so converted
before the tenth day following such Class B Conversion Event and shall reserve
such shares until such tenth day for reissuance in compliance with the next
sentence. If any Class B Non-Voting Common Shares are converted into Voting
Common Shares in connection with a Class B Conversion Event and such Voting
Comon Shares are not actually distributed, disposed of or sold in such Class B
Conversion Event, such Voting Common Shares shall be promptly
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converted back into the same number of Class B Non-Voting Common Shares.
(c) Conversion of Class C Non-Voting Common Stock.
(i) In connection with the occurrence (or the expected occurrence of any
Class C Conversion Event, each holder of Class C Non-Voting Common Shares shall
be entitled to convert into an equal number of shares of Voting Common Stock any
or all of the shares of such holder's Class C Non-Voting Common Stock being
distributed, disposed of or sold by such holder in connection with such Class C
Conversion Event.
(ii) For purposes of this Section 4(c), a "Class C Conversion Event" shall
mean (a) any public offering or public sale of the Common Stock of the
Corporation (including a public offering registered under the 1933 Act or a
public sale pursuant to Rule 144 of the Securities and Exchange Commission or
any similar rule then in force), (b) any sale of the securities of the
Corporation to a person or group of persons (within the meaning of the 1934 Act,
if, after such sale, such person or group of persons in the aggregate would own
or control securities which possess in the aggregate the ordinary voting power
to elect a majority of the Corporation's directors, provided that such sale has
been approved by the Corporation's Board of Directors or a committee thereof,
(c) a merger, consolidation or similar transaction involving the Corporation if,
after such transaction, a person or group of persons (within the meaning of the
1934 Act) would own or control securities which possess in the aggregate the
ordinary voting power to elect a majority of the surviving corporation's
directors, provided that such transaction has been approved by the Corporation's
Board of Directors or a committee thereof, and (d) a sale of the securities of
the Corporation by the MDC Entities (as such term is defined in clause (b)(ii)
above pursuant to the provisions of Section 2.3 of the Amended and Restated
Stockholders Agreement, dated as of February 16, 1996, by and among the
Corporation and the stockholders party thereto. Notwithstanding anything in the
foregoing to the contrary, no sale which would otherwise constitute a Class C
Conversion Event pursuant to clauses (b), (c) or (d) above shall constitute a
Class C Conversion Event if such sale is to the MDC Entities and their Related
Persons. For purposes of this paragraph, the term (A) "person" shall include any
natural person and any corporation, partnership, joint venture, trust,
unincorporated organization and any other entity or organization, (B) "Related
Person" shall have the meaning assigned to such term in clause (b)(ii) above,
and (C)
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"Affiliate" shall have the meaning assigned to such term in clause (b)(ii)
above.
(iii) Each holder of Class C Non-Voting Common Shares shall be entitled to
convert shares of Class C Non-Voting Common Stock into an equal number of shares
of Voting Common Stock in connection with any Class C Conversion Event if such
holder reasonably believes that such Class C Conversion Event shall be
consummated, and a written request for conversion from any holder of Class C
Non-Voting Common Stock to the Corporation stating such holder's reasonable
belief that a Class C Conversion Event shall occur shall be conclusive and shall
obligate the Corporation to effect such conversion in a timely manner so as to
enable each such holder to participate in a Class C Conversion Event. The
Corporation shall not cancel the shares of Class C Non-Voting Common Stock so
converted before the tenth day following such Class C Conversion Event and shall
reserve such shares until such tenth day for reissuance in compliance with the
next sentence. If any Class C Non-Voting Common Shares are converted into Voting
Common Stock in connection with a Class C Conversion Event and such shares of
Voting Common Stock are not actually distributed, disposed of or sold in such
Class C Conversion Event, such shares of Voting Common Stock shall be promptly
converted back into the same number of shares of Class C Non-Voting Common
Stock.
(d) Conversion Procedure.
(i) Unless otherwise provided herein, each conversion of shares of one
class of Common Stock into shares of the other class of Common Stock will be
effected by the surrender of the certificate or certificates representing the
Common Shares to be converted at the principal office of the Corporation at any
time during normal business hours, together with a written notice by the holder
of such Common Shares stating that such holder desires to convert such Common
Shares, or a stated number of such Common Shares, represented by such
certificate(s) into shares of the other class of Common Shares. Unless otherwise
provided herein, each conversion will be deemed to have been effected as of the
close of business on the date on which such certificate(s) have been surrendered
and such notice has been received, and at such time the rights of the holder of
the converted Voting Common Shares or Non-Voting Common Shares, as the case may
be, as such holder will cease and the person or persons in whose name or names
the certificate(s) for NonVoting Common Shares or Voting Common Shares are to be
issued upon such conversion will be deemed to have become the holder
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or holders of record of the Non-Voting Common Shares or Voting Common Shares
represented thereby.
(ii) Promptly after the surrender of certificates and the receipt of
written notice, the Corporation will issue and deliver in accordance with the
surrendering holder's instructions (a) the certificate(s) for the Voting Common
Shares or Non-Voting Common Shares issuable upon such conversion and (b) a
certificate representing any Voting Common Shares or Non-Voting Common Shares
that was represented by the certificate(s) delivered to the Corporation in
connection with such conversion but that was not converted.
(iii) The issuance of certificates for Voting Common Shares upon conversion
of Non-Voting Common Shares and for Non-Voting Common Shares upon conversion of
Voting Common Shares will be made without charge to the holders of such shares
for any issuance tax in respect thereof or other cost incurred by the
Corporation in connection with such conversion and the related issuance of
Voting Common Shares or Non-Voting Common Shares, as the case may be.
(iv) The Corporation will at all times reserve and keep available out of
its authorized but unissued Voting Common Shares and Class A Non-Voting Common
Shares, solely for the purpose of issuance upon the conversion of the Voting
Common Shares and the Class A Non-Voting Common Shares, respectively, such
number of Voting Common Shares and Class A Non-Voting Common Shares as are
issuable upon the conversion of all outstanding Voting Common Shares and Class A
Non-Voting Common Shares, respectively. All Common Shares which are so issuable
will, when issued, be duly and validly issued, fully paid and nonassessable and
free from all taxes, liens and charges. The Corporation will take all such
actions as may be necessary to assure that all such Common Shares may be so
issued without violation of any applicable law or governmental regulation or any
requirements of any domestic securities exchange upon which Common Shares may be
listed (except for official notices of issuance which will be immediately
transmitted by the Corporation upon issuance).
(v) The Corporation will not close its books against the transfer of Common
Shares in any manner which would interfere with the timely conversion of any
Common Shares.
5. Stock Splits. If the Corporation in any manner subdivides or
combines the outstanding shares of one class of Common Shares, the outstanding
shares of the other class of
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Common Shares will be proportionately subdivided or combined in a similar
manner.
6. Notices. All notices referred to in this Article FOURTH shall be in
writing, shall be delivered personally, by facsimile or by first class mail,
postage prepaid, and shall be deemed to have been given when so delivered or
mailed to the Corporation at its principal office and to any stockholder at such
holder's address as it appears in the stock records of the Corporation (unless
otherwise specified in a written notice to the Corporation by such holder).
7. Amendment and Waiver. No amendment or waiver of any provision of
paragraph 4 of this Article FOURTH, Section (B) or of this paragraph 7 shall be
effective without the prior approval of both the holders of a majority of the
Voting Common Shares then outstanding, voting as a separate class, and the
holders of a majority of the affected class or classes of Non-Voting Common
Shares then outstanding, each voting as a separate class.
FIFTH: The name and mailing address of the incorporator is as
follows:
Name Mailing Address
---- ---------------
James M. Cahillane 1155 Avenue of the Americas
New York, New York 10036
SIXTH: The business of the Corporation shall be managed under the
direction of the Board of Directors except as otherwise provided by law. The
number of Directors of the Corporation shall be fixed from time to time by, or
in the manner provided in, the By-Laws. Election of Directors need not be by
written ballot unless the By-Laws of the Corporation shall so provide.
SEVENTH: The Board of Directors may make, alter or repeal the By-Laws
of the Corporation except as otherwise provided in the By-Laws adopted by the
Corporation's stock- holders.
EIGHTH: The Directors of the Corporation shall be protected from
personal liability, through indemnification or otherwise, to the fullest extent
permitted under the General Corporation Law of the State of Delaware as from
time to time in effect.
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1. A Director of the Corporation shall under no circumstances have any
personal liability to the Corporation or its stockholders for monetary
damages for breach of fiduciary duty as a Director except for those
breaches and acts or omissions with respect to which the General
Corporation Law of the State of Delaware, as from time to time amended,
expressly provides that this provision shall not eliminate or limit such
personal liability of Directors. Neither the modification or repeal of this
paragraph 1 of Article EIGHTH nor any amendment to said General Corporation
Law that does not have retroactive application shall limit the right of
Directors hereunder to exculpation from personal liability for any act or
omission occurring prior to such amendment, modification or repeal.
2. The Corporation shall indemnify each Director and Officer of the
Corporation to the fullest extent permitted by applicable law, except as
may be otherwise provided in the Corporation's By-Laws, and in furtherance
hereof the Board of Directors is expressly authorized to amend the
Corporation's By-Laws from time to time to give full effect hereto,
notwithstanding possible self interest of the Directors in the action being
taken. Neither the modification or repeal of this paragraph 2 of Article
EIGHTH nor any amendment to the General Corporation Law of the State of
Delaware that does not have retroactive application shall limit the right
of Directors and Officers to indemnification hereunder with respect to any
act or omission occurring prior to such modification, amendment or repeal.
NINTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
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BY-LAWS
OF
OUTSOURCING SOLUTIONS INC.
ARTICLE I
STOCKHOLDERS
Section 1. Annual Meeting. The annual meeting of the stockholders of
the Corporation shall be held either within or without the State of Delaware, at
such place as the Board of Directors may designate in the call or in a waiver of
notice thereof, on the first Monday in May of each year beginning with the year
1996 (or if such day be a legal holiday, then on the next succeeding day not a
holiday) at 10 a.m., for the purpose of electing directors and for the
transaction of such other business as may properly be brought before the
meeting.
Section 2. Special Meetings. Special Meetings of the stockholders may
be called by the Board of Directors or by the President, and shall be called by
the President or by the Secretary upon the written request of the holders of
record of at least twenty-five per cent (25%) of the shares of stock of the
Corporation, issued and outstanding and entitled to vote, at such times and at
such place either within or without the State of Delaware as may be stated in
the call or in a waiver of notice thereof.
Section 3. Notice of Meetings. Notice of the time, place and purpose
of every meeting of stockholders shall be delivered personally or mailed not
less than ten days nor more than sixty days previous thereto to each stockholder
of record entitled to vote, at his post office address appearing upon the
records of the Corporation or at such other address as shall be furnished in
writing by him to the Corporation for such purpose. Such further notice shall be
given as may be required by law or by these ByLaws. Any meeting may be held
without notice if all stockholders entitled to vote are present in person or by
proxy,
<PAGE>
or if notice is waived in writing, either before or after the meeting, by those
not present.
Section 4. Quorum. The holders of record of at least a majority of the
shares of the stock of the Corporation, issued and outstanding and entitled to
vote, present in person or by proxy, shall, except as otherwise provided by law
or by these By-Laws, constitute a quorum at all meetings of the stockholders; if
there be no such quorum, the holders of a majority of such shares so present or
represented may adjourn the meeting from time to time until a quorum shall have
been obtained.
Section 5. Organization of Meetings. Meetings of the stockholders
shall be presided over by the Chairman of the Board, if there be one, or if he
is not present by the President, or if he is not present, by a chairman to be
chosen at the meeting. The Secretary of the Corporation, or in his absence an
Assistant Secretary, shall act as Secretary of the meeting, if present.
Section 6. Voting. At each meeting of stockholders, except as
otherwise provided by statute or the Certificate of Incorporation, every holder
of record of stock entitled to vote shall be entitled to one vote in person or
by proxy for each share of such stock standing in his name on the records of the
Corporation. Elections of directors shall be determined by a plurality of the
votes cast thereat and, except as otherwise provided by statute, the Certificate
of Incorporation, or these By-Laws, all other action shall be determined by a
majority of the votes cast at such meeting. Each proxy to vote shall be in
writing and signed by the stockholder or by his duly authorized attorney.
At all elections of directors, the voting shall be by ballot or in
such other manner as may be determined by the stockholders present in person or
by proxy entitled to vote at such election. With respect to any other matter
presented to the stockholders for their consideration at a meeting, any
stockholder entitled to vote may, on any question, demand a vote by ballot.
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A complete list of the stockholders entitled to vote at each such
meeting, arranged in alphabetical order, with the address of each, and the
number of shares registered in the name of each stockholder, shall be prepared
by the Secretary and shall be open to the examination of any stockholder, for
any purpose germane to the meeting, during ordinary business hours, for a period
of at least ten days prior to the meeting, either at a place within the city
where the meeting is to be held, which place shall be specified in the notice of
the meeting, or, if not so specified, at the place where the meeting is to be
held. The list shall also be produced and kept at the time and place of the
meeting during the whole time thereof, and may be inspected by any stockholder
who is present.
Section 7. Inspectors of Election. The Board of Directors in advance
of any meeting of stockholders may appoint one or more Inspectors of Election to
act at the meeting or any adjournment thereof. If Inspectors of Election are not
so appointed, the chairman of the meeting may, and on the request of any
stockholder entitled to vote, shall appoint one or more Inspectors of Election.
Each Inspector of Election, before entering upon the discharge of his duties,
shall take and sign an oath faithfully to execute the duties of Inspector of
Election at such meeting with strict impartiality and according to the best of
his ability. If appointed, Inspectors of Election shall take charge of the polls
and, when the vote is completed, shall make a certificate of the result of the
vote taken and of such other facts as may be required by law.
Section 8. Action by Consent. Any action required or permitted to be
taken at any meeting of stockholders may be taken without a meeting, without
prior notice and without a vote, if, prior to such action, a written consent or
consents thereto, setting forth such action, is signed by the holders of record
of shares of the stock of the Corporation, issued and outstanding and entitled
to vote thereon, having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted.
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ARTICLE II
DIRECTORS
Section 1. Number, Quorum, Term, Vacancies, Removal. The Board of
Directors of the Corporation shall consist of at least seven and not more than
fifteen persons. The number of directors may be changed by a resolution passed
by a majority of the whole Board or by a vote of the holders of record of at
least a majority of the shares of stock of the Corporation, issued and
outstanding and entitled to vote.
A majority of the members of the Board of Directors then holding
office (but not less than one-third of the total number of directors nor less
than two directors) shall constitute a quorum for the transaction of business,
but if at any meeting of the Board there shall be less than a quorum present, a
majority of those present may adjourn the meeting from time to time until a
quorum shall have been obtained.
Directors shall hold office until the next annual election and until
their successors shall have been elected and shall have qualified, unless sooner
displaced.
Whenever any vacancy shall have occurred in the Board of Directors, by
reason of death, resignation, or otherwise, other than removal of a director
with or without cause by a vote of the stockholders, it shall be filled by a
majority of the remaining directors, though less than a quorum (except as
otherwise provided by law), or by the stockholders, and the person so chosen
shall hold office until the next annual election and until his successor is duly
elected and has qualified.
Any one or more of the directors of the Corporation may be removed
either with or without cause at any time by a vote of the holders of record of
at least a majority of the shares of stock of the Corporation, issued and
outstanding and entitled to vote, and thereupon the term of the director or
directors who shall have been so removed shall forthwith terminate and there
shall be a vacancy or vacancies in the Board of Directors, to be
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<PAGE>
filled by a vote of the stockholders as provided in these By-Laws.
Section 2. Meetings, Notice. Meetings of the Board of Directors shall
be held at such place either within or without the State of Delaware, as may
from time to time be fixed by resolution of the Board, or as may be specified in
the call or in a waiver of notice thereof. Regular meetings of the Board of
Directors shall be held at such times as may from time to time be fixed by
resolution of the Board, and special meetings may be held at any time upon the
call of two directors, the Chairman of the Board, if one be elected, or the
President, by oral, telegraphic or written notice, duly served on or sent or
mailed to each director not less than two days before such meeting. A meeting of
the Board may be held without notice immediately after the annual meeting of
stockholders at the same place at which such meeting was held. Notice need not
be given of regular meetings of the Board. Any meeting may be held without
notice, if all directors are present, or if notice is waived in writing, either
before or after the meeting, by those not present. Any member of the Board of
Directors, or any committee thereof, may participate in a meeting by means of
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other and participation in a
meeting by such means shall constitute presence in person at such meeting.
Section 3. Committees. The Board of Directors may, in its discretion,
by resolution passed by a majority of the whole Board, designate from among its
members one or more committees which shall consist of two or more directors. The
Board may designate one or more directors as alternate members of any such
committee, who may replace any absent or disqualified member at any meeting of
the committee. Such committees shall have and may exercise such powers as shall
be conferred or authorized by the resolution appointing them. A majority of any
such committee may determine its action and fix the time and place of its
meetings, unless the Board of Directors shall otherwise provide. The Board shall
have power at any time to change the membership of any such committee, to fill
vacancies in it, or to dissolve it.
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Section 4. Action by Consent. Any action required or permitted to be
taken at any meeting of the Board of Directors, or of any committee thereof, may
be taken without a meeting, if prior to such action a written consent or
consents thereto is signed by all members of the Board, or of such committee as
the case may be, and such written consent or consents is filed with the minutes
of proceedings of the Board or committee.
Section 5. Compensation. The Board of Directors may determine, from
time to time, the amount of compensation which shall be paid to its members. The
Board of Directors shall also have power, in its discretion, to allow a fixed
sum and expenses for attendance at each regular or special meeting of the Board,
or of any committee of the Board; in addition the Board of Directors shall also
have power, in its discretion, to provide for and pay to directors rendering
services to the Corporation not ordinarily rendered by directors, as such,
special compensation appropriate to the value of such services, as determined by
the Board from time to time.
ARTICLE III
OFFICERS
Section 1. Titles and Election. The officers of the Corporation, who
shall be chosen by the Board of Directors at its first meeting after each annual
meeting of stockholders, shall be a President, a Treasurer and a Secretary. The
Board of Directors from time to time may elect a Chairman of the Board, one or
more Vice Presidents, Assistant Secretaries, Assistant Treasurers and such other
officers and agents as it shall deem necessary, and may define their powers and
duties. Any number of offices may be held by the same person.
Section 2. Terms of Office. The officer shall hold office until their
successors are chosen and qualify.
Section 3. Removal. Any officer may be removed, either with or without
cause, at any time, by the affirmative vote of a majority of the Board of
Directors.
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Section 4. Resignations. Any officer may resign at any time by giving
written notice to the Board of Directors or to the Secretary. Such resignation
shall take effect at the time specified therein, and, unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make it
effective.
Section 5. Vacancies. If the office of any officer or agent becomes
vacant by reason of death, resignation, retirement, disqualification, removal
from office or otherwise, the directors may choose a successor, who shall hold
office for the unexpired term in respect of which such vacancy occurred.
Section 6. Chairman of the Board. The Chairman of the Board of
Directors, if one be elected, shall preside at all meetings of the Board of
Directors and of the stockholders, and he shall have and perform such other
duties as from time to time may be assigned to him by the Board of Directors.
Section 7. President. The President shall be the Chief Executive
Officer of the Corporation and, in the absence of the Chairman, shall preside at
all meetings of the Board of Directors, and of the stockholders. He shall
exercise the powers and perform the duties usual to the chief executive officer
and, subject to the control of the Board of Directors, shall have general
management and control of the affairs and business of the Corporation; he shall
appoint and discharge employees and agents of the Corporation (other than
officers elected by the Board of Directors) and fix their compensation; and he
shall see that all orders and resolutions of the Board of Directors are carried
into effect. He shall have the power to execute bonds, mortgages and other
contracts, agreements and instruments of the Corporation, and shall do and
perform such other duties as from time to time may be assigned to him by the
Board of Directors.
Section 8. Vice Presidents. If chosen, the Vice Presidents, in the
order of their seniority, shall, in the absence or disability of the President,
exercise all of the powers and duties of the President. Such Vice Presidents
shall have the power to execute bonds, notes, mortgages and
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<PAGE>
other contracts, agreements and instruments of the Corporation, and shall do and
perform such other duties incident to the office of Vice President and as the
Board of Directors, or the President shall direct.
Section 9. Secretary. The Secretary shall attend all sessions of the
Board and all meetings of the stockholders and record all votes and the minutes
of proceedings in a book to be kept for that purpose. He shall give, or cause to
be given, notice of all meetings of the stockholders and of the Board of
Directors, and shall perform such other duties as may be prescribed by the Board
of Directors. The Secretary shall affix the corporate seal to any instrument
requiring it, and when so affixed, it shall be attested by the signature of the
Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer
who may affix the seal to any such instrument in the event of the absence or
disability of the Secretary. The Secretary shall have and be the custodian of
the stock records and all other books, records and papers of the Corporation
(other than financial) and shall see that all books, reports, statements,
certificates and other documents and records required by law are properly kept
and filed.
Section 10. Treasurer. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys, and other valuable effects in the name and to the credit of
the Corporation, in such depositories as may be designated by the Board of
Directors. He shall disburse the funds of the Corporation as may be ordered by
the Board, taking proper vouchers for such disbursements, and shall render to
the directors whenever they may require it, an account of all his transactions
as Treasurer and of the financial condition of the Corporation.
Section 11. Duties of Officers may be Delegated. In case of the
absence or disability of any officer of the Corporation, or for any other reason
that the Board may deem sufficient, the Board may delegate, for the time being,
the powers or duties, or any of them, of such officer to any other officer, or
to any director.
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ARTICLE IV
INDEMNIFICATION
Section 1. Actions by Others. The Corporation (1) shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the Corporation) by reason of the fact that he is or was a director or
an officer of the Corporation and (2) except as otherwise required by Section 3
of this Article, may indemnify any person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other than
an action by or in the right of the Corporation) by reason of the fact that he
is or was an employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee, agent of or
participant in another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts actually and reasonably incurred by him in connection with such action,
suit or proceeding if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the Corporation, and
with respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the person did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the Corporation, and,
with respect to any criminal action or proceeding, had reasonable cause to
believe that his conduct was unlawful.
Section 2. Actions by or in the Right of the Corporation. The
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the Corporation to procure a judgment in
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its favor by reason of the fact that he is or was a director, officer, employee
or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee, agent of or participant in another
corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Corporation and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable for negligence or misconduct in the performance of
his duty to the Corporation unless and only to the extent that the Delaware
Court of Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Delaware Court of Chancery or
such other court shall deem proper.
Section 3. Successful Defense. To the extent that a person who is or
was a director, officer, employee or agent of the Corporation has been
successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Section 1 or Section 2 of this Article, or in defense
of any claim, issue or matter therein, he shall be indemnified against expenses
(including attor-neys' fees) actually and reasonably incurred by him in
connection therewith.
Section 4. Specific Authorization. Any indemnification under Section 1
or Section 2 of this Article (unless ordered by a court) shall be made by the
Corporation only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in the
circumstances because he has met the applicable standard of conduct set forth in
said Sections 1 and 2. Such determination shall be made (1) by the Board of
Directors by a majority vote of a quorum consisting of directors who were not
parties to such action, suit or proceeding, or (2) if such a quorum is not
obtainable, or, even if obtainable a quorum of disinter-
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<PAGE>
ested directors so directs, by independent legal counsel in a written opinion,
or (3) by the stockholders.
Section 5. Advance of Expenses. Expenses incurred by any person who
may have a right of indemnification under this Article in defending a civil or
criminal action, suit or proceeding may be paid by the Corporation in advance of
the final disposition of such action, suit or proceeding as authorized by the
Board of Directors in the specific case upon receipt of an undertaking by or on
behalf of the director, officer, employee or agent to repay such amount unless
it shall ultimately be determined that he is entitled to be indemnified by the
Corporation pursuant to this Article.
Section 6. Right of Indemnity not Exclusive. The indemnification
provided by this Article shall not be deemed exclusive of any other rights to
which those seeking indemnification may be entitled under any by-law, agreement,
vote of stockholders or disinterested directors or otherwise, both as to action
in his official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
Section 7. Insurance. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of or participant in another
corporation, partnership, joint venture, trust or other enterprise against any
liability asserted against him and incurred by him in any such capacity, or
arising out of his status as such, whether or not the Corporation would have the
power to indemnify him against such liability under the provisions of this
Article, Section 145 of the General Corporation Law of the State of Delaware or
otherwise.
Section 8. Invalidity of any Provisions of this Article. The
invalidity or unenforceability of any provi-
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<PAGE>
sion of this Article shall not affect the validity or enforceability of the
remaining provisions of this Article.
ARTICLE V
CAPITAL STOCK
Section 1. Certificates. The interest of each stockholder of the
Corporation shall be evidenced by certificates for shares of stock in such form
as the Board of Directors may from time to time prescribe. The certificates of
stock shall be signed by the President or a Vice President and by the Secretary,
or the Treasurer, or an Assistant Secretary, or an Assistant Treasurer, sealed
with the seal of the Corporation or a facsimile thereof, and countersigned and
registered in such manner, if any, as the Board of Directors may by resolution
prescribe. Where any such certificate is countersigned by a transfer agent other
than the Corporation or its employee, or registered by a registrar other than
the Corporation or its employee, the signature of any such officer may be a
facsimile signature. In case any officer or officers who shall have signed, or
whose facsimile signature or signatures shall have been used on, any such
certificate or certificates shall cease to be such officer or officers of the
Corporation, whether because of death, resignation or otherwise, before such
certificate or certificates shall have been delivered by the Corporation, such
certificate or certificates may nevertheless be adopted by the Corporation and
be issued and delivered as though the person or persons who signed such
certificate or certificates or whose facsimile signature or signatures shall
have been used thereon had not ceased to be such officer or officers of the
Corporation.
Section 2. Transfer. The shares of stock of the Corporation shall be
transferred only upon the books of the Corporation by the holder thereof in
person or by his attorney, upon surrender for cancellation of certificates for
the same number of shares, with an assignment and power of transfer endorsed
thereon or attached thereto, duly executed, with such proof of the authenticity
of the signature as the Corporation or its agents may reasonably require.
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<PAGE>
Section 3. Record Dates. The Board of Directors may fix in advance a
date, not less than ten nor more than sixty days preceding the date of any
meeting of stockholders, or the date for the payment of any dividend, or the
date for the distribution or allotment of any rights, or the date when any
change, conversion or exchange of capital stock shall go into effect, as a
record date for the determination of the stockholders entitled to notice of, and
to vote at, any such meeting, or entitled to receive payment of any such
dividend, or to receive any distribution or allotment of such rights, or to
exercise the rights in respect of any such change, conversion or exchange of
capital stock, and in such case only such stockholders as shall be stockholders
of record on the date so fixed shall be entitled to such notice of, and to vote
at, such meeting, or to receive payment of such dividend, or to receive such
distribution or allotment or rights or to exercise such rights, as the case may
be, notwithstanding any transfer of any stock on the books of the Corporation
after any such record date fixed as aforesaid.
Section 4. Lost Certificates. In the event that any certificate of
stock is lost, stolen, destroyed or mutilated, the Board of Directors may
authorize the issuance of a new certificate of the same tenor and for the same
number of shares in lieu thereof. The Board may in its discretion, before the
issuance of such new certificate, require the owner of the lost, stolen,
destroyed or mutilated certificate, or the legal representative of the owner to
make an affidavit or affirmation setting forth such facts as to the loss,
destruction or mutilation as it deems necessary, and to give the Corporation a
bond in such reasonable sum as it directs to indemnify the Corporation.
ARTICLE VI
CHECKS, NOTES, ETC.
Section 1. Checks, Notes, Etc. All checks and drafts on the
Corporation's bank accounts and all bills of exchange and promissory notes, and
all acceptances, obligations and other instruments for the payment of money,
may be signed by the President or any Vice President and may
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<PAGE>
also be signed by such other officer or officers, agent or agents, as shall be
thereunto authorized from time to time by the Board of Directors.
ARTICLE VII
MISCELLANEOUS PROVISIONS
Section 1. Offices. The registered office of the Corporation shall be
located at the office of the Prentice-Hall Corporation System, Inc., in the City
of Dover, County of Kent, in the State of Delaware and said Corporation shall be
the registered agent of this Corporation in charge thereof. The Corporation may
have other offices either within or without the State of Delaware at such places
as shall be determined from time to time by the Board of Directors or the
business of the Corporation may require.
Section 2. Fiscal Year. The fiscal year of the Corporation shall be
determined by the Board of Directors.
Section 3. Corporate Seal. The seal of the Corporation shall be
circular in form and contain the name of the Corporation, and the year and state
of its incorporation. Such seal may be altered from time to time at the
discretion of the Board of Directors.
Section 4. Books. There shall be kept at such office of the
Corporation as the Board of Directors shall determine, within or without the
State of Delaware, correct books and records of account of all its business and
transactions, minutes of the proceedings of its stockholders, Board of Directors
and committees, and the stock book, containing the names and addresses of the
stockholders, the number of shares held by them, respectively, and the dates
when they respectively became the owners of record thereof, and in which the
transfer of stock shall be registered, and such other books and records as the
Board of Directors may from time to time determine.
Section 5. Voting of Stock. Unless otherwise specifically authorized
by the Board of Directors, all
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<PAGE>
stock owned by the Corporation, other than stock of the Corporation, shall be
voted, in person or by proxy, by the President or any Vice President of the
Corporation on behalf of the Corporation.
ARTICLE VIII
AMENDMENTS
Section 1. Amendments. The vote of the holders of at least a majority
of the shares of stock of the Corporation, issued and outstanding and entitled
to vote, shall be necessary at any meeting of stockholders to amend or repeal
these By-Laws or to adopt new by-laws. These ByLaws may also be amended or
repealed, or new by-laws adopted, at any meeting of the Board of Directors by
the vote of at least a majority of the entire Board; provided that any by-law
adopted by the Board may be amended or repealed by the stockholders in the
manner set forth above.
Any proposal to amend or repeal these By-Laws or to adopt new by-laws
shall be stated in the notice of the meeting of the Board of Directors or the
stockholders, or in the waiver of notice thereof, as the case may be, unless all
of the directors or the holders of record of all of the shares of stock of the
Corporation, issued and outstanding and entitled to vote, are present at such
meeting.
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<PAGE>
EXECUTION COPY
================================================================================
------------------------------------
OUTSOURCING SOLUTIONS INC.
11% SENIOR SUBORDINATED NOTES DUE 2006
------------------------------------
INDENTURE
Dated as of November 6, 1996
------------------------------------
Wilmington Trust Company
Trustee
------------------------------------
================================================================================
<PAGE>
CROSS-REFERENCE TABLE*
Trust Indenture
Act Section Indenture Section
310 (a)(1)..............................................................7.10
(a)(2)..............................................................7.10
(a)(3)..............................................................N.A.
(a)(4)..............................................................N.A.
(a)(5)..............................................................7.10
(b).................................................................7.10
(c).................................................................N.A.
311 (a).................................................................7.11
(b).................................................................7.11
(c).................................................................N.A.
312 (a).................................................................2.05
(b)................................................................11.03
(c)................................................................11.03
313 (a) ... ............................................................7.06
(b)(1)..............................................................N.A.
(b)(2)..............................................................7.07
(c)..........................................................7.06; 11.02
(d).................................................................7.06
314 (a)..........................................................4.03; 11.02
(c)(1).............................................................11.04
(c)(2).............................................................11.04
(c)(3)..............................................................N.A.
(d).................................................................N.A.
(e)................................................................11.05
(f).................................................................N.A.
315 (a).................................................................7.01
(b)...........................................................7.05,11.02
(c).................................................................7.01
(d).................................................................7.01
(e).................................................................6.11
316 (a)(last sentence)..................................................2.09
(a)(1)(A)...........................................................6.05
(a)(1)(B)...........................................................6.04
(a)(2)..............................................................N.A.
(b).................................................................6.07
(c).................................................................N.A.
317 (a)(1)..............................................................6.08
(a)(2)..............................................................6.09
(b).................................................................2.04
318 (a)................................................................11.01
(b).................................................................N.A.
(c)................................................................11.01
N.A. means not applicable.
*This Cross-Reference Table is not part of the Indenture.
i
<PAGE>
TABLE OF CONTENTS
Page
----
SECTION 1.01. DEFINITIONS................................................. 1
SECTION 1.02. OTHER DEFINITIONS........................................... 15
SECTION 1.03. INCORPORATION BY REFERENCE OF TRUST INDENTURE
ACT......................................................... 15
SECTION 1.04. RULES OF CONSTRUCTION....................................... 16
ARTICLE 2
THE NOTES
SECTION 2.01. FORM AND DATING............................................. 16
SECTION 2.02. EXECUTION AND AUTHENTICATION................................ 18
SECTION 2.03. REGISTRAR AND PAYING AGENT.................................. 18
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST......................... 19
SECTION 2.05. HOLDER LISTS................................................ 19
SECTION 2.06. TRANSFER AND EXCHANGE....................................... 19
SECTION 2.07. REPLACEMENT NOTES........................................... 28
SECTION 2.08. OUTSTANDING NOTES........................................... 28
SECTION 2.09. TREASURY NOTES.............................................. 29
SECTION 2.10. TEMPORARY NOTES............................................. 29
SECTION 2.11. CANCELLATION................................................ 29
SECTION 2.12. DEFAULTED INTEREST.......................................... 29
ARTICLE 3
REDEMPTION AND PREPAYMENT
SECTION 3.01. NOTICES TO TRUSTEE.......................................... 30
SECTION 3.02. SELECTION OF NOTES TO BE REDEEMED........................... 30
SECTION 3.03. NOTICE OF REDEMPTION........................................ 30
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION.............................. 31
SECTION 3.05. DEPOSIT OF REDEMPTION PRICE................................. 31
SECTION 3.06. NOTES REDEEMED IN PART...................................... 32
SECTION 3.07. OPTIONAL REDEMPTION......................................... 32
SECTION 3.08. MANDATORY REDEMPTION........................................ 32
SECTION 3.09. OFFER TO PURCHASE BY APPLICATION OF EXCESS
PROCEEDS.................................................... 32
ARTICLE 4
COVENANTS
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<PAGE>
SECTION 4.01. PAYMENT OF NOTES............................................ 34
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY............................. 35
SECTION 4.03. REPORTS..................................................... 35
SECTION 4.04. COMPLIANCE CERTIFICATE...................................... 35
SECTION 4.05. TAXES....................................................... 36
SECTION 4.06. STAY, EXTENSION AND USURY LAWS.............................. 36
SECTION 4.07. RESTRICTED PAYMENTS......................................... 36
SECTION 4.08. DIVIDEND AND OTHER PAYMENT RESTRICTIONS
AFFECTING RESTRICTED SUBSIDIARIES........................... 39
SECTION 4.09. INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF
DISQUALIFIED STOCK.......................................... 40
SECTION 4.10. ASSET SALES................................................. 42
SECTION 4.11. TRANSACTIONS WITH AFFILIATES................................ 43
SECTION 4.12. LIENS....................................................... 43
SECTION 4.13. BUSINESS ACTIVITIES......................................... 43
SECTION 4.14. CORPORATE EXISTENCE......................................... 44
SECTION 4.15. OFFER TO REPURCHASE UPON CHANGE OF CONTROL.................. 44
SECTION 4.16. ANTI-LAYERING............................................... 45
SECTION 4.17. SALE AND LEASEBACK TRANSACTIONS............................. 45
SECTION 4.18. ADDITIONAL SUBSIDIARY GUARANTEES............................ 45
SECTION 4.19 LIMITATION ON ISSUANCES AND SALES OF CAPITAL
STOCK OF WHOLLY OWNED RESTRICTED
SUBSIDIARIES................................................ 46
ARTICLE 5
SUCCESSORS
SECTION 5.01. MERGER, CONSOLIDATION, OR SALE OF ASSETS.................... 46
SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED........................... 46
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT........................................... 47
SECTION 6.02. ACCELERATION................................................ 49
SECTION 6.03. OTHER REMEDIES.............................................. 50
SECTION 6.04. WAIVER OF PAST DEFAULTS..................................... 50
SECTION 6.05. CONTROL BY MAJORITY......................................... 50
SECTION 6.06. LIMITATION ON SUITS......................................... 50
SECTION 6.07. RIGHTS OF HOLDERS OF NOTES TO RECEIVE
PAYMENT..................................................... 51
SECTION 6.08. COLLECTION SUIT BY TRUSTEE.................................. 51
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM............................ 51
SECTION 6.10. PRIORITIES.................................................. 52
SECTION 6.11. UNDERTAKING FOR COSTS....................................... 52
ARTICLE 7
TRUSTEE
SECTION 7.01. DUTIES OF TRUSTEE........................................... 52
iii
<PAGE>
SECTION 7.02. RIGHTS OF TRUSTEE.......................................... 53
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE............................... 54
SECTION 7.04. TRUSTEE'S DISCLAIMER....................................... 54
SECTION 7.05. NOTICE OF DEFAULTS......................................... 54
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES................. 55
SECTION 7.07. COMPENSATION AND INDEMNITY................................. 55
SECTION 7.08. REPLACEMENT OF TRUSTEE..................................... 56
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC........................... 57
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.............................. 57
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST
COMPANY.................................................... 57
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.01. OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT
DEFEASANCE................................................. 57
SECTION 8.02. LEGAL DEFEASANCE AND DISCHARGE............................. 57
SECTION 8.03. COVENANT DEFEASANCE........................................ 58
SECTION 8.04. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE................. 58
SECTION 8.05. DEPOSITED MONEY AND GOVERNMENT SECURITIES TO
BE HELD IN TRUST; OTHER MISCELLANEOUS
PROVISIONS................................................. 59
SECTION 8.06. REPAYMENT TO COMPANY....................................... 60
SECTION 8.07. REINSTATEMENT.............................................. 60
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.01. WITHOUT CONSENT OF HOLDERS OF NOTES........................ 60
SECTION 9.02. WITH CONSENT OF HOLDERS OF NOTES........................... 61
SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT........................ 62
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS.......................... 62
SECTION 9.05. NOTATION ON OR EXCHANGE OF NOTES........................... 63
SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC............................ 63
ARTICLE 10
SUBORDINATION
SECTION 10.01. AGREEMENT TO SUBORDINATE................................... 63
SECTION 10.02. LIQUIDATION; DISSOLUTION; BANKRUPTCY....................... 63
SECTION 10.03. DEFAULT ON DESIGNATED SENIOR DEBT.......................... 64
SECTION 10.04. ACCELERATION OF NOTES...................................... 64
SECTION 10.05. WHEN DISTRIBUTION MUST BE PAID OVER........................ 65
SECTION 10.06. NOTICE BY COMPANY.......................................... 65
SECTION 10.07. SUBROGATION................................................ 65
SECTION 10.08. RELATIVE RIGHTS............................................ 65
SECTION 10.09. SUBORDINATION MAY NOT BE IMPAIRED BY
COMPANY.................................................... 66
SECTION 10.10. DISTRIBUTION OR NOTICE TO REPRESENTATIVE................... 66
iv
<PAGE>
SECTION 10.11. RIGHTS OF TRUSTEE AND PAYING AGENT......................... 67
SECTION 10.12. AUTHORIZATION TO EFFECT SUBORDINATION...................... 67
SECTION 10.13. THIRD PARTY BENEFICIARY, ETC............................... 67
v
<PAGE>
ARTICLE 11
SUBSIDIARY GUARANTEES
SECTION 11.01. SUBSIDIARY GUARANTEES...................................... 67
SECTION 11.02. EXECUTION AND DELIVERY OF SUBSIDIARY
GUARANTEES................................................. 68
SECTION 11.03. GUARANTORS MAY CONSOLIDATE, ETC. ON CERTAIN
TERMS...................................................... 69
SECTION 11.04. RELEASES FOLLOWING SALE OF ASSETS.......................... 69
SECTION 11.05. LIMITATION ON GUARANTOR LIABILITY.......................... 70
SECTION 11.06. "TRUSTEE" TO INCLUDE PAYING AGENT.......................... 70
SECTION 11.07. SUBORDINATION OF SUBSIDIARY GUARANTEE..................... 70
ARTICLE 12
MISCELLANEOUS
SECTION 12.01. TRUST INDENTURE ACT CONTROLS............................... 71
SECTION 12.02. NOTICES.................................................... 71
SECTION 12.03. COMMUNICATION BY HOLDERS OF NOTES WITH OTHER
HOLDERS OF NOTES........................................... 72
SECTION 12.04. CERTIFICATE AND OPINION AS TO CONDITIONS
PRECEDENT.................................................. 72
SECTION 12.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.............. 72
SECTION 12.06. RULES BY TRUSTEE AND AGENTS................................ 73
SECTION 12.07. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS,
EMPLOYEES AND STOCKHOLDERS................................. 73
SECTION 12.08. GOVERNING LAW.............................................. 73
SECTION 12.09. NO ADVERSE INTERPRETATION OF OTHER
AGREEMENTS................................................. 73
SECTION 12.10. SUCCESSORS................................................. 73
SECTION 12.11. SEVERABILITY............................................... 73
SECTION 12.12. COUNTERPART ORIGINALS...................................... 74
SECTION 12.13. TABLE OF CONTENTS; HEADINGS; ETC........................... 74
vi
<PAGE>
EXHIBITS
Exhibit A-1 FORM OF NOTE
Exhibit A-2 FORM OF REGULATION S TEMPORARY GLOBAL NOTE
Exhibit B-1 FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF
TRANSFER FROM U.S. GLOBAL NOTE TO REGULATION S GLOBAL
NOTE
Exhibit B-2 FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF
TRANSFER FROM REGULATION S GLOBAL NOTE TO RULE 144A
GLOBAL NOTE OR ACCREDITED INSTITUTIONAL INVESTOR GLOBAL
NOTE
Exhibit B-3 FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF
TRANSFER FROM RULE 144A GLOBAL NOTE OR ACCREDITED
INSTITUTIONAL INVESTOR GLOBAL NOTE TO ACCREDITED
INSTITUTIONAL INVESTOR GLOBAL NOTE OR RULE 144A GLOBAL
NOTE, RESPECTIVELY
Exhibit B-4 FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF
TRANSFER OF DEFINITIVE NOTES
Exhibit B-5 FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF
TRANSFER FROM RULE 144A GLOBAL NOTE, OR ACCREDITED
INSTITUTIONAL INVESTOR GLOBAL NOTE OR REGULATION S
PERMANENT GLOBAL NOTE TO DEFINITIVE NOTE
Exhibit B-6 FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF
TRANSFER FROM DEFINITIVE NOTE TO RULE 144A GLOBAL NOTE, OR
ACCREDITED INSTITUTIONAL INVESTOR GLOBAL NOTE OR
REGULATION S PERMANENT GLOBAL NOTE
Exhibit C SUBSIDIARY GUARANTEE
vii
<PAGE>
INDENTURE dated as of November 6, 1996 among Outsourcing Solutions Inc., a
Delaware corporation (the "Company"); CFC Services Corp., a Delaware
corporation; A.M. Miller & Associates, Inc., a Minnesota corporation; The
Continental Alliance, Inc., a Washington corporation; Alaska Financial Services,
Inc., an Alaska corporation; Southwest Credit Services, Inc., an Arizona
corporation; Account Portfolios, Inc., a Delaware corporation; Account
Portfolios G.P., Inc. a Delaware corporation; Account Portfolios, L.P., a
Georgia limited partnership; Perimeter Credit, L.P., a Georgia limited
partnership; Gulf State Credit, L.P., a Georgia limited partnership; Payco
American Corporation, a Wisconsin corporation; Payco American Corporation, a
Wisconsin corporation; Payco-General American Credits, Inc., a Delaware
corporation; National Account Systems, Inc., a Delaware corporation; University
Accounting Service, a Wisconsin corporation; Asset Recovery & Management Corp.,
a Wisconsin corporation; Indiana Mutual Credit Association, Inc., an Indiana
corporation; Furst and Furst, Inc., a Wisconsin corporation; Jennifer Loomis &
Associates, Inc., an Arizona corporation; FM Services Corporation, an Arizona
corporation; Qualink, Inc., a Wisconsin corporation; Professional Recoveries
Inc., a Wisconsin corporation; Payco American International Corp, a Wisconsin
corporation; and Wilmington Trust Company, a Delaware banking corporation, as
trustee (the "Trustee").
The Company, the Guarantors (as defined in Section 1.01 hereof) and the
Trustee agree as follows for the benefit of each other and for the equal and
ratable benefit of the Holders of the 11% Senior Subordinated Notes due 2006
(the "Subordinated Notes") and the 11% Senior Subordinated Exchange Notes due
2006 (the "Exchange Notes" and, together with the Subordinated Notes, the
"Notes"):
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
SECTION 1.01. DEFINITIONS.
"Accredited Institutional Investor Global Note" means a permanent global
note that contains the paragraph referred to in footnote 1 and the additional
schedule referred to in footnote 2 to the form of the Note attached hereto as
Exhibit A-1, and that is deposited with and registered in the name of the
Depositary, representing a series of Notes sold to institutional accredited
investors in transactions exempt from registration under the Securities Act not
made in reliance on Rule 144A or Regulation S.
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Restricted Subsidiary of such specified Person,
including, without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Restricted Subsidiary of such specified Person, and (ii) Indebtedness secured by
a Lien encumbering any asset acquired by such specified Person.
"Advisory Services Agreement" means the Advisory Services Agreement, dated
as of September 21, 1995, between the Company and MDC Management Company III,
L.P, as amended from time to time.
<PAGE>
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that (i)
beneficial ownership of 10% or more of the voting securities of a Person shall
be deemed to be control and (ii)(a) Goldman, Sachs & Co. and its Affiliates,
including, without limitation, Goldman Sachs Credit Partners L.P., (b) Chase
Securities Inc. and its Affiliates, including, without limitation, The Chase
Manhattan Bank and Chase Equity Associates, L.P., and (c) Clipper Capital
Associates, L.P. and its Affiliates, in each case, shall not be deemed to be
Affiliates of the Company solely by virtue of clause (i) of this proviso.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Agent Members" means members of, or participants in, the Depositary.
"Applicable Procedures" means applicable procedures of the Depositary,
Euroclear or Cedel Bank, as the case may be.
"Asset Sale" means:
(i) the sale, conveyance, transfer or other disposition (whether in a
single transaction or a series of related transactions) of property or
assets (including by way of a sale and leaseback) of the Company or any
Restricted Subsidiary to any Person other than the Company or any
Restricted Subsidiary of the Company (each referred to in this definition
as a "disposition") or
(ii) the issuance or sale of Equity Interests of any Restricted
Subsidiary to any Person other than the Company or any Restricted
Subsidiary of the Company (whether in a single transaction or a series of
related transactions), in each case, other than:
(a) a disposition of Cash Equivalents or goods held for sale in the
ordinary course of business or obsolete equipment in the ordinary course of
business of the Company or the applicable Restricted Subsidiary;
(b) the disposition of all or substantially all of the assets of the
Company in a manner permitted pursuant to and in accordance with the
provisions of Section 5.01 hereof or any disposition that constitutes a
Change of Control pursuant to this Indenture;
(c) any disposition that is a Restricted Payment or Permitted
Investment that is permitted under the provisions of Section 4.07 hereof;
and
(d) any disposition, or related series of dispositions, of assets with
an aggregate Fair Market Value of less than $1.0 million.
"Attributable Debt" means, in respect of a sale and leaseback transaction,
at the time of determination, the present value (discounted at the rate of
interest implicit in such transaction, determined in accordance with GAAP) of
the obligation of the lessee for net rental payments during
2
<PAGE>
the remaining term of the lease included in such sale and leaseback transaction
(including any period for which such lease has been extended or may, at the
option of the lessor, be extended).
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal or state
law for the relief of debtors.
"Board of Directors" means, as to any Person, the board of directors of
such Person or any duly authorized committee thereof.
"Business Day" means any day other than a Legal Holiday.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership, partnership interests
(whether general or limited) and (iv) any other interest or participation that
confers on a Person the right to receive a share of the profits and losses of,
or distributions of assets of, the issuing Person.
"Cash Equivalents" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof having maturities of not more than one
year from the date of acquisition, (iii) certificates of deposit and eurodollar
time deposits with maturities of one year or less from the date of acquisition,
bankers' acceptances with maturities not exceeding one year and overnight bank
deposits, in each case with any domestic commercial bank having capital and
surplus in excess of $500.0 million and a Thomson Bank Watch Rating of "B" or
better, (iv) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (ii) and (iii) above
entered into with any financial institution meeting the qualifications specified
in clause (iii) above and (v) commercial paper rated A-1 or higher by Standard &
Poor's Corporation or P-1 by Moody's Investors Service, Inc. and in each case
maturing within one year after the date of acquisition.
"Change of Control" means the occurrence of any of the following:
(i) the sale, lease or transfer, in one or a series of related
transactions (other than by merger or consolidation), of all or
substantially all of the assets of the Company and its Restricted
Subsidiaries, taken as a whole, to any "person" (as such term is used in
Section 13(d)(3) of the Exchange Act) (other than the Principals or their
Related Parties);
(ii) the adoption of a plan relating to the liquidation or dissolution
of the Company;
(iii) the acquisition by any Person or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Exchange Act) (other than the
Principals and their Related Parties) of a direct or indirect interest in
more than 35% of the voting power of the voting stock of the Company by way
of merger or consolidation or otherwise; or
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(iv) a majority of the members of the Board of Directors of the
Company cease to be Continuing Directors.
"Company" has the meaning set forth in the preamble hereto.
"Company Preferred Stock" means the $10.8 million in aggregate liquidation
preference of the 8.0% Preferred Stock of the Company outstanding on the date
hereof.
"Consolidated Cash Flow" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus (i) an amount
equal to any extraordinary loss plus any net loss realized in connection with
all Asset Sales (to the extent such losses were deducted in computing such
Consolidated Net Income), plus (ii) provision for taxes based on income or
profits of such Person and its Restricted Subsidiaries for such period, to the
extent that such provision for taxes was deducted in computing such Consolidated
Net Income, plus (iii) consolidated interest expense of such Person and its
Restricted Subsidiaries for such period, whether paid or accrued and whether or
not capitalized (including, without limitation, amortization of original issue
discount, non-cash interest payments, the interest component of any deferred
payment obligations, the interest component of all payments associated with
Capital Lease Obligations, imputed interest with respect to Attributable Debt,
commissions, discounts and other fees and charges incurred in respect of letter
of credit or bankers' acceptance financings, and net payments (if any) pursuant
to Hedging Obligations), to the extent that any such expense was deducted in
computing such Consolidated Net Income, plus (iv) any Consolidated Non-Cash
Charges that were deducted in computing such Consolidated Net Income, less (v)
the aggregate amount of contingent and "earnout" payments in respect of any
Permitted Business acquired by the Company or any Restricted Subsidiary of the
Company that are paid in cash during such period and less (vi) any non-cash
items increasing Consolidated Net Income for such period.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Restricted Subsidiaries
for such period, on a consolidated basis, determined in accordance with GAAP;
provided that (i) the Net Income (but not loss) of any Person that is not a
Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the referent Person or a Wholly Owned Restricted
Subsidiary thereof, (ii) the Net Income of any Restricted Subsidiary shall be
excluded to the extent that the declaration or payment of dividends or similar
distributions by that Restricted Subsidiary of that Net Income is not at the
date of determination permitted without any prior governmental approval (that
has not been obtained) or, directly or indirectly, by operation of the terms of
its charter or any agreement, instrument, judgment, decree, order, statute, rule
or governmental regulation applicable to that Restricted Subsidiary or its
stockholders, (iii) the Net Income of any Person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition shall
be excluded, (iv) the cumulative effect of a change in accounting principles
shall be excluded and (v) the Net Income of any Unrestricted Subsidiary shall be
excluded, whether or not distributed to the Company or one of its Subsidiaries.
"Consolidated Net Worth" means, with respect to any Person as of any date,
the sum of (i) the consolidated equity of the common stockholders of such Person
and its consolidated Subsidiaries as of such date (provided that the
Consolidated Net Worth of any Person shall exclude the effect of non-cash
charges relating to the acceleration of stock options or similar securities of
such Person or another Person with which such Person is merged or consolidated)
plus (ii) the respective amounts reported on such Person's balance sheet as of
such date with respect to any series of Preferred Stock
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(other than Disqualified Stock) that by its terms is not entitled to the payment
of dividends unless such dividends may be declared and paid only out of net
earnings in respect of the year of such declaration and payment, but only to the
extent of any cash received by such Person upon issuance of such preferred
stock, less (x) all write-ups (other than write-ups resulting from foreign
currency translations and write-ups of tangible assets of a going concern
business made within 12 months after the acquisition of such business)
subsequent to the date of this Indenture in the book value of any asset owned by
such Person or a consolidated Subsidiary of such Person, (y) all investments as
of such date in unconsolidated Subsidiaries and in Persons that are not
Subsidiaries (except, in each case, Permitted Investments), and (z) all
unamortized debt discount and expense and unamortized deferred charges as of
such date, all of the foregoing determined in accordance with GAAP.
"Consolidated Non-Cash Charges" means, with respect to any Person, for any
period, the aggregate depreciation and amortization (including (a) amortization
of goodwill, (b) amortization of Purchased Portfolios, (c) amortization of
amounts reflected on the Company's combined consolidated balance sheet as of the
date of this Indenture related to "in-process technology," (e) any incremental
increase in amortization of account inventory resulting from write-ups of such
inventory in connection with the purchase accounting treatment of an acquisition
and (f) amortization of other intangibles and other non-cash charges (excluding
any such intangible and non-cash charge to the extent that it represents an
accrual of or reserve for cash charges in any future period (other than any
non-cash charge relating to the Payco Acquisition or the rationalization of
operations in connection with the Payco Acquisition incurred within 12 months
after the date of this Indenture) or amortization of a prepaid cash expense that
was paid in a prior period) of such Person and its Restricted Subsidiaries for
such period, in each case, determined on a consolidated basis in accordance with
GAAP.
"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors who (i) was a member of such Board of Directors on the
date of this Indenture or (ii) was nominated for election or elected to such
Board of Directors with, or whose election to such Board of Directors was
approved by, the affirmative vote of a majority of the Continuing Directors who
were members of such Board of Directors at the time of such nomination or
election.
"Corporate Trust Office of the Trustee" shall be at the address of the
Trustee specified in Section 12.02 hereof; provided, however, for the purpose of
presentation of Notes for payment, transfer or exchange and maintenance of the
registration books, such term shall mean the office at which the Trustee
conducts its corporate agency business, or such other address as to which the
Trustee may give notice to the Company.
"Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"Definitive Notes" means Notes that are in the form of the Notes attached
hereto as Exhibit A-1, that do not include the information called for by
footnotes 1 and 2 thereof.
"Depositary" means, with respect to the Notes issuable or issued in whole
or in part in global form, the Person specified in Section 2.03 hereof as the
Depositary with respect to the Notes, until a successor shall have been
appointed and become such pursuant to the applicable provision of this
Indenture, and, thereafter, "Depositary" shall mean or include such successor.
"Designated Senior Debt" means (i) so long as the Senior Bank Debt is
outstanding, the Senior Bank Debt and (ii) at any time thereafter, any other
Senior Debt permitted under this Indenture
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the aggregate principal amount of which is $25.0 million or more and that has
been designated by the Company as "Designated Senior Debt."
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the Holder thereof, in whole or in part, on or prior to the date
that is 91 days after the date on which the Notes mature.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Notes" means the Company's 11% Senior Subordinated Exchange Notes
due 2006 issuable in exchange for the Company's 11% Senior Subordinated Notes
due 2006.
"Exchange Offer" means the offer that may be made by the Company pursuant
to the Registration Rights Agreement to issue and exchange the Exchange Notes
for the Subordinated Notes.
"Existing Indebtedness" means Indebtedness of the Company and its
Restricted Subsidiaries (other than Indebtedness under the New Bank Credit
Facility) in existence on the date of this Indenture, until such amounts are
repaid.
"Fair Market Value" means, with respect to any asset or property, the price
which could be negotiated in an arm's-length, free market transaction, in cash,
between an informed and willing seller and an informed and willing and able
buyer, neither of whom is under undue pressure or compulsion to complete the
transaction. Fair Market Value shall be determined by the Board of Directors of
the Company acting reasonably and in good faith and shall be evidenced by a
Board Resolution delivered to the Trustee; provided, however, that, in the case
of any determination of Fair Market Value for purposes of the covenant described
under Section 4.07 hereof, if the aggregate Fair Market Value could be
reasonably likely to exceed $5.0 million, the Fair Market Value shall be
determined by an accounting, appraisal or investment banking firm of nationally
recognized standing that is, in the reasonable and good faith judgment of the
Board of Directors of the Company, qualified to perform the task for which such
firm has been engaged.
"Fixed Charges" means, with respect to any Person for any period, the sum
of (i) the consolidated interest expense of such Person and its Restricted
Subsidiaries for such period, whether paid or accrued (including, without
limitation, amortization of original issue discount, non-cash interest payments,
the interest component of any deferred payment obligations, the interest
component of all payments associated with Capital Lease Obligations, imputed
interest with respect to Attributable Debt, commissions, discounts and other
fees and charges incurred in respect of letter of credit or bankers' acceptance
financings, and net payments (if any) pursuant to Hedging Obligations, but
excluding amortization of those deferred financing costs reflected on the
Company's combined consolidated balance sheet as of the date of this Indenture)
and (ii) the consolidated interest expense of such Person and its Restricted
Subsidiaries that was capitalized during such period, and (iii) any interest
expense on Indebtedness of another Person that is Guaranteed by such Person or
one of its Restricted Subsidiaries or secured by a Lien on assets of such Person
or one of its Restricted
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Subsidiaries (whether or not such Guarantee or Lien is called upon) and (iv) the
product of (a) all cash dividend payments (and non-cash dividend payments in the
case of a Person that is a Restricted Subsidiary) on any series of Preferred
Stock of such Person, times (b) a fraction, the numerator of which is one and
the denominator of which is one minus the then current effective federal, state
and local statutory tax rate of such Person, expressed as a decimal, in each
case, on a consolidated basis and in accordance with GAAP.
"Fixed Charge Coverage Ratio" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person for such period
to the Fixed Charges of such Person for such period. In the event that the
Company or any of its Restricted Subsidiaries incurs, assumes, Guarantees or
redeems any Indebtedness (other than revolving credit borrowings) or issues
Preferred Stock subsequent to the commencement of the period for which the Fixed
Charge Coverage Ratio is being calculated but prior to the date on which the
event for which the calculation of the Fixed Charge Coverage Ratio is made (the
"Calculation Date"), then the Fixed Charge Coverage Ratio shall be calculated
giving pro forma effect to such incurrence, assumption, Guarantee or redemption
of Indebtedness, or such issuance or redemption of Preferred Stock, as if the
same had occurred at the beginning of the applicable four-quarter reference
period. In addition, for purposes of making the computation referred to above,
(i) acquisitions that have been made by the Company or any of its Restricted
Subsidiaries, including through mergers or consolidations and including any
related financing transactions, during the four-quarter reference period or
subsequent to such reference period and on or prior to the Calculation Date
shall be deemed to have occurred on the first day of the four-quarter reference
period and Consolidated Cash Flow for such reference period shall be calculated
giving pro forma effect (excluding any pro forma increase in revenues but
including any pro forma expense and cost reductions calculated on a basis
consistent with Regulation S-X under the Securities Act) to such acquisition and
without giving effect to clause (iii) of the proviso set forth in the definition
of Consolidated Net Income, and (ii) the Consolidated Cash Flow attributable to
discontinued operations, as determined in accordance with GAAP, and operations
or businesses disposed of prior to the Calculation Date, calculated giving pro
forma effect to such disposition, shall be excluded, and (iii) the Fixed Charges
attributable to discontinued operations, as determined in accordance with GAAP,
and operations or businesses disposed of prior to the Calculation Date, shall be
excluded, but only to the extent that the obligations giving rise to such Fixed
Charges shall not be obligations of the referent Person or any of its Restricted
Subsidiaries following the Calculation Date.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the date of this Indenture.
"Global Notes" means, individually and collectively, the Regulation S
Temporary Global Note, the Regulation S Permanent Global Note, the Accredited
Institutional Investor Global Note and the Rule 144A Global Note.
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America for the payment of which guarantee
or obligations the full faith and credit of the United States is pledged.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without
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limitation, letters of credit and reimbursement agreements in respect thereof),
of all or any part of any Indebtedness.
"Guarantors" means (i) each of CFC Services Corp., a Delaware corporation;
A.M. Miller & Associates, Inc., a Minnesota corporation; The Continental Credit
Alliance, Inc., a Washington corporation; Alaska Financial Services, Inc., an
Alaska corporation; Southwest Credit Services, Inc., an Arizona corporation;
Account Portfolios, Inc., a Delaware corporation; Account Portfolios G.P., Inc.
a Delaware corporation; Account Portfolios, L.P., a Georgia limited partnership;
Perimeter Credit, L.P., a Georgia limited partnership; Gulf State Credit, L.P.,
a Georgia limited partnership; Payco American Corporation, a Wisconsin
corporation; Payco American Corporation, a Wisconsin corporation; Payco-General
American Credits, Inc., a Delaware corporation; National Account Systems, Inc.,
a Delaware corporation; University Accounting Service, a Wisconsin corporation;
Asset Recovery & Management Corp., a Wisconsin corporation; Indiana Mutual
Credit Association, Inc., an Indiana corporation; Furst and Furst, Inc., a
Wisconsin corporation; Jennifer Loomis & Associates, Inc., an Arizona
corporation; FM Services Corporation, an Arizona corporation; Qualink, Inc., a
Wisconsin corporation; Professional Recoveries Inc., a Wisconsin corporation;
Payco American International Corp, a Wisconsin corporation; and (ii) each other
direct or indirect Restricted Subsidiary of the Company that executes a
Subsidiary Guarantee or supplemental indenture in accordance with the provisions
of this Indenture, and their respective successors and assigns.
"HBR Services Agreement" means the Master Services Agreement, dated as of
October 1, 1992, by and between Account Portfolios, L.P. and HBR Capital, Ltd.
"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under (i) currency exchange or interest rate swap agreements,
currency exchange or interest rate cap agreements and currency exchange or
interest rate collar agreements and (ii) other agreements or arrangements
designed to protect such Person against fluctuations in currency exchange or
interest rates.
"Holder" means a holder of any of the Notes.
"Indebtedness" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of the
purchase price of any property (other than contingent or "earnout" payment
obligations) or representing any Hedging Obligations, except any such balance
that constitutes an accrued expense or trade payable, if and to the extent any
of the foregoing indebtedness (other than letters of credit and Hedging
Obligations) would appear as a liability upon a balance sheet of such Person
prepared in accordance with GAAP, as well as all indebtedness of others secured
by a Lien on any asset of such Person (whether or not such indebtedness is
assumed by such Person) and, to the extent not otherwise included, the Guarantee
by such Person of any indebtedness of any other Person.
"Indenture" means this Indenture, as amended or supplemented from time to
time.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or
8
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other acquisitions for consideration of Indebtedness, Equity Interests or other
securities, together with all items that are or would be classified as
investments on a balance sheet prepared in accordance with GAAP. If the Company
or any Subsidiary of the Company sells or otherwise disposes of any Equity
Interests of any direct or indirect Restricted Subsidiary of the Company such
that, after giving effect to any such sale or disposition, such Person is no
longer a Subsidiary of the Company, the Company shall be deemed to have made an
Investment on the date of any such sale or disposition equal to the Fair Market
Value of the Equity Interests of such Subsidiary not sold or disposed of.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York, New York, Wilmington, Delaware or at a
place of payment are authorized by law, regulation or executive order to remain
closed. If a payment date is a Legal Holiday at a place of payment, payment may
be made at that place on the next succeeding day that is not a Legal Holiday,
and no interest shall accrue for the intervening period.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"Liquidated Damages" means all liquidated damages then owing pursuant to
Section 5 of the Registration Rights Agreement.
"Maturity" means, with respect to any Note, the date on which the principal
of such Note becomes due and payable as provided in such Note or this Indenture,
whether at the Stated Maturity or by declaration of acceleration, call for
redemption or otherwise.
"Moody's" means Moody's Investor Service., Inc. and its successors.
"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of Preferred Stock dividends, excluding, however, (i) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions) or (b) the
disposition of any securities by such Person or any of its Restricted
Subsidiaries or the extinguishment of any Indebtedness of such Person or any of
its Restricted Subsidiaries and (ii) any extraordinary or nonrecurring gain (but
not loss), together with any related provision for taxes on such extraordinary
or nonrecurring gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received by the Company or
any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of the direct costs
relating to such Asset Sale (including, without limitation, legal, accounting
and investment banking fees, and brokerage and sales commissions) and any
relocation expenses incurred as a result thereof, taxes paid or payable as a
result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements), amounts required to be applied to
the repayment of Indebtedness (other than Senior Bank Debt) secured by a Lien on
the asset or assets that
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were the subject of such Asset Sale and any reserve for adjustment in respect of
the sale price of such asset or assets established in accordance with GAAP.
"New Bank Credit Facility" means that certain credit facility dated as of
November 6, 1996, by and among the Company, Goldman Sachs Credit Partners L.P.
and The Chase Manhattan Bank, as Co-Administrative Agents, Goldman Sachs Credit
Partners L.P. and Chase Securities Inc., as Arranging Agents, and the financial
institutions party thereto, including any related notes, guarantees, collateral
documents, instruments and agreements executed in connection therewith, and in
each case as amended (including any amendment and restatement thereof),
modified, renewed, refunded, replaced or refinanced from time to time, including
any agreement extending the maturity of, refinancing, replacing or otherwise
restructuring (including increasing the amount of available borrowings
thereunder (provided that such increase in borrowings is permitted by Section
4.09 hereof) or adding Subsidiaries of the Company as additional borrowers or
guarantors thereunder) all or any portion of the Indebtedness under such
agreement or any successor or replacement agreement and whether by the same or
any other agent, lender or group of lenders.
"Non-Recourse Debt" means Indebtedness (i) as to which neither the Company
nor any of its Restricted Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable (as a guarantor or
otherwise), or (c) constitutes the lender; and (ii) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness of the
Company or any of its Restricted Subsidiaries to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its stated maturity; and (iii) as to which the lenders have been notified in
writing that they shall not have any recourse to the stock or assets of the
Company or any of its Restricted Subsidiaries.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Offering" means the offering of the Notes by the Company pursuant to the
Offering Circular.
"Offering Circular" means the Offering Circular, dated October 31, 1996,
relating to the Notes.
"Officer" means, with respect to any Person, the Chairman of the Board, the
Chief Executive Officer, the President, the Chief Operating Officer, the Chief
Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the
Secretary or any Vice-President of such Person.
"Officer's Certificate" means a certificate signed on behalf of the Company
by the principal executive officer, the principal financial officer, the
treasurer or the principal accounting officer of the Company, that meets the
requirements set forth in Section 12.05 hereof.
"Opinion of Counsel" means an opinion from legal counsel who is reasonably
acceptable to the Trustee, that meets the requirements of Section 12.05 hereof.
The counsel may be an employee of or counsel to the Company, any Subsidiary of
the Company or the Trustee.
"Pari Passu Indebtedness" means Indebtedness that ranks pari passu in right
of payment to the Notes.
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"Payco Acquisition" means the acquisition by the Company of Payco American
Corporation in a merger transaction.
"Permitted Investments" means (a) any Investment in the Company or in a
Restricted Subsidiary of the Company; (b) any Investment in cash and Cash
Equivalents; (c) any Investment by the Company or any Restricted Subsidiary of
the Company in a Person, if as a result of such Investment (A) such Person
becomes a Restricted Subsidiary of the Company or (B) such Person, in one
transaction or a series of related transactions, is merged, consolidated or
amalgamated with or into, or transfers or conveys substantially all of its
assets to, or is liquidated into, the Company or a Restricted Subsidiary of the
Company; (d) any Restricted Investment made as a result of the receipt of
consideration not constituting cash or Cash Equivalents from an Asset Sale that
was made pursuant to and in compliance with the provisions set forth in Section
4.10 hereof; (e) any Investment existing on the date of this Indenture; (f) any
Investment by Restricted Subsidiaries in other Restricted Subsidiaries and
Investments by Subsidiaries that are not Restricted Subsidiaries in other
Subsidiaries that are not Restricted Subsidiaries; (g) any Investment acquired
by the Company or any of its Restricted Subsidiaries (A) in exchange for any
other Investment or receivable held by the Company or any such Restricted
Subsidiary in connection with or as a result of a bankruptcy, workout,
reorganization or recapitalization of the issuer of such other Investment or
receivable or (B) as a result of a foreclosure by the Company or any of its
Restricted Subsidiaries with respect to any secured Investment or other transfer
of title with respect to any secured Investment in default; (h) Hedging
Obligations; (i) any acquisition of assets, Equity Interests or other securities
by the Company for consideration consisting of common Equity Interests of the
Company; (j) any acquisition by the Company or any of its Subsidiaries of
Purchased Portfolios; (k) loans and advances to officers, directors and
employees for business-related travel expenses, moving expenses and other
similar expenses, in each case, incurred in the ordinary course of business; (l)
Investments the payment for which consists exclusively of Equity Interests
(exclusive of Disqualified Stock) of the Company and (m) Investments in
Unrestricted Subsidiaries or Persons other than Subsidiaries not to exceed $5.0
million, in the aggregate, at any time outstanding (measured as of the date made
and without giving effect to subsequent changes in value).
"Permitted Junior Securities" means equity securities of the Company or
debt securities of the Company that are subordinated in right of payment to all
Senior Debt and all securities issued in exchange for Senior Debt that may at
the time be outstanding, to substantially the same extent as, or to a greater
extent than, the Notes.
"Permitted Refinancing Indebtedness" means any Indebtedness of the Company
or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Company or any of its Restricted Subsidiaries;
provided that: (i) the principal amount (or accreted value, if applicable) of
such Permitted Refinancing Indebtedness does not exceed the principal amount (or
accreted value, if applicable) of the Indebtedness so extended, refinanced,
renewed, replaced, defeased or refunded (plus the amount of any premium required
to be paid in connection therewith and plus reasonable expenses incurred in
connection therewith); (ii) such Permitted Refinancing Indebtedness has a final
maturity date later than the final maturity date of, and has a Weighted Average
Life to Maturity equal to or greater than the Weighted Average Life to Maturity
of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded; (iii) if the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded is subordinated in right of payment to the Notes,
such Permitted Refinancing Indebtedness has a final maturity date later than the
final maturity date of, and is subordinated in right of payment to, the Notes on
terms at least as favorable to the Holders of
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Notes as those contained in the documentation governing the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded; and (iv) such
Indebtedness is incurred either by the Company or by the Restricted Subsidiary
who is the obligor on the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-- stock company, trust, unincorporated organization,
government or any agency or political subdivision thereof or any other entity.
"Preferred Stock" means any Equity Interest with preferential right of
payment of dividends or upon liquidation, dissolution, or winding up.
"Principal Business" means the accounts receivable management and
outsourcing business and lines of businesses and services that are related to or
complimentary to the foregoing.
"Principals" means each of the general partners of MDC Management Company
III, L.P., MDC Management Company IIIE, L.P. and MDC Management Company IIIA,
L.P. and any Person controlled by one or more of such general partners.
"Purchase Money Indebtedness" means Indebtedness the net proceeds of which
are used for the purchase of property or assets acquired in the ordinary course
of business by the Person incurring such Indebtedness.
"Purchased Portfolios" means account receivable portfolios purchased by the
Company or any of its Subsidiaries in the ordinary course of business.
"Registration Rights Agreement" means the Registration Rights Agreement,
dated as of the date hereof, by and among the Company, the Guarantors and the
other parties named on the signature pages thereof, as such agreement may be
amended, modified or supplemented from time to time.
"Regulation S" means Regulation S promulgated under the Securities Act.
"Regulation S Global Note" means a Regulation S Temporary Global Note or
Regulation S Permanent Global Note, as appropriate.
"Regulation S Permanent Global Note" means a permanent global note that
contains the paragraph referred to in footnote 1 and the additional schedule
referred to in footnote 2 to the form of the Note attached hereto as Exhibit
A-1, and that is deposited with and registered in the name of the Depositary,
representing a series of Notes sold in reliance on Regulation S.
"Regulation S Temporary Global Note" means a single temporary global note
in the form of the Note attached hereto as Exhibit A-2 that is deposited with
and registered in the name of the Depositary, representing a series of Notes
sold in reliance on Regulation S.
"Related Parties" means any Person controlled by the Principals, including
any partnership of which the Principals or their Affiliates is the general
partner.
"Representative" means the indenture trustee or other trustee, agent or
representative for any Senior Debt.
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"Responsible Officer," when used with respect to the Trustee, means any
officer within the Corporate Trust Administration of the Trustee (or any
successor group of the Trustee) or any other officer of the Trustee assigned to
perform the duties of Trustee hereunder and also means, with respect to a
particular corporate trust matter, any other officer to whom such matter is
referred because of his knowledge of and familiarity with the particular
subject.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the referent
Person that is not (i) an Unrestricted Subsidiary or (ii) a direct or indirect
Subsidiary of an Unrestricted Subsidiary; provided, however, that upon the
occurrence of any Unrestricted Subsidiary ceasing to be an Unrestricted
Subsidiary, such Subsidiary shall be included in the definition of Restricted
Subsidiary.
"Rule 144A" means Rule 144A promulgated under the Securities Act.
"Rule 144A Global Note" means a permanent global note that contains the
paragraph referred to in footnote 1 and the additional schedule referred to in
footnote 2 to the form of the Note attached hereto as Exhibit A-1, and that is
deposited with and registered in the name of the Depositary, representing a
series of Notes sold in reliance on Rule 144A.
"S&P" means Standard & Poor's Rating Group, a division of McGraw Hill,
Inc., a New York corporation and its successors.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Seller Paper" means Indebtedness of the Company or a Restricted Subsidiary
of the Company that is outstanding on the date of this Indenture and that was
issued in connection with an acquisition of a business or assets in respect of
the balance deferred and unpaid of the purchase price of any property, the
aggregate principal amount of which, as of the date of this Indenture, does not
exceed $11.0 million.
"Senior Bank Debt" means all Obligations under or in respect of the New
Bank Credit Facility, together with any refunding, refinancing or replacement,
in whole or part, of such Indebtedness.
"Senior Debt" means (i) the Senior Bank Debt and (ii) any other
Indebtedness permitted to be incurred by the Company under the terms of this
Indenture, unless the instrument under which such Indebtedness is incurred
expressly provides that it is on a parity with or subordinated in right of
payment to the Notes. Notwithstanding anything to the contrary in the foregoing,
Senior Debt shall not include (1) any liability for federal, state, local or
other taxes owed or owing by the Company, (2) any Indebtedness of the Company to
any of its Restricted Subsidiaries or other Affiliates, (3) any trade payables,
(4) that portion of any Indebtedness that is incurred in violation of this
Indenture, (5) Indebtedness which, when incurred and without respect to any
election under Section 1111(b) of the Title 11, United States Code, is without
recourse to the Company, (6) Indebtedness evidenced by the Notes and (7) Capital
Stock.
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"Significant Subsidiary" means any Restricted Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act, as such Regulation is in effect on
the date of this Indenture.
"Significant Subsidiary Guarantee" means the Subsidiary Guarantee of a
Significant Subsidiary.
"Subordinated Indebtedness" means any Indebtedness of the Company or any of
its Restricted Subsidiaries which is expressly by its terms subordinated in
right of payment to any other Indebtedness.
"Stated Maturity," when used with respect to any Note or any installment of
interest thereof, means the date specified in such Note as the fixed date on
which the principal of such Note or such installment of interest is due and
payable.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"Subsidiary Guarantees" means the Guarantees of the Notes by each of the
Guarantors pursuant to this Indenture.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss. 77aaa-77bbbb)
as in effect on the date on which this Indenture is qualified under the TIA.
"Transfer Restricted Securities" means securities that bear or are required
to bear the legend set forth in Section 2.06 hereof.
"Trustee" means the party named as such in the preamble hereto until a
successor replaces it in accordance with the applicable provisions of this
Indenture and thereafter means the successor serving hereunder.
"Unrestricted Subsidiary" means (i) any Subsidiary that is designated by
the Board of Directors as an Unrestricted Subsidiary pursuant to a Board
Resolution; but only to the extent that such Subsidiary: (a) has no Indebtedness
other than Non-Recourse Debt; (b) is not party to any agreement, contract,
arrangement or understanding with the Company or any Restricted Subsidiary of
the Company unless the terms of any such agreement, contract, arrangement or
understanding are no less favorable to the Company or such Restricted Subsidiary
than those that might be obtained at the time from Persons who are not
Affiliates of the Company; (c) is a Person with respect to which neither the
Company nor any of its Restricted Subsidiaries has any direct or indirect
obligation (x) to subscribe for additional Equity Interests or (y) to maintain
or preserve such Person's financial condition or to cause such Person to achieve
any specified levels of operating results; (d) has not guaranteed or otherwise
directly or indirectly provided credit support for any Indebtedness of the
Company or any of its Restricted Subsidiaries; and (e) has at least one director
on its board of
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directors that is not a director or executive officer of the Company or any of
its Restricted Subsidiaries and has at least one executive officer that is not a
director or executive officer of the Company or any of its Restricted
Subsidiaries. Any such designation by the Board of Directors shall be evidenced
to the Trustee by filing with the Trustee a certified copy of the Board
Resolution giving effect to such designation and an Officer's Certificate
certifying that such designation complied with the foregoing conditions and was
permitted pursuant to and in accordance with the provisions set forth in Section
4.07 hereof. If, at any time, any Unrestricted Subsidiary would fail to meet the
foregoing requirements as an Unrestricted Subsidiary, it shall thereafter cease
to be an Unrestricted Subsidiary for purposes of this Indenture and any
Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted
Subsidiary of the Company as of such date (and, if such Indebtedness is not
permitted to be incurred as of such date pursuant to and in accordance with the
provisions set forth in Section 4.09 hereof, the Company shall be in default of
such covenant). The Board of Directors of the Company may at any time designate
any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that such
designation shall be deemed to be an incurrence of Indebtedness by a Restricted
Subsidiary of the Company of any outstanding Indebtedness of such Unrestricted
Subsidiary and such designation shall only be permitted if (i) such Indebtedness
is permitted to be incurred pursuant to and in accordance with the provisions
set forth in Section 4.09 hereof and (ii) no Default or Event of Default would
be in existence following such designation.
"Voting Stock" means, with respect to any Person, any class or series of
capital stock of such Person that is ordinarily entitled to vote in the election
of directors thereof at a meeting of stockholders called for such purpose,
without the occurrence of any additional event or contingency.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" is any Wholly Owned Subsidiary that is
a Restricted Subsidiary.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of such Person
all of the outstanding Capital Stock or other ownership interests of which
(other than directors' qualifying shares) shall at the time be owned by such
Person or by one or more Wholly Owned Subsidiaries of such Person and one or
more Wholly Owned Subsidiaries of such Person.
SECTION 1.02. OTHER DEFINITIONS.
Defined in
Term Section
"Accredited Investor"......................................... 2.01
"Affiliate Transaction"....................................... 4.11
"Asset Sale Offer"............................................ 4.10
"Cedel Bank".................................................. 2.01
"Change of Control Offer"..................................... 4.15
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"Change of Control Payment"................................... 4.15
"Change of Control Payment Date".............................. 4.15
"Covenant Defeasance"......................................... 8.03
"Custodian"................................................... 6.01
"DTC"......................................................... 2.03
"Euroclear"................................................... 2.01
"Event of Default"............................................ 6.01
"Excess Proceeds"............................................. 4.10
"incur"....................................................... 4.09
"Legal Defeasance"............................................ 8.02
"Note Custodian".............................................. 2.03
"Offer"....................................................... 4.15
"Offer Amount"................................................ 3.09
"Offer Period"................................................ 3.09
"Paying Agent"................................................ 2.03
"Payment Blockage Notice"..................................... 10.03
"Purchase Date"............................................... 3.09
"QIB"......................................................... 2.01
"Registrar"................................................... 2.03
"Restricted Payments"......................................... 4.07
"Shelf Registration Statement"................................ 7.03
"U.S. Global Notes"........................................... 2.01
SECTION 1.03. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following meanings:
"indenture securities" means the Notes;
"indenture security Holder" means a Holder of a Note;
"indenture to be qualified' means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee;
"obligor" on the Notes and the Subsidiary Guarantees means the Company and
the Guarantors, respectively, and any successor obligor upon the Notes and
the Subsidiary Guarantees, respectively.
All other terms used in this Indenture that are defined by the TIA, defined
by TIA reference to another statute or defined by SEC rule under the TIA have
the meanings so assigned to them.
SECTION 1.04. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
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(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned to it
in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural include the
singular;
(5) provisions apply to successive events and transactions; and
(6) references to sections of or rules under the Securities Act shall be
deemed to include substitute, replacement of successor sections or rules adopted
by the SEC from time to time.
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ARTICLE 2
THE NOTES
SECTION 2.01. FORM AND DATING.
The Notes and the Trustee's certificate of authentication shall be
substantially in the form of (i) in the case of the Notes other than a
Regulation S Temporary Global Note, Exhibit A-1 attached hereto, and (ii) in the
case of a Regulation S Temporary Global Note, Exhibit A-2 attached hereto. The
Notes may have notations, legends or endorsements required by law, stock
exchange rule or usage. The Company and the Trustee shall approve the form of
the Notes and any notation, legend or endorsement on them. Each Note shall be
dated the date of its issuance and shall show the date of its authentication.
The Notes shall be issued in minimum denominations of $1,000 and integral
multiples of $1,000 in excess thereof. The terms and provisions contained in the
Notes shall constitute, and are hereby expressly made, a part of this Indenture
and the Company, the Guarantors and the Trustee, by their execution and delivery
of this Indenture, expressly agree to such terms and provisions and to be bound
thereby.
(a) Global Notes. Notes offered and sold to (i) qualified institutional
buyers as defined in Rule 144A ("QIBs") in reliance on Rule 144A and (ii)
institutional accredited investors as defined in Rule 501 (a)(1), (2), (3) or
(7) under the Securities Act ("Accredited Investors") who are not QIBs, shall be
issued initially in the form of Rule 144A Global Notes and Accredited
Institutional Investor Global Notes (collectively, the "U.S. Global Notes"),
respectively, which shall be deposited on behalf of the purchasers of the Notes
represented thereby with the Depositary at its New York office, and registered
in the name of the Depositary or a nominee of the Depositary, duly executed by
the Company and authenticated by the Trustee as hereinafter provided. The
aggregate principal amount of the U.S. Global Notes may from time to time be
increased or decreased by adjustments made on the records of the Trustee and the
Depositary or its nominee as hereinafter provided.
Notes offered and sold in reliance on Regulation S shall be issued
initially in the form of the Regulation S Temporary Global Note, which shall be
deposited on behalf of the purchasers of the Notes represented thereby with the
Trustee, at its New York office, as custodian for the Depositary, and registered
in the name of the Depositary or the nominee of the Depositary for the accounts
of designated agents holding on behalf of the Euroclear System ("Euroclear") or
Cedel Bank, S.A. ("Cedel Bank"), duly executed by the Company and authenticated
by the Trustee as hereinafter provided. The "40-day restricted period" (as
defined in Regulation S) shall be terminated upon the receipt by the Trustee of
(i) a written certificate from the Depositary, together with copies of
certificates from Euroclear and Cedel Bank certifying that they have received
certification of nonUnited States beneficial ownership of 100% of the aggregate
principal amount of the Regulation S Temporary Global Note (except to the extent
of any beneficial owners thereof who acquired an interest therein pursuant to
another exemption from registration under the Securities Act and who will take
delivery of a beneficial ownership interest in a U.S. Global Note, all as
contemplated by Section 2.06(a)(ii) hereof), and (ii) an Officer's Certificate
from the Company. Following the termination of the 40-day restricted period,
beneficial interests in the Regulation S Temporary Global Note shall be
exchanged for beneficial interests in Regulation S Permanent Global Notes
pursuant to the Applicable Procedures. Simultaneously with the authentication of
Regulation S Permanent Global Notes, the Trustee shall cancel the Regulation S
Temporary Global Note.
The aggregate principal amount of the Regulation S Temporary Global Note
and the Regulation S Permanent Global Notes may from time to time be increased
or decreased by
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adjustments made on the records of the Trustee and the Depositary or its
nominee, as the case may be, in connection with transfers of interest as
hereinafter provided.
Each Global Note shall represent such of the outstanding Notes as shall be
specified therein and each shall provide that it shall represent the aggregate
amount of outstanding Notes from time to time endorsed thereon and that the
aggregate amount of outstanding Notes represented thereby may from time to time
be reduced or increased, as appropriate, to reflect exchanges and redemptions.
Any endorsement of a Global Note to reflect the amount of any increase or
decrease in the amount of outstanding Notes represented thereby shall be made by
the Trustee or the Note Custodian (as hereinafter defined), at the direction of
the Trustee, in accordance with instructions given by the Holder thereof as
required by Section 2.06 hereof.
The provisions of the "Operating Procedures of the Euroclear System" and
"Terms and Conditions Governing Use of Euroclear" and the "Management
Regulations" and "Instructions to Participants" of Cedel Bank shall be
applicable to interests in the Regulation S Temporary Global Note and the
Regulation S Permanent Global Notes that are held by the Agent Members through
Euroclear or Cedel Bank.
Except as set forth in Section 2.06 hereof, the Global Notes may be
transferred, in whole and not in part, only to another nominee of the Depositary
or to a successor of the Depositary or its nominee.
(b) Book-Entry Provisions. This Section 2.01(b) shall apply only to U.S.
Global Notes and the Regulation S Permanent Global Notes deposited with or on
behalf of the Depositary.
The Company shall execute and the Trustee shall, in accordance with this
Section 2.01(b), authenticate and deliver the Global Notes that (i) shall be
registered in the name of the Depositary or the nominee of the Depositary and
(ii) shall be delivered by the Trustee to the Depositary or pursuant to the
Depositary's instructions or held by the Trustee as custodian for the
Depositary.
Agent Members shall have no rights either under this Indenture with respect
to any Global Note held on their behalf by the Depositary or by the Trustee as
custodian for the Depositary or under such Global Note, and the Depositary may
be treated by the Company, the Trustee and any agent of the Company or the
Trustee as the absolute owner of such Global Note for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Company, the
Trustee or any agent of the Company or the Trustee from giving effect to any
written certification, proxy or other authorization furnished by the Depositary
or impair, as between the Depositary and its Agent Members, the operation of
customary practices of such Depositary governing the exercise of the rights of
an owner of a beneficial interest in any Global Note.
(c) Definitive Notes. Notes issued in certificated form shall be
substantially in the form of Exhibit A-1 attached hereto (but without including
the text referred to in footnotes 1 and 2 thereto).
SECTION 2.02. EXECUTION AND AUTHENTICATION.
One Officer shall sign the Notes for the Company by manual or facsimile
signature.
If an Officer whose signature is on a Note no longer holds that office at
the time a Note is authenticated, the Note shall nevertheless be valid.
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A Note shall not be valid until authenticated by the manual signature of
the Trustee. The signature shall be conclusive evidence that the Note has been
authenticated under this Indenture.
The Trustee shall, upon a written order of the Company signed by one
Officer, authenticate Notes for original issue up to the aggregate principal
amount stated in paragraph 4 of the Notes, in the case of Notes other than a
Regulation S Temporary Global Note, and the second paragraph of the Notes, in
the case of a Regulation S Temporary Global Note. The Trustee shall, upon a
written order of the Company, authenticate Exchange Notes for original issue up
to the aggregate principal amount of Subordinated Notes exchanged in the
Exchange Offer or otherwise exchanged for Subordinated Notes pursuant to the
terms of the Registration Rights Agreement. The aggregate principal amount of
Notes outstanding at any time may not exceed such amount except as provided in
Section 2.07 hereof.
The Trustee may appoint an authenticating agent acceptable to the Company
to authenticate Notes. An authenticating agent may authenticate Notes whenever
the Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent has the
same rights as an Agent to deal with the Company or an Affiliate of the Company.
SECTION 2.03. REGISTRAR AND PAYING AGENT.
The Company shall maintain an office or agency where Notes may be presented
for registration of transfer or for exchange ("Registrar") and an office or
agency where Notes may be presented for payment ("Paying Agent"). The Registrar
shall keep a register of the Notes and of their transfer and exchange. The
Company may appoint one or more co-registrars and one or more additional paying
agents. The term "Registrar" includes any co-registrar and the term "Paying
Agent" includes any additional paying agent. The Company may change any Paying
Agent or Registrar without notice to any Holder. The Company shall notify the
Trustee in writing of the name and address of any Agent not a party to this
Indenture. If the Company fails to appoint or maintain another entity as
Registrar or Paying Agent, the Trustee shall act as such. The Company or any of
the Guarantors may act as Paying Agent or Registrar.
The Company initially appoints The Depository Trust Company ("DTC") to act
as Depositary with respect to the Global Notes.
The Company initially appoints the Trustee to act as the Registrar and
Paying Agent and to act as custodian with respect to the Global Notes (the "Note
Custodian").
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST.
The Company shall require each Paying Agent other than the Trustee to agree
in writing that the Paying Agent will hold in trust for the benefit of Holders
or the Trustee all money held by the Paying Agent for the payment of principal
of and premium, interest and Liquidated Damages, if any, on the Notes, and will
notify the Trustee of any default by the Company or any Guarantor in making any
such payment. While any such default continues, the Trustee may require a Paying
Agent to pay all money held by it to the Trustee. The Company at any time may
require a Paying Agent to pay all money held by it to the Trustee. Upon payment
over to the Trustee, the Paying Agent (if other than the Company or a Guarantor)
shall have no further liability for the money delivered to the Trustee. If the
Company or a Guarantor acts as Paying Agent, it shall segregate and hold in a
separate trust fund for the benefit of the Holders all money held by it as
Paying Agent. Upon any bankruptcy or
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reorganization proceedings relating to the Company or any Guarantor, the Trustee
shall serve as Paying Agent for the Notes.
SECTION 2.05. HOLDER LISTS.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Holders and shall otherwise comply with TIA ss. 312(a). If the Trustee is
not the Registrar, the Company and/or the Guarantors shall furnish to the
Trustee at least seven Business Days before each interest payment date and at
such other times as the Trustee may request in writing, a list in such form and
as of such date as the Trustee may reasonably require of the names and addresses
of the Holders of Notes and the Company and the Guarantors shall otherwise
comply with TIA ss.312(a).
SECTION 2.06. TRANSFER AND EXCHANGE.
(a) Transfer and Exchange of Global Notes. The transfer and exchange of
Global Notes or beneficial interests therein shall be effected through the
Depositary, in accordance with this Indenture and the procedures of the
Depositary therefor, which shall include restrictions on transfer comparable to
those set forth herein to the extent required by the Securities Act. Beneficial
interests in a Global Note may be transferred to Persons who take delivery
thereof in the form of a beneficial interest in the same Global Note in
accordance with the transfer restrictions set forth in the legend in subsection
(g) of this Section 2.06. Transfers of beneficial interests in the Global Notes
to Persons required to take delivery thereof in the form of an interest in
another Global Note shall be permitted as follows:
(i) U. S. Global Note to Regulation S Global Note. If, at any time,
an owner of a beneficial interest in a U.S. Global Note deposited
with the Depositary (or the Trustee as custodian for the
Depositary) wishes to transfer its interest in such U.S. Global
Note to a Person who is required or permitted to take delivery
thereof in the form of an interest in a Regulation S Global Note,
such owner shall, subject to the Applicable Procedures, exchange
or cause the exchange of such interest for an equivalent
beneficial interest in a Regulation S Global Note as provided in
this Section 2.06(a)(i). Upon receipt by the Trustee of (1)
instructions given in accordance with the Applicable Procedures
from an Agent Member directing the Trustee to credit or cause to
be credited a beneficial interest in the Regulation S Global Note
in an amount equal to the beneficial interest in the applicable
U.S. Global Note (e.g., the Rule 144A Global Note or the
Accredited Institutional Investor Global Note) to be exchanged,
(2) a written order given in accordance with the Applicable
Procedures containing information regarding the participant
account of the Depositary and the Euroclear or Cedel Bank account
to be credited with such increase, and (3) a certificate in the
form of Exhibit B-1 hereto given by the owner of such beneficial
interest stating that the transfer of such interest has been made
in compliance with the transfer restrictions applicable to the
Global Notes and pursuant to and in accordance with Rule 903 or
Rule 904 of Regulation S, then the Trustee, as Registrar, shall
instruct the Depositary to reduce or cause to be reduced the
aggregate principal amount at maturity of the applicable U.S.
Global Note and to increase or cause to be increased the
aggregate principal amount at maturity of the applicable
Regulation S Global
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Note by the principal amount at maturity of the beneficial
interest in the U.S. Global Note to be exchanged, to credit or
cause to be credited to the account of the Person specified in
such instructions a beneficial interest in the Regulation S
Global Note equal to the reduction in the aggregate principal
amount at maturity of the applicable U.S. Global Note, and to
debit, or cause to be debited, from the account of the Person
making such exchange or transfer the beneficial interest in the
U.S. Global Note that is being exchanged or transferred.
(ii) Regulation S Global Note to U. S. Global Note. If, at any time,
an owner of a beneficial interest in a Regulation S Global Note
deposited with the Depositary or with the Trustee as custodian
for the Depositary wishes to transfer its interest in such
Regulation S Global Note to (1) a Person who is required or
permitted to take delivery thereof in the form of an interest in
a Rule 144A Global Note or (2) a Person who is required or
permitted to take delivery thereof in the form of an interest in
an Accredited Institutional Investor Global Note, such owner
shall, subject to the Applicable Procedures, exchange or cause
the exchange of such interest for an equivalent beneficial
interest in a Rule 144A Global Note or an Accredited
Institutional Investor Global Note, as applicable, as provided in
this Section 2.06(a)(ii). Upon receipt by the Trustee of (1)
instructions from Euroclear or Cedel Bank, if applicable, and the
Depositary, directing the Trustee, as Registrar, to credit or
cause to be credited a beneficial interest in the Rule 144A
Global Note or the Accredited Institutional Investor Global Note,
as applicable, equal to the beneficial interest in the Regulation
S Global Note to be exchanged, such instructions to contain
information regarding the participant account with the Depositary
to be credited with such increase, (2) a written order given in
accordance with the Applicable Procedures containing information
regarding the participant account of the Depositary and (3) a
certificate in the form of Exhibit B-2 attached hereto given by
the owner of such beneficial interest stating (A) if the transfer
is pursuant to Rule 144A, that the Person transferring such
interest in a Regulation S Global Note reasonably believes that
the Person acquiring such interest in a Rule 144A Global Note is
a QIB and is obtaining such beneficial interest in a transaction
meeting the requirements of Rule 144A and any applicable blue sky
or securities laws of any state of the United States, (B) that
the transfer complies with the requirements of Rule 144A under
the Securities Act and any applicable blue sky or securities laws
of any state of the United States or (C) if the transfer is
pursuant to any other exemption from the registration
requirements of the Securities Act, that the transfer of such
interest has been made in compliance with the transfer
restrictions applicable to the Global Notes and pursuant to and
in accordance with the requirements of the exemption claimed,
such statement to be supported by an Opinion of Counsel from the
transferee or the transferor in form reasonably acceptable to the
Company and to the Registrar, then the Trustee, as Registrar,
shall instruct the Depositary to reduce or cause to be reduced
the aggregate principal amount at maturity of such Regulation S
Global Note and to increase or cause to be increased the
aggregate principal amount at maturity of the applicable Rule
144A Global Note or the Accredited Institutional Investor Global
Note, as applicable, by the principal amount at
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maturity of the beneficial interest in the Regulation S Global
Note to be exchanged, and the Trustee, as Registrar, shall
instruct the Depositary, concurrently with such reduction, to
credit or cause to be credited to the account of the Person
specified in such instructions a beneficial interest in the
applicable Rule 144A Global Note or the Accredited Institutional
Investor Global Note, as applicable, equal to the reduction in
the aggregate principal amount at maturity of such Regulation S
Global Note and to debit or cause to be debited from the account
of the Person making such transfer the beneficial interest in the
Regulation S Global Note that is being transferred.
(iii) Rule 144A Global Note to Accredited Institutional Investor
Global Note; Accredited Institutional Investor Global Note to
Rule 144A Global Note. If, at any time, an owner of a beneficial
interest in a Rule 144A Global Note deposited with the Depositary
or with the Trustee as custodian for the Depositary wishes to
transfer its interest in such Rule 144A Global Note to a Person
who is required or permitted to take delivery thereof in the form
of an interest in an Accredited Institutional Investor Global
Note or an owner of an Accredited Institutional Investor Global
Note wishes to transfer its interest in such Accredited
Institutional Investor Global Note to a Person who is required or
permitted to take delivery thereof in the form of an interest in
a Rule 144A Global Note, such owner shall, subject to the
Applicable Procedures, exchange or cause the exchange of such
interest for an equivalent beneficial interest in a Rule 144A
Global Note or an Accredited Institutional Investor Global Note,
as applicable, as provided in this Section 2.06(a)(iii). Upon
receipt by the Trustee of (1) instructions from the Depositary,
directing the Trustee, as Registrar, to credit or cause to be
credited a beneficial interest in the Rule 144A Global Note or
the Accredited Institutional Investor Global Note, as applicable,
equal to the beneficial interest in the Rule 144A Global Note or
Accredited Institutional Investor Global Note, as applicable, to
be exchanged, such instructions to contain information regarding
the participant account with the Depositary to be credited with
such increase, (2) a written order given in accordance with the
Applicable Procedures containing information regarding the
participant account of the Depositary and (3) a certificate in
the form of Exhibit B-3 attached hereto given by the owner of
such beneficial interest stating (A) if the transfer is pursuant
to Rule 144A, that (i) the Person transferring such interest in
an Accredited Institutional Investor Global Note reasonably
believes that the Person acquiring such interest in a Rule 144A
Global Note is a QIB and is obtaining such beneficial interest in
a transaction meeting the requirements of Rule 144A and any
applicable blue sky or securities laws of any state of the United
States and (ii) that the transfer complies with the requirements
of Rule 144A under the Securities Act and any applicable blue sky
or securities laws of any state of the United States or (B) if
the transfer is pursuant to any other exemption from the
registration requirements of the Securities Act, that the
transfer of such interest has been made in compliance with the
transfer restrictions applicable to the Global Notes and pursuant
to and in accordance with the requirements of the exemption
claimed, such statement to be supported by an Opinion of Counsel
from the transferee or the transferor in form reasonably
acceptable to the Company and to the Registrar, then the Trustee,
as
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Registrar, shall instruct the Depositary to reduce or cause to be
reduced the aggregate principal amount at maturity of such Rule
144A Global Note or Accredited Institutional Investor Global
Note, as applicable, and to increase or cause to be increased the
aggregate principal amount at maturity of the applicable Rule
144A Global Note or the Accredited Institutional Investor Global
Note, as applicable, by the principal amount at maturity of the
beneficial interest in the Rule 144A Global Note or Accredited
Institutional Investor Global Note, as applicable, to be
exchanged, and the Trustee, as Registrar, shall instruct the
Depositary, concurrently with such reduction, to credit or cause
to be credited to the account of the Person specified in such
instructions a beneficial interest in the applicable Rule 144A
Global Note or the Accredited Institutional Investor Global Note,
as applicable, equal to the reduction in the aggregate principal
amount at maturity of such Rule 144A Global Note or the
Accredited Institutional Investor Global Note, as applicable, and
to debit or cause to be debited from the account of the Person
making such transfer the beneficial interest in the Rule 144A
Global Note or the Accredited Institutional Investor Global Note,
as applicable, that is being transferred.
(b) Transfer and Exchange of Definitive Notes. When Definitive Notes are
presented by a Holder to the Registrar with a request:
(x) to register the transfer of the Definitive Notes; or
(y) to exchange such Definitive Notes for an equal principal amount of
Definitive Notes of other authorized denominations, the Registrar
shall register the transfer or make the exchange as requested;
provided, however, that the Definitive Notes presented or surrendered
for register of transfer or exchange:
(i) shall be duly endorsed or accompanied by a written
instruction of transfer in form satisfactory to the
Registrar duly executed by such Holder or by his or her
attorney, duly authorized in writing; and
(ii) in the case of a Definitive Note that is a Transfer
Restricted Security, such request shall be accompanied by
the following additional information and documents, as
applicable:
(A) if such Transfer Restricted Security is being delivered
to the Registrar by a Holder for registration in the
name of such Holder, without transfer, or such Transfer
Restricted Security is being transferred to the
Company, a certification to that effect from such
Holder (in substantially the form of Exhibit B-4
hereto);
(B) if such Transfer Restricted Security is being
transferred to a QIB in accordance with Rule 144A under
the Securities Act or pursuant to an exemption from
registration in accordance with Rule 144 under the
Securities Act or pursuant to an effective registration
statement under the Securities Act, a certification to
that effect from such Holder (in substantially the form
of Exhibit B-4 hereto); or
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(C) if such Transfer Restricted Security is being
transferred in reliance on any other exemption from the
registration requirements of the Securities Act, a
certification to that effect from such Holder (in
substantially the form of Exhibit B-4 hereto) and an
Opinion of Counsel from such Holder or the transferee
reasonably acceptable to the Company and to the
Registrar to the effect that such transfer is in
compliance with the Securities Act.
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(c) Transfer of a Beneficial Interest in a Global Note for a Definitive
Note.
(i) Any Person having a beneficial interest in a Global Note (other
than a Regulation S Temporary Global Note) may upon request,
subject to the Applicable Procedures, exchange such beneficial
interest for a Definitive Note. Upon receipt by the Trustee of
written instructions or such other form of instructions as is
customary for the Depositary (or Euroclear or Cedel Bank, if
applicable) from the Depositary or its nominee on behalf of any
Person having a beneficial interest in such Global Note, and, in
the case of a Transfer Restricted Security, the following
additional information and documents (all of which may be
submitted by facsimile):
(A) if such beneficial interest is being transferred to the
Person designated by the Depositary as being the beneficial
owner, a certification to that effect from such Person (in
substantially the form of Exhibit B-5 hereto);
(B) if such beneficial interest is being transferred to a QIB in
accordance with Rule 144A under the Securities Act or
pursuant to an exemption from registration in accordance
with Rule 144 under the Securities Act or pursuant to an
effective registration statement under the Securities Act, a
certification to that effect from the transferor (in
substantially the form of Exhibit B-5 hereto); or
(C) if such beneficial interest is being transferred in reliance
on any other exemption from the registration requirements of
the Securities Act, a certification to that effect from the
transferor (in substantially the form of Exhibit B-5 hereto)
and an Opinion of Counsel from the transferee or the
transferor reasonably acceptable to the Company and to the
Registrar to the effect that such transfer is in compliance
with the Securities Act.
the Trustee or the Note Custodian, at the direction of the
Trustee, shall, in accordance with the standing instructions and
procedures existing between the Depositary and the Note
Custodian, cause the aggregate principal amount of the applicable
Global Note (e.g., the Rule 144A Global Note, the Accredited
Institutional Investor Global Note or the Regulation S Permanent
Global Note) to be reduced accordingly and, following such
reduction, the Company and the Guarantors shall execute and, the
Trustee shall authenticate and deliver to the transferee a
Definitive Note in the appropriate principal amount.
(ii) Definitive Notes issued in exchange for a beneficial interest in
a Global Note (other than a Regulation S Temporary Global Note),
as applicable, pursuant to this Section 2.06(c) shall be
registered in such names and in such authorized denominations as
the Depositary, pursuant to instructions from its direct or
indirect participants or otherwise, shall instruct the Trustee.
The Trustee shall deliver such Definitive Notes to the Persons in
whose names such Notes are so registered. Following any such
issuance of Definitive Notes, the Trustee, as Registrar, shall
instruct the Depositary to reduce or cause to be reduced the
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aggregate principal amount at maturity of the applicable Global
Note to reflect the transfer.
(d) Restrictions on Transfer and Exchange of Global Notes. Notwithstanding
any other provision of this Indenture (other than the provisions set forth in
subsection (f) of this Section 2.06), a Global Note may not be transferred as a
whole except by the Depositary to a nominee of the Depositary or by a nominee of
the Depositary to the Depositary or another nominee of the Depositary or by the
Depositary or any such nominee to a successor Depositary or a nominee of such
successor Depositary.
(e) Transfer and Exchange of a Definitive Note for a Beneficial Interest in
a Global Note. A Definitive Note may not be exchanged for a beneficial interest
in a Global Note except, subject to the Applicable Procedures, upon satisfaction
of the requirements set forth below. Upon receipt by the Trustee of a Definitive
Note, duly endorsed or accompanied by appropriate instruments of transfer, in
form satisfactory to the Trustee, and, in the case of a Transfer Restricted
Security, the following additional information and documents (all of which may
be submitted by facsimile):
(i) if such beneficial interest is being transferred to the Person
designated by the Depositary as being the beneficial owner, a
certification to that effect from such Person (in substantially
the form of Exhibit B-6 hereto);
(ii) if such beneficial interest is being transferred to a QIB in
accordance with Rule 144A under the Securities Act or pursuant to
an exemption from registration in accordance with Rule 144 under
the Securities Act or pursuant to an effective registration
statement under the Securities Act, a certification to that
effect from the transferor (in substantially the form of Exhibit
B-6 hereto); or
(iii) if such beneficial interest is being transferred in reliance on
any other exemption from the registration requirements of the
Securities Act, a certification to that effect from the
transferor (in substantially the form of Exhibit B-6 hereto) and
an Opinion of Counsel from the transferee or the transferor
reasonably acceptable to the Company and to the Registrar to the
effect that such transfer is in compliance with the Securities
Act,
the Trustee shall cancel such Definitive Note in accordance with Section 2.11
hereof and cause, or direct the Note Custodian to cause, in accordance with the
standing instructions and procedures existing between the Depositary and the
Note Custodian, the aggregate principal amount of Notes represented by the
applicable Global Note (e.g., the Rule 144A Global Note, the Accredited
Institutional Investor Global Note or the Regulation S Permanent Global Note, as
the case may be) to be increased accordingly. If none of the applicable Global
Notes are then outstanding, the Company shall issue and, upon receipt of an
authentication order in accordance with Section 2.02 hereof, the Trustee shall
authenticate a new applicable Global Note in the appropriate principal amount.
(f) Authentication of Definitive Notes in Absence of Depositary. If at any
time:
(i) the Depositary for the Notes notifies the Company that the
Depositary is unwilling or unable to continue as Depositary for
the Global Notes and a
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successor Depositary for the Global Notes is not appointed by the
Company within 90 days after delivery of such notice; or
(ii) the Company, at its sole discretion, notifies the Trustee in
writing that it elects to cause the issuance of Definitive Notes
under this Indenture,
then the Company and the Guarantors shall execute, and the Trustee shall, upon
receipt of an authentication order in accordance with Section 2.02 hereof,
authenticate and deliver, Definitive Notes in an aggregate principal amount
equal to the principal amount of the Global Notes in exchange for such Global
Notes.
(g) Legends.
(i) Except as permitted by the following paragraphs (ii) and (iii),
each Note certificate evidencing Global Notes and Definitive
Notes (and all Notes issued in exchange therefor or substitution
thereof) shall bear legends in substantially the following form:
THE NOTES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT") AND (A) MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED EXCEPT (1) BY THE INITIAL INVESTOR (a) TO A PERSON
WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL
BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT
PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144A, (b) IN AN OFFSHORE TRANSACTION COMPLYING WITH RULE 903
OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (c)
PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), (d) TO THE
COMPANY OR (e) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT AND (2) BY SUBSEQUENT INVESTORS AS SET
FORTH IN (1) ABOVE AND, IN ADDITION, TO AN INSTITUTIONAL
ACCREDITED INVESTOR IN A TRANSACTION EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT, AND, IN EACH CASE, IN
ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF
THE UNITED STATES AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT
HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE NOTES
EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A)
ABOVE. NO REPRESENTATION CAN BE MADE AS TO THE AVAILABILITY OF
THE EXEMPTION PROVIDED BY RULE 144 FOR RESALES OF THE NOTES.
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(ii) Upon any sale or transfer of a Transfer Restricted Security
(including any Transfer Restricted Security represented by a
Global Note) pursuant to Rule 144 under the Securities Act or
pursuant to an effective registration statement under the
Securities Act:
(A) in the case of any Transfer Restricted Security that is a
Definitive Note, the Registrar shall permit the Holder
thereof to exchange such Transfer Restricted Security for a
Definitive Note that does not bear the legend set forth in
(i) above and rescind any restriction on the transfer of
such Transfer Restricted Security upon receipt of a
certification from the transferring holder substantially in
the form of Exhibit B-4 hereto; and
(B) in the case of any Transfer Restricted Security represented
by a Global Note, such Transfer Restricted Security shall
not be required to bear the legend set forth in (i) above,
but shall continue to be subject to the provisions of
Section 2.06(a) and (b) hereof; provided, however, that with
respect to any request for an exchange of a Transfer
Restricted Security that is represented by a Global Note for
a Definitive Note that does not bear the legend set forth in
(i) above, which request is made in reliance upon Rule 144,
the Holder thereof shall certify in writing to the Registrar
that such request is being made pursuant to Rule 144 (such
certification to be substantially in the form of Exhibit B-4
hereto).
(iii) Upon any sale or transfer of a Transfer Restricted Security
(including any Transfer Restricted Security represented by a
Global Note) in reliance on any exemption from the registration
requirements of the Securities Act (other than exemptions
pursuant to Rule 144A or Rule 144 under the Securities Act) in
which the Holder or the transferee provides an Opinion of Counsel
to the Company and the Registrar in form and substance reasonably
acceptable to the Company and the Registrar (which Opinion of
Counsel shall also state that the transfer restrictions contained
in the legend are no longer applicable):
(A) in the case of any Transfer Restricted Security that is a
Definitive Note, the Registrar shall permit the Holder
thereof to exchange such Transfer Restricted Security for a
Definitive Note that does not bear the legend set forth in
(i) above and rescind any restriction on the transfer of
such Transfer Restricted Security; and
(B) in the case of any Transfer Restricted Security represented
by a Global Note, such Transfer Restricted Security shall
not be required to bear the legend set forth in (i) above,
but shall continue to be subject to the provisions of
Section 2.06(a) and (b) hereof.
(iv) Notwithstanding the foregoing, upon consummation of the Exchange
Offer in accordance with the Registration Rights Agreement, the
Company shall issue and, upon receipt of an authentication order
in accordance with Section 2.02 hereof, the Trustee shall
authenticate the Exchange Notes in exchange for the
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Subordinated Notes accepted for exchange in the Exchange Offer,
which Exchange Notes shall not bear the legend set forth in (i)
above, and the Registrar shall rescind any restriction on the
transfer of such Exchange Notes, in each case unless the Holder
of such Subordinated Notes is either (A) a broker-dealer, (B) a
Person participating in the distribution of the Subordinated
Notes or (C) a Person who is an affiliate (as defined in Rule
144A) of the Company.
(h) Cancellation and/or Adjustment of Global Notes. At such time as all
beneficial interests in Global Notes have been exchanged for Definitive Notes,
redeemed, repurchased or canceled, all Global Notes shall be returned to or
retained and canceled by the Trustee in accordance with Section 2.11 hereof. At
any time prior to such cancellation, if any beneficial interest in a Global Note
is exchanged for Definitive Notes, redeemed, repurchased or canceled, the
principal amount of Notes represented by such Global Note shall be reduced
accordingly and an endorsement shall be made on such Global Note, by the Trustee
or the Note Custodian, at the direction of the Trustee, to reflect such
reduction.
(i) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges, the Company
and the Guarantors shall execute and the Trustee shall
authenticate Definitive Notes and Global Notes at the Registrar's
request.
(ii) No service charge shall be made to a Holder for any registration
of transfer or exchange, but the Company may require payment of a
sum sufficient to cover any transfer tax or similar governmental
charge payable in connection therewith (other than any such
transfer taxes or similar governmental charge payable upon
exchange or transfer pursuant to Sections 3.07, 4.10, 4.15 and
9.05 hereof).
(iii) The Registrar shall not be required to register the transfer of
or exchange any Note selected for redemption in whole or in part,
except the unredeemed portion of any Note being redeemed in part.
(iv) All Definitive Notes and Global Notes issued upon any
registration of transfer or exchange of Definitive Notes or
Global Notes shall be the valid obligations of the Company and
the Guarantors, evidencing the same debt, and entitled to the
same benefits under this Indenture, as the Definitive Notes or
Global Notes surrendered upon such registration of transfer or
exchange.
(v) The Company shall not be required:
(A) to issue, to register the transfer of or to exchange Notes
during a period beginning at the opening of business 15 days
before the day of any selection of Notes for redemption
under Section 3.02 hereof and ending at the close of
business on the day of selection; or
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(B) to register the transfer of or to exchange any Note so
selected for redemption in whole or in part, except the
unredeemed portion of any Note being redeemed in part; or
(C) to register the transfer of or to exchange a Note between a
record date and the next succeeding interest payment date.
(vi) Prior to due presentment for the registration of a transfer of
any Note, the Trustee, any Agent and the Company may deem and
treat the Person in whose name any Note is registered as the
absolute owner of such Note for the purpose of receiving payment
of principal of and interest, premium and Liquidated Damages, if
any, on such Notes, and neither the Trustee, any Agent nor the
Company shall be affected by notice to the contrary.
(vii) The Trustee shall authenticate Definitive Notes and Global Notes
in accordance with the provisions of Section 2.02 hereof.
SECTION 2.07. REPLACEMENT NOTES.
If any mutilated Note is surrendered to the Trustee or the Company and the
Trustee receives evidence to its satisfaction of the destruction, loss or theft
of any Note, the Company shall issue and the Trustee, upon the written order of
the Company signed by one Officer of the Company, shall authenticate a
replacement Note if the Trustee's requirements are met. If required by the
Trustee or the Company, an indemnity bond must be supplied by the Holder that is
sufficient in the reasonable judgment of the Trustee and the Company to protect
the Company, the Trustee, any Agent and any authenticating agent from any loss
that any of them may suffer if a Note is replaced. The Company may charge such
Holder for its expenses in replacing a Note.
Every replacement Note is an additional obligation of the Company and the
Guarantors and shall be entitled to all of the benefits of this Indenture
equally and proportionately with all other Notes duly issued hereunder.
SECTION 2.08. OUTSTANDING NOTES.
The Notes outstanding at any time are all the Notes authenticated by the
Trustee except for those canceled by it, those delivered to it for cancellation,
those reductions in the interest in a Global Note effected by the Trustee in
accordance with the provisions hereof, and those described in this Section as
not outstanding. Except as set forth in Section 2.09 hereof, a Note does not
cease to be outstanding because the Company or an Affiliate of the Company holds
the Note.
If a Note is replaced pursuant to Section 2.07 hereof (other than a
mutilated Note surrendered for replacement), it ceases to be outstanding unless
the Trustee receives proof satisfactory to it that the replaced Note is held by
a bona fide purchaser. A mutilated Note ceases to be outstanding upon surrender
of such Note and replacement thereof pursuant to Section 2.07 hereof.
If the principal amount of any Note is considered paid under Section 4.01
hereof, it ceases to be outstanding and interest on it ceases to accrue.
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If the Paying Agent (other than the Company or a Restricted Subsidiary)
holds, on a redemption date or maturity date, money sufficient to pay Notes
payable on that date, then on and after that date such Notes shall be deemed to
be no longer outstanding and shall cease to accrue interest.
SECTION 2.09. TREASURY NOTES.
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver or consent, Notes owned by the
Company, by any Guarantor or by any Person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company or any
Guarantor, shall be considered as though not outstanding, except that for the
purposes of determining whether the Trustee shall be protected in relying on any
such direction, waiver or consent, only Notes that a Trustee knows are so owned
shall be so disregarded.
SECTION 2.10. TEMPORARY NOTES.
Until definitive Notes are ready for delivery, the Company may prepare and
the Trustee shall authenticate temporary Notes upon a written order of the
Company signed by one Officer of the Company. Temporary Notes shall be
substantially in the form of definitive Notes but may have variations that the
Company considers appropriate for temporary Notes and as shall be reasonably
acceptable to the Trustee. Without unreasonable delay, the Company shall prepare
and the Trustee shall authenticate definitive Notes in exchange for temporary
Notes.
Holders of temporary Notes shall be entitled to all of the benefits of this
Indenture.
SECTION 2.11. CANCELLATION.
The Company at any time may deliver Notes to the Trustee for cancellation.
The Registrar and Paying Agent shall forward to the Trustee any Notes
surrendered to them for registration of transfer, exchange or payment. The
Trustee and no one else shall cancel all Notes surrendered for registration of
transfer, exchange, payment, replacement or cancellation and shall destroy
cancelled Notes (subject to the record retention requirement of the Exchange
Act). Certification of the destruction of all cancelled Notes shall be delivered
to the Company. The Company may not issue new Notes to replace Notes that it has
paid or that have been delivered to the Trustee for cancellation.
SECTION 2.12. DEFAULTED INTEREST.
If the Company or any Guarantor defaults in a payment of interest on the
Notes, it shall pay the defaulted interest in any lawful manner plus, to the
extent lawful, interest payable on the defaulted interest, to the Persons who
are Holders on a subsequent special record date, in each case at the rate
provided in the Notes and in Section 4.01 hereof. The Company shall notify the
Trustee in writing of the amount of defaulted interest proposed to be paid on
each Note and the date of the proposed payment. The Company shall fix or cause
to be fixed each such special record date and payment date, provided that no
such special record date shall be less than 10 days prior to the related payment
date for such defaulted interest. At least 15 days before the special record
date, the Company (or, upon the written request of the Company, the Trustee in
the name and at the expense of the Company) shall mail or cause to be mailed to
Holders a notice that states the special record date, the related payment date
and the amount of such interest to be paid.
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ARTICLE 3
REDEMPTION AND PREPAYMENT
SECTION 3.01. NOTICES TO TRUSTEE.
If the Company elects to redeem Notes pursuant to the optional redemption
provisions of Section 3.07 hereof, it shall furnish to the Trustee, at least 45
days but not more than 60 days before a redemption date, an Officer's
Certificate setting forth (i) the clause of this Indenture pursuant to which the
redemption shall occur, (ii) the redemption date, (iii) the principal amount of
Notes to be redeemed and (iv) the redemption price.
SECTION 3.02. SELECTION OF NOTES TO BE REDEEMED.
If less than all of the Notes are to be redeemed at any time, the Trustee
shall select the Notes to be redeemed among the Holders of the Notes in
compliance with the requirements of the principal national securities exchange,
if any, on which the Notes are listed or, if the Notes are not so listed, on a
pro rata basis, by lot or such method as the Trustee shall deem fair and
appropriate. In the event of partial redemption by lot, the particular Notes to
be redeemed shall be selected, unless otherwise provided herein, not less than
30 nor more than 60 days prior to the redemption date by the Trustee from the
outstanding Notes not previously called for redemption.
The Trustee shall promptly notify the Company in writing of the Notes
selected for redemption and, in the case of any Note selected for partial
redemption, the principal amount thereof to be redeemed. Notes and portions of
Notes selected shall be in amounts of $1,000 or whole multiples of $1,000;
except that if all of the Notes of a Holder are to be redeemed, the entire
outstanding amount of Notes held by such Holder, even if not a multiple of
$1,000, shall be redeemed. Except as provided in the preceding sentence,
provisions of this Indenture that apply to Notes called for redemption also
apply to portions of Notes called for redemption.
SECTION 3.03. NOTICE OF REDEMPTION.
Subject to the provisions of Section 3.09 hereof, at least 30 days but not
more than 60 days before a redemption date, the Company shall mail or cause to
be mailed, by first class mail, a notice of redemption to each Holder whose
Notes are to be redeemed at its registered address.
The notice shall identify the Notes to be redeemed and shall state:
(a) the redemption date;
(b) the redemption price and the amount of accrued interest and Liquidated
Damages, if any;
(c) if any Note is being redeemed in part, the portion of the principal
amount of such Note to be redeemed and that, after the redemption date upon
surrender of such Note, a new Note or Notes in principal amount equal to the
unredeemed portion shall be issued upon surrender of the original Note;
(d) the name and address of the Paying Agent;
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(e) that Notes called for redemption must be surrendered to the Paying
Agent to collect the redemption price;
(f) that, unless the Company defaults in making such redemption payment,
interest and Liquidated Damages, if any, on Notes called for redemption ceases
to accrue on and after the redemption date;
(g) the paragraph of the Notes and/or Section of this Indenture pursuant to
which the Notes called for redemption are being redeemed;
(h) that no representation is made as to the correctness or accuracy of the
CUSIP number, if any, listed in such notice or printed on the Notes; and
(i) if fewer than all the Notes are to be redeemed, the identification of
the particular Notes (or portions thereof) to be redeemed as well as the
aggregate principal amount of Notes to be redeemed and the aggregate principal
amount of Notes to be outstanding after such partial redemption.
At the Company's request, the Trustee shall give the notice of redemption
in the Company's name and at its expense; provided, however, that the Company
shall have delivered to the Trustee, at least 45 days prior to the redemption
date, an Officer's Certificate requesting that the Trustee give such notice and
setting forth the information to be stated in such notice as provided in the
preceding paragraph.
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed in accordance with Section 3.03 hereof,
Notes called for redemption become irrevocably due and payable on the redemption
date at the redemption price. A notice of redemption may not be conditional.
SECTION 3.05. DEPOSIT OF REDEMPTION PRICE.
On or before 10:00 a.m. Eastern Time on the redemption date, the Company
shall deposit with the Trustee or with the Paying Agent money sufficient to pay
the redemption price of and accrued interest and Liquidated Damages, if any, on
all Notes to be redeemed on that date. The Trustee or the Paying Agent shall
promptly return to the Company any money deposited with the Trustee or the
Paying Agent by the Company in excess of the amounts necessary to pay the
redemption price of, and accrued interest on and Liquidated Damages, if any, all
Notes to be redeemed.
If the Company complies with the provisions of the preceding paragraph, on
and after the redemption date, interest and Liquidated Damages, if any, shall
cease to accrue on the Notes or the portions of Notes called for redemption
whether or not such Notes are presented for payment. If a Note is redeemed on or
after an interest record date but on or prior to the related interest payment
date, then any accrued and unpaid interest and Liquidated Damages, if any, shall
be paid to the Person in whose name such Note was registered at the close of
business on such record date. If any Note called for redemption shall not be so
paid upon surrender for redemption because of the failure of the Company to
comply with the preceding paragraph, interest and Liquidated Damages, if any,
shall be paid on the unpaid principal, from the redemption date until such
principal is paid, and to the
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extent lawful on any interest and Liquidated Damages, if any, not paid on such
unpaid principal, in each case at the rate provided in the Notes and in Section
4.01 hereof.
SECTION 3.06. NOTES REDEEMED IN PART.
Upon surrender of a Note that is redeemed in part, the Company shall issue
and, upon the Company's written request, the Trustee shall authenticate for the
Holder at the expense of the Company a new Note equal in principal amount to the
unredeemed portion of the Note surrendered.
SECTION 3.07. OPTIONAL REDEMPTION.
Except as described below, the Notes are not redeemable, in whole or in
part, at the Company's option prior to November 1, 2001. From and after November
1, 2001, the Company may redeem all or any portion of the Notes at a redemption
price (expressed as a percentage of the principal amount thereof), as set forth
in the immediately succeeding paragraph, plus accrued and unpaid interest and
Liquidated Damages, if any, to the redemption date.
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The redemption price as a percentage of the principal amount shall be as
follows, if the Notes are redeemed during the twelve-month period commencing on
November 1 of each of the years indicated below, plus, in each case, accrued and
unpaid interest and Liquidated Damages, if any, thereon to the redemption date:
Percentage of
Year Principal Amount
---- ----------------
2001................................................. 105.500%
2002................................................. 103.667%
2003................................................. 101.833%
2004 and thereafter ................................. 100.000%
Prior to November 1, 1999, the Company may, at its option, on any one or
more occasions, redeem up to 35% of the aggregate principal amount of Notes
originally offered in the Offering at a redemption price equal to 111% of the
principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages, if any, thereon to the redemption date, with the net proceeds of a
public or private sale of common stock of the Company; provided that at least
65% of the original aggregate principal amount of Notes remains outstanding
immediately after the occurrence of each such redemption; and provided, further,
that any such redemption shall occur within 60 days of the date of the closing
of the corresponding sale of common stock of the Company.
Any redemption pursuant to this Section 3.07 shall be made pursuant to the
provisions of Section 3.01 through 3.06 hereof.
SECTION 3.08. MANDATORY REDEMPTION.
Except as set forth under Sections 4.10 and 4.15 hereof, the Company shall
not be required to make mandatory or sinking fund redemption payments with
respect to the Notes.
SECTION 3.09. OFFER TO PURCHASE BY APPLICATION OF EXCESS PROCEEDS.
In the event that, pursuant to Section 4.10 hereof, the Company shall be
required to commence an offer to all Holders to purchase Notes, it shall follow
the procedures specified below.
The Asset Sale Offer shall remain open for a period of 20 Business Days
following its commencement and no longer, except to the extent that a longer
period is required by applicable law (the "Offer Period"). No later than five
Business Days after the termination of the Offer Period (the "Purchase Date"),
the Company shall purchase the principal amount of Notes required to be
purchased pursuant to Section 4.10 hereof (the "Offer Amount") or, if less than
the Offer Amount has been tendered, all Notes tendered in response to the Asset
Sale Offer. Payment for any Notes so purchased shall be made in the same manner
as interest payments are made.
If the Purchase Date is on or after an interest record date and on or
before the related interest payment date, any accrued and unpaid interest and
Liquidated Damages, if any, shall be paid to the Person in whose name a Note is
registered at the close of business on such record date, and no additional
interest or Liquidated Damages, if any, shall be payable to Holders who tender
Notes pursuant to the Asset Sale Offer.
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Upon the commencement of an Asset Sale Offer, the Company shall send, by
first class mail, a notice to the Trustee and each of the Holders, with a copy
to the Trustee. The notice shall contain all instructions and materials
necessary to enable such Holders to tender Notes pursuant to the Asset Sale
Offer. The Asset Sale Offer shall be made to all Holders. The notice, which
shall govern the terms of the Asset Sale Offer, shall state:
(a) that the Asset Sale Offer is being made pursuant to this Section 3.09
and Section 4.10 hereof and the length of time the Asset Sale Offer shall remain
open;
(b) the Offer Amount, the purchase price, the amount of accrued and unpaid
interest and Liquidated Damages, if any, as of the Purchase Date and the
Purchase Date;
(c) that any Note not tendered or accepted for payment shall continue to
accrete or accrue interest and Liquidated Damages, if any;
(d) that, unless the Company defaults in making such payment, any Note
accepted for payment pursuant to the Asset Sale Offer shall cease to accrete or
accrue interest and Liquidated Damages, if any, after the Purchase Date;
(e) that Holders electing to have a Note purchased pursuant to an Asset
Sale Offer may only elect to have all of such Note purchased and may not elect
to have only a portion of such Note purchased;
(f) that Holders electing to have a Note purchased pursuant to any Asset
Sale Offer shall be required to surrender the Note, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Note completed, or
transfer the Note by book-entry transfer, to the Company, a depositary, if
appointed by the Company, or a Paying Agent at the address specified in the
notice at least three days before the Purchase Date;
(g) that Holders shall be entitled to withdraw their election if the
Company, the Depositary or the Paying Agent, as the case may be, receives, not
later than the expiration of the Offer Period, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of the Note the Holder delivered for purchase and a statement that such
Holder is withdrawing his or her election to have such Note purchased;
(h) that, if the aggregate principal amount of Notes surrendered by Holders
exceeds the Offer Amount, the Company shall select the Notes to be purchased on
a pro rata basis (with such adjustments as may be deemed appropriate by the
Company so that only Notes in denominations of $1,000, or integral multiples
thereof, shall be purchased); and
(i) that Holders whose Notes were purchased only in part shall be issued
new Notes equal in principal amount to the unpurchased portion of the Notes
surrendered (or transferred by book-entry transfer).
On the Purchase Date for any Asset Sale Offer, the Company shall (i) accept
for payment the maximum principal amount of Notes tendered pursuant to such
Asset Sale Offer than can be purchased out of Excess Proceeds from such Asset
Sales, (ii) deposit with the Paying Agent the aggregate purchase price of all
Notes accepted for payment and any accrued and unpaid interest and Liquidated
Damages, if any, on such Notes as of the Purchase Date, and (iii) deliver or
cause to be
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delivered to the Trustee all Notes tendered pursuant to the Asset Sale Offer. If
less than all Notes tendered pursuant to any Asset Sale Offer are accepted for
payment by the Company for any reason, selection of the Notes to be purchased by
the Trustee shall be in compliance with the requirements of the principal
national securities exchange, if any, on which the Notes are listed or, if the
Notes are not so listed, by lot or by such method as the Trustee shall deem fair
and appropriate; provided that Notes accepted for payment in part shall only be
purchased in integral multiples of $1,000. The Paying Agent shall promptly mail
to each Holder of Notes accepted for payment an amount equal to the purchase
price for such Notes plus any accrued and unpaid interest and Liquidated Damages
thereon, if any, and the Trustee shall promptly authenticate and mail to such
Holder of Notes accepted for payment in part a new Note equal in principal
amount to any unpurchased portion of the Notes, and any Note not accepted for
payment in whole or in part shall be promptly returned to the Holder of such
Note. On and after a Purchase Date, interest and Liquidated Damages, if any,
shall cease to accrue on the Notes accepted for payment. The Company shall
announce the results of the Offer to Holders of the Notes on or as soon as
practicable after the Purchase Date.
Other than as specifically provided in this Section 3.09, any purchase
pursuant to this Section 3.09 shall be made pursuant to the provisions of
Sections 3.01 through 3.06 hereof.
ARTICLE 4
COVENANTS
SECTION 4.01. PAYMENT OF NOTES.
The Company shall pay or cause to be paid the principal of, premium, if
any, and interest on the Notes on the dates and in the manner provided in the
Notes. Principal, premium, if any, and interest shall be considered paid on the
date due if the Paying Agent, if other than the Company or any Guarantor, holds
as of 10:00 a.m. Eastern Time on the due date money deposited by the Company in
immediately available funds and designated for and sufficient to pay all
principal, premium, if any, and interest then due. The Company shall pay all
Liquidated Damages, if any, in the same manner on the dates and in the amounts
set forth in the Registration Rights Agreement.
The Company shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal at the rate equal to
1% per annum in excess of the rate set forth in the Notes to the extent lawful;
it shall pay interest (including post-petition interest in any proceeding under
any Bankruptcy Law) on overdue installments of interest and Liquidated Damages,
if any, (without regard to any applicable grace period) at the same rate to the
extent lawful.
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY.
The Company shall maintain in the Borough of Manhattan, the City of New
York, an office or agency (which may be an office of the Trustee or an affiliate
of the Trustee, Registrar or co-registrar) where Notes may be surrendered for
registration of transfer or for exchange and where notices and demands to or
upon the Company in respect of the Notes and this Indenture may be served. The
Company shall give prompt written notice to the Trustee of the location, and any
change in the location, of such office or agency. If at any time the Company
shall fail to maintain any such required office or agency or shall fail to
furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the Corporate Trust Office of the
Trustee.
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The Company may also from time to time designate one or more other offices
or agencies where the Notes may be presented or surrendered for any or all such
purposes and may from time to time rescind such designations; provided, however,
that no such designation or rescission shall in any manner relieve the Company
of its obligation to maintain an office or agency in the Borough of Manhattan,
the City of New York for such purposes. The Company shall give prompt written
notice to the Trustee of any such designation or rescission and of any change in
the location of any such other office or agency.
The Company hereby designates the Corporate Trust Office of the Trustee as
one such office or agency of the Company in accordance with Section 2.03.
SECTION 4.03. REPORTS.
(a) Whether or not required by the rules and regulations of the SEC, so
long as any Notes are outstanding, the Company shall furnish to the Holders of
Notes (i) all quarterly and annual financial information that would be required
to be contained in a filing with the SEC on Forms 10-Q and 10-K if the Company
were required to file such Forms, including a "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and, with respect to
the annual information only, a report thereon by the Company's certified
independent accountants and (ii) all current reports that would be required to
be filed with the SEC on Form 8-K if the Company were required to file such
reports. In addition, whether or not required by the rules and regulations of
the SEC, commencing immediately after the consummation of the Exchange Offer
contemplated by the Registration Rights Agreement, the Company shall file a copy
of all such information and reports with the SEC for public availability (unless
the SEC will not accept such a filing) and make such information available to
securities analysts and prospective investors upon request. The Company shall at
all times comply with TIA ss. 314(a).
(b) For so long as any Transfer Restricted Securities remain outstanding,
the Company shall furnish to all Holders and prospective purchasers of the Notes
designated by the Holders of Transfer Restricted Securities, promptly upon their
request, the information required to be delivered pursuant to Rule 144A(d)(4)
under the Securities Act.
SECTION 4.04. COMPLIANCE CERTIFICATE.
(a) The Company shall deliver to the Trustee, within 120 days after the end
of each fiscal year, an Officer's Certificate stating that a review of the
activities of the Company and its Subsidiaries during the preceding fiscal year
has been made under the supervision of the signing Officer with a view to
determining whether each of the Company and the Guarantors has kept, observed,
performed and fulfilled its obligations under this Indenture, and further
stating, as to such Officer signing such certificate, that to the best of his or
her knowledge each of the Company and the Guarantors has kept, observed,
performed and fulfilled each and every covenant contained in this Indenture and
is not in default in the performance or observance of any of the terms,
provisions and conditions of this Indenture (or, if a Default or Event of
Default shall have occurred, describing all such Defaults or Events of Default
of which he or she may have knowledge and what action the Company is taking or
proposes to take with respect thereto) and that to the best of his or her
knowledge no event has occurred and remains in existence by reason of which
payments on account of the principal of or interest or Liquidated Damages, if
any, on the Notes is prohibited or if such event has occurred, a description of
the event and what action the Company is taking or proposes to take with respect
thereto.
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(b) So long as not contrary to the then current recommendations of the
American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.03(a) above shall be accompanied by a
written statement of the Company's independent public accountants (who shall be
a firm of established national reputation) that in making the examination
necessary for certification of such financial statements, nothing has come to
their attention that would lead them to believe that the Company has violated
any provisions of Article 4 or Article 5 hereof or, if any such violation has
occurred, specifying the nature and period of existence thereof, it being
understood that such accountants shall not be liable directly or indirectly to
any Person for any failure to obtain knowledge of any such violation.
(c) The Company shall, so long as any of the Notes are outstanding, deliver
to the Trustee, forthwith upon any Officer of the Company or any Guarantor
becoming aware of any Default or Event of Default, an Officer's Certificate
specifying such Default or Event of Default and what action the Company is
taking or proposes to take with respect thereto.
SECTION 4.05. TAXES.
The Company shall pay, and shall cause each of its Subsidiaries to pay,
prior to delinquency, all material taxes, assessments, and governmental levies
except such as are contested in good faith and by appropriate proceedings or
where the failure to effect such payment is not adverse in any material respect
to the Holders of the Notes.
SECTION 4.06. STAY, EXTENSION AND USURY LAWS.
The Company and each of the Guarantors covenants (to the extent that it may
lawfully do so) that it shall not at any time insist upon, plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay, extension
or usury law wherever enacted, now or at any time hereafter in force, that may
affect the covenants or the performance of this Indenture; and the Company and
each of the Guarantors (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and covenants that it
shall not, by resort to any such law, hinder, delay or impede the execution of
any power herein granted to the Trustee, but shall suffer and permit the
execution of every such power as though no such law has been enacted.
SECTION 4.07. RESTRICTED PAYMENTS.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or make
any other payment or distribution on account of the Company's Equity Interests
(other than dividends or distributions payable in Equity Interests (other than
Disqualified Stock) of the Company); (ii) purchase, redeem, defease or otherwise
acquire or retire for value any Equity Interests of the Company or any direct or
indirect parent of the Company; (iii) make any principal payment on, or
purchase, redeem, defease or otherwise acquire or retire for value any
Subordinated Indebtedness, except at final maturity; or (iv) make any Restricted
Investment (all such payments and other actions set forth in clauses (i) through
(iv) above being collectively referred to as "Restricted Payments"), unless, at
the time of and after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof;
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(b) the Company shall, at the time of such Restricted Payment and
immediately after giving pro forma effect thereto as if such Restricted
Payment had been made at the beginning of the applicable four-quarter
period, have been permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in
Section 4.09 hereof; and
(c) such Restricted Payment, together with the aggregate of all other
Restricted Payments made by the Company and its Restricted Subsidiaries
after the date hereof (including Restricted Payments permitted by clauses
(i), (v) and (vii) of the next succeeding paragraph, but excluding all
other Restricted Payments permitted by the next succeeding paragraph), is
less than the sum of (i) 50% of the Consolidated Net Income of the Company
for the period (taken as one accounting period) from the beginning of the
first fiscal quarter commencing after the date hereof to the end of the
Company's most recently ended fiscal quarter for which internal financial
statements are available at the time of such Restricted Payment (or, if
such Consolidated Net Income for such period is a deficit, less 100% of
such deficit), plus (ii) 100% of the aggregate net cash proceeds received
by the Company from the issue or sale since the date hereof of Equity
Interests of the Company or of Disqualified Stock or debt securities of the
Company that have been converted into such Equity Interests (other than
Equity Interests, Disqualified Stock or convertible debt securities of the
Company sold to a Restricted Subsidiary of the Company and other than
Disqualified Stock or debt securities that have been converted into
Disqualified Stock), plus (iii) 100% of the aggregate amounts contributed
to the capital of the Company since the date hereof, plus (iv) to the
extent that any Restricted Investment that was made after the date hereof
was sold for cash, the lesser of (A) the cash return of capital with
respect to such Restricted Investment (less the cost of disposition, if
any) and (B) the initial amount of such Restricted Investment, plus (v)
without duplication, to the extent that any Unrestricted Subsidiary is
designated by the Company as a Restricted Subsidiary, an amount equal to
the lesser of (A) the net book value of the Company's Investment in such
Unrestricted Subsidiary at the time of such designation and (B) the Fair
Market Value of such Investment at the time of such designation, plus (vi)
50% of any dividends received by the Company or a Wholly Owned Restricted
Subsidiary of the Company (except to the extent that such dividends were
already included in Consolidated Net Income) after the date hereof from an
Unrestricted Subsidiary of the Company.
The foregoing provisions shall not prohibit:
(i) the payment of any dividend or redemption payment within 60 days
after the date of declaration thereof, if at the date of declaration such
payment would have complied with the provisions of this Indenture;
(ii) the redemption, repurchase, retirement or other acquisition of
any Equity Interests of the Company or any Restricted Subsidiary or any
Subordinated Indebtedness of the Company in exchange for, or out of the
proceeds of, the substantially concurrent sale (other than to a Restricted
Subsidiary of the Company) of Equity Interests of the Company (other than
any Disqualified Stock); provided that the amount of any such net cash
proceeds that are utilized for any such redemption, repurchase, retirement
or other acquisition shall be excluded from clause (c)(ii) of this Section;
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(iii) the defeasance, redemption, repurchase, retirement or other
acquisition of Subordinated Indebtedness with the net cash proceeds from an
incurrence of Permitted Refinancing Indebtedness;
(iv) the redemption, repurchase, retirement or other acquisition of
Subordinated Indebtedness; provided that the aggregate price paid for all
such redemptions, repurchases, retirements or other acquisitions since the
date hereof does not exceed the consideration received by the Company or
any of its Restricted Subsidiaries from the incurrence of Subordinated
Indebtedness since the date hereof; provided further, that the amount of
any such net cash proceeds that are utilized for any such redemption,
repurchase, retirement or other acquisition shall be excluded from the
immediately preceding clause (iii) and from clause (c)(ii) of this Section;
(v) the repurchase, redemption, retirement or other acquisition for
value of any Equity Interests of the Company or any Restricted Subsidiary
of the Company held by any director, officer or employee of the Company or
any of its Restricted Subsidiaries pursuant to any employment agreement,
management equity subscription agreement or stock option agreement;
provided further that the aggregate price paid for all such repurchased,
redeemed, acquired or retired Equity Interests shall not exceed the sum of
$1.0 million in any twelve-month period;
(vi) repurchases of Equity Interests deemed to occur upon exercise of
stock options if such Equity Interests represent a portion of the exercise
price of such options;
(vii) the payment of any dividend on, or the redemption of, the
Company Preferred Stock, in each case in accordance with the terms thereof
as in effect on the date hereof; provided that the Fixed Charge Coverage
Ratio for the Company for the most recently ended four full fiscal quarters
for which internal financial statements are available immediately preceding
the date of such payment, redemption, repurchase, retirement or other
acquisition would have been at least 2.0 to 1.0 determined on a pro forma
basis, as if such payment, redemption, repurchase, retirement or other
acquisition, together with an other payments, redemptions, repurchases,
retirements and other acquisitions permitted by this clause (vii) occurring
during the preceding twelve-month period, had occurred at the beginning of
the applicable four-quarter period;
(viii) the redemption, repurchase, retirement or other acquisition of
Seller Paper; and
(ix) the making of other Restricted Payments not to exceed $10.00
million in the aggregate.
provided, further, that at the time of, and after giving effect to, any
Restricted Payment permitted under clauses (iv), (v), (vii), (viii) or (ix)
above, no Default or Event of Default shall have occurred and be continuing or
would occur as a consequence thereof; and provided further that for purposes of
determining the aggregate amount expended for Restricted Payments in accordance
with clause (c) of this Section, only the amounts expended under clauses (i),
(v) and (vii) shall be included.
As of the date hereof, all of the Company's Subsidiaries shall be
Restricted Subsidiaries. The Company shall not permit any Unrestricted
Subsidiary to become a Restricted
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Subsidiary except pursuant to the last sentence of the definition of
"Unrestricted Subsidiary." For purposes of designating any Restricted Subsidiary
as an Unrestricted Subsidiary, all outstanding Investments by the Company and
its Restricted Subsidiaries (except to the extent repaid) in the Subsidiary so
designated shall be deemed to be Restricted Payments in an amount equal to the
Fair Market Value of such Investment at the time of such designation. Such
designation shall only be permitted if a Restricted Payment in such amount would
be permitted at such time and if such Subsidiary otherwise meets the definition
of an Unrestricted Subsidiary.
The amount of all Restricted Payments (other than cash) shall be the
Fair Market Value (evidenced by a resolution of the Board of Directors set forth
in an Officer's Certificate delivered to the Trustee) on the date of the
Restricted Payment of the asset(s) proposed to be transferred by the Company or
such Restricted Subsidiary, as the case may be, pursuant to the Restricted
Payment. Not later than the date of making any Restricted Payment, the Company
shall deliver to the Trustee an Officer's Certificate stating that such
Restricted Payment is permitted and setting forth the basis upon which the
calculations required by this Section 4.07 were computed, which calculations may
be based upon the Company's latest available financial statements.
SECTION 4.08. DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING
RESTRICTED SUBSIDIARIES.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary to (i)(a) pay dividends or make any other distributions to
the Company or any of its Restricted Subsidiaries (1) on its Capital Stock or
(2) with respect to any other interest or participation in, or measured by, its
profits, or (b) pay any indebtedness owed to the Company or any of its
Restricted Subsidiaries, (ii) make loans or advances to the Company or any of
its Restricted Subsidiaries or (iii) sell, lease or transfer any of its
properties or assets to the Company or any of its Restricted Subsidiaries,
except for such encumbrances or restrictions existing under or by reason of (a)
Existing Indebtedness as in effect on the date hereof, (b) the New Bank Credit
Facility as in effect as of the date hereof, and any amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacements or
refinancings thereof, in whole or in part, provided that such amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacement or refinancings are no more restrictive in any material respect with
respect to such dividend and other payment restrictions than those contained in
the New Bank Credit Facility as in effect on the date hereof, (c) this Indenture
and the Notes, (d) applicable law, (e) Indebtedness or Capital Stock of a Person
acquired by the Company or any of its Restricted Subsidiaries as in effect at
the time of such acquisition (except to the extent such Indebtedness was
incurred in connection with or in contemplation of such acquisition), which
encumbrance or restriction is not applicable to any Person, or the properties or
assets of any Person, other than the Person, or the property or assets of the
Person, so acquired, provided that, in the case of Indebtedness, such
Indebtedness was permitted by the terms of this Indenture to be incurred, (f) by
reason of customary non-assignment provisions in leases entered into in the
ordinary course of business and consistent with past practices, (g) purchase
money obligations for property acquired in the ordinary course of business that
impose restrictions of the nature described in clause (iii) above on the
property so acquired, or (h) Permitted Refinancing Indebtedness, provided that
the restrictions contained in the agreements governing such Permitted
Refinancing Indebtedness are no more restrictive in any material respect than
those contained in the agreements governing the Indebtedness being refinanced.
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SECTION 4.09. INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF DISQUALIFIED
STOCK.
The Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create, incur, issue, assume, guarantee or otherwise
become directly or indirectly liable, contingently or otherwise, with respect to
(collectively, "incur" and correlatively, an "incurrence" of) any Indebtedness
(including Acquired Debt) and the Company shall not issue any Disqualified Stock
and shall not permit any of its Subsidiaries to issue any shares of Preferred
Stock; provided, however, that the Company may incur Indebtedness (including
Acquired Debt) or issue shares of Disqualified Stock if the Fixed Charge
Coverage Ratio for the Company for the most recently ended four full fiscal
quarters for which internal financial statements are available immediately
preceding the date of such incurrence would have been at least 2.0 to 1.0
determined on a pro forma basis (including a pro forma application of the net
proceeds therefrom), as if the additional Indebtedness had been incurred or the
Disqualified Stock had been issued, as the case may be, and the application of
proceeds therefrom had occurred, at the beginning of such four-quarter period.
The foregoing provisions shall not apply to:
(a) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness under the New Bank Credit Facility and
Guarantees thereof by the Guarantors and the issuance of letters of credit
thereunder (with letters of credit being deemed to have a principal amount
equal to the maximum face amount thereunder) so long as, immediately after
any such incurrence, the aggregate principal amount outstanding under the
New Bank Credit Facility (together with any Permitted Refinancing
Indebtedness incurred to refund, replace or refinance any Indebtedness
incurred pursuant to the New Bank Credit Facility) does not exceed an
amount equal to $200.0 million, less the aggregate amount of all principal
repayments of term loans (other than repayments that are immediately
reborrowed) and permanent commitment reductions with respect to revolving
loans and letters of credit under the New Bank Credit Facility (or any such
Permitted Refinancing Indebtedness) that have been made since the date
hereof;
(b) the incurrence by the Company or any of its Restricted
Subsidiaries of any Existing Indebtedness;
(c) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness represented by the Notes and the Subsidiary
Guarantees;
(d) Guarantees by the Company or a Guarantor of Indebtedness incurred
by the Company or a Restricted Subsidiary of the Company so long as the
incurrence of such Indebtedness by the primary obligor thereon was
permitted under the terms of this Indenture;
(e) the incurrence by the Company or a Restricted Subsidiary of the
Company of intercompany Indebtedness between or among the Company and any
of its Restricted Subsidiaries; provided, however, that (i) all such
intercompany Indebtedness is expressly subordinate to the prior payment in
full of all Obligations with respect to the Notes and the Subsidiary
Guarantees and (ii)(A) any subsequent issuance or transfer of Equity
Interests that results in any such intercompany Indebtedness being held by
a Person other than the Company or a Restricted Subsidiary and (B) any sale
or transfer of any such intercompany Indebtedness to a Person that is not
either the Company or a Restricted Subsidiary of the Company shall be
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deemed, in each case, to constitute an incurrence of such Indebtedness by
the Company or such Restricted Subsidiary, as the case may be, that is not
permitted by this clause (e);
(f) the issuance by a Restricted Subsidiary of the Company of any
shares of Preferred Stock to the Company or any of its Restricted
Subsidiaries; provided, however, that (i) all such Preferred Stock is
expressly subordinate to the prior payment in full of all Obligations with
respect to the Notes and the Subsidiary Guarantees and (ii)(A) any
subsequent issuance or transfer of Equity Interests that results in any
such Preferred Stock being held by a Person other than the Company or a
Restricted Subsidiary and (B) any sale or transfer of any such shares of
Preferred Stock to a Person that is not either the Company or a Restricted
Subsidiary of the Company shall be deemed, in each case, to constitute an
issuance of such Preferred Stock by such Restricted Subsidiary that is not
permitted by this clause (f);
(g) Hedging Obligations that are incurred (1) for the purpose of
fixing or hedging interest rate risk with respect to any Indebtedness that
is permitted by the terms of this Indenture to be outstanding or (2) for
the purpose of fixing or hedging currency exchange rate risk with respect
to any currency exchanges;
(h) the incurrence of Acquired Debt of a Restricted Subsidiary in
connection with the acquisition of such Subsidiary in an aggregate
principal amount at any time outstanding (including any Permitted
Refinancing Indebtedness incurred to refund, replace or refinance any
Acquired Debt incurred pursuant to this clause (h)) not to exceed $25.0
million; provided that such Indebtedness is not incurred in contemplation
of such acquisition; and provided further that the Company's Fixed Charge
Coverage Ratio for the most recently ended four full fiscal quarters for
which internal financial statements are available immediately preceding the
date of such transaction would have been at least 2.0 to 1.0 determined on
a pro forma basis, as if such transaction had occurred at the beginning of
such four-quarter period and such Indebtedness or Disqualified Stock had
been included for all purposes in such pro forma calculation;
(i) the incurrence by the Company or any of its Restricted
Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the
net proceeds of which are used to extend, refinance, renew, replace,
defease or refund, Indebtedness that was permitted by this Indenture to be
incurred;
(j) the incurrence by the Company's Unrestricted Subsidiaries of
Non-Recourse Debt; provided, however, that if any such Indebtedness ceases
to be Non-Recourse Debt of an Unrestricted Subsidiary, such event shall be
deemed to constitute an incurrence of Indebtedness by a Restricted
Subsidiary of the Company;
(k) Capital Lease Obligations and Purchase Money Indebtedness of the
Company or any of its Restricted Subsidiaries (including any Permitted
Refinancing Indebtedness incurred to refund, replace or refinance any
Capital Lease Obligations or Purchase Money Indebtedness incurred pursuant
to this clause (k)) not to exceed $5.0 million at any one time outstanding;
and
(l) additional indebtedness of the Company or any of its Restricted
Subsidiaries (including any Permitted Refinancing Indebtedness incurred to
refund, replace or refinance any Indebtedness incurred pursuant to this
clause (l)) in an aggregate principal amount not to
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exceed $15.0 million at any one time outstanding (which Indebtedness may,
but need not, be incurred under the New Bank Credit Facility).
SECTION 4.10. ASSET SALES.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, cause, make or suffer to exist an Asset Sale unless (i) the
Company (or the Restricted Subsidiary, as the case may be) receives
consideration at the time of such Asset Sale at least equal to the Fair Market
Value (evidenced by a resolution of the Board of Directors set forth in an
Officer's Certificate delivered to the Trustee) of the assets or Equity
Interests issued or sold or otherwise disposed of and (ii) at least 85% of the
consideration therefor received by the Company or such Restricted Subsidiary is
in the form of cash or Cash Equivalents; provided that the amount of (x) any
liabilities (as shown on the Company's or such Restricted Subsidiary's most
recent balance sheet) of the Company or any Restricted Subsidiary (other than
contingent liabilities and liabilities that are by their terms subordinated to
the Notes or any Guarantee thereof) that are assumed by the transferee of any
such assets pursuant to a customary novation agreement that releases the Company
or such Restricted Subsidiary from further liability and (y) any notes or other
Obligations received by the Company or any such Restricted Subsidiary from such
transferee that are immediately converted by the Company or such Restricted
Subsidiary into cash (to the extent of the cash received), shall be deemed to be
cash for purposes of this provision.
Within 270 days after the Company's or any Restricted Subsidiary's receipt
of the Net Proceeds of any Asset Sale, the Company or such Restricted Subsidiary
may apply the Net Proceeds from such Asset Sale, at its option, (i) to
permanently reduce Obligations under the New Bank Credit Facility (and to
correspondingly reduce commitments with respect thereto) or other Senior Debt or
Pari Passu Indebtedness, (ii) to the acquisition of a controlling interest in
any one or more businesses, to the making of a capital expenditure or the
acquisition of Purchased Portfolios or other long-term assets, in each case,
that is engaged in or that is used or useful in a Principal Business and/or
(iii) to an investment in properties or assets that replace the properties and
assets that are the subject of such Asset Sale. Pending the final application of
any such Net Proceeds, the Company or such Restricted Subsidiary may temporarily
reduce Indebtedness under a revolving credit facility, if any, or otherwise
invest such Net Proceeds in Cash Equivalents. Any Net Proceeds from the Asset
Sale that are not invested as provided and within the time period set forth in
the first sentence of this paragraph shall be deemed to constitute "Excess
Proceeds."
When the aggregate amount of Excess Proceeds exceeds $10.0 million, the
Company shall be required to make an offer to all Holders of Notes (an "Asset
Sale Offer") to purchase the maximum principal amount of Notes, that is an
integral multiple of $1,000, that may be purchased out of the Excess Proceeds at
an offer price in cash in an amount equal to 100% of the principal amount
thereof, plus accrued and unpaid interest and Liquidated Damages, if any,
thereon to the date fixed for the closing of such offer, in accordance with the
procedures set forth herein. The Company shall commence an Asset Sale Offer with
respect to Excess Proceeds within ten Business Days after the date that the
aggregate amount of Excess Proceeds exceeds $10.0 million by mailing the notice
required pursuant to the terms of this Indenture, with a copy to the Trustee. To
the extent that the aggregate amount of Notes tendered pursuant to an Asset Sale
Offer is less than the Excess Proceeds, the Company may use any remaining Excess
Proceeds for any purpose not prohibited by this Indenture. If the aggregate
principal amount of Notes surrendered by Holders thereof exceeds the amount of
Excess Proceeds, the Trustee shall select the Notes to be purchased on a pro
rata basis. Upon completion of any such Asset Sale Offer, the amount of Excess
Proceeds shall be reset at zero.
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SECTION 4.11. TRANSACTIONS WITH AFFILIATES.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or make or amend any contract, agreement,
understanding, loan, advance or guarantee with, or for the benefit of, any
Affiliate (each of the foregoing, an "Affiliate Transaction"), unless (i) such
Affiliate Transaction is on terms that are no less favorable to the Company or
the relevant Restricted Subsidiary than those that might reasonably have been
obtained in a comparable transaction by the Company or such Restricted
Subsidiary with an unrelated Person and (ii) the Company delivers to the Trustee
(a) with respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of $1.0 million, a
resolution of the Board of Directors set forth in an Officer's Certificate
certifying that such Affiliate Transaction complies with clause (i) above and
that such Affiliate Transaction has been approved by a majority of the
disinterested members of the Board of Directors and (b) with respect to any
Affiliate Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $5.0 million, an opinion as to the fairness
to the Holders of the Notes of such Affiliate Transaction from a financial point
of view issued by an accounting, appraisal or investment banking firm of
national standing.
The foregoing provisions shall not apply to the following: (i) transactions
between or among the Company and/or any of its Restricted Subsidiaries; (ii)
Restricted Payments or Permitted Investments permitted under Section 4.07
hereof; (iii) the payment of reasonable and customary fees and compensation to,
and indemnity provided on behalf of, officers, directors, employees or
consultants of the Company or any Restricted Subsidiary of the Company; (iv) the
payment of fees in an aggregate amount not to exceed $750,000 in any
twelve-month period pursuant to the Advisory Services Agreement; (v) any other
transactions pursuant to the Advisory Services Agreement or transactions
pursuant to the HBR Services Agreement, in each case, as in effect on the date
hereof; and (vi) the payment of fees and expenses as set forth under the caption
"Use of Proceeds" contained in the Offering Circular.
SECTION 4.12. LIENS.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume or suffer to
exist any Lien that secures obligations under any Pari Passu Indebtedness or
Subordinated Indebtedness on any asset or property now owned or hereafter
acquired by the Company or any of its Restricted Subsidiaries, or any income or
profits therefrom or assign or convey any right to receive income therefrom,
unless the Notes are equally and ratably secured with the obligations so secured
or until such time as such obligations are no longer secured by a Lien;
provided, that in any case involving a Lien securing Subordinated Indebtedness,
such Lien is subordinated to the Lien securing the Notes on a basis no less
favorable than such Subordinated Indebtedness is subordinated to the Notes.
SECTION 4.13. BUSINESS ACTIVITIES.
The Company shall not, and shall not permit any Restricted Subsidiary to,
engage in any business other than a Principal Business, except to such extent as
would not be material to the Company and its Restricted Subsidiaries, taken as a
whole.
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SECTION 4.14. CORPORATE EXISTENCE.
Subject to Article 5 hereof, each of the Company and the Guarantors shall
do or cause to be done all things necessary to preserve and keep in full force
and effect (i) its corporate existence, and the corporate, partnership or other
existence of each of its Restricted Subsidiaries, in accordance with the
respective organizational documents (as the same may be amended from time to
time) of the Company, any such Guarantor or any such Subsidiary and (ii) the
rights (charter and statutory), licenses and material franchises of the Company,
the Guarantors and any of the Company's Restricted Subsidiaries; provided,
however, that the Company and the Guarantors shall not be required to preserve
any such right, license or franchise, or the corporate, partnership or other
existence of any of their Restricted Subsidiaries, if the Board of Directors
shall determine that the preservation thereof is no longer desirable in the
conduct of the business of the Company or such Guarantor, as applicable, and the
Company's Restricted Subsidiaries, taken as a whole, and that the loss thereof
is not adverse in any material respect to the Holders of the Notes.
SECTION 4.15. OFFER TO REPURCHASE UPON CHANGE OF CONTROL.
(a) Upon the occurrence of a Change of Control, each Holder of Notes shall
have the right to require the Company to repurchase all or any part (equal to
$1,000 or an integral multiple thereof) of such Holder's Notes pursuant to the
offer described below (the "Change of Control Offer") at an offer price in cash
(the "Change of Control Payment") equal to 101% of the aggregate principal
amount thereof plus accrued and unpaid interest and Liquidated Damages, if any,
thereon to the date of purchase. Within 30 days following a Change of Control,
the Company shall mail to each Holder of Notes at such Holder's registered
address a notice stating: (i) that an offer (an "Offer") is being made pursuant
to this Section 4.15 as a result of a Change of Control, the length of time the
Offer shall remain open, and the maximum aggregate principal amount of Notes
that will be accepted for payment pursuant to such Offer; (ii) the purchase
price, the amount of accrued and unpaid interest and Liquidated Damages, if any,
as of the purchase date, and the purchase date (which will be no earlier than 30
days or later than 60 days from the date such notice is mailed) (the "Change of
Control Payment Date"); (iii) the circumstances and material facts regarding
such Change of Control to the extent known to the Company (including, but not
limited to, information with respect to pro forma and historical financial
information after giving effect to such Change of Control and information
regarding the Person or Persons acquiring control); (iv) that any Note not
tendered will continue to accrue interest and Liquidated Damages, if any; (v)
that, unless the Company defaults in the payment of the Change of Control
Payment, all Notes accepted for payment pursuant to the Offer shall cease to
accrue interest and Liquidated Damages, if any, after the Change of Control
Payment Date; (vii) that Holders electing to have any Notes purchased pursuant
to an Offer will be required to surrender the Notes, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Notes completed, to
the Paying Agent at the address specified in the notice prior to the close of
business on the third Business Day preceding the Change of Control Payment Date;
(viii) that Holders shall be entitled to withdraw their election if the Paying
Agent receives, not later than the close of business on the second Business Day
preceding the Change of Control Payment Date, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of Notes delivered for purchase, and a statement that such Holder is
withdrawing his election to have the Notes purchased; and (ix) that Holders
whose Notes are being purchased only in part shall be issued new Notes equal in
principal amount to the unpurchased portion of the Notes surrendered, which
unpurchased portion must be equal to $1,000 in principal amount or an integral
multiple thereof. The Company shall comply with the requirements of Rule 14e-1
under the Exchange Act and any other
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securities laws and regulations thereunder to the extent such laws and
regulations are applicable in connection with the repurchase of Notes in
connection with a Change of Control.
(b) On the Change of Control Payment Date, the Company shall, to the extent
lawful, (1) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer, (2) deposit with the Paying Agent an
amount equal to the Change of Control Payment in respect of all Notes or
portions thereof so tendered and (3) deliver or cause to be delivered to the
Trustee for cancellation the Notes so accepted together with an Officer's
Certificate stating the aggregate principal amount of Notes or portions thereof
being purchased by the Company. The Paying Agent shall promptly mail to each
Holder of Notes so tendered the Change of Control Payment for such Notes, and
the Trustee shall promptly authenticate and mail (or cause to be transferred by
book entry) to each Holder a new Note equal in principal amount to any
unpurchased portion of the Notes surrendered, if any; provided that each such
new Note shall be in a principal amount of $1,000 or an integral multiple
thereof. The Company shall publicly announce the results of the Change of
Control Offer on or as soon as practicable after the Change of Control Payment
Date. Any amounts remaining after the purchase of Notes pursuant to the Change
of Control Offer shall be returned by the Paying Agent to the Company.
(c) The Company shall not be required to make a Change of Control Offer
upon a Change of Control if a third party makes the Change of Control Offer in
the manner, at the times and otherwise in compliance with the requirements set
forth herein applicable to a Change of Control Offer made by the Company and
purchases all Notes validly tendered and not withdrawn under such Change of
Control Offer.
SECTION 4.16. ANTI-LAYERING.
The Company shall not directly or indirectly incur, create, issue, assume,
guarantee or otherwise become liable for any Indebtedness that is subordinate or
junior in right of payment to any Senior Debt and senior in any respect in right
of payment to the Notes, and no Guarantor shall incur, create, issue, assume,
guarantee or otherwise become liable for any Indebtedness that is subordinate or
junior in right of payment to its Senior Debt and senior in any respect in right
of payment to the Subsidiary Guarantees.
SECTION 4.17. SALE AND LEASEBACK TRANSACTIONS.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, enter into any sale and leaseback transaction; provided that
the Company may enter into a sale and leaseback transaction if (i) the Company
could have (a) incurred Indebtedness in an amount equal to the Attributable Debt
relating to such sale and leaseback transaction pursuant to the Fixed Charge
Coverage Ratio test set forth in Section 4.09 hereof and (b) incurred a Lien to
secure such Indebtedness pursuant to Section 4.12 hereof, (ii) the gross cash
proceeds of such sale and leaseback transaction are at least equal to the Fair
Market Value (as determined in good faith by the Board of Directors and set
forth in an Officer's Certificate delivered to the Trustee) of the property that
is the subject of such sale and leaseback transaction and (iii) the transfer of
assets in such sale and leaseback transaction is permitted by, and the Company
applies the proceeds of such transaction in compliance with, Section 4.10
hereof.
SECTION 4.18. ADDITIONAL SUBSIDIARY GUARANTEES.
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If (i) the Company acquires or creates any additional Subsidiary that is a
domestic Restricted Subsidiary or (ii) any Restricted Subsidiary of the Company
that is not a Guarantor guarantees any Indebtedness of the Company other than
the Notes, the Company shall cause such Restricted Subsidiary to (A) execute and
deliver to the Trustee a supplemental indenture in form and substance reasonably
satisfactory to the Trustee pursuant to which such Restricted Subsidiary shall
unconditionally guarantee all of the Company's obligations under the Notes on
the terms set forth in such supplemental indenture and (B) deliver to the
Trustee an Opinion of Counsel reasonably satisfactory to the Trustee that such
supplemental indenture has been duly executed and delivered by such Restricted
Subsidiary.
SECTION 4.19 LIMITATION ON ISSUANCES AND SALES OF CAPITAL STOCK OF WHOLLY
OWNED RESTRICTED SUBSIDIARIES
The Company (i) shall not, and shall not permit any Wholly Owned Restricted
Subsidiary of the Company to, transfer, convey, sell, lease or otherwise dispose
of any Capital Stock of any Wholly Owned Restricted Subsidiary of the Company to
any Person (other than the Company or a Wholly Owned Restricted Subsidiary of
the Company), unless (a) such transfer, conveyance, sale, lease or other
disposition is of all the Capital Stock of such Wholly Owned Restricted
Subsidiary and (b) the cash Net Cash Proceeds from such transfer, conveyance,
sale, lease or other disposition are applied in accordance with Section 4.10
hereof and (ii) will not permit any Wholly Owned Restricted Subsidiary of the
Company to issue any of its Equity Interests (other than, if necessary, shares
of its Capital Stock constituting directors' qualifying shares) to any Person
other than to the Company or a Wholly Owned Restricted Subsidiary of the
Company.
ARTICLE 5
SUCCESSORS
SECTION 5.01. MERGER, CONSOLIDATION, OR SALE OF ASSETS.
The Company shall not consolidate or merge with or into (whether or not the
Company is the surviving corporation), or sell, assign, transfer, lease, convey
or otherwise dispose of all or substantially all of its properties or assets in
one or more related transactions, to another corporation, Person or entity
unless (i) the Company is the surviving corporation or the entity or the Person
formed by or surviving any such consolidation or merger (if other than the
Company) or to which such sale, assignment, transfer, lease, conveyance or other
disposition shall have been made is a corporation organized or existing under
the laws of the United States, any state thereof or the District of Columbia;
(ii) the entity or Person formed by or surviving any such consolidation or
merger (if other than the Company) or the entity or Person to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made assumes all the obligations of the Company under the Notes and this
Indenture pursuant to a supplemental indenture in a form reasonably satisfactory
to the Trustee; (iii) immediately after such transaction no Default or Event of
Default exists; and (iv) except in the case of a merger of the Company with or
into a Wholly Owned Restricted Subsidiary of the Company, the Company or the
entity or Person formed by or surviving any such consolidation or merger (if
other than the Company), or to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have been made (A) shall have Consolidated
Net Worth immediately after the transaction equal to or greater than the
Consolidated Net Worth of the Company immediately prior to the transaction and
(B) shall, at the time of such transaction and after giving pro forma effect
thereto as if such transaction had occurred at the beginning of the applicable
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four-quarter period, be permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in
Section 4.09 hereof. Notwithstanding the foregoing, any Restricted Subsidiary
may consolidate with, merge into or transfer all or part of its properties and
assets to the Company.
SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation or merger, or any sale, assignment, transfer, lease,
conveyance or other disposition of all or substantially all of the assets of the
Company in accordance with Section 5.01 hereof, the successor corporation formed
by such consolidation or into which or with which the Company is merged or to
which such sale, assignment, transfer, lease, conveyance or other disposition is
made shall succeed to, and be substituted for (so that from and after the date
of such consolidation, merger, sale, lease, conveyance or other disposition, the
provisions of this Indenture referring to the "Company" shall refer instead to
the successor corporation and not to the Company), and may exercise every right
and power of the Company under this Indenture with the same effect as if such
successor Person had been named as the Company herein; provided, however, that
the predecessor Company shall not be relieved from the obligation to pay the
principal of and interest and Liquidated Damages, if any, on the Notes except in
the case of a sale of all of the Company's assets that meets the requirements of
Section 5.01 hereof.
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ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT.
Each of the following constitutes an "Event of Default":
(i) default for 30 days in the payment when due of interest or
Liquidated Damages, if any, on the Notes (whether or not prohibited by
Article 10 hereof);
(ii) default in payment when due of the principal of or premium, if
any, on the Notes (whether or not prohibited by Article 10 hereof);
(iii) failure by the Company for 30 days after notice from the Trustee
or the Holders of at least 25% in aggregate principal amount of the then
outstanding Notes to comply with the provisions described under Sections
4.07, 4.09, 4.15 or Article 5 hereof;
(iv) failure by the Company for 60 days after notice from the Trustee
or the Holders of at least 25% in aggregate principal amount of the then
outstanding Notes to comply with any of its other agreements in this
Indenture or the Notes;
(v) default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any of its Restricted
Subsidiaries (or the payment of which is guaranteed by the Company or any
of its Restricted Subsidiaries) whether such Indebtedness or guarantee now
exists, or is created after the date hereof, which default results in the
acceleration of such Indebtedness prior to its express maturity and, in
each case, the principal amount of any such Indebtedness, together with the
principal amount of any other such Indebtedness the maturity of which has
been so accelerated, aggregates $10.0 million or more;
(vi) failure by the Company or any of its Restricted Subsidiaries to
pay final judgments aggregating in excess of $10.0 million, which judgments
are not paid, discharged or stayed for a period of 60 days;
(vii) except as permitted by this Indenture, any Significant
Subsidiary Guarantee shall be held in any judicial proceeding to be
unenforceable or invalid or shall cease for any reason to be in full force
and effect (except by its terms) or any Guarantor, or any Person acting on
behalf of any Guarantor, shall deny or disaffirm its obligations under its
Significant Subsidiary Guarantee;
(viii) the Company or any of its Significant Subsidiaries or any group
of Subsidiaries that, taken as a whole, would constitute a Significant
Subsidiary pursuant to or within the meaning of Bankruptcy Law;
(a) commences a voluntary case,
(b) consents to the entry of an order for relief against it in an
involuntary case,
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(c) consents to the appointment of a custodian of it or for all
or substantially all of its property,
(d) makes a general assignment for the benefit of its creditors,
or
(e) generally is not paying its debts as they become due; or
(ix) a court of competent jurisdiction enters an order or decree in an
involuntary case or proceeding under any Bankruptcy Law that:
(a) is for relief against the Company or any of its Significant
Subsidiaries or any group of Subsidiaries that, taken as a whole,
would constitute a Significant Subsidiary;
(b) appoints a custodian of the Company or any of its Significant
Subsidiaries or any group of Subsidiaries that, taken as whole, would
constitute a Significant Subsidiary or for all or substantially all of
the Company or any of its Significant Subsidiaries or any group of
Subsidiaries that, taken as a whole, would constitute a Significant
Subsidiary; or
(c) orders the liquidation of the Company or any of its
Significant Subsidiaries or any group of Subsidiaries that, taken as a
whole, would constitute a Significant Subsidiary;
and the order or decree remains unstayed and in effect for 60 consecutive
days; or
(x) failure by the Company to file Articles of Merger in the State of
Wisconsin and a Certificate of Merger in the State of Delaware in connection
with the Payco Acquistion by 5:00 p.m. Eastern Time on the Business Day
immediately following the date of this Indenture.
The term "Custodian" means any receiver, trustee, assignee, liquidator or
similar official under any Bankruptcy Law.
An Event of Default shall not be deemed to have occurred under clause (iv)
of this Section 6.01 until the Trustee notifies the Company, or the Holders of
at least 25% in aggregate principal amount of the then outstanding Notes notify
the Company and the Trustee, of the Default and the Company does not cure the
Default within 60 days after receipt of the notice. The notice must specify the
Default, demand that it be remedied and state that the notice is a "Notice of
Default."
In the case of any Event of Default pursuant to the provisions of this
Section 6.01 occurring by reason of any action (or inaction) willfully taken (or
not taken) by or on behalf of the Company with the intention of avoiding payment
of the premium that the Company would have had to pay if the Company then had
elected to redeem the Notes pursuant to Section 3.07 hereof, an equivalent
premium shall also become and be immediately due and payable to the extent
permitted by law upon the acceleration of the Notes, anything in this Indenture
or in the Notes to the contrary notwithstanding. If an Event of Default occurs
prior to November 1, 2001 by reason of any willful action (or inaction) taken
(or not taken) by or on behalf of the Company with the intention of avoiding the
prohibition on redemption of the Notes prior to November 1, 2001, then the
premium payable for purposes of this paragraph for each of the years beginning
on November 1 of the years set forth below shall be as set forth in the
following table expressed as a percentage of the amount that would otherwise be
due but for the provisions of this sentence, plus accrued interest and
Liquidated Damages, if any, to the date of payment:
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Year Percentage
1996..................................................... 114.665%
1997..................................................... 112.832%
1998..................................................... 110.999%
1999..................................................... 109.166%
2000...................................................... 107.333%
SECTION 6.02. ACCELERATION.
If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding Notes may
declare all the Notes to be due and payable immediately; provided, however, that
so long as the New Bank Credit Facility shall be in full force and effect, if an
Event of Default shall have occurred and be continuing (other than an Event of
Default under clauses (viii) or (ix) of Section 6.01 hereof with respect to the
Company), any such acceleration shall not be effective until the earlier to
occur of (x) five days following the delivery of a notice of such acceleration
to the agent or other representative of the lenders under the New Bank Credit
Facility and (y) acceleration of any Indebtedness under the New Bank Credit
Facility. Notwithstanding the foregoing, in the case of an Event of Default
arising from certain events of bankruptcy or insolvency described in clauses
(viii) and (ix) of Section 6.01 hereof, with respect to the Company, any
Significant Subsidiary or any group of Restricted Subsidiaries that, taken
together, would constitute a Significant Subsidiary, all outstanding Notes shall
ipso facto become due and payable without further action or notice on the part
of the Trustee or any Holder.
At any time after a declaration of acceleration with respect to the Notes,
the Holders of a majority in aggregate principal amount of the Notes may rescind
and cancel such declaration and its consequences (i) if the rescission would not
conflict with any judgment or decree, (ii) if all existing Events of Default
have been cured or waived except nonpayment of principal, interest or Liquidated
Damages, if any, that have become due solely because of the acceleration, (iii)
if, to the extent the payment of such interest is lawful, interest on overdue
installments of interest and Liquidated Damages, if any, and overdue principal
at a rate equal to 1% per annum in excess of the rate borne by the Notes, which
has become due otherwise than by such declaration of acceleration, has been
paid, (iv) if the Company has paid the Trustee its reasonable compensation and
reimbursed the Trustee for its expenses, disbursements and advances and (v) if,
in the event of the cure or waiver of an Event of Default of the type described
in clauses (viii) or (ix) of Section 6.01 hereof, the Trustee shall have
received an Officer's Certificate and an Opinion of Counsel that such Event of
Default has been cured or waived. No such rescission shall affect any subsequent
Default or impair any right consequent thereto.
SECTION 6.03. OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee may pursue any
available remedy to collect the payment of principal, premium and Liquidated
Damages, if any, and interest on the Notes or to enforce the performance of any
provision of the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any of
the Notes or does not produce any of them in the proceeding. A delay or omission
by the Trustee or any Holder of a Note in exercising any right or remedy
accruing upon an Event of Default shall not impair the right
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or remedy or constitute a waiver of or acquiescence in the Event of Default. All
remedies are cumulative to the extent permitted by law.
SECTION 6.04. WAIVER OF PAST DEFAULTS.
The Holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the Holders of all of the
Notes waive any existing Default or Event of Default and its consequences under
this Indenture, except, subject to the second paragraph of Section 6.02 hereof,
a continuing Default or Event of Default in the payment of interest or
Liquidated Damages, if any, on, or the principal of, the Notes (including in
connection with an offer to purchase) or a Default or Event of Default with
respect to any covenant or provision which cannot be modified or amended without
the consent of the Holder of each outstanding Note affected. Upon any such
waiver, such Default shall cease to exist, and any Event of Default arising
therefrom shall be deemed to have been cured for every purpose of this
Indenture; but no such waiver shall extend to any subsequent or other Default or
impair any right consequent thereon.
SECTION 6.05. CONTROL BY MAJORITY.
Holders of a majority in principal amount of the then outstanding Notes may
direct the time, method and place of conducting any proceeding for exercising
any remedy available to the Trustee or exercising any trust or power conferred
on it. However, the Trustee may refuse to follow any direction that conflicts
with law or this Indenture that the Trustee determines may be unduly prejudicial
to the rights of other Holders of Notes or that may involve the Trustee in
personal liability.
SECTION 6.06. LIMITATION ON SUITS.
A Holder of a Note may pursue a remedy with respect to this Indenture or
the Notes only if:
(a) the Holder of a Note gives to the Trustee written notice of a
continuing Event of Default;
(b) the Holders of at least 25% in principal amount of the then
outstanding Notes make a written request to the Trustee to pursue the
remedy;
(c) such Holder of a Note or Holders of Notes offer and, if
requested, provide to the Trustee indemnity satisfactory to the
Trustee against any loss, liability or expense;
(d) the Trustee does not comply with the request within 60 days
after receipt of the request and the offer and, if requested, the
provision of indemnity; and
(e) during such 60-day period the Holders of a majority in
principal amount of the then outstanding Notes do not give the Trustee
a direction inconsistent with the request.
A Holder of a Note may not use this Indenture to prejudice the rights of
another Holder of a Note or to obtain a preference or priority over another
Holder of a Note.
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SECTION 6.07. RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right of any
Holder of a Note to receive payment of principal, premium and Liquidated
Damages, if any, and interest on the Note, on or after the respective due dates
expressed in the Note (including in connection with an offer to purchase), or to
bring suit for the enforcement of any such payment on or after such respective
dates, shall not be impaired or affected without the consent of such Holder.
SECTION 6.08. COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in Section 6.01(i) or (ii) occurs and is
continuing, the Trustee is authorized to recover judgment in its own name and as
trustee of an express trust against the Company for the whole amount of
principal of and premium, interest and Liquidated Damages, if any, remaining
unpaid on the Notes and interest on overdue principal and, to the extent lawful,
interest and Liquidated Damages, if any, in each case at the rate per annum
borne by the Notes, and such further amount as shall be sufficient to cover the
costs and expenses of collection, including the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel.
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee is authorized to file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders of the Notes allowed in any judicial proceedings relative to the Company
or any of the Guarantors (or any other obligor upon the Notes), its creditors or
its property and shall be entitled and empowered to collect, receive and
distribute any money or other property payable or deliverable on any such claims
and any Custodian in any such judicial proceeding is hereby authorized by each
Holder to make such payments to the Trustee, and in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay to
the Trustee any amount due to it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 7.07 hereof. To the extent that the
payment of any such compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.07 hereof out of the estate in any such proceeding, shall be denied
for any reason, payment of the same shall be secured by a Lien on, and shall be
paid out of, any and all distributions, dividends, money, securities and other
properties that the Holders may be entitled to receive in such proceeding
whether in liquidation or under any plan of reorganization or arrangement or
otherwise. Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Notes or
the rights of any Holder, or to authorize the Trustee to vote in respect of the
claim of any Holder in any such proceeding.
SECTION 6.10. PRIORITIES.
If the Trustee collects any money pursuant to this Article 6, it shall pay
out the money in the following order:
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First: to the Trustee, its agents and attorneys for any amounts due under
Section 7.07 hereof, including payment of all compensation, expense and
liabilities incurred, and all advances made, by the Trustee and the costs and
expenses of collection;
Second: to Holders of Notes for amounts due and unpaid on the Notes for
principal, premium, interest and Liquidated Damages, if any, ratably, without
preference or priority of any kind, according to the amounts due and payable on
the Notes for principal, premium, interest and Liquidated Damages, if any,
respectively; and
Third: to the Company, the Guarantors or to such party as a court of
competent jurisdiction shall direct.
The Trustee, upon prior notice to the Company, may fix a record date and
payment date for any payment to Holders of Notes pursuant to this Section 6.10.
SECTION 6.11. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this Indenture
or in any suit against the Trustee for any action taken or omitted by it as a
Trustee, a court in its discretion may require the filing by any party litigant
in the suit of an undertaking to pay the costs of the suit, and the court in its
discretion may assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in the suit, having due regard to the merits and good
faith of the claims or defenses made by the party litigant. This Section 6.11
does not apply to a suit by the Trustee, a suit by a Holder of a Note pursuant
to Section 6.07 hereof, or a suit by Holders of more than 10% in principal
amount of the then outstanding Notes.
ARTICLE 7
TRUSTEE
SECTION 7.01. DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the duties, rights and powers vested in it by this
Indenture, and use the same degree of care and skill in its exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs.
(b) Except during the continuance of an Event of Default actually known to
the Trustee:
(i) the Trustee shall not be liable hereunder except for such duties
of the Trustee which shall be determined solely by the express
provisions of this Indenture and the Trustee need perform only
those duties that are specifically set forth in this Indenture
and no others, and no implied covenants or obligations shall be
read into this Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates
or opinions furnished to the Trustee and conforming to the
requirements of this Indenture. However, the Trustee shall
examine the
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certificates and opinions to determine whether or not they
conform to the requirements of this Indenture.
(c) The Trustee shall not be relieved from liabilities for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b) of this
Section 7.01;
(ii) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer, unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 6.05 hereof.
(d) Whether or not therein expressly so provided, every provision of this
Indenture that in any way relates to the Trustee is subject to paragraphs (a),
(b), and (c) of this Section 7.01.
(e) No provision of this Indenture shall require the Trustee to expend or
risk its own funds or incur any liability whatsoever in the performance of any
of its duties hereunder or in the exercise of any of its rights or powers
hereunder. The Trustee shall be under no obligation to exercise any of its
duties under this Indenture at the request of any Holders, unless such Holder
shall have offered to the Trustee security or indemnity satisfactory to it in
its reasonable judgment against any loss, liability or expense that might be
incurred by it in compliance with such request or direction.
(f) The Trustee shall not be liable for interest on any money received by
it except as the Trustee may agree in writing with the Company. Money held in
trust by the Trustee need not be segregated from other funds except to the
extent required by law.
SECTION 7.02. RIGHTS OF TRUSTEE.
(a) The Trustee may conclusively rely upon any document believed by it to
be genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require an
Officer's Certificate or an Opinion of Counsel or both. The Trustee shall not be
liable for any action it takes or omits to take in good faith in reliance on
such Officer's Certificate or Opinion of Counsel. The Trustee may consult with
counsel and other experts and the written advice of such counsel or expert or
any Opinion of Counsel as to matters of law shall be full and complete
authorization and protection from liability in respect of any action taken,
suffered or omitted by it hereunder in good faith and in reliance thereon.
(c) The Trustee may act through its attorneys and agents and shall not be
responsible for the misconduct or negligence of any agent (other than an agent
who is an employee of the Trustee) chosen in good faith.
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(d) The Trustee shall not be liable for any action it takes or omits to
take in good faith that it reasonably believes to be authorized or within the
rights or powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture, any demand,
request, direction or notice from the Company or any Guarantor shall be
sufficient if signed by an Officer of the Company or Guarantor, as applicable.
(f) The Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Indenture at the request or direction of any of
the Holders unless such Holders shall have offered to the Trustee security or
indemnity satisfactory to it in its reasonable judgment against any loss,
liability or expense that might be incurred by it in compliance with such
request or direction.
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the owner or
pledgee of Notes and may otherwise deal with the Company, the Guarantors or any
Affiliate of the Company with the same rights it would have if it were not
Trustee. However, in accordance with the requirements of the TIA, in the event
that the Trustee acquires any conflicting interest it must eliminate such
conflict within 90 days, apply to the SEC for permission to continue as trustee
(in the event such conflict arises after consummation of the Exchange Offer, or
if a Shelf Registration Statement (as defined in the Registration Rights
Agreement) has been filed, after such Shelf Registration Statement has been
declared effective by the SEC) or resign. Any Agent may do the same with like
rights and duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof.
SECTION 7.04. TRUSTEE'S DISCLAIMER.
The Trustee shall not be responsible for and makes no representation as to
the validity or adequacy of this Indenture or the Notes, it shall not be
accountable for the Company's use of the proceeds from the Notes or any money
paid to the Company or upon the Company's direction under any provision of this
Indenture, it shall not be responsible for the use or application of any money
received by any Paying Agent other than the Trustee, and it shall not be
responsible for any statement or recital herein or any statement in the Notes or
any other document in connection with the sale of the Notes or pursuant to this
Indenture other than its certificate of authentication.
The Trustee in its capacity as Registrar hereunder, shall not be charged
with knowledge of the Applicable Procedures and may conclusively rely that
instructions and certificates presented to it are in accordance with such
Applicable Procedures in effecting transfers pursuant to Section 2.06 hereof.
SECTION 7.05. NOTICE OF DEFAULTS.
If a Default or Event of Default occurs and is continuing and if it is
known to the Trustee, the Trustee shall mail to Holders of Notes (with a copy to
the Representative under the New Bank Credit Facility) a notice of the Default
or Event of Default within 90 days after it occurs. Except in the case of a
Default or Event of Default in payment of principal of, premium, if any, or
interest or Liquidated Damages, if any, on any Note, the Trustee may withhold
the notice if and so long as a committee of its Responsible Officers in good
faith determines that withholding the notice is in the interests of the Holders
of the Notes.
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SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES.
Within 60 days after each November 1 beginning with the November 1
following the date hereof, and for so long as Notes remain outstanding, the
Trustee shall mail to the Holders of the Notes a brief report dated as of such
reporting date that complies with TIA ss. 313(a) (but if no event described in
TIA ss. 313(a) has occurred within the twelve months preceding the reporting
date, no report need be transmitted). The Trustee also shall comply with TIA ss.
313(b)(2). The Trustee shall also transmit by mail all reports as required by
TIA ss. 313(c).
A copy of each report at the time of its mailing to the Holders of Notes
shall be mailed to the Company and, if such report is prepared after the
Exchange Offer Registration Statement or the Shelf Registration Statement has
been declared effective by the SEC, filed with the SEC and each stock exchange,
if any, on which the Notes are listed in accordance with TIA ss. 313(d). The
Company shall promptly notify the Trustee when the Notes are listed on any stock
exchange and of any delisting thereof.
SECTION 7.07. COMPENSATION AND INDEMNITY.
The Company and the Guarantors shall pay to the Trustee upon demand from
time to time compensation for its acceptance of this Indenture and services
hereunder which shall be agreed to by the Company and the Trustee in a separate
fee agreement. The Trustee's compensation shall not be limited by any law on
compensation of a trustee of an express trust. The Company and the Guarantors
shall reimburse the Trustee promptly upon request for all reasonable
disbursements, advances and expenses incurred or made by it in addition to the
compensation for its services, except any disbursements, expenses and advances
as may be attributable to the Trustee's negligence or willful misconduct. Such
expenses shall include the reasonable compensation, disbursements and expenses
of the Trustee's agents and counsel.
The Company and the Guarantors shall indemnify the Trustee against any and
all losses, liabilities or expenses incurred by it arising out of or in
connection with the acceptance or administration of its duties under this
Indenture, including the reasonable costs and expenses of enforcing this
Indenture against the Company and the Guarantors (including this Section 7.07)
and defending itself against any claim (whether asserted by the Company, the
Guarantors or any Holder or any other Person) or liability in connection with
the exercise or performance of any of its powers or duties hereunder, except to
the extent any such loss, liability or expense may be attributable to its
negligence or willful misconduct. The Trustee shall notify the Company and the
Guarantors promptly of any claim for which it may seek indemnity. Failure by the
Trustee to so notify the Company and the Guarantors shall not relieve the
Company or the Guarantors of their obligations hereunder. The Company and the
Guarantors shall defend the claim and the Trustee shall cooperate in the
defense. The Trustee may have separate counsel and the Company and the
Guarantors shall pay the reasonable fees and expenses of such counsel. The
Company and the Guarantors need not pay for any settlement made without their
consent, which consent shall not be unreasonably withheld.
The obligations of the Company and the Guarantors under this Section 7.07
shall survive the satisfaction and discharge of this Indenture.
To secure the Company's and the Guarantors' payment obligations in this
Section 7.07, the Trustee shall have a Lien prior to the Notes on all money or
property held or collected by the
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Trustee, except that held in trust to pay principal of and interest and
Liquidated Damages, if any, on particular Notes. Such Lien shall survive the
satisfaction and discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01 (viii) or (ix) hereof occurs, the expenses and
the compensation for the services (including the reasonable fees and expenses of
its agents and counsel) are intended to constitute expenses of administration
under any Bankruptcy Law.
As to notice of liens or charges, the Trustee shall comply with the
provisions of TIA ss. 313(b)(2) to the extent applicable.
SECTION 7.08. REPLACEMENT OF TRUSTEE.
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section 7.08.
The Trustee may resign in writing at any time and be discharged from the
trust hereby created by so notifying the Company (with a copy to the agent under
the New Bank Credit Facility). The Holders of Notes of a majority in principal
amount of the then outstanding Notes may remove the Trustee by so notifying the
Trustee and the Company in writing (with a copy to the agent under the New Bank
Credit Facility). The Company may remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or an order for
relief is entered with respect to the Trustee under any Bankruptcy Law;
(c) a custodian or public officer takes charge of the Trustee or its
property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the office
of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the then outstanding Notes may appoint a
successor Trustee to replace the successor Trustee appointed by the Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company, or
the Holders of Notes of at least 10% in principal amount of the then outstanding
Notes may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee, after written request by any Holder of a Note who has been
a Holder of a Note for at least six months, fails to comply with Section 7.10,
such Holder of a Note may petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to the Company (with a copy to the agent under the
New Bank Credit Facility).
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Thereupon, the resignation or removal of the retiring Trustee shall become
effective, and the successor Trustee shall have all the rights, powers and
duties of the Trustee under this Indenture. The successor Trustee shall mail a
notice of its succession to Holders of the Notes (with a copy to the agent under
the New Bank Credit Facility). The retiring Trustee shall promptly transfer all
property held by it as Trustee to the successor Trustee, provided all sums owing
to the Trustee hereunder have been paid and subject to the Lien provided for in
Section 7.07 hereof. Notwithstanding replacement of the Trustee pursuant to this
Section 7.08, the Company's obligations under Section 7.07 hereof shall continue
for the benefit of the retiring Trustee.
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates, merges or converts into, or transfers all or
substantially all of its corporate trust business to, another corporation, the
successor corporation without any further act shall, if such resulting surviving
or transferee corporation is otherwise eligible hereunder, be the successor
Trustee.
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.
There shall at all times be a Trustee hereunder that is a corporation
organized and doing business under the laws of the United States of America or
of any state thereof that is authorized under such laws to exercise corporate
trustee power, that is subject to supervision or examination by federal or state
authorities and that has or has a corporate parent that has a combined capital
and surplus of at least $100.0 million as set forth in its most recent published
annual report of condition.
This Indenture shall always have a Trustee who satisfies the requirements
of TIA ss. 310(a)(1), (2) and (5). The Trustee is subject to TIA ss. 310(b).
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
The Trustee is subject to TIA ss. 311(a), excluding any creditor
relationship listed in TIA ss. 311(b). A Trustee who has resigned or been
removed shall be subject to TIA ss. 311(a) to the extent indicated therein.
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.01. OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT
DEFEASANCE.
The Company may, at the option of its Board of Directors evidenced by a
resolution set forth in an Officer's Certificate, at any time, elect to have
either Section 8.02 or 8.03 hereof be applied to all outstanding Notes upon
compliance with the conditions set forth below in this Article 8.
SECTION 8.02. LEGAL DEFEASANCE AND DISCHARGE.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.02, the Company and the Guarantors shall, subject
to the satisfaction of the conditions set forth in Section 8.04 hereof, be
deemed to have been discharged from their obligations with respect to
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all outstanding Notes on the date the conditions set forth below are satisfied
(hereinafter, "Legal Defeasance"). For this purpose, Legal Defeasance means that
the Company shall be deemed to have paid and discharged the entire Indebtedness
represented by the outstanding Notes, which shall thereafter be deemed to be
"outstanding" only for the purposes of Section 8.05 hereof and the other
Sections of this Indenture referred to in (a) and (b) below, and to have
satisfied all its other obligations under such Notes and this Indenture (and the
Trustee, on demand of and at the expense of the Company, shall execute proper
instruments acknowledging the same), except for the following provisions which
shall survive until otherwise terminated or discharged hereunder: (a) the rights
of Holders of outstanding Notes to receive solely from the trust fund described
in Section 8.04 hereof, and as more fully set forth in such Section, payments in
respect of the principal of, premium, if any, interest and Liquidated Damages,
if any, on such Notes when such payments are due, (b) the Company's obligations
with respect to such Notes under Sections 2.02, 2.03, 2.04, 2.05, 2.06, 2.07,
2.10 and 2.12 and Section 4.02 hereof, (c) the rights, powers, trusts, duties
and immunities of the Trustee hereunder and the Company's obligations in
connection therewith and (d) this Article 8. Subject to compliance with this
Article 8, the Company may exercise its option under this Section 8.02
notwithstanding the prior exercise of its option under Section 8.03 hereof.
SECTION 8.03. COVENANT DEFEASANCE.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.03, the Company and the Guarantors shall, subject
to the satisfaction of the conditions set forth in Section 8.04 hereof, be
released from their obligations under the covenants contained in Sections 4.07,
4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.15, 4.16, 4.17, 4.19, 5.01 and 11.01
hereof with respect to the outstanding Notes on and after the date the
conditions set forth below are satisfied (hereinafter, "Covenant Defeasance"),
and the Notes shall thereafter be deemed not "outstanding" for the purposes of
any direction, waiver, consent or declaration or act of Holders (and the
consequences of any thereof) in connection with such covenants, but shall
continue to be deemed "outstanding" for all other purposes hereunder (it being
understood that such Notes shall not be deemed outstanding for accounting
purposes). For this purpose, Covenant Defeasance means that, with respect to the
outstanding Notes, the Company, its Subsidiaries and any Guarantor may omit to
comply with and shall have no liability in respect of any term, condition or
limitation set forth in any such covenant, whether directly or indirectly, by
reason of any reference elsewhere herein to any such covenant or by reason of
any reference in any such covenant to any other provision herein or in any other
document and such omission to comply shall not constitute a Default or an Event
of Default under Section 6.01 hereof, but, except as specified above, the
remainder of this Indenture and such Notes shall be unaffected thereby. In
addition, upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.03 hereof, subject to the satisfaction of the
conditions set forth in Section 8.04 hereof, Sections 6.01 (iii) through 6.01
(vii) hereof shall not constitute Events of Default.
SECTION 8.04. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.
The following shall be the conditions to the application of either Section
8.02 or 8.03 hereof to the outstanding Notes:
(a) the Company must irrevocably deposit with the Trustee, in trust, for
the benefit of the Holders of Notes, cash in U.S. dollars, non-callable
Government Securities, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, premium and Liquidated Damages, if any,
and interest on
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the outstanding Notes on the stated maturity or on the applicable redemption
date, as the case may be, and the Company must specify whether the Notes are
being defeased to maturity or to a particular redemption date;
(b) in the case of an election under Section 8.02 hereof, the Company shall
have delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that (A) the Company has
received from, or there has been published by, the Internal Revenue Service a
ruling or (B) since the date hereof, there has been a change in the applicable
federal income tax law, in either case to the effect that, and based thereon
such Opinion of Counsel shall confirm that, the Holders of the outstanding Notes
will not recognize income, gain or loss for federal income tax purposes as a
result of such Legal Defeasance and will be subject to federal income tax on the
same amounts, in the same manner and at the same times as would have been the
case if such Legal Defeasance had not occurred;
(c) in the case of an election under Section 8.03 hereof, the Company shall
have delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that the Holders of the
outstanding Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such Covenant Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such Covenant Defeasance had not occurred;
(d) no Default or Event of Default shall have occurred and be continuing on
the date of such deposit (other than a Default or Event of Default resulting
from the borrowing of funds to be applied to such deposit) or insofar as
Sections 6.01 (viii) or 6.01 (ix) hereof are concerned, at any time in the
period ending on the 91st day after the date of deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under the New Bank Credit
Facility or, any other material agreement or instrument (other than this
Indenture) to which the Company or any of its Restricted Subsidiaries is a party
or by which the Company or any of its Restricted Subsidiaries is bound;
(f) the Company shall have delivered to the Trustee an Opinion of Counsel
to the effect that after the 91st day following the deposit, the trust funds
will not be subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally;
(g) the Company shall have delivered to the Trustee an Officer's
Certificate stating that the deposit was not made by the Company with the intent
of preferring the Holders of Notes over the other creditors of the Company with
the intent of defeating, hindering, delaying or defrauding creditors of the
Company or others; and
(h) the Company shall have delivered to the Trustee an Officer's
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for or relating to the Legal Defeasance or the Covenant
Defeasance have been complied with.
SECTION 8.05. DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN
TRUST; OTHER MISCELLANEOUS PROVISIONS.
Subject to Section 8.06 hereof, all money and non-callable Government
Securities (including the proceeds thereof) deposited with the Trustee (or other
qualifying trustee, collectively for purposes
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of this Section 8.05, the "Trustee") pursuant to Section 8.04 hereof in respect
of the outstanding Notes shall be held in trust and applied by the Trustee, in
accordance with the provisions of such Notes and this Indenture, to the payment,
either directly or through any Paying Agent (including the Company acting as
Paying Agent) as the Trustee may determine, to the Holders of such Notes of all
sums due and to become due thereon in respect of principal, premium, and
Liquidated Damages, if any, and interest, but such money need not be segregated
from other funds except to the extent required by law.
The Company and the Guarantors shall pay and indemnify the Trustee against
any tax, fee or other charge imposed on or assessed against the cash or
non-callable Government Securities deposited pursuant to Section 8.04 hereof or
the principal and interest received in respect thereof other than any such tax,
fee or other charge which by law is for the account of the Holders of the
outstanding Notes.
Anything in this Article 8 to the contrary notwithstanding, the Trustee
shall deliver or pay to the Company from time to time upon the request of the
Company any money or non-callable Government Securities held by it as provided
in Section 8.04 hereof which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee (which may be the opinion delivered under Section
8.04(a) hereof), are in excess of the amount thereof that would then be required
to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance.
SECTION 8.06. REPAYMENT TO COMPANY.
Any money deposited with the Trustee or any Paying Agent, or then held by
the Company, in trust for the payment of the principal of and premium or
Liquidated Damages, if any, or interest on any Note and remaining unclaimed for
one year after such principal and premium or Liquidated Damages, if any, or
interest has become due and payable shall be paid to the Company on its request
or (if then held by the Company) shall be discharged from such trust; and the
Holder of such Note shall thereafter, as a creditor, look only to the Company or
Guarantors for payment thereof, and all liability of the Trustee or such Paying
Agent with respect to such trust money, and all liability of the Company as
trustee thereof, shall thereupon cease; provided, however, that the Trustee or
such Paying Agent, before being required to make any such repayment, may at the
written request and expense of the Company cause to be published once, in The
New York Times or The Wall Street Journal (national edition), notice that such
money remains unclaimed and that, after a date specified therein, which shall
not be less than 30 days from the date of such notification or publication, any
unclaimed balance of such money then remaining will be repaid to the Company.
SECTION 8.07. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any United States dollars
or non-callable Government Securities in accordance with Section 8.02 or 8.03
hereof, as the case may be, by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, then the obligations of the Company or the Guarantors under this
Indenture and the Notes shall be revived and reinstated as though no deposit had
occurred pursuant to Section 8.02 or 8.03 hereof until such time as the Trustee
or Paying Agent is permitted to apply all such money in accordance with Section
8.02 or 8.03 hereof, as the case may be; provided, however, that, if either the
Company or any Guarantor makes any payment of principal of and premium or
Liquidated Damages, if any, or interest on any Note following the reinstatement
of its obligations, the
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Company or any Guarantor shall be subrogated to the rights of the Holders of
such Notes to receive such payment from the money held by the Trustee or Paying
Agent.
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.01. WITHOUT CONSENT OF HOLDERS OF NOTES.
Notwithstanding Section 9.02 of this Indenture, the Company, the Guarantors
and the Trustee may amend or supplement this Indenture or the Notes without the
consent of any Holder of a Note:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to or in place of
certificated Notes;
(c) to provide for the assumption of the Company's or any Guarantor's
obligations to Holders of Notes in the case of a merger or consolidation
pursuant to Article 5 or Article 11 hereof, as applicable;
(d) to make any change that would provide any additional rights or benefits
to the Holders of Notes or that does not adversely affect the legal rights
hereunder of any Holder of the Note; or
(e) to comply with requirements of the SEC in order to effect or maintain
the qualification of this Indenture under the TIA.
Upon the request of the Company accompanied by a resolution of its Board of
Directors of the Company and each of the Guarantors authorizing the execution of
any such amended or supplemental Indenture, and upon receipt by the Trustee of
the documents described in Section 7.02 hereof, the Trustee shall join with the
Company and each of the Guarantors in the execution of any amended or
supplemental Indenture authorized or permitted by the terms of this Indenture
and to make any further appropriate agreements and stipulations that may be
therein contained, but the Trustee shall not be obligated to enter into such
amended or supplemental Indenture that affects its own rights, duties or
immunities under this Indenture or otherwise.
SECTION 9.02. WITH CONSENT OF HOLDERS OF NOTES.
Except as provided below in this Section 9.02, this Indenture or the Notes
may be amended or supplemented with the consent of the Holders of at least a
majority in principal amount of the Notes then outstanding (including, without
limitation, consents obtained in connection with a purchase of, or tender offer
or exchange offer for, Notes), and, subject to Sections 6.02, 6.04 and 6.07
hereof, any existing Default or Event of Default (other than a Default or Event
of Default in the payment of principal of, premium or Liquidated Damages, if
any, or interest on the Notes) or compliance with any provision of this
Indenture or the Notes may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Notes (including consents
obtained in connection with a tender offer or exchange offer for Notes).
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In addition, any amendment to the provisions of Article 10 hereof will
require the consent of the Holders of at least 75% in aggregate principal amount
of the Notes then outstanding if such amendment would adversely affect the
rights of the Holders of the Notes.
Upon the request of the Company accompanied by a resolution of the Board of
Directors of the Company and each of the Guarantors authorizing the execution of
any such amended or supplemental Indenture, and upon the filing with the Trustee
of evidence satisfactory to the Trustee of the consent of the Holders of Notes
as aforesaid, and upon receipt by the Trustee of the documents described in
Section 7.02 hereof, the Trustee shall join with the Company and each of the
Guarantors in the execution of such amended or supplemental Indenture unless
such amended or supplemental Indenture affects the Trustee's own rights, duties
or immunities under this Indenture or otherwise, in which case the Trustee may
in its discretion, but shall not be obligated to, enter into such amended or
supplemental Indenture.
It shall not be necessary for the consent of the Holders of Notes under
this Section 9.02 to approve the particular form of any proposed amendment or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section 9.02 becomes
effective, the Company shall mail to the Holders of Notes affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such amended or supplemental
Indenture or waiver. Subject to Sections 6.02, 6.04 and 6.07 hereof, the Holders
of a majority in aggregate principal amount of the Notes then outstanding may
waive compliance in a particular instance by the Company with any provision of
this Indenture or the Notes. However, without the consent of each Holder
affected, an amendment or waiver may not (with respect to any Notes held by a
non-consenting Holder):
(i) reduce the principal amount of Notes whose Holders must consent to an
amendment, supplement or waiver;
(ii) reduce the principal of or change the fixed maturity of any Note or
alter the provisions with respect to the redemption of the Notes (except as
provided above with respect to Sections 3.09, 4.10 and 4.15 hereof);
(iii) reduce the rate of or change the time for payment of interest or
Liquidated Damages, if any, on any Note;
(iv) waive a Default or Event of Default in the payment of principal of or
premium or Liquidated Damages, if any, or interest on the Notes (except a
rescission of acceleration of the Notes by the Holders of at least a majority in
aggregate principal amount of the Notes and a waiver of the payment default that
resulted from such acceleration);
(v) make any Note payable in money other than that stated in the Notes;
(vi) make any change in the provisions of this Indenture relating to
waivers of past Defaults or the rights of Holders of Notes to receive payments
of principal of or premium, if any, interest or Liquidated Damages, if any, on
the Notes;
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(vii) waive a redemption payment with respect to any Note (except as
provided above with respect to Sections 3.09, 4.10 and 4.15 hereof); or
(viii) make any change in Section 6.04 or 6.07 hereof or in the foregoing
amendment and waiver provisions.
SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment or supplement to this Indenture or the Notes shall be set
forth in a amended or supplemental Indenture that complies with the TIA as then
in effect.
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, supplement or waiver becomes effective, a consent to it
by a Holder of a Note is a continuing consent by the Holder of a Note and every
subsequent Holder of a Note or portion of a Note that evidences the same debt as
the consenting Holder's Note, even if notation of the consent is not made on any
Note. However, any such Holder of a Note or subsequent Holder of a Note may
revoke the consent as to his/her Note if the Trustee receives written notice of
revocation before the date the waiver, supplement or amendment becomes
effective. An amendment, supplement or waiver becomes effective in accordance
with its terms and thereafter binds every Holder.
The Company may, but shall not be obligated to, fix a record date for the
purpose of determining the Holders of Notes entitled to consent to any
amendment, supplement or waiver. If a record date is fixed, then notwithstanding
the provisions of the second sentence of the preceding paragraph, those Holders
of Notes who were Holders on such record date (or their duly designated
proxies), and only those Holders, shall be entitled to revoke any consent
previously given, whether or not such Holder of Notes continues to be a Holder
of Notes after such record date. No such consent shall be valid or effective for
more than 90 days after such record date.
After an amendment, supplement or waiver becomes effective, it shall bind
every Holder of Notes, unless it makes a change described in clauses (i) though
(viii) of Section 9.02 hereof, in which case, the amendment, supplement or
waiver shall bind only each Holder of Notes who has consented to it; provided
that any such waiver shall not impair or affect the right of any Holder to
receive payment of principal of and interest and Liquidated Damages, if any, on
the Notes, on or after the respective due dates expressed in such Notes, or to
bring suit for the enforcement of any such payment on or after such respective
dates without the consent of such Holder of Notes.
SECTION 9.05. NOTATION ON OR EXCHANGE OF NOTES.
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Note thereafter authenticated. If an amendment,
supplement or waiver changes the terms of the Notes, the Company may require the
Holders of the Notes to deliver the Notes to the Trustee. The Company may place
an appropriate notation on the Notes and return them to the Holders.
Alternatively, the Company in exchange for all Notes may issue and the Trustee
shall authenticate new Notes (accompanied by a notation of the Subsidiary
Guarantees duly endorsed by the Guarantors) that reflect the amendment,
supplement or waiver.
Failure to make the appropriate notation or issue a new Note shall not
affect the validity and effect of such amendment, supplement or waiver.
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SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any amended or supplemental Indenture authorized
pursuant to this Article 9 if the amendment or supplement does not adversely
affect the rights, duties, liabilities or immunities of the Trustee. If it does,
the Trustee may, but need not, sign it. The Company and the Guarantors may not
sign an amendment or supplemental Indenture until their respective Board of
Directors approves it. In executing any amended or supplemental indenture, the
Trustee shall be entitled to receive and (subject to Section 7.01 hereof) shall
be fully protected in relying upon, an Officer's Certificate and an Opinion of
Counsel stating that the execution of such amended or supplemental indenture is
authorized or permitted by this Indenture.
ARTICLE 10
SUBORDINATION
SECTION 10.01. AGREEMENT TO SUBORDINATE.
Each of the Company and the Guarantors agrees, and each Holder of Notes by
accepting a Note agrees, that the payment of principal of, interest, premium and
Liquidated Damages, if any, on and all other Obligations in respect of, the
Notes (including, without limitation, by redemption or purchase of any Notes as
provided by Sections 3.07, 4.10 and 4.15 hereof) will be subordinated in right
of payment, to the extent and in the manner as set forth in this Article 10 and
Article 11, to the prior payment in full in cash or Cash Equivalents of all
Senior Debt, whether outstanding on the date hereof or hereafter incurred.
SECTION 10.02. LIQUIDATION; DISSOLUTION; BANKRUPTCY.
Upon any distribution to creditors of the Company or any Guarantor in a
liquidation or dissolution of the Company or such Guarantor or in a bankruptcy,
reorganization, insolvency, receivership or similar proceeding relating to the
Company or such Guarantor or their respective property, an assignment for the
benefit of creditors or any marshaling of the Company's or such Guarantor's
assets and liabilities:
(1) the holders of Senior Debt shall be entitled to receive payment in full
in cash or Cash Equivalents of all Obligations due in respect of such Senior
Debt (including interest after the commencement of any such proceeding at the
rate specified in the documents relating to the applicable Senior Debt, whether
or not the claim for such interest is allowed as a claim in such proceeding)
before the Holders of Notes shall be entitled to receive any payment on account
of any Obligations with respect to the Notes (except that all Holders of Notes
may receive (i) Permitted Junior Securities and (ii) payments and other
distributions made from any defeasance trust created pursuant to Article 8
hereof); and
(2) until all Obligations with respect to Senior Debt (as provided in
subsection (1) above) are paid in full in cash or Cash Equivalents, any
distribution to which Holders of Notes would be entitled but for this Article 10
shall be made to holders of Senior Debt (except that Holders of Notes may
receive (i) Permitted Junior Securities and (ii) payments and other
distributions made from any defeasance trust created pursuant to Article 8
hereof), as their interests may appear.
SECTION 10.03. DEFAULT ON DESIGNATED SENIOR DEBT.
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The Company and the Guarantors may not make any payment or distribution to
the Trustee or any Holder of Notes on account of any Obligations in respect of
the Notes and may not acquire from the Trustee or any Holder of Notes any Notes
for cash or property (other than (i) Permitted Junior Securities and (ii)
payments and other distributions made from any defeasance trust created pursuant
to Article 8 hereof) until all principal and other Obligations with respect to
the Senior Debt have been paid in full in cash or Cash Equivalents if:
(i) a default in the payment of any principal or other Obligations with
respect to Designated Senior Debt occurs and is continuing beyond any applicable
grace period (including any default in payment upon the maturity of any
Designated Senior Debt by lapse of time, acceleration or otherwise) in the
agreement, indenture or other document governing such Designated Senior Debt, or
any judicial proceeding is pending to determine whether any such default has
occurred; or
(ii) any other default occurs and is continuing with respect to Designated
Senior Debt that then permits, or would permit, with the passage of time or the
giving of notice or both, holders of the Designated Senior Debt as to which such
default relates to accelerate its maturity and the Trustee receives a notice of
such default (a "Payment Blockage Notice") from a Person who may give it
pursuant to Section 10.11 hereof. If the Trustee receives any such Payment
Blockage Notice, no subsequent Payment Blockage Notice shall be effective for
purposes of this Section unless and until at least 360 days have elapsed since
the first day of effectiveness of the immediately prior Payment Blockage Notice.
No nonpayment default that existed or was continuing on the date of delivery of
any Payment Blockage Notice to the Trustee shall be, or be made, the basis for a
subsequent Payment Blockage Notice unless such default shall have been cured or
waived for a period of not less than 180 days.
The Company may and shall resume payments on and distributions in respect
of the Notes and may acquire them upon the earlier of:
(1) in the case of a payment default referred to in clause (i) above, upon
the date on which the default is cured or waived or otherwise ceases to
exist, unless another default, event of default or other event that would
prohibit such payment shall have occurred and be continuing, or all
Obligations in respect of such Designated Senior Debt shall have been paid
in full in cash or Cash Equivalents; or
(2) in the case of a nonpayment default referred to in clause (ii) above,
the earlier of the date on which such nonpayment default is cured or waived
or 179 days after the applicable Payment Blockage Notice is received by the
Trustee.
SECTION 10.04. ACCELERATION OF NOTES.
If payment of the Notes is accelerated because of an Event of Default, the
Trustee shall promptly notify the Representative for the Senior Debt of the
acceleration.
SECTION 10.05. WHEN DISTRIBUTION MUST BE PAID OVER.
In the event that the Trustee or any Holder receives any payment of any
Obligations with respect to the Notes at a time when such payment is prohibited
under the terms of this Indenture, such payment shall be held by the Trustee or
such Holder, in trust for the benefit of, and shall be paid forthwith over and
delivered to the holders of Senior Debt as their interests may appear or their
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Representative under the indenture or other agreement (if any) pursuant to which
Senior Debt may have been issued, as their respective interests may appear, for
application to the payment of all Obligations with respect to Senior Debt
remaining unpaid to the extent necessary to pay such Obligations in full in cash
or Cash Equivalents in accordance with their terms, after giving effect to any
payment or distribution to or for the holders of Senior Debt made concurrently
with such payment received by the Trustee or such Holder. Any distribution to
the holders of Senior Debt or their Representatives of assets other than cash
may be held by such holders or such Representatives as additional collateral
without any duty to the Holder of Notes to liquidate or otherwise realize on
such assets or to apply such assets to any Senior Debt or other Obligations
relating thereto.
With respect to the holders of Senior Debt, the Trustee undertakes to
perform only such obligations on the part of the Trustee as are specifically set
forth in this Article 10, and no implied covenants or obligations with respect
to the holders of Senior Debt shall be read into this Indenture against the
Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Debt, and shall not be liable to any such holders if the
Trustee shall pay over or distribute to or on behalf of Holders of Notes or the
Company or any other Person money or assets to which any holders of Senior Debt
shall be entitled by virtue of this Article 10, except if such payment is made
as a result of the willful misconduct or gross negligence of the Trustee.
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SECTION 10.06. NOTICE BY COMPANY.
The Company shall promptly notify the Trustee and the Paying Agent of any
facts known to the Company that would cause a payment of any Obligations with
respect to the Notes to violate this Article 10, but failure to give such notice
shall not affect the subordination of the Notes to the Senior Debt as provided
in this Article 10.
SECTION 10.07. SUBROGATION.
After all Senior Debt is paid in full in cash or Cash Equivalents and until
the Notes are paid in full, Holders shall be subrogated (equally and ratably
with all other Indebtedness pari passu with the Notes) to the rights of holders
of Senior Debt to receive distributions applicable to Senior Debt to the extent
that distributions otherwise payable to the Holders have been applied to the
payment of Senior Debt. A distribution made under this Article 10 to holders of
Senior Debt that otherwise would have been made to Holders is not, as between
the Company and Holders, a payment by the Company on the Notes.
SECTION 10.08. RELATIVE RIGHTS.
This Article 10 defines the relative rights of Holders of Notes and holders
of Senior Debt. Nothing in this Indenture shall:
(1) impair, as between the Company and Holders, the obligation of the
Company, which is absolute and unconditional, to pay principal of and interest
and Liquidated Damages, if any, on the Notes in accordance with their terms;
(2) affect the relative rights of Holders and creditors of the Company
other than their rights in relation to holders of Senior Debt; or
(3) prevent the Trustee or any Holder from exercising its available
remedies upon a Default or Event of Default, subject to the rights of holders of
Senior Debt to receive distributions and payments otherwise payable to or
received by Holders.
If the Company fails because of this Article 10 to pay principal of or
interest or Liquidated damages, if any, on a Note on the due date, the failure
is nevertheless a Default or Event of Default.
SECTION 10.09. SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY.
No right of any holder of Senior Debt to enforce the subordination of the
Indebtedness evidenced by the Notes shall be impaired by any act or failure to
act by the Company or any Holder or by the failure of the Company or any Holder
to comply with this Indenture regardless of any knowledge thereof that any such
Holder of Notes or holder of Senior Debt, as the case may be, may have or be
otherwise charged with. The holders of Senior Debt may extend, renew, restate,
supplement, modify or amend the terms of the Senior Debt or any Obligations with
respect thereto or any security therefor and release, sell or exchange such
security and otherwise deal freely with the Company and its Subsidiaries and
Affiliates all without incurring responsibility to any Holder or the Trustee,
without impairing or releasing the obligations of any Holder or the Trustee to
the holders of Senior Debt, and without affecting the liabilities and
obligations of the parties to this Indenture or the Holders.
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Each Holder of the Notes by its acceptance thereof: (a) acknowledges and
agrees that the holders of any Senior Debt or their Representative, in its or
their discretion, and without affecting any rights of any holder of Senior Debt
under this Article 10, may foreclose any mortgage or deed of trust covering
interest in real property securing such Senior Debt or any guarantee thereof by
judicial or nonjudicial sale, even though such action may release the Company or
any guarantor of such Senior Debt from further liability under such Senior Debt
or any guarantee thereof or may otherwise limit the remedies available to the
holders thereof; and (b) hereby waives any defense that such Holder may
otherwise have to the enforcement by any holder of any Senior Debt or any
Representative of such holder against such Holder of this Article 10 after or as
a result of any action, including any such defense based on any loss or
impairment of rights of subrogation.
If at any time any payment of Obligations with respect to any Senior Debt
is rescinded or must otherwise be returned upon the insolvency, bankruptcy,
reorganization or liquidation of the Company or any Guarantor or otherwise, the
provisions of this Article 10 shall continue to be effective or reinstated, as
the case may be, to the same extent as though such payments had not been made.
SECTION 10.10. DISTRIBUTION OR NOTICE TO REPRESENTATIVE.
Whenever a distribution is to be made or a notice given to holders of
Senior Debt, the distribution may be made and the notice given to their
Representative.
Upon any payment or distribution of assets of the Company referred to in
this Article 10, the Trustee and the Holders shall be entitled to rely upon any
order or decree made by any court of competent jurisdiction or upon any
certificate of such Representative or of the liquidating trustee or agent or
other Person making any distribution to the Trustee or to the Holders for the
purpose of ascertaining the Persons entitled to participate in such
distribution, the holders of the Senior Debt and other Indebtedness of the
Company, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Article 10.
SECTION 10.11. RIGHTS OF TRUSTEE AND PAYING AGENT.
Notwithstanding the provisions of this Article 10 or any other provision of
this Indenture, the Trustee shall not be charged with knowledge of the existence
of any facts that would prohibit the making of any payment or distribution by
the Trustee, or the taking of any action by the Trustee, and the Trustee and the
Paying Agent may continue to make payments on the Notes, unless the Trustee
shall have received at its Corporate Trust Office at least five Business Days
prior to the date of such payment written notice of facts that would cause the
payment of any Obligations with respect to the Notes to violate this Article 10.
Only the Company or a Representative or a holder of Senior Debt that has no
Representative may give the notice. Nothing in this Article 10 shall impair the
claims of, or payments to, the Trustee under or pursuant to Section 7.07 hereof.
Nothing in this Section 10.11 is intended to or shall relieve any Holder from
the obligations imposed under Section 10.05 hereof with respect to monies or
other distributions received in violation of the provisions hereof.
The Trustee in its individual or any other capacity may hold Senior Debt
with the same rights it would have if it were not Trustee. Any Agent may do the
same with like rights.
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SECTION 10.12. AUTHORIZATION TO EFFECT SUBORDINATION.
Each Holder of a Note by the Holder's acceptance thereof authorizes and
directs the Trustee on the Holder's behalf to take such action as may be
necessary or appropriate to effectuate the subordination as provided in this
Article 10, and appoints the Trustee to act as the Holder's attorney-in-fact for
any and all such purposes, including, in the event of any insolvency, bankruptcy
or receivership case or proceeding or any dissolution, winding-up, liquidation,
reorganization or other similar proceedings relative to the Company (whether
voluntary or involuntary and whether in bankruptcy, insolvency or receivership
proceedings or otherwise), the timely filing of a claim for the unpaid balance
of the Notes of such Holder in the form required in such proceedings and the
causing of such claim to be approved. If the Trustee does not file a proper
proof of claim or proof of debt in the form required in any proceeding referred
to in Section 6.09 hereof at least 30 days before the expiration of the time to
file such claim, the holders of Senior Debt and any Representative are hereby
authorized, and shall have the right (without any duty), to demand, sue for,
collect, and receive the payments and distributions in respect of the Notes
which are required to be paid or delivered to the holders of the Senior Debt as
provided in this Article 10, and to file and prove all claims therefor.
The Company, the Trustee and each Holder by their acceptance of the Notes,
acknowledge that damages would be inadequate to compensate the holders of Senior
Debt for any breach or default by the Company, the Trustee or any such Holder of
its obligations under this Article 10, and, therefore, agree that the holders of
Senior Debt and their Representatives shall be entitled to equitable relief,
including injunctive relief and specific performance, in the enforcement
thereof.
SECTION 10.13. THIRD PARTY BENEFICIARY, ETC.
The foregoing provisions regarding subordination are solely for the purpose
of defining the relative rights of the holders of Senior Debt on the one hand
and the Holders of Notes on the other hand. Such provisions are for the benefit
of the holders of Senior Debt (and their successors and assigns) and shall be
enforceable by them directly against the Holders (and their successors and
assigns). This Article 10 shall constitute a continuing offer to all Persons who
become holders of, or who continue to hold, Senior Debt (whether such Senior
Debt was created or acquired before or after the issuance of the Notes).
ARTICLE 11
SUBSIDIARY GUARANTEES
SECTION 11.01. SUBSIDIARY GUARANTEES.
Each of the Guarantors hereby, jointly and severally, unconditionally
guarantees to each Holder of a Note authenticated and delivered by the Trustee
and to the Trustee and its successors and assigns, irrespective of the validity
and enforceability of this Indenture, the Notes or the Obligations of the
Company hereunder or thereunder, that: (a) the principal of and interest and
premium and Liquidated Damages, if any, on the Notes shall be promptly paid in
full when due, whether at maturity, by acceleration, redemption, repurchase or
otherwise, and interest on the overdue principal of and interest and Liquidated
Damages, if any, on the Notes, if lawful, and all other Obligations of the
Company to the Holders or the Trustee hereunder or thereunder shall be promptly
paid in full or performed, all in accordance with the terms hereof and thereof;
and (b) in case of any extension of time of payment or renewal of any Notes or
any of such other Obligations,
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the same shall be promptly paid in full when due or performed in accordance with
the terms of the extension or renewal, whether at stated maturity, by
acceleration, redemption, repurchase or otherwise, subject, however, to the
limitations set forth in Section 11.05 hereof. Failing payment when due of any
amount so guaranteed or any performance so guaranteed for whatever reason, the
Guarantors shall be jointly and severally obligated to pay the same immediately.
The Guarantors hereby agree that their Obligations hereunder shall be
unconditional, irrespective of the validity, regularity or enforceability of the
Notes or this Indenture, the absence of any action to enforce the same, any
waiver or consent by any Holder of the Notes with respect to any provisions
hereof or thereof, the recovery of any judgment against the Company, and action
to enforce the same or any other circumstance which might otherwise constitute a
legal or equitable discharge or defense of a Guarantor. Each Guarantor hereby
waives diligence, presentment, demand of payment, filing of claims with a court
in the event of insolvency or bankruptcy of the Company, any right to require a
proceeding first against the Company, protest, notice and all demands whatsoever
and covenant that this Subsidiary Guarantee shall not be discharged except by
complete performance of the Obligations contained in the Notes and this
Indenture. If any Holder of Notes or the Trustee is required by any court or
otherwise to return to the Company or Guarantors, or any Custodian, Trustee,
liquidator or other similar official acting in relation to either the Company or
Guarantors, any amount paid by the Company or any Guarantor either to the
Trustee or such Holder, this Subsidiary Guarantee, to the extent theretofore
discharged, shall be reinstated in full force and effect. Each Guarantor agrees
that it shall not be entitled to any right of subrogation in relation to the
Holders of Notes in respect of any Obligations guaranteed hereby until payment
in full of all Obligations guaranteed hereby. Each Guarantor further agrees
that, as between the Guarantors, on the one hand, and the Holders and the
Trustee, on the other hand, (x) the maturity of the Obligations guaranteed
hereby may be accelerated as provided in Article 6 hereof for the purposes of
this Subsidiary Guarantee, notwithstanding any stay, injunction or other
prohibition preventing such acceleration in respect of the Obligations
guaranteed hereby and (y) in the event of any declaration of acceleration of
such Obligations as provided in Article 6 hereof, such Obligations (whether or
not due and payable) shall forthwith become due and payable by the Guarantors
for the purpose of this Subsidiary Guarantee. The Guarantors shall have the
right to seek contribution from any non-paying Guarantor so long as the exercise
of such right does not impair the rights of the Holders under the Subsidiary
Guarantees.
SECTION 11.02. EXECUTION AND DELIVERY OF SUBSIDIARY GUARANTEES.
To evidence its Subsidiary Guarantee set forth in Section 11.01 hereof,
each Guarantor hereby agrees that a notation of such Subsidiary Guarantee
substantially in the form of Exhibit C (executed by the manual or facsimile
signature of one of its Officers) shall be endorsed by an Officer of such
Guarantor on each Note authenticated and delivered by the Trustee and that this
Indenture shall be executed on behalf of such Guarantor by an Officer of such
Guarantor.
Each Guarantor hereby agrees that its Subsidiary Guarantee set forth in
Section 11.01 hereof shall remain in full force and effect notwithstanding any
failure to endorse on each Note a notation of such Subsidiary Guarantee.
If an Officer whose signature is on this Indenture or on the Subsidiary
Guarantee no longer holds that office at the time the Trustee authenticates the
Note on which a Subsidiary Guarantee is endorsed, the Subsidiary Guarantee shall
be valid nevertheless.
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The delivery of any Note by the Trustee, after the authentication thereof
hereunder, shall constitute due delivery of the Subsidiary Guarantee set forth
in this Indenture on behalf of the Guarantors.
SECTION 11.03. GUARANTORS MAY CONSOLIDATE, ETC. ON CERTAIN TERMS.
(a) Except as set forth in Articles 4 and 5 hereof, nothing contained
in this Indenture or in any of the Notes shall prevent any consolidation or
merger of a Guarantor with or into the Company or another Guarantor or shall
prevent any sale or conveyance of the property of a Guarantor, as an entirety or
substantially as an entirety, to the Company.
(b) Except as provided in Section 11.03(a) hereof or in a transaction
referred to in Section 11.04 hereof, no Guarantor may consolidate with or merge
with or into (whether or not such Guarantor is the surviving Person) another
corporation, Person or entity whether or not affiliated with such Guarantor, or
sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of its assets to, another corporation, Person or entity
unless: (i) subject to the provisions of Section 11.04 hereof, the Person formed
by or surviving any such consolidation or merger (if other than such Guarantor)
shall assume all the Obligations of such Guarantor, pursuant to a supplemental
indenture in form and substance reasonably satisfactory to the Trustee, under
the Notes and this Indenture; (ii) immediately after giving effect to such
transaction, no Default or Event of Default exists; and (iii) the Company would
be permitted to incur, immediately after giving effect to such transaction, at
least $1.00 of additional Indebtedness (other than Permitted Refinancing
Indebtedness) pursuant to the Fixed Charge Coverage Ratio Test set forth in
Section 4.09 hereof. Subject to Section 11.04 hereof, in case of any such
consolidation, merger, sale or conveyance and upon the assumption by the
successor corporation, by supplemental indenture, executed and delivered to the
Trustee and satisfactory in form to the Trustee, of the Subsidiary Guarantee
endorsed upon the Notes and the due and punctual performance of all of the
covenants and conditions of this Indenture to be performed by the Guarantor,
such successor corporation shall succeed to and be substituted for the Guarantor
with the same effect as if it had been named herein as a Guarantor. Such
successor corporation thereupon may cause to be signed any or all of the
Subsidiary Guarantees to be endorsed upon all of the Notes issuable hereunder
which theretofore shall not have been signed by the Company and delivered to the
Trustee. All the Subsidiary Guarantees so issued shall in all respects have the
same legal rank and benefit under this Indenture as the Subsidiary Guarantees
theretofore and thereafter issued in accordance with the terms of this Indenture
as though all of such Subsidiary Guarantees had been issued at the date of the
execution hereof.
SECTION 11.04. RELEASES FOLLOWING SALE OF ASSETS.
Concurrently with any sale of assets of any Guarantor (including, if
applicable, all of the Capital Stock of any Guarantor), any Liens in favor of
the Trustee in the assets sold thereby shall be released; provided that in the
event of an Asset Sale, the Net Proceeds from such sale or other disposition are
treated in accordance with the provisions of Section 4.10 hereof. In the event
of a sale or other disposition of all of the assets of any Guarantor, by way of
merger, consolidation or otherwise, or a sale or other disposition of all of the
Capital Stock of any Guarantor, then such Guarantor (in the event of a sale or
other disposition, by way of such a merger, consolidation or otherwise, of all
of the Capital Stock of such Guarantor in accordance with the provisions of this
Indenture) or the corporation acquiring the property (in the event of a sale or
other disposition of all of the assets of such Guarantor), shall be released and
relieved of its Obligations under its Subsidiary Guarantee and Section 11.03
hereof; provided that in the event of an Asset Sale, the Net Proceeds
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from such sale or other disposition are treated in accordance with the
provisions of Section 4.10 hereof. Upon delivery by the Company to the Trustee
of an Officer's Certificate and an Opinion of Counsel to the effect that such
sale or other disposition was made by the Company in accordance with the
provisions of this Indenture, including without limitation Section 4.10 hereof,
the Trustee shall execute any documents reasonably required in order to evidence
the release of any Guarantor from its Obligations under its Subsidiary
Guarantee. Any Guarantor not released from its Obligations under its Subsidiary
Guarantee shall remain liable for the full amount of principal of and interest
and Liquidated Damages, if any, on the Notes and for the other Obligations of
any Guarantor under this Indenture as provided in this Article 11. The release
of any Guarantor pursuant to this Section 11.04 shall be effective whether or
not such release shall be noted on any Note then outstanding or thereafter
authenticated and delivered.
SECTION 11.05. LIMITATION ON GUARANTOR LIABILITY.
For purposes hereof, each Guarantor's liability shall be that amount from
time to time equal to the aggregate liability of such Guarantor thereunder, but
shall be limited to the lesser of (i) the aggregate amount of the Obligations of
the Company under the Notes and this Indenture and (ii) the amount, if any,
which would not have (A) rendered such Guarantor "insolvent" (as such term is
defined in the federal Bankruptcy Law and in the Debtor and Creditor Law of the
State of New York) or (B) left it with unreasonably small capital at the time
its Subsidiary Guarantee was entered into, after giving effect to the incurrence
of existing Indebtedness immediately prior to such time; provided that, it shall
be a presumption in any lawsuit or other proceeding in which such Guarantor is a
party that the amount guaranteed pursuant to its Subsidiary Guarantee is the
amount set forth in clause (i) above unless any creditor, or representative of
creditors of such Guarantor, or debtor in possession or trustee in bankruptcy of
such Guarantor, otherwise proves in such a lawsuit that the aggregate liability
of such Guarantor is limited to the amount set forth in clause (ii). In making
any determination as to the solvency or sufficiency of capital of a Guarantor in
accordance with the previous sentence, the right of such Guarantor to
contribution from other Guarantors and any other rights such Guarantor may have,
contractual or otherwise, shall be taken into account.
SECTION 11.06. "TRUSTEE" TO INCLUDE PAYING AGENT.
In case at any time any Paying Agent other than the Trustee shall have been
appointed by the Company and be then acting hereunder, the term "Trustee" as
used in this Article 11 shall in such case (unless the context shall otherwise
require) be construed as extending to and including such Paying Agent within its
meaning as fully and for all intents and purposes as if such Paying Agent were
named in this Article 11 in place of the Trustee.
SECTION 11.07. SUBORDINATION OF SUBSIDIARY GUARANTEE.
The obligations of each Guarantor under its Subsidiary Guarantee pursuant
to this Article 11 shall be junior and subordinated to the Senior Debt of such
Guarantor on the same basis as the Notes are junior and subordinated to Senior
Debt. For the purposes of the foregoing sentence, the Trustee and the Holders of
Notes shall have the right to receive and/or retain payments by any of the
Guarantors only at such times as they may receive and/or retain payments in
respect of the Notes pursuant to this Indenture, including Article 10 hereof.
Each Holder of a Note by its acceptance thereof (a) agrees to and shall be
bound by the provisions of this Section 11.07, (b) authorizes and directs the
Trustee on its behalf to take such
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action as may be necessary or appropriate to effectuate the subordination so
provided and (c) appoints the Trustee its attorney-in-fact for any and all such
purposes.
ARTICLE 12
MISCELLANEOUS
SECTION 12.01. TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies or conflicts with the
duties imposed by TIA ss.318(c), the imposed duties shall control.
SECTION 12.02. NOTICES.
Any notice or communication by the Company or the Trustee to the others is
duly given if in writing and delivered in Person or mailed by first class mail
(registered or certified, return receipt requested), telex, telecopier or
overnight air courier guaranteeing next day delivery, to the others' address:
If to the Company or any Guarantor:
Outsourcing Solutions Inc.
300 Galleria Parkway
Suite 690
Atlanta, Georgia 30339
Telecopier No.:(770) 988-2910
Attention: Chief Financial Officer
With a copy to:
White & Case
1155 Avenue of the Americas
New York, New York 10036
Telecopier No.: (212) 354-8113
Attention: Frank L. Schiff, Esq.
If to the Trustee:
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
Telecopier No.: (302) 651-1576
Attention: Corporate Trust Administration
Notice by the Trustee to the agent under the New Bank Credit Facility
provided for herein shall be delivered or mailed to Goldman Sachs Credit
Partners L.P., c/o Goldman, Sachs & Co., 85 Broad Street, New York, New York
10004 and to The Chase Manhattan Bank, N.A., 270 Park Avenue, New York, New York
10017 and to any other person who hereafter becomes an agent under
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the New Bank Credit Facility, provided the Trustee has been notified by the
Company or the agent of the names and mailing addressees of such persons.
The Company, any Guarantor or the Trustee by written notice to the others
may designate additional or different addresses for subsequent notices or
communications.
All notices and communications (other than those sent to Holders) shall be
deemed to have been duly given: at the time delivered by hand, if personally
delivered; five Business Days after being deposited in the mail, postage
prepaid, if sent by registered or certified mail; when answered back, if
telexed; when receipt acknowledged, if telecopied; and the next Business Day
after timely delivery to the courier, if sent by overnight air courier
guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by first class
mail, certified or registered, return receipt requested, or by overnight air
courier guaranteeing next day delivery to its address shown on the register kept
by the Registrar. Any notice or communication shall also be so mailed to any
Person described in TIA ss. 313(c), to the extent required by the TIA. Failure
to mail a notice or communication to a Holder or any defect in it shall not
affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above within
the time prescribed, it is duly given, whether or not the addressee receives it.
If the Company mails a notice or communication to Holders, it shall mail a
copy to the Trustee and each Agent at the same time.
SECTION 12.03. COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS OF
NOTES.
Holders may communicate pursuant to TIA ss. 312(b) with other Holders with
respect to their rights under this Indenture or the Notes. The Company, the
Guarantors, the Trustee, the Registrar and any other Person shall have the
protection of TIA ss. 312(c).
SECTION 12.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company or any Guarantor to the
Trustee to take any action under this Indenture, the Company or such Guarantor
shall furnish to the Trustee, at the request of the Trustee:
(a) an Officer's Certificate in form and substance reasonably satisfactory
to the Trustee (which shall include the statements set forth in Section 12.05
hereof) stating that, in the opinion of the signers, all conditions precedent
and covenants, if any, provided for in this Indenture relating to the proposed
action have been satisfied; and
(b) an Opinion of Counsel in form and substance reasonably satisfactory to
the Trustee (which shall include the statements set forth in Section 12.05
hereof) stating that, in the opinion of such counsel, all such conditions
precedent and covenants have been satisfied.
SECTION 12.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
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Each certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture (other than a certificate provided
pursuant to TIA ss. 314(a)(4) and the Officer's Certificate required by Section
4.08 hereof) shall comply with the provisions of TIA ss. 314(e) and shall
include:
(a) a statement that the Person making such certificate or opinion has read
such covenant or condition;
(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he or she has made
such examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
satisfied; and
(d) a statement as to whether or not, in the opinion of such Person, such
condition or covenant has been satisfied; provided, however, that with respect
to matters of fact, an Opinion of Counsel may rely on an Officer's Certificate
or certificates of public officials.
SECTION 12.06. RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
SECTION 12.07. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND
STOCKHOLDERS.
No director, officer, employee, incorporator or stockholder of the Company
or any Guarantor, as such, shall have any liability for any obligations of the
Company or the Guarantors under the Notes, the Subsidiary Guarantees or this
Indenture or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder of Notes by accepting a Note waives
and releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes.
SECTION 12.08. GOVERNING LAW.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO
CONSTRUE THIS INDENTURE, THE NOTES AND THE SUBSIDIARY GUARANTEES.
SECTION 12.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret any other indenture, loan or
debt agreement of the Company or its Subsidiaries or of any other Person. Any
such indenture, loan or debt agreement may not be used to interpret this
Indenture.
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SECTION 12.10. SUCCESSORS.
All agreements of the Company and the Guarantors in this Indenture and the
Notes shall bind their respective successors. All agreements of the Trustee in
this Indenture shall bind its successors.
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SECTION 12.11. SEVERABILITY.
In case any provision in this Indenture or in the Notes shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
SECTION 12.12. COUNTERPART ORIGINALS.
The parties may sign any number of copies of this Indenture. Each signed
copy shall be an original, but all of them together represent the same
agreement.
SECTION 12.13. TABLE OF CONTENTS; HEADINGS; ETC.
The Table of Contents, Cross-Reference Table and Headings of the Articles
and Sections of this Indenture have been inserted for convenience of reference
only, are not to be considered a part of this Indenture and shall in no way
modify or restrict any of the terms or provisions hereof.
[Signatures on following page.]
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SIGNATURES
Dated as of November 6, 1996 OUTSOURCING SOLUTIONS INC.
By: /s/ Tyler T. Zachem
-------------------------------------
Name: Tyler T. Zachem
Title: Vice President
CFC SERVICES CORP.
By: /s/ Tyler T. Zachem
-------------------------------------
Name: Tyler T. Zachem
Title: Vice President
A.M. MILLER & ASSOCIATES, INC.
By: /s/ Tyler T. Zachem
-------------------------------------
Name: Tyler T. Zachem
Title: Assistant Secretary
THE CONTINENTAL ALLIANCE, INC.
By: /s/ Tyler T. Zachem
-------------------------------------
Name: Tyler T. Zachem
Title: Vice President
ALASKA FINANCIAL SERVICES, INC.
By: /s/ Tyler T. Zachem
-------------------------------------
Name: Tyler T. Zachem
Title: Vice President
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SOUTHWEST CREDIT SERVICES, INC.
By: /s/ Tyler T. Zachem
-------------------------------------
Name: Tyler T. Zachem
Title: Vice President
ACCOUNT PORTFOLIOS, INC.
By: /s/ Tyler T. Zachem
-------------------------------------
Name: Tyler T. Zachem
Title: Assistant Secretary
ACCOUNT PORTFOLIOS G.P., INC.
By: /s/ Tyler T. Zachem
-------------------------------------
Name: Tyler T. Zachem
Title: Assistant Secretary
ACCOUNT PORTFOLIOS, L.P.
By: /s/ Tyler T. Zachem
-------------------------------------
Name: Tyler T. Zachem
Title: Assistant Secretary
PERIMETER CREDIT, L.P.
By: /s/ Tyler T. Zachem
-------------------------------------
Name: Tyler T. Zachem
Title: Assistant Secretary
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GULF STATE CREDIT, L.P.
By: /s/ Tyler T. Zachem
-------------------------------------
Name: Tyler T. Zachem
Title: Assistant Secretary
PAYCO AMERICAN CORPORATION
By: /s/ Tyler T. Zachem
-------------------------------------
Name: Tyler T. Zachem
Title: Assistant Secretary
PAYCO-GENERAL AMERICAN CREDITS, INC.
By: /s/ Tyler T. Zachem
-------------------------------------
Name: Tyler T. Zachem
Title: Assistant Secretary
NATIONAL ACCOUNT SYSTEMS, INC.
By: /s/ Tyler T. Zachem
-------------------------------------
Name: Tyler T. Zachem
Title: Assistant Secretary
UNIVERSITY ACCOUNTING SERVICE, INC.
By: /s/ Tyler T. Zachem
-------------------------------------
Name: Tyler T. Zachem
Title: Assistant Secretary
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ASSET RECOVERY & MANAGEMENT CORP.
By: /s/ Tyler T. Zachem
-------------------------------------
Name: Tyler T. Zachem
Title: Assistant Secretary
INDIANA MUTUAL CREDIT ASSOCIATION, INC.
By: /s/ Tyler T. Zachem
-------------------------------------
Name: Tyler T. Zachem
Title: Assistant Secretary
FURST AND FURST, INC.
By: /s/ Tyler T. Zachem
-------------------------------------
Name: Tyler T. Zachem
Title: Assistant Secretary
JENNIFER LOOMIS & ASSOCIATES, INC.
By: /s/ Tyler T. Zachem
-------------------------------------
Name: Tyler T. Zachem
Title: Assistant Secretary
FM SERVICES CORPORATION
By: /s/ Tyler T. Zachem
-------------------------------------
Name: Tyler T. Zachem
Title: Assistant Secretary
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QUALINK, INC.
By: /s/ Tyler T. Zachem
-------------------------------------
Name: Tyler T. Zachem
Title: Assistant Secretary
PROFESSIONAL RECOVERIES INC.
By: /s/ Tyler T. Zachem
-------------------------------------
Name: Tyler T. Zachem
Title: Assistant Secretary
PAYCO AMERICAN INTERNATIONAL CORP.
By: /s/ Tyler T. Zachem
-------------------------------------
Name: Tyler T. Zachem
Title: Assistant Secretary
WILMINGTON TRUST CO.
By: /s/ Donald G. MacKelcan
-------------------------------------
Name: Donald G. MacKelcan
Title: Assistant Vice President
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================================================================================
EXHIBIT A-1
(Face of Note)
11% Senior Subordinated Notes due 2006
No. $____________
OUTSOURCING SOLUTIONS INC.
promises to pay to _________________________________________________________ or
registered assigns, the principal sum of _______________ Dollars on November 1,
2006.
Interest Payment Dates: May 1 and November 1
Record Dates: April 15 and October 15
Dated: November 6, 1996
OUTSOURCING SOLUTIONS INC.
By_____________________________
Name:
Title:
This is one of the
Notes referred to in the
within-mentioned indenture:
Dated: November 6, 1996
WILMINGTON TRUST COMPANY
as Trustee
By:___________________________
A-1-1
<PAGE>
(Back of Note)
11% Senior Subordinated Notes due 2006
[Unless and until it is exchanged in whole or in part for Notes in
definitive form, this Note may not be transferred except as a whole by the
Depositary to a nominee of the Depositary or by a nominee of the Depositary to
the Depositary or another nominee of the Depositary or by the Depositary or any
such nominee to a successor Depositary or a nominee of such successor
Depositary. Unless this certificate is presented by an authorized representative
of The Depository Trust Company (55 Water Street, New York, New York) ("DTC") to
the issuer or its agent for registration of transfer, exchange or payment, and
any certificate issued is registered in the name of Cede & Co. or such other
name as may be requested by an authorized representative of DTC (and any payment
is made to Cede & Co. or such other entity as may be requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.](1)
THE NOTES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") AND
(A) MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT
(1) BY THE INITIAL INVESTOR (a) TO A PERSON WHOM THE SELLER REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE
144A UNDER THE SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR
THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144A, (b) IN AN OFFSHORE TRANSACTION
COMPLYING WITH RULE 903 OR RULE 904 OF REGULATION S UNDER THE
SECURITIES ACT, (c) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), (d)
TO THE COMPANY OR (e) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT AND (2) BY SUBSEQUENT INVESTORS AS SET FORTH
IN (1) ABOVE AND, IN ADDITION, TO AN INSTITUTIONAL ACCREDITED INVESTOR
IN A TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT, AND, IN EACH CASE, IN ACCORDANCE WITH ALL APPLICABLE
SECURITIES LAWS OF THE STATES OF THE UNITED STATES AND (B) THE HOLDER
WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER
FROM IT OF THE NOTES EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET
FORTH IN (A) ABOVE. NO REPRESENTATION CAN BE MADE AS TO THE
AVAILABILITY OF THE EXEMPTION PROVIDED BY RULE 144 FOR RESALES OF THE
NOTES.
- ----------
(1) This paragraph should be included only if the Note is issued in global form.
A-1-3
<PAGE>
Capitalized terms used herein shall have the meanings assigned to them
in the Indenture referred to below unless otherwise indicated.
A-1-4
<PAGE>
1. INTEREST. Outsourcing Solutions Inc., a Delaware corporation (the
"Company"), promises to pay interest on the principal amount of this Note at 11%
per annum from November 6, 1996 until November 1, 2006 and shall pay the
Liquidated Damages, if any, payable pursuant to Section 5 of the Registration
Rights Agreement referred to below. The Company shall pay interest and
Liquidated Damages, if any, semi-annually in arrears on May 1 and November 1 of
each year, or if any such day is not a Business Day, on the next succeeding
Business Day (each an "Interest Payment Date"). Interest on the Notes will
accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from the date of issuance; provided that if there is no
existing Default in the payment of interest, and if this Note is authenticated
between a record date referred to on the face hereof and the next succeeding
Interest Payment Date, interest shall accrue from such next succeeding Interest
Payment Date; provided, further, that the first Interest Payment Date shall be
May 1, 1997. The Company shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law) on overdue principal and premium, if
any, from time to time on demand at a rate equal to 1% plus the per annum rate
on the Notes then in effect; it shall pay interest (including post-petition
interest in any proceeding under any Bankruptcy Law) on overdue installments of
interest and Liquidated Damages, if any, (without regard to any applicable grace
periods) from time to time on demand at the same rate to the extent lawful.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months.
2. METHOD OF PAYMENT. The Company shall make payments in respect of
the Notes represented by the Global Notes (including principal, premium,
interest and Liquidated Damages, if any) by wire transfer of immediately
available funds to the accounts specified by the Global Note custodian. With
respect to Notes issued in definitive form, the Company shall make all payments
of principal, premium, interest and Liquidated Damages, if any, by mailing a
check to each such Holder's registered address, provided that all payments with
respect to Notes having an aggregate principal amount of $100,000 or more, the
Holders of which have given wire transfer instructions to the Company at least
ten business days prior to the applicable payment date, will be required to be
made by wire transfer of immediately available funds to the accounts specified
by the Holders thereof. Except for trades involving only Euroclear or CEDEL
participants, the Notes represented by the Global Notes are expected to be
eligible to trade in DTC's Same-Day Funds Settlement System, and any permitted
secondary market trading activity in such Notes will, therefore, be required by
DTC to be settled in immediately available funds. The Company expects that
secondary trading in the Definitive Notes also will be settled in immediately
available funds.
3. PAYING AGENT AND REGISTRAR. Initially, Wilmington Trust Company,
the Trustee under the Indenture, will act as Paying Agent and Registrar. The
Notes may be presented for registration of transfer and exchange at the offices
of the Registrar. The Company may change any Paying Agent or Registrar without
notice to any Holder. The Company or any of the Guarantors may act in any such
capacity.
4. INDENTURE. The Company issued the Notes under an Indenture dated as
of November 6, 1996 ("Indenture") among the Company, the Guarantors and the
Trustee. The terms of the Notes include those stated in the Indenture and those
made part of the Indenture by reference to the Trust Indenture Act of 1939, as
amended (15 U.S. Code ss.ss. 77aaa-77bbbb). The Notes are subject to all such
terms, and Holders are referred to the Indenture and such Act for a statement of
such terms. The Notes are obligations of the Company limited to $100,000,000 in
aggregate principal amount.
A-1-5
<PAGE>
5. OPTIONAL REDEMPTION.
(a) Except as described below, the Notes are not redeemable, in whole
or in part, at the Company's option prior to November 1, 2001. From and after
November 1, 2001, the Company may redeem all or any portion of the Notes at a
redemption price (expressed as a percentage of the principal amount thereof), as
set forth in the immediately succeeding paragraph, plus accrued and unpaid
interest and Liquidated Damages, if any, to the redemption date.
The redemption price as a percentage of the principal amount shall be
as follows, if the Notes are redeemed during the twelve-month period commencing
on November 1 of each of the years indicated below, plus, in each case, accrued
interest and Liquidated Damages, if any, thereon to the redemption date:
Percentage of
Year Principal Amount
---- ----------------
2001................................................ 105.500%
2002................................................ 103.667%
2003................................................ 101.833%
2004 and thereafter ................................ 100.000%
(b) Prior to November 1, 1999, the Company may, at its option, on any
one or more occasions, redeem up to 35% of the aggregate principal amount of
Notes originally offered in the Offering at a redemption price equal to 111% of
the principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages, if any, thereon to the redemption date, with the net proceeds of a
public or private sale of common stock of the Company; provided that at least
65% of the original aggregate principal amount of Notes remains outstanding
immediately after the occurrence of each such redemption; and provided, further,
that any such redemption shall occur within 60 days of the date of the closing
of the corresponding sale of common stock of the Company.
6. MANDATORY REDEMPTION.
Except as set forth in paragraph 7 below, the Company shall not be
required to make mandatory redemption payments with respect to the Notes.
7. REPURCHASE AT OPTION OF HOLDER.
(a) If there is a Change of Control, the Company shall be required to
make an offer (a "Change of Control Offer") to repurchase all or any part (equal
to $1,000 or an integral multiple thereof) of each Holder's Notes at a purchase
price equal to 101% of the aggregate principal amount thereof plus accrued and
unpaid interest and Liquidated Damages thereon, if any, to the date of purchase,
which date shall be no fewer than 30 and no more than 60 days from the date such
notice is mailed (the "Change of Control Payment"). Within 30 days following any
Change of Control, the Company shall mail a notice to each Holder setting forth
the procedures governing the Change of Control Offer as required by the
Indenture.
(b) As soon as practical, but in no event later than 10 Business Days
after any date that the aggregate amount of Excess Proceeds exceeds $10.0
million, the Company shall commence an Asset Sale Offer to purchase the maximum
principal amount of Notes that may be
A-1-6
<PAGE>
purchased out of the Excess Proceeds, at an Asset Sale offer price in cash in an
amount equal to 100% of the principal amount thereof, plus accrued and unpaid
interest and Liquidated Damages thereon, if any, to the date fixed for the
closing of such offer. To the extent that the aggregate amount of Notes tendered
pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Company
may use any remaining Excess Proceeds for any purpose not prohibited by the
Indenture. If the aggregate principal amount of Notes surrendered by Holders
thereof exceeds the amount of Excess Proceeds, the Trustee shall select the
Notes to be purchased on a pro rata basis. Holders of Notes that are the subject
of an offer to purchase will receive an Asset Sale Offer from the Company prior
to any related purchase date and may elect to have such Notes purchased by
completing the form entitled "Option of Holder to Elect Purchase" on the reverse
of the Notes. Upon completion of such Asset Sale Offer, the amount of Excess
Proceeds will be reset to zero.
8. NOTICE OF REDEMPTION. Notice of redemption will be mailed at least
30 days but not more than 60 days before the redemption date to each Holder
whose Notes are to be redeemed at its registered address. Notes may be redeemed
in part but only in whole multiples of $1,000. On and after the redemption date
interest ceases to accrue on Notes or portions thereof called for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form
without coupons in minimum denominations of $1,000 and integral multiples of
$1,000 in excess thereof. The transfer of Notes may be registered and Notes may
be exchanged as provided in the Indenture. The Registrar and the Trustee may
require a Holder, among other things, to furnish appropriate endorsements and
transfer documents and the Company may require a Holder to pay any taxes and
fees required by law or permitted by the Indenture. The Company need not
exchange or register the transfer of any Note or portion of a Note selected for
redemption, except for the unredeemed portion of any Note being redeemed in
part. Also, it need not exchange or register the transfer of any Notes for a
period of 15 days before a selection of Notes to be redeemed or during the
period between a record date and the corresponding Interest Payment Date.
10. PERSONS DEEMED OWNERS. The registered Holder of a Note may be
treated as its owner for all purposes.
11. AMENDMENT, SUPPLEMENTED AND WAIVER. Subject to certain exceptions,
the Indenture or the Notes may be amended or supplemented with the consent of
the Holders of at least a majority in principal amount of the then outstanding
Notes, and any existing default or compliance with any provision of the
Indenture or the Notes may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Notes. Without the consent
of any Holder of a Note, the Indenture or the Notes may be amended or
supplemented to cure any ambiguity, defect or inconsistency, to provide for
uncertificated Notes in addition to or in place of Definitive Notes, to provide
for the assumption of the Company's and Guarantors' obligations to Holders of
the Notes in case of a merger or consolidation, to make any change that would
provide any additional rights or benefits to the Holders of the Notes or that
does not adversely affect the legal rights under the Indenture of any such
Holder, or to comply with the requirements of the SEC in order to effect or
maintain the qualification of the Indenture under the Trust Indenture Act.
12. DEFAULTS AND REMEDIES. Each of the following constitutes an Event
of Default: (i) default for 30 days in the payment when due of interest or
Liquidated Damages, if any, on the Notes (whether or not prohibited by Article
10 of the Indenture); (ii) default in payment when due of the principal of or
premium, if any, on the Notes (whether or not prohibited by Article 10 of
A-1-7
<PAGE>
the Indenture); (iii) failure by the Company for 30 days after notice from the
Trustee or the Holders of at least 25% in aggregate principal amount of the then
outstanding Notes to comply with the provisions described under Sections 4.07,
4.09, 4.15 or Article 5 of the Indenture; (iv) failure by the Company for 60
days after notice from the Trustee or the Holders of at least 25% in aggregate
principal amount of the then outstanding Notes to comply with any of its other
agreements in the Indenture or the Notes; (v) default under any mortgage,
indenture or instrument under which there may be issued or by which there may be
secured or evidenced any Indebtedness for money borrowed by the Company or any
of its Restricted Subsidiaries (or the payment of which is guaranteed by the
Company or any of its Restricted Subsidiaries) whether such Indebtedness or
guarantee now exists, or is created after the date of the Indenture, which
default results in the acceleration of such Indebtedness prior to its express
maturity and, in each case, the principal amount of any such Indebtedness,
together with the principal amount of any other such Indebtedness the maturity
of which has been so accelerated, aggregates $10.0 million or more; (vi) failure
by the Company or any of its Restricted Subsidiaries to pay final judgments
aggregating in excess of $10.0 million, which judgments are not paid, discharged
or stayed for a period of 60 days; (vii) except as permitted by the Indenture,
any Significant Subsidiary Guarantee shall be held in any judicial proceeding to
be unenforceable or invalid or shall cease for any reason to be in full force
and effect (except by its terms) or any Guarantor, or any Person acting on
behalf of any Guarantor, shall deny or disaffirm its obligations under its
Significant Subsidiary Guarantee; and (viii) certain events of bankruptcy or
insolvency with respect to the Company or any of its Significant Subsidiaries;
and (ix) failure by the Company to file Articles of Merger in the State of
Wisconsin and a Certificate of Merger in the State of Delaware in connection
with the Payco Acquisition by 5:00 p.m. Eastern Time on the Business Day
immediately following the date of the Indenture.
If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding Notes may
declare all the Notes to be due and payable immediately; provided, however, that
so long as the New Bank Credit Facility shall be in full force and effect, if an
Event of Default shall have occurred and be continuing (other than an Event of
Default under clauses (viii) or (ix) of Section 6.01 of the Indenture with
respect to the Company), any such acceleration shall not be effective until the
earlier to occur of (x) five days following the delivery of a notice of such
acceleration to the agent or other representative of the lenders under the New
Bank Credit Facility and (y) acceleration of any Indebtedness under the New Bank
Credit Facility. Notwithstanding the foregoing, in the case of an Event of
Default arising from certain events of bankruptcy or insolvency described in
clauses (viii) and (ix) of Section 6.01 of the Indenture, with respect to the
Company, any Significant Subsidiary or any group of Subsidiaries that, taken
together, would constitute a Significant Subsidiary, all outstanding Notes shall
ipso facto become due and payable without further action or notice on the part
of the Trustee or any Holder.
In the case of any Event of Default occurring prior to November 1,
2001, by reason of any willful action (or inaction) taken (or not taken) by or
on behalf of the Company with the intention of avoiding payment of the premium
that the Company would have had to pay if the Company then had elected to redeem
the Notes pursuant to Section 3.07 of the Indenture, an equivalent premium shall
also become and be immediately due and payable to the extent permitted by law
upon the acceleration of the Notes.
At any time after a declaration of acceleration with respect to the
Notes, the Holders of a majority in aggregate principal amount of the Notes may
rescind and cancel such declaration and its consequences (i) if the rescission
would not conflict with any judgment or decree, (ii) if all existing Events of
Default have been cured or waived except nonpayment of principal, interest or
Liquidated Damages, if any, that have become due solely because of the
acceleration, (iii) if, to the extent the payment of such interest is lawful,
interest on overdue installments of interest and Liquidated Damages, if any, and
overdue principal at a rate equal to 1% per annum in excess of the rate borne
A-1-8
<PAGE>
by the Notes, which has become due otherwise than by such declaration of
acceleration, has been paid, (iv) if the Company has paid the Trustee its
reasonable compensation and reimbursed the Trustee for its expenses,
disbursements and advances and (v) if, in the event of the cure or waiver of an
Event of Default of the type described in clauses (viii) or (ix) of Section 6.01
of the Indenture, the Trustee shall have received an Officer's Certificate and
an Opinion of Counsel that such Event of Default has been cured or waived. No
such rescission shall affect any subsequent Default or impair any right
consequent thereto.
Subject to the second paragraph of Section 6.02 of the Indenture,
Holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the Holders of all of the
Notes waive any existing Default or Event of Default and its consequences under
the Indenture, except a continuing Default or Event of Default in the payment of
interest on, or the principal of, the Notes or a default with respect to any
covenant or provision which cannot be modified or amended without the consent of
the Holder of each outstanding Note affected.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required, upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
13. SUBORDINATION. Each Holder by accepting a Note agrees that the
payment of principal of, premium and Liquidated Damages, if any, and interest
on, and all other Obligations in respect of, each Note is subordinated in right
of payment, to the extent and in the manner provided in Article 10 of the
Indenture, to the prior payment in full in cash or Cash Equivalents of all
Senior Debt (whether outstanding on the date of the Indenture or thereafter
created, incurred, assumed or guaranteed), and that the subordination is for the
benefit of the holders of the Senior Debt.
14. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Company or its Affiliates, and may otherwise deal with the
Company or its Affiliates, as if it were not the Trustee.
15. NO RECOURSE AGAINST OTHERS. A director, officer, employee,
incorporator or stockholder, of the Company or the Guarantors, as such, shall
not have any liability for any obligations of the Company or the Guarantors
under the Notes, the Subsidiary Guarantees or the Indenture or for any claim
based on, in respect of, or by reason of, such obligations or their creation.
Each Holder by accepting a Note waives and releases all such liability. The
waiver and release are part of the consideration for the issuance of the Notes.
16. AUTHENTICATION. This Note shall not be valid until authenticated
by the manual signature of the Trustee or an authenticating agent.
17. ABBREVIATIONS. Customary abbreviations may be used in the name of
a Holder or an assignee, such as: TEN COM (= tenants in common), TENENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
18. ADDITIONAL RIGHTS OF HOLDERS OF TRANSFER RESTRICTED SECURITIES. In
addition to the rights provided to Holders of Notes under the Indenture, Holders
of Transfer Restricted Securities shall have all the rights set forth in the
Registration Rights Agreement,
A-1-9
<PAGE>
dated as of November 6, 1996, among the Company, the Guarantors and the parties
named on the signature pages thereof.
19. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Company shall furnish to any Holder upon written request and
without charge a copy of the Indenture and/or the Registration Rights Agreement.
Requests may be made to:
Outsourcing Solutions Inc.
300 Galleria Parkway
Suite 690
Atlanta, Georgia 30339
Attention: Chief Financial Officer
A-1-10
<PAGE>
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and
transfer this Note to
________________________________________________________________________________
(Insert assignee's soc. sec. or tax I.D. no.)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint_________________________________________________________
agent to transfer this Note on the books of the Company. The agent may
substitute another to act for him.
Date:________________________ Your Signature:_____________________________
(Sign exactly as your name appears on the face
of this Note)
Signature Guarantee:
A-1-11
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.10 or 4.15 of the Indenture, check the box below:
|_| Section 4.10 |_| Section 4.15
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.10 or Section 4.15 of the Indenture, state the
amount you elect to have purchased: $
Date:________________________ Your Signature:______________________________
(Sign exactly as your name
appears on the Note)
Tax Identification No.:________________
Signature Guarantee:
A-1-12
<PAGE>
SCHEDULE OF EXCHANGES OF NOTES(2)
The following exchanges of a part of this Global Note for other Notes have
been made:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Date of Exchange Amount of decrease in Amount of increase in Principal Amount of this Signature of authorized
Principal Amount of this Principal Amount of this Global Note following officer of Trustee or
Global Note Global Note such decrease (or Note Custodian
increase)
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------
(2) This should be included only if the Note is issued in global form.
A-1-13
<PAGE>
================================================================================
EXHIBIT A-2
(Face of Regulation S Temporary Global Note)
11% Senior Subordinated Notes due 2006
No. $_____________
OUTSOURCING SOLUTIONS INC.
promises to pay to _________________________________________________________ or
registered assigns, the principal sum of _______________ Dollars on November 1,
2006.
Interest Payment Dates: May 1 and November 1
Record Dates: April 15 and October 15
Dated: November 6, 1996
OUTSOURCING SOLUTIONS INC.
By_____________________________
Name:
Title:
This is one of the
Notes referred to in the
within-mentioned indenture:
Dated: November 6, 1996
WILMINGTON TRUST COMPANY
as Trustee
By:__________________________
================================================================================
A-2-1
<PAGE>
(Back of Regulation S Temporary Global Note)
11% Senior Subordinated Note due 2006
Unless and until it is exchanged in whole or in part for Notes in
definitive form, this Note may not be transferred except as a whole by the
Depositary to a nominee of the Depositary or by a nominee of the Depositary to
the Depositary or another nominee of the Depositary or by the Depositary or any
such nominee to a successor Depositary or a nominee of such successor
Depositary. Unless this certificate is presented by an authorized representative
of The Depository Trust Company (55 Water Street, New York, New York) ("DTC") to
the issuer or its agent for registration of transfer, exchange or payment, and
any certificate issued is registered in the name of Cede & Co. or such other
name as may be requested by an authorized representative of DTC (and any payment
is made to Cede & Co. or such other entity as may be requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.
THE NOTES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") AND
(A) MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT
(1) BY THE INITIAL INVESTOR (a) TO A PERSON WHOM THE SELLER REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE
144A UNDER THE SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR
THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144A, (b) IN AN OFFSHORE TRANSACTION
COMPLYING WITH RULE 903 OR RULE 904 OF REGULATION S UNDER THE
SECURITIES ACT, (c) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), (d)
TO THE COMPANY OR (e) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT AND (2) BY SUBSEQUENT INVESTORS AS SET FORTH
IN (1) ABOVE AND, IN ADDITION, TO AN INSTITUTIONAL ACCREDITED INVESTOR
IN A TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT, AND, IN EACH CASE, IN ACCORDANCE WITH ALL APPLICABLE
SECURITIES LAWS OF THE STATES OF THE UNITED STATES AND (B) THE HOLDER
WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER
FROM IT OF THE NOTES EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET
FORTH IN (A) ABOVE. NO REPRESENTATION CAN BE MADE AS TO THE
AVAILABILITY OF THE EXEMPTION PROVIDED BY RULE 144 FOR RESALES OF THE
NOTES.
THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND
THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR DEFINITIVE
NOTES, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN).
A-2-2
<PAGE>
NEITHER THE HOLDER NOR THE BENEFICIAL OWNERS OF THIS REGULATION S
TEMPORARY GLOBAL NOTE SHALL BE ENTITLED TO RECEIVE PAYMENT OF INTEREST
HEREON.
Subject to the provisions hereof, Outsourcing Solutions Inc., a
Delaware corporation, (the "Company"), promises to pay to
________________________ the principal sum of ________________________ UNITED
STATES DOLLARS (U.S. $________________) on November 1, 2006, and to pay interest
on the principal amount of this Note beginning November 6, 1996 at the rate of
11% per annum. Upon exchange of this Regulation S Temporary Global Note for a
Regulation S Permanent Global Note as set forth below, interest shall be payable
in cash semi-annually in arrears on May 1 and November 1, or if any such day is
not a Business Day, on the next succeeding Business Day (each an "Interest
Payment Date"); provided that the first Interest Payment Date shall be May 1,
1997. Interest on the Notes will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from the date of
original issuance. Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months.
This Regulation S Temporary Global Note is issued in respect of an
issue of 11% Senior Subordinated Notes due 2006 (the "Notes") of the Company,
limited to the aggregate principal amount of U.S. $100,000,000 issued pursuant
to an Indenture (the "Indenture") dated as of November 6, 1996, among the
Company, the Guarantors and Wilmington Trust Company, as trustee (the
"Trustee"), and is governed by the terms and conditions of the Indenture
governing the Notes, which terms and conditions are incorporated herein by
reference and, except as otherwise provided herein, shall be binding on the
Company, the Guarantors and the Holder hereof as if fully set forth herein.
Unless the context otherwise requires, the terms used herein shall have the
meanings specified in the Indenture.
Until this Regulation S Temporary Global Note is exchanged for a
Regulation S Permanent Global Note, the Holder hereof shall not be entitled to
receive payments of interest hereon; until so exchanged in full, this Regulation
S Temporary Global Note shall in all other respects be entitled to the same
benefits as other Notes under the Indenture.
This Regulation S Temporary Global Note is exchangeable in whole or in
part for one or more Regulation S Permanent Global Notes or U.S. Global Notes
only (i) on or after the termination of the 40-day restricted period (as defined
in Regulation S) and (ii) upon presentation of certificates (accompanied by an
Opinion of Counsel, if applicable) required by Article 2 of the Indenture. Upon
exchange of this Regulation S Temporary Global Note for one or more Regulation S
Permanent Global Notes or U.S. Global Notes, the Trustee shall cancel this
Regulation S Temporary Global Note.
This Regulation S Temporary Global Note shall not become valid or
obligatory until the certificate of authentication hereon shall have been duly
manually signed by the Trustee in accordance with the Indenture. This Regulation
S Temporary Global Note shall be governed by and construed in accordance with
the laws of the State of the New York. All references to "$," "Dollars,"
"dollars" or "U.S. $" are to such coin or currency of the United States of
America as at the time shall be legal tender for the payment of public and
private debts therein.
A-2-3
<PAGE>
SCHEDULE OF EXCHANGES OF NOTES
The following exchanges of a part of this Regulation S Temporary
Global Note for other Global Notes have been made:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Date of Exchange Amount of decrease in Amount of increase in Principal Amount of this Signature of authorized
Principal Amount of this Principal Amount of this Global Note following officer of Trustee or
Global Note Global Note such decrease (or Note Custodian
increase)
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
A-2-4
<PAGE>
EXHIBIT B-1
FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER
FROM U.S. GLOBAL NOTE TO REGULATION S GLOBAL NOTE
(Pursuant to Section 2.06(a)(i) of the Indenture)
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
Attention: ______________
Re: 11% Senior Subordinated Notes due 2006 of Outsourcing Solutions Inc.
Reference is hereby made to the Indenture, dated as of November 6,
1996 (the "Indenture"), among Outsourcing Solutions Inc., as issuer (the
"Company"), the Guarantors and Wilmington Trust Company, as trustee. Capitalized
terms used but not defined herein shall have the meanings given to them in the
Indenture.
This letter relates to $__________________ principal amount of Notes
which are evidenced by one or more (check one) |_| Rule 144A Global Notes (CUSIP
No. ________) or |_| Accredited Institutional Investor Global Notes (CUSIP No.
___________) and held with the Depositary in the name of ____________________
(the "Transferor"). The Transferor has requested a transfer of such beneficial
interest in the Notes to a Person (the "Transferee") who will take delivery
thereof in the form of an equal principal amount of Notes evidenced by one or
more Regulation S Global Notes (CUSIP No. ______________), which amount,
immediately after such transfer, is to be held with the Depositary through
Euroclear or Cedel Bank or both (Common Code _____________).
In connection with such request and in respect of such Notes, the
Transferor hereby certifies that such transfer has been effected in compliance
with the transfer restrictions applicable to the Global Notes and pursuant to
and in accordance with Rule 903 or Rule 904 under the United States Securities
Act of 1933, as amended (the "Securities Act"), and accordingly the Transferor
hereby further certifies that:
(1) The offer of the Notes was not made to a person in the United States;
(2) either:
(a) at the time the buy order was originated, the transferee was
outside the United States or the Transferor and any person acting
on its behalf reasonably believed and believes that the
transferee was outside the United States; or
(b) the transaction was executed in, on or through the facilities of
a designated offshore securities market and neither the
Transferor nor any person acting on its behalf knows that the
transaction was prearranged with a buyer in the United States;
(3) no directed selling efforts have been made in contravention of the
requirements of Rule 904(b) of Regulation S;
B-1-1
<PAGE>
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act; and
(5) upon completion of the transaction, the beneficial interest being
transferred as described above is to be held with the Depositary
through Euroclear or Cedel Bank or both (Common Code ______________).
Upon giving effect to this request to exchange a beneficial interest
in such Rule 144A Global Note or Accredited Institutional Investor Global Note
for a beneficial interest in a Regulation S Global Note, the resulting
beneficial interest shall be subject to the restrictions on transfer applicable
to Regulation S Global Notes pursuant to the Indenture and the Securities Act
and, if such transfer occurs prior to the end of the 40-day restricted period
associated with the initial offering of Notes, the additional restrictions
applicable to transfers of interest in the Regulation S Temporary Global Note.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company and the Guarantors and Goldman, Sachs &
Co. and Chase Securities Inc. (collectively, the "Initial Purchasers"), the
Initial Purchasers of such Notes being transferred and each of you are entitled
to rely upon this letter and are irrevocably authorized to produce this letter
or a copy hereof to any interested party in any administrative or legal
proceedings with respect to the materials covered hereby. Terms used in this
certificate and not otherwise defined in the Indenture have the meanings set
forth in Regulation S under the Securities Act.
_________________________________________
[Insert Name of Transferor]
By:______________________________________
Name:
Title:
Dated:________________, __
cc: Outsourcing Solutions Inc.
Goldman, Sachs & Co.
Chase Securities Inc.
B-1-2
<PAGE>
EXHIBIT B-2
FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER
FROM REGULATION S GLOBAL NOTE TO RULE 144A GLOBAL NOTE OR
ACCREDITED INSTITUTIONAL INVESTOR GLOBAL NOTE
(Pursuant to Section 2.06(a)(ii) of the Indenture)
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
Attention: ______________
Re: 11% Senior Subordinated Notes due 2006 of Outsourcing Solutions Inc.
Reference is hereby made to the Indenture, dated as of November 6,
1996 (the "Indenture), among Outsourcing Solutions Inc., as issuer (the
"Company"), the Guarantors and Wilmington Trust Company, as trustee. Capitalized
terms used but not defined herein shall have the meanings given to them in the
Indenture.
This letter relates to $__________ principal amount of Notes which are
evidenced by one or more Regulation S Global Notes (CUSIP No. ___________) and
held with the Depositary through Euroclear or Cedel Bank or both (Common Code
_______________) in the name of _________________ (the "Transferor"). The
Transferor has requested a transfer of such beneficial interest in the Notes to
a Person (the "Transferee") who will take delivery thereof in the form of an
equal principal amount of Notes evidenced by one or more (check one) |_| Rule
144A Global Notes (CUSIP No. ___________) or |_| Accredited Institutional
Investor Global Note (CUSIP No. ___________) to be held with the Depositary.
In connection with such request and in respect of such Notes, the
Transferor hereby certifies that:
[CHECK ONE]
|_| such transfer is being effected pursuant to and in accordance with
Rule 144A under the United States Securities Act of 1933, as amended
(the "Securities Act"), and, accordingly, the Transferor hereby
further certifies that the Notes are being transferred to a Person
that the Transferor reasonably believes is purchasing the Notes for
its own account, or for one or more accounts with respect to which
such Person exercises sole investment discretion, and such Person and
each such account is a "qualified institutional buyer" within the
meaning of Rule 144A in a transaction meeting the requirements of Rule
144A;
or
|_| such transfer is being effected pursuant to and in accordance with
Rule 144 under the Securities Act;
B-2-1
<PAGE>
or
|_| such transfer is being effected pursuant to an effective registration
statement under the Securities Act;
or
|_| such transfer is being effected pursuant to an exemption from the
registration requirements of the Securities Act other than Rule 144A
or Rule 144, and the Transferor hereby further certifies that the
Notes are being transferred in compliance with the transfer
restrictions applicable to the Global Notes and in accordance with the
requirements of the exemption claimed, which certification is
supported by an Opinion of Counsel, provided by the Transferor or the
Transferee (a copy of which the Transferor has attached to this
certification) in form reasonably acceptable to the Company and to the
Registrar, to the effect that such transfer is in compliance with the
Securities Act;
and such Notes are being transferred in compliance with any applicable
blue sky securities laws of any state of the United States.
Upon giving effect to this request to exchange a beneficial interest
in Regulation S Global Notes for a beneficial interest in Rule 144A Global Notes
or Accredited Institutional Investor Global Notes, as the case may be, the
resulting beneficial interest shall be subject to the restrictions on transfer
applicable to Rule 144A Global Notes or Accredited Institutional Investor Global
Notes, as the case may be, pursuant to the Indenture and the Securities Act.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company and the Guarantors and Goldman, Sachs &
Co. and Chase Securities Inc. (collectively, the "Initial Purchasers"), the
Initial Purchasers of such Notes being transferred and each of you are entitled
to rely upon this letter and are irrevocably authorized to produce this letter
or a copy hereof to any interested party in any administrative or legal
proceedings with respect to the materials covered hereby. Terms used in this
certificate and not otherwise defined in the Indenture have the meanings set
forth in Regulation S under the Securities Act.
________________________________________
[Insert Name of Transferor]
By:_____________________________________
Name:
Title:
Dated: ________________, __
cc: Outsourcing Solutions Inc.
Goldman, Sachs & Co.
Chase Securities Inc.
B-2-2
<PAGE>
EXHIBIT B-3
FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER
FROM RULE 144A GLOBAL NOTE OR ACCREDITED INSTITUTIONAL INVESTOR
GLOBAL NOTE TO ACCREDITED INSTITUTIONAL INVESTOR GLOBAL NOTE
OR RULE 144A GLOBAL NOTE, RESPECTIVELY
(Pursuant to Section 2.06(a)(iii) of the Indenture)
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
Attention: ______________
Re: 11% Senior Subordinated Notes due 2006 of Outsourcing Solutions Inc.
Reference is hereby made to the Indenture, dated as of November 6,
1996 (the "Indenture"), among Outsourcing Solutions Inc., as issuer (the
"Company"), the Guarantors and Wilmington Trust Company, as trustee. Capitalized
terms used but not defined herein shall have the meanings given to them in the
Indenture.
This letter relates to $__________ principal amount of Notes which are
evidenced by one or more (check one) |_| Rule 144A Global Notes (CUSIP No.
____________) or |_| Accredited Institutional Investor Global Notes (CUSIP No.
____________) and held with the Depositary in the name of ____________ (the
"Transferor"). The Transferor has requested a transfer of such beneficial
interest in such Notes to a Person (the "Transferee") who will take delivery
thereof in the form of an equal principal amount of Notes evidenced by one or
more (check one) |_| Rule 144A Global Notes (CUSIP No. ____________), or |_|
Accredited Institutional Investor Global Notes (CUSIP No. ____________), to be
held with the Depositary.
In connection with such request and in respect of such Notes, the
Transferor hereby certifies that:
[CHECK ONE]
|_| such transfer is being effected pursuant to and in accordance with
Rule 144A under the United States Securities Act of 1933, as amended
(the "Securities Act"), and, accordingly, the Transferor hereby
further certifies that the Notes are being transferred to a Person
that the Transferor reasonably believes is purchasing the Notes for
its own account, or for one or more accounts with respect to which
such Person exercises sole investment discretion, and such Person and
each such account is a "qualified institutional buyer" within the
meaning of Rule 144A in a transaction meeting the requirements of Rule
144A;
or
|_| such transfer is being effected pursuant to and in accordance with
Rule 144 under the Securities Act;
B-3-1
<PAGE>
or
|_| such transfer is being effected pursuant to an effective registration
statement under the Securities Act;
or
|_| such transfer is being effected pursuant to an exemption from the
registration requirements of the Securities Act other than Rule 144A
or Rule 144, and the Transferor hereby further certifies that the
Notes are being transferred in compliance with the transfer
restrictions applicable to the Global Notes and in accordance with the
requirements of the exemption claimed, which certification is
supported by an Opinion of Counsel, provided by the Transferor or the
Transferee (a copy of which the Transferor has attached to this
certification) in form reasonably acceptable to the Company and to the
Registrar, to the effect that such transfer is in compliance with the
Securities Act;
and such Notes are being transferred in compliance with any applicable
blue sky securities laws of any state of the United States.
Upon giving effect to this request to exchange a beneficial interest
in Rule 144A Global Notes or Accredited Institutional Investor Global Notes for
a beneficial interest in Accredited Institutional Investor Global Notes or Rule
144A Global Notes, as the case may be, the resulting beneficial interest shall
be subject to the restrictions on transfer applicable to Rule 144A Global Notes
or Accredited Institutional Investor Global Notes, as the case may be, pursuant
to the Indenture and the Securities Act.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company, the Guarantors and Goldman, Sachs & Co.
and Chase Securities Inc. (collectively, the "Initial Purchasers"), the Initial
Purchasers of such Notes being transferred and each of you are entitled to rely
upon this letter and are irrevocably authorized to produce this letter or a copy
hereof to any interested party in any administrative or legal proceedings with
respect to the materials covered hereby.
_________________________________________
[Insert Name of Transferor]
By:______________________________________
Name:
Title:
Dated:___________________, __
cc: Outsourcing Solutions Inc.
Goldman, Sachs & Co.
Chase Securities Inc.
B-3-2
<PAGE>
EXHIBIT B-4
FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER
OF DEFINITIVE NOTES
(Pursuant to Section 2.06(b) of the Indenture)
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
Attention: ______________
Re: 11% Senior Subordinated Notes due 2006 of Outsourcing Solutions Inc.
Reference is hereby made to the Indenture, dated as of November 6,
1996 (the "Indenture"), among Outsourcing Solutions Inc., as issuer (the
"Company"), the Guarantors and Wilmington Trust Company, as trustee. Capitalized
terms used but not defined herein shall have the meanings given to them in the
Indenture.
This letter relates to $_____________ principal amount of Notes which
are evidenced by one or more Definitive Notes (CUSIP No. __________) and
registered with the Registrar in the name of (the "Transferor"). The Transferor
has requested an exchange or transfer of such Definitive Note(s) in the form of
an equal principal amount of Notes evidenced by one or more Definitive Notes
(CUSIP No. ________), to be delivered to the Transferor or, in the case of a
transfer of such Notes, to such Person as the Transferor instructs the Trustee.
In connection with such request and in respect of the Notes
surrendered to the Trustee herewith for exchange (the "Surrendered Notes"), the
Holder of such Surrendered Notes hereby certifies that:
[CHECK ONE]
|_| the Surrendered Notes are being acquired for the Transferor's own
account, without transfer;
or
|_| the Surrendered Notes are being transferred to the Company;
or
|_| the Surrendered Notes are being transferred pursuant to and in
accordance with Rule 144A under the United States Securities Act of
1933, as amended (the "Securities Act"), and, accordingly, the
Transferor hereby further certifies that the Surrendered Notes are
being transferred to a Person that the Transferor reasonably believes
is purchasing the Surrendered Notes for its own account, or for one or
more accounts with respect to which such Person exercises sole
investment discretion, and such Person and each such
B-4-1
<PAGE>
account is a "qualified institutional buyer," within the meaning of
Rule 144A, in each case in a transaction meeting the requirements of
Rule 144A;
or
|_| the Surrendered Notes are being transferred in a transaction permitted
by Rule 144 under the Securities Act;
or
|_| the Surrendered Notes are being transferred pursuant to an effective
registration statement under the Securities Act;
or
|_| such transfer is being effected pursuant to an exemption from the
registration requirements of the Securities Act other than Rule 144A
or Rule 144, and the Transferor hereby further certifies that the
Notes are being transferred in compliance with the transfer
restrictions applicable to the Global Notes and in accordance with the
requirements of the exemption claimed, which certification is
supported by an Opinion of Counsel, provided by the Transferor or the
transferee (a copy of which the Transferor has attached to this
certification) in form reasonably acceptable to the Company and to the
Registrar, to the effect that such transfer is in compliance with the
Securities Act;
and the Surrendered Notes are being transferred in compliance with any
applicable blue sky securities laws of any state of the United States.
This certificate and the statements contained herein are made for your benefit
and the benefit of the Company, the Guarantors and Goldman, Sachs & Co. and
Chase Securities Inc. (collectively, the "Initial Purchasers"), the Initial
Purchasers of such Notes being transferred and each of you are entitled to rely
upon this letter and are irrevocably authorized to produce this letter or a copy
hereof to any interested party in any administrative or legal proceedings with
respect to the materials covered hereby.
__________________________________________
[Insert Name of Transferor]
By:_______________________________________
Name:
Title:
Dated: ______________, __
cc: Outsourcing Solutions Inc.
Goldman, Sachs & Co.
Chase Securities Inc.
B-4-2
<PAGE>
EXHIBIT B-5
FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER FROM RULE
144A GLOBAL NOTE, ACCREDITED INSTITUTIONAL INVESTOR GLOBAL NOTE OR
REGULATION S PERMANENT GLOBAL NOTE TO DEFINITIVE NOTE
(Pursuant to Section 2.06(c) of the Indenture)
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
Attention: ______________
Re: 11% Senior Subordinated Notes due 2006 of Outsourcing Solutions Inc.
Reference is hereby made to the Indenture, dated as of November 6,
1996 (the "Indenture"), among Outsourcing Solutions Inc., as issuer (the
"Company"), the Guarantors and Wilmington Trust Company, as trustee. Capitalized
terms used but not defined herein shall have the meanings given to them in the
Indenture.
This letter relates to $_______________ principal amount of Notes
which are evidenced by one or more (check one) |_| Rule 144A Global Notes (CUSIP
No. ___________) or |_| Accredited Institutional Investor Global Notes (CUSIP
No. ________) or |_| Regulation S Permanent Global Notes (CUSIP No. __________)
and held with the Depositary through Euroclear or Cedel Bank or both in the name
of __________ (the "Transferor"). The Transferor has requested a transfer of
such beneficial interest in the Notes to a Person (the "Transferee") who will
take delivery thereof in the form of an equal principal amount of Notes
evidenced by one or more Definitive Notes (CUSIP No. ________) to be registered
with the Registrar in the name of ____________.
In connection with such request and in respect of the Notes
surrendered to the Trustee herewith for exchange (the "Surrendered Notes"), the
Holder of such Surrendered Notes hereby certifies that:
[CHECK ONE]
|_| the Surrendered Notes are being transferred to the beneficial owner of
such Notes;
or
|_| the Surrendered Notes are being transferred pursuant to and in
accordance with Rule 144A under the United States Securities Act of
1933, as amended (the "Securities Act"), and, accordingly, the
Transferor hereby further certifies that the Surrendered Notes are
being transferred to a Person that the Transferor reasonably believes
is purchasing the Surrendered Notes for its own account, or for one or
more accounts with respect to which such Person exercises sole
investment discretion, and such Person and each such account is a
"qualified institutional buyer" within the meaning of Rule 144A, in
each case in a transaction meeting the requirements of Rule 144A;
or
B-5-1
<PAGE>
|_| the Surrendered Notes are being transferred in a transaction permitted
by Rule 144 under the Securities Act;
or
|_| the Surrendered Notes are being transferred pursuant to an effective
registration statement under the Securities Act;
or
|_| such transfer is being effected pursuant to an exemption from the
registration requirements of the Securities Act other than Rule 144A
or Rule 144, and the Transferor hereby further certifies that the
Notes are being transferred in compliance with the transfer
restrictions applicable to the Global Notes and in accordance with the
requirements of the exemption claimed, which certification is
supported by an Opinion of Counsel, provided by the Transferor or the
Transferee (a copy of which the Transferor has attached to this
certification) in form reasonably acceptable to the Company and to the
Registrar, to the effect that such transfer is in compliance with the
Securities Act;
and the Surrendered Notes are being transferred in compliance with any
applicable blue sky securities laws of any state of the United States.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company, the Guarantors and Goldman, Sachs & Co.
and Chase Securities Inc. (collectively, the "Initial Purchasers"), the Initial
Purchasers of such Notes being transferred and each of you are entitled to rely
upon this letter and are irrevocably authorized to produce this letter or a copy
hereof to any interested party in any administrative or legal proceedings with
respect to the materials covered hereby. Terms used in this certificate and not
otherwise defined in the Indenture have the meanings set forth in Regulation S
under the Securities Act.
[Insert Name of Transferor]
By:______________________________________
Name:
Title:
Dated: _________________, __
cc: Outsourcing Solutions Inc.
Goldman, Sachs & Co.
Chase Securities Inc.
B-5-2
<PAGE>
EXHIBIT B-6
FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER FROM
DEFINITIVE NOTE TO RULE 144A GLOBAL NOTE, ACCREDITED INSTITUTIONAL
INVESTOR GLOBAL NOTE OR REGULATION S PERMANENT GLOBAL NOTE
(Pursuant to Section 2.06(e) of the Indenture)
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
Attention: ______________
Re: 11% Senior Subordinated Notes due 2006 of Outsourcing Solutions Inc.
Reference is hereby made to the Indenture, dated as of November 6,
1996 (the "Indenture"), among Outsourcing Solutions Inc., as issuer (the
"Company"), the Guarantors and Wilmington Trust Company, as trustee. Capitalized
terms used but not defined herein shall have the meanings given to them in the
Indenture.
This letter relates to $_____________ principal amount of Notes which
are evidenced by one or more Definitive Notes (CUSIP No._____________ and
registered with the Registrar in the name of (the "Transferor"). The Transferor
has requested a transfer of such Definitive Notes to a Person who will take
delivery thereof in the form of an equal beneficial interest in Global Notes
evidenced by one or more (check one) |_| Rule 144A Global Notes (CUSIP No.
______________ ) or |_| Accredited Institutional Investor Global Notes (CUSIP
No. _____________ or |_| Regulation S Permanent Global Notes (CUSIP No.
____________), which amount, immediately after such transfer, is to be held with
the Depositary through Euroclear or Cedel Bank or both (Common Code
_______________ ).
In connection with such request and in respect of the Notes
surrendered to the Trustee herewith for exchange (the "Surrendered Notes"), the
Holder of such Surrendered Notes hereby certifies that:
[CHECK ONE]
|_| the Surrendered Notes are being transferred to the beneficial owner of
such Notes;
or
|_| the Surrendered Notes are being transferred pursuant to and in
accordance with Rule 144A under the United States Securities Act of
1933, as amended (the "Securities Act"), and, accordingly, the
Transferor hereby further certifies that the Surrendered Notes are
being transferred to a Person that the Transferor reasonably believes
is purchasing the Surrendered Notes for its own account, or for one or
more accounts with respect to which such Person exercises sole
investment discretion, and such Person and each such account is a
"qualified institutional buyer" within the meaning of Rule 144A, in
each case in a transaction meeting the requirements of Rule 144A;
or
B-6-1
<PAGE>
|_| the Surrendered Notes are being transferred in a transaction permitted
by Rule 144 under the Securities Act;
or
|_| the Surrendered Notes are being transferred pursuant to an effective
registration statement under the Securities Act;
or
|_| such transfer is being effected pursuant to an exemption from the
registration requirements of the Securities Act other than Rule 144A
or Rule 144, and the Transferor hereby further certifies that the
Notes are being transferred in compliance with the transfer
restrictions applicable to the Global Notes and in accordance with the
requirements of the exemption claimed, which certification is
supported by an Opinion of Counsel, provided by the Transferor or the
transferee (a copy of which the Transferor has attached to this
certification) in form reasonably acceptable to the Company and to the
Registrar, to the effect that such transfer is in compliance with the
Securities Act;
or
|_| such transfer is being effected pursuant to and in accordance with
Rule 903 or Rule 904 under the Securities Act, and accordingly the
Transferor hereby further certifies that:
(1) The offer of the Notes was not made to a person in the United
States;
(2) either:
(a) at the time the buy order was originated, the transferee was
outside the United States or the Transferor and any person
acting on its behalf reasonably believed and believes that
the transferee was outside the United States; or
(b) the transaction was executed in, on or through the
facilities of a designated offshore securities market and
neither the Transferor nor any person acting on its behalf
knows that the transaction was prearranged with a buyer in
the United States;
(3) no directed selling efforts have been made in contravention of
the requirements of Rule 904(b) of Regulation S;
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act; and
(5) upon completion of the transaction, the beneficial interest being
transferred as described above is to be held with the Depositary
through Euroclear or Cedel Bank or both (Common Code ).
B-6-2
<PAGE>
and the Surrendered Notes are being transferred in compliance with any
applicable blue sky securities laws of any state of the United States.
Upon giving effect to this request to exchange a Definitive Note for a
beneficial interest in such Rule 144A Global Note, Accredited
Institutional Investor Global Note or Regulation S Global Note, the
resulting beneficial interest shall be subject to the restrictions on
transfer applicable to Global Notes pursuant to the Indenture and the
Securities Act and, if such transfer occurs prior to the end of the
40-day restricted period associated with the initial offering of
Notes, the additional restrictions applicable to transfers of interest
in the Regulation S Temporary Global Note.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company, the Guarantors and Goldman, Sachs & Co.
and Chase Securities Inc. (collectively, the "Initial Purchasers"), the Initial
Purchasers of such Notes being transferred and each of you are entitled to rely
upon this letter and are irrevocably authorized to produce this letter or a copy
hereof to any interested party in any administrative or legal proceedings with
respect to the materials covered hereby. Terms used in this certificate and not
otherwise defined in the Indenture have the meanings set forth in Regulation S
under the Securities Act.
________________________________________
[Insert Name of Transferor]
By:_____________________________________
Name:
Title:
Dated: ______________ , __
cc: Outsourcing Solutions Inc.
Goldman, Sachs & Co.
Chase Securities Inc.
B-6-3
<PAGE>
EXHIBIT C
SUBSIDIARY GUARANTEE
Each Guarantor hereby, jointly and severally, unconditionally guarantees to
each Holder of Notes authenticated and delivered by the Trustee and to the
Trustee and its successors and assigns, irrespective of the validity and
enforceability of the Indenture, the Notes or the Obligations of the Company to
the Holders or the Trustee under the Notes or under the Indenture, that: (a) the
principal of, and premium and Liquidated Damages, if any, and interest on the
Notes shall be promptly paid when due, whether at maturity, by acceleration,
redemption or otherwise, and interest on overdue principal of and interest and
Liquidated Damages, if any, on any Note, if lawful, and all other Obligations of
the Company to the Holders or the Trustee under the Indenture or under the Notes
shall be promptly paid in full or performed, all in accordance with the terms
thereof; and (b) in case of any extension of time of payment or renewal of any
Notes or any of such other Obligations, the same will be promptly paid in full
when due in accordance with the terms of the extension or renewal, whether at
stated maturity, by acceleration or otherwise. Failing payment when due of any
amount so guaranteed, for whatever reason, the Guarantors will be jointly and
severally obligated to pay the same immediately.
The Obligations of the Guarantors to the Holders of Notes and to the
Trustee pursuant to this Subsidiary Guarantee and the Indenture are expressly
set forth in Article 11 of the Indenture, and reference is hereby made to the
Indenture for the precise terms of this Subsidiary Guarantee. The terms of
Article 11 of the Indenture are incorporated herein by reference.
No director, officer, employee, incorporator or stockholder, as such, past,
present or future, of each of the Guarantors shall have any personal liability
under this Subsidiary Guarantee by reason of its status as such director,
officer, employee, incorporator or stockholder.
Each of the Guarantors agrees, and each Holder by accepting a Note and the
related Subsidiary Guarantees agrees, that the payment of principal of, premium,
if any, and interest and Liquidated Damages, if any, on, and all other
Obligations in respect of, the Notes pursuant to the Subsidiary Guarantees is
subordinated in right of payment, to the extent and in the manner provided in
Articles 10 and 11 of the Indenture, to the prior payment in full in cash or
Cash Equivalents of all Senior Debt of such Guarantor and the subordination set
forth herein is for the benefit of and enforceable by the holders of Senior
Debt. Each Holder by accepting a Note authorizes and directs the Trustee on his
behalf to take such action as may be necessary or appropriate to acknowledge or
effectuate the subordination between the Holders and the holders of Senior Debt
as provided in the Indenture and appoints the Trustee as attorney-in-fact for
any and all such purposes.
This is a continuing Subsidiary Guarantee and shall remain in full force
and effect and shall be binding upon each Guarantor and its respective
successors and assigns to the extent set forth in the Indenture until full and
final payment of all of the Company's Obligations under the Notes and the
Indenture and shall inure to the benefit of the successors and assigns of the
Trustee and the Holders of Notes and, in the event of any transfer or assignment
of rights by any Holder of Notes or the Trustee, the rights and privileges
herein conferred upon that party shall automatically extend to and be vested in
such transferee or assignee, all subject to the terms and conditions hereof.
In certain circumstances more fully described in the Indenture, any
Guarantor may be released from its liability under this Subsidiary Guarantee,
and any such release will be effective whether or not noted hereon.
C-1-1
<PAGE>
This Subsidiary Guarantee shall not be valid or obligatory for any purpose
until the certificate of authentication on the Note upon which this Subsidiary
Guarantee is noted shall have been executed by the Trustee under the Indenture
by the manual signature of one of its authorized officers.
For purposes hereof, each Guarantor's liability will be that amount from
time to time equal to the aggregate liability of such Guarantor thereunder, but
shall be limited to the lesser of (i) the aggregate amount of the Obligations of
the Company under the Notes and the Indenture and (ii) the amount, if any, which
would not have (A) rendered such Guarantor "insolvent" (as such term is defined
in the federal Bankruptcy Law and in the Debtor and Creditor Law of the State of
New York) or (B) left it with unreasonably small capital at the time its
Subsidiary Guarantee was entered into, after giving effect to the incurrence of
existing Indebtedness immediately prior to such time; provided that, it shall be
a presumption in any lawsuit or other proceeding in which such Guarantor is a
party that the amount guaranteed pursuant to its Subsidiary Guarantee is the
amount set forth in clause (i) above unless any creditor, or representative of
creditors of such Guarantor, or debtor in possession or trustee in bankruptcy of
such Guarantor, otherwise proves in such a lawsuit that the aggregate liability
of such Guarantor is limited to the amount set forth in clause (ii). The
Indenture provides that, in making any determination as to the solvency or
sufficiency of capital of a Guarantor in accordance with the previous sentence,
the right of such Guarantor to contribution from other Guarantors and any other
rights such Guarantor may have, contractual or otherwise, shall be taken into
account.
Capitalized terms used herein have the same meanings given in the Indenture
unless otherwise indicated.
CFC SERVICES CORP.
By:
----------------------
Name: Tyler T. Zachem
Title: Vice President
A.M. MILLER & ASSOCIATES, INC.
By:
----------------------
Name: Tyler T. Zachem
Title: Assistant Secretary
C-1-2
<PAGE>
THE CONTINENTAL ALLIANCE, INC.
By:______________________________________
Name:
Title:
ALASKA FINANCIAL SERVICES, INC.
By:______________________________________
Name:
Title:
SOUTHWEST CREDIT SERVICES, INC.
By:______________________________________
Name:
Title:
ACCOUNT PORTFOLIOS, INC.
By:______________________________________
Name:
Title:
ACCOUNT PORTFOLIOS G.P., INC.
By:______________________________________
Name:
Title:
C-1-3
<PAGE>
ACCOUNT PORTFOLIOS, L.P.
By:______________________________________
Name:
Title:
PERIMETER CREDIT, L.P.
By:______________________________________
Name:
Title:
GULF STATE CREDIT, L.P.
By:______________________________________
Name:
Title:
PAYCO AMERICAN CORPORATION
By:______________________________________
Name:
Title:
PAYCO-GENERAL AMERICAN CREDITS, INC.
By:______________________________________
Name:
Title:
C-1-4
<PAGE>
NATIONAL ACCOUNT SYSTEMS, INC.
By:______________________________________
Name:
Title:
UNIVERSITY ACCOUNTING SERVICE, INC.
By:______________________________________
Name:
Title:
ASSET RECOVERY & MANAGEMENT CORP.
By:______________________________________
Name:
Title:
INDIANA MUTUAL CREDIT ASSOCIATION, INC.
By:______________________________________
Name:
Title:
FURST AND FURST, INC.
By:______________________________________
Name:
Title:
C-1-5
<PAGE>
JENNIFER LOOMIS & ASSOCIATES, INC.
By:______________________________________
Name:
Title:
FM SERVICES CORPORATION
By:______________________________________
Name:
Title:
QUALINK, INC.
By:______________________________________
Name:
Title:
PROFESSIONAL RECOVERIES INC.
By:______________________________________
Name:
Title:
PAYCO AMERICAN INTERNATIONAL CORP.
By:______________________________________
Name:
Title:
C-1-6
<PAGE>
Execution Copy
REGISTRATION RIGHTS AGREEMENT
Dated as of November 6,1996
by and among
Outsourcing Solutions Inc.
as Issuer
CFC Services Corp.; A.M. Miller & Associates, Inc.; The Continental Alliance,
Inc.; Alaska Financial Services, Inc.; Southwest Credit Services, Inc.; Central
Credit Services, Inc.; Account Portfolios, Inc.; Account Portfolios G.P., Inc.;
Account Portfolios, L.P.; Perimeter Credit, L.P.; Gulf State Credit, L.P.; Payco
American Corporation; Payco-General American Credits, Inc.; National Account
Systems, Inc.; University Accounting Service; Asset Recovery & Management Corp.;
Indiana Mutual Credit Association, Inc.; Furst and Furst, Inc.; Jennifer Loomis
& Associates, Inc.; FM Services Corporation; Qualink, Inc.; Professional
Recoveries Inc.; Payco American International Corp.
as Guarantors
and
Goldman, Sachs & Co.
Chase Securities Inc.
as Initial Purchasers
<PAGE>
This Registration Rights Agreement (this "Agreement") is made and entered
into as of November 6, 1996, by and among Outsourcing Solutions Inc., a Delaware
corporation (the "Company"), CFC Services Corp., a Delaware corporation, A.M.
Miller & Associates, Inc., a Minnesota corporation, The Continental Alliance,
Inc., a Washington corporation, Alaska Financial Services, Inc., an Alaska
corporation, Southwest Credit Services, Inc., an Arizona corporation, Account
Portfolios, Inc., a Delaware corporation, Account Portfolios G.P., Inc., a
Delaware corporation, Account Portfolios, L.P., a Georgia limited partnership,
Perimeter Credit, L.P., a Georgia limited partnership, Gulf State Credit, L.P.,
a Georgia limited partnership, Payco American Corporation, a Wisconsin
corporation, Payco American Corporation, a Wisconsin corporation, Payco-General
American Credits, Inc., a Delaware corporation, National Account Systems, Inc.,
a Delaware corporation, University Accounting Service, a Wisconsin corporation,
Asset Recovery & Management Corp., a Wisconsin corporation, Indiana Mutual
Credit Association, Inc., an Indiana corporation, Furst and Furst, Inc., a
Wisconsin corporation, Jennifer Loomis & Associates, Inc., an Arizona
corporation, FM Services Corporation, an Arizona corporation, Qualink, Inc., a
Wisconsin corporation, Professional Recoveries Inc., a Wisconsin corporation and
Payco American International Corp, a Wisconsin corporation (each a "Guarantor"
and collectively, the "Guarantors"), and Goldman, Sachs & Co. and Chase
Securities Inc. (each an "Initial Purchaser" and, collectively, the "Initial
Purchasers"), each of whom has agreed to purchase the Company's 11% Senior
Subordinated Notes due 2006 (the "Subordinated Notes") pursuant to the Purchase
Agreement (as defined below).
This Agreement is made pursuant to the Purchase Agreement, dated October
31, 1996, (the "Purchase Agreement"), by and among the Company, the Guarantors
and the Initial Purchasers. In order to induce the Initial Purchasers to
purchase the Subordinated Notes, the Company has agreed to provide the
registration rights set forth in this Agreement. The execution and delivery of
this Agreement is a condition to the obligations of the Initial Purchasers set
forth in Section 3 of the Purchase Agreement.
The parties hereby agree as follows:
1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have the
following meanings:
Act: The Securities Act of 1933, as amended.
Business Day: Any day except a Saturday, Sunday or other day in the City of
New York, or in the city of the Corporate Trust Office (as defined in the
Indenture) of the Trustee, on which banks are authorized to close.
Broker-Dealer: Any broker or dealer registered under the Exchange Act.
Broker-Dealer Transfer Restricted Securities: Exchange Notes that are
acquired by a BrokerDealer in the Exchange Offer in exchange for Subordinated
Notes that such Broker-Dealer acquired for its own account as a result of market
making activities or other trading activities (other than Subordinated Notes
acquired directly from the Company or any of its affiliates).
Certificated Securities: As defined in the Indenture.
Closing Date: The date hereof.
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Commission: The Securities and Exchange Commission.
Consummate: An Exchange Offer shall be deemed "Consummated" for purposes of
this Agreement upon the occurrence of (a) the filing and effectiveness under the
Act of the Exchange Offer Registration Statement relating to the Exchange Notes
to be issued in the Exchange Offer, (b) the maintenance of such Registration
Statement continuously effective and the keeping of the Exchange Offer open for
a period not less than the minimum period required pursuant to Section 3(b)
hereof and (c) the delivery by the Company to the Registrar under the Indenture
of Exchange Notes in the same aggregate principal amount as the aggregate
principal amount of Subordinated Notes tendered by Holders thereof pursuant to
the Exchange Offer.
Damages Payment Date: With respect to the Subordinated Notes, each Interest
Payment Date.
Effectiveness Target Date: As defined in Section 5.
Exchange Act: The Securities Exchange Act of 1934, as amended.
Exchange Notes: The Company's 11% Senior Subordinated Notes due 2006 to be
issued pursuant to the Indenture in the Exchange Offer.
Exchange Offer: The registration by the Company under the Act of the
Exchange Notes pursuant to the Exchange Offer Registration Statement pursuant to
which the Company shall offer the Holders of all outstanding Transfer Restricted
Securities the opportunity to exchange all such outstanding Transfer Restricted
Securities for Exchange Notes in an aggregate principal amount equal to the
aggregate principal amount of the Transfer Restricted Securities tendered in
such exchange offer by such Holders.
Exchange Offer Registration Statement: The Registration Statement relating
to the Exchange Offer, including the related Prospectus.
Exempt Resales: The transactions in which the Initial Purchasers propose to
sell the Subordinated Notes (i) to certain "qualified institutional buyers," as
such term is defined in Rule 144A under the Act, (ii) to certain "accredited
investors," as such term is defined in Rule 501(a)(1), (2), (3) or (7) of
Regulation D under the Act or (iii) in an offshore transaction complying with
Rule 903 or 904 of Regulation S under the Act.
Global Noteholder: As defined in the Indenture.
Holders: As defined in Section 2(b) hereof.
Indenture: The Indenture, dated the Closing Date, among the Company, the
Guarantors and Wilmington Trust Company, as trustee (the "Trustee"), pursuant to
which the Notes are to be issued, as such Indenture is amended or supplemented
from time to time in accordance with the terms thereof.
Interest Payment Date: As defined in the Indenture and the Notes.
NASD: National Association of Securities Dealers, Inc.
Notes: The Subordinated Notes and the Exchange Notes.
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Person: An individual, partnership, limited liability company, corporation,
trust, unincorporated organization, or a government or agency or political
subdivision thereof.
Prospectus: The prospectus included in a Registration Statement at the time
such Registration Statement is declared effective, as amended or supplemented by
any prospectus supplement and by all other amendments thereto, including
post-effective amendments, and all material incorporated by reference into such
Prospectus.
Record Holder: With respect to any Damages Payment Date, each Person who is
a Holder of Notes on the record date with respect to the Interest Payment Date
on which such Damages Payment Date shall occur.
Registration Default: As defined in Section 5 hereof.
Registration Statement: Any registration statement of the Company and the
Guarantors relating to (a) an offering of Exchange Notes pursuant to an Exchange
Offer or (b) the registration for resale of Transfer Restricted Securities
pursuant to the Shelf Registration Statement, in each case, (i) which is filed
pursuant to the provisions of this Agreement and (ii) including the Prospectus
included therein, all amendments and supplements thereto (including
post-effective amendments) and all exhibits and material incorporated by
reference therein.
Restricted Broker-Dealer: Any Broker-Dealer which holds Broker-Dealer
Transfer Restricted Securities.
Shelf Registration Statement: As defined in Section 4 hereof.
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb) as in
effect on the date of the Indenture.
Transfer Restricted Securities: Each Note, until the earliest to occur of
(a) the date on which such Note is exchanged in the Exchange Offer and entitled
to be resold to the public by the Holder thereof without complying with the
prospectus delivery requirements of the Act, (b) the date on which such Note has
been disposed of in accordance with a Shelf Registration Statement, (c) the date
on which such Note is disposed of by a Broker-Dealer pursuant to the "Plan of
Distribution" contemplated by the Exchange Offer Registration Statement
(including delivery of the Prospectus contained therein) or (d) the date on
which such Note is distributed to the public pursuant to Rule 144 under the Act.
Underwritten Registration or Underwritten Offering: A registration in which
securities of the Company are sold to an underwriter for reoffering to the
public.
2. SECURITIES SUBJECT TO THIS AGREEMENT
(a) Transfer Restricted Securities. The securities entitled to the benefits
of this Agreement are the Transfer Restricted Securities.
(b) Holders of Transfer Restricted Securities. A Person is deemed to be a
holder of Transfer Restricted Securities (each, a "Holder") whenever such Person
owns Transfer Restricted Securities.
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3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permitted by applicable federal
law (after the procedures set forth in Section 6(a) below have been complied
with), the Company and the Guarantors shall (i) cause to be filed with the
Commission as soon as practicable after the Closing Date, but in no event later
than 45 days after the Closing Date, the Exchange Offer Registration Statement,
(ii) use its best efforts to cause such Exchange Offer Registration Statement to
become effective at the earliest possible time, but in no event later than 150
days after the date on which such Exchange Offer Registration Statement is filed
with the Commission, (iii) in connection with the foregoing, (A) file all
pre-effective amendments to such Exchange Offer Registration Statement as may be
necessary in order to cause such Exchange Offer Registration Statement to become
effective, (B) file, if applicable, a post-effective amendment to such Exchange
Offer Registration Statement pursuant to Rule 430A under the Act and (C) cause
all necessary filings, if any, in connection with the registration and
qualification of the Exchange Notes to be made under the Blue Sky laws of such
jurisdictions as are necessary to permit Consummation of the Exchange Offer, and
(iv) upon the effectiveness of such Exchange Offer Registration Statement,
commence and Consummate the Exchange Offer. The Exchange Offer shall be on the
appropriate form permitting registration of the Exchange Notes to be offered in
exchange for the Subordinated Notes that are Transfer Restricted Securities and
to permit sales of Broker-Dealer Transfer Restricted Securities by Restricted
Broker-Dealers as contemplated by Section 3(c) below.
(b) The Company and the Guarantors shall use their respective best efforts
to cause the Exchange Offer Registration Statement to be effective continuously,
and shall keep the Exchange Offer open for a period of not less than the minimum
period required under applicable federal and state securities laws to Consummate
the Exchange Offer; provided, however, that in no event shall such period be
less than 20 Business Days. The Company and the Guarantors shall cause the
Exchange Offer to comply with all applicable federal and state securities laws.
No securities other than the Notes shall be included in the Exchange Offer
Registration Statement. The Company and the Guarantors shall use their
respective best efforts to cause the Exchange Offer to be Consummated on the
earliest practicable date after the Exchange Offer Registration Statement has
become effective, but in no event later than 30 Business Days thereafter.
(c) The Company shall include a "Plan of Distribution" section in the
Prospectus contained in the Exchange Offer Registration Statement and indicate
therein that any Restricted Broker-Dealer who holds Subordinated Notes that are
Transfer Restricted Securities and that were acquired for the account of such
Broker-Dealer as a result of market-making activities or other trading
activities, may exchange such Subordinated Notes (other than Transfer Restricted
Securities acquired directly from the Company or any affiliate of the Company)
pursuant to the Exchange Offer; however, such Broker-Dealer may be deemed to be
an "underwriter" within the meaning of the Act and must, therefore, deliver a
prospectus meeting the requirements of the Act in connection with its initial
sale of each Exchange Note received by such Broker-Dealer in the Exchange Offer,
which prospectus delivery requirement may be satisfied by the delivery by such
Broker-Dealer of the Prospectus contained in the Exchange Offer Registration
Statement. Such "Plan of Distribution" section shall also contain all other
information with respect to such sales of Broker-Dealer Transfer Restricted
Securities by Restricted Broker-Dealers that the Commission may require in order
to permit such sales pursuant thereto, but such "Plan of Distribution" shall not
name any such Broker-Dealer or disclose the amount of Notes held by any such
Broker-Dealer, except to the extent required by the Commission as a result of a
change in policy after the date of this Agreement.
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The Company and the Guarantors shall use their respective best efforts to
keep the Exchange Offer Registration Statement continuously effective,
supplemented and amended as required by the provisions of Section 6(c) below to
the extent necessary to ensure that it is available for sales of BrokerDealer
Transfer Restricted Securities by Restricted Broker-Dealers, and to ensure that
such Registration Statement conforms with the requirements of this Agreement,
the Act and the policies, rules and regulations of the Commission as announced
from time to time, for a period of one year from the date on which the Exchange
Offer is declared effective.
The Company and the Guarantors shall promptly provide sufficient copies of
the latest version of such Prospectus to such Restricted Broker-Dealers promptly
upon request, at any time during such one-year period in order to facilitate
such sales.
4. SHELF REGISTRATION
(a) Shelf Registration. If (i) the Company is not required to file an
Exchange Offer Registration Statement with respect to the Exchange Notes because
the Exchange Offer is not permitted by applicable law (after the procedures set
forth in Section 6(a) below have been complied with) or (ii) if any Holder of
Transfer Restricted Securities shall notify the Company within 20 Business Days
following the Consummation of the Exchange Offer that (A) such Holder was
prohibited by law or Commission policy from participating in the Exchange Offer
or (B) such Holder may not resell the Exchange Notes acquired by it in the
Exchange Offer to the public without delivering a prospectus and the Prospectus
contained in the Exchange Offer Registration Statement is not appropriate or
available for such resales by such Holder or (C) such Holder is a Broker-Dealer
and holds Subordinated Notes acquired directly from the Company or one of its
affiliates, then the Company and the Guarantors shall (x) use their respective
best efforts to cause to be filed on or prior to 45 days after the date on which
the Company determines that it is not required to file the Exchange Offer
Registration Statement pursuant to clause (i) above or 45 days after the date on
which the Company receives the notice specified in clause (ii) above a shelf
registration statement pursuant to Rule 415 under the Act (which may be an
amendment to the Exchange Offer Registration Statement) (in either event, the
"Shelf Registration Statement"), relating to all Transfer Restricted Securities
the Holders of which shall have provided the information required pursuant to
Section 4(b) hereof, and shall (y) use their respective best efforts to cause
such Shelf Registration Statement to become effective on or prior to 150 days
after the date on which the Company becomes obligated to file such Shelf
Registration Statement. The Company and the Guarantors shall use their
respective best efforts to keep such Shelf Registration Statement continuously
effective, supplemented and amended as required by and subject to the provisions
of Sections 6(b) and (c) hereof to the extent necessary to ensure that it is
available for sales of Transfer Restricted Securities by the Holders thereof
entitled to the benefit of this Section 4(a), and to ensure that it conforms
with the requirements of this Agreement, the Act and the policies, rules and
regulations of the Commission as announced from time to time, for a period of at
least three years (as extended pursuant to Section 6(c)(i)) following the
Closing Date or such shorter period that will terminate when all Transfer
Restricted Securities covered by the Shelf Registration Statement have been sold
pursuant to the Shelf Registration Statement.
(b) Provision by Holders of Certain Information in Connection with the
Shelf Registration Statement. No Holder of Transfer Restricted Securities may
include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
the Company in writing, within 20 days after receipt of a request therefor, such
information specified in item 507 of Regulation S-K under the Act for use in
connection with any Shelf Registration Statement or Prospectus or preliminary
Prospectus included therein. No Holder of Transfer Restricted
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Securities shall be entitled to Liquidated Damages pursuant to Section 5 hereof
unless and until such Holder shall have used its best efforts to provide all
such information. Each Holder as to which any Shelf Registration Statement is
being effected agrees to furnish promptly to the Company all information
required to be disclosed in order to make the information previously furnished
to the Company by such Holder not materially misleading.
5. LIQUIDATED DAMAGES
If (i) any Registration Statement required by this Agreement is not filed
with the Commission on or prior to the date specified for such filing in this
Agreement, (ii) any such Registration Statement has not been declared effective
by the Commission on or prior to the date specified for such effectiveness in
this Agreement (the "Effectiveness Target Date"), (iii) the Exchange Offer has
not been Consummated within 30 Business Days after the Effectiveness Target Date
with respect to the Exchange Offer Registration Statement or (iv) subject to the
provisions of Section 6(c)(i) below, any Registration Statement required by this
Agreement is filed and declared effective but shall thereafter cease to be
effective or fail to be usable for its intended purpose without being succeeded
immediately by a post-effective amendment to such Registration Statement that
cures such failure and that is itself declared effective immediately (each such
event referred to in clauses (i) through (iv), a "Registration Default"), then
the Company and the Guarantors hereby jointly and severally agree to pay
liquidated damages to each Holder of Transfer Restricted Securities with respect
to the first 90-day period immediately following the occurrence of such
Registration Default, in an amount equal to $.05 per week per $1,000 principal
amount of Transfer Restricted Securities held by such Holder for each week or
portion thereof that the Registration Default continues. The amount of the
liquidated damages shall increase by an additional $.05 per week per $1,000 in
principal amount of Transfer Restricted Securities with respect to each
subsequent 90-day period until all Registration Defaults have been cured, up to
a maximum amount of liquidated damages of $.50 per week per $1,000 principal
amount of Transfer Restricted Securities. All accrued liquidated damages shall
be paid to Record Holders by the Company by wire transfer of immediately
available funds or by federal funds check on each Damages Payment Date, as
provided in the Indenture. Following the cure of all Registration Defaults
relating to any particular Transfer Restricted Securities, the accrual of
liquidated damages with respect to such Transfer Restricted Securities will
cease.
All obligations of the Company and the Guarantors set forth in the
preceding paragraph that are outstanding with respect to any Transfer Restricted
Security at the time such security ceases to be a Transfer Restricted Security
shall survive until such time as all such obligations with respect to such
security shall have been satisfied in full.
6. REGISTRATION PROCEDURES
(a) Exchange Offer Registration Statement. In connection with the Exchange
Offer, the Company and the Guarantors shall comply with all applicable
provisions of Section 6(c) below, shall use their respective best efforts to
effect such exchange and to permit the sale of Broker-Dealer Transfer Restricted
Securities being sold in accordance with the intended method or methods of
distribution thereof, and shall comply with all of the following provisions:
(i) If, following the date hereof there has been published a change in
Commission policy with respect to exchange offers such as the Exchange
Offer, such that in the reasonable opinion of counsel to the Company there
is a substantial question as to whether the Exchange Offer is permitted by
applicable federal law, the Company and the Guarantors hereby agree to
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seek a no-action letter or other favorable decision from the Commission
allowing the Company and the Guarantors to Consummate an Exchange Offer for
such Subordinated Notes. The Company and the Guarantors hereby agree to
pursue the issuance of such a decision to the Commission staff level, but
shall not be required to take commercially unreasonable action to effect a
change of Commission policy. In connection with the foregoing, the Company
and the Guarantors hereby agree to take all such other actions as are
requested by the Commission or otherwise required in connection with the
issuance of such decision, including without limitation (A) participating
in telephonic conferences with the Commission, (B) delivering to the
Commission staff an analysis prepared by counsel to the Company setting
forth the legal bases, if any, upon which such counsel has concluded that
such an Exchange Offer should be permitted and (C) diligently pursuing a
resolution by the Commission staff of such submission.
(ii) As a condition to its participation in the Exchange Offer
pursuant to the terms of this Agreement, each Holder of Transfer Restricted
Securities shall furnish, upon the request of the Company, prior to the
Consummation of the Exchange Offer, a written representation to the Company
and the Guarantors (which may be contained in the letter of transmittal
contemplated by the Exchange Offer Registration Statement) to the effect
that (A) it is not an affiliate of the Company, (B) it is not engaged in,
and does not intend to engage in, and has no arrangement or understanding
with any person to participate in, a distribution of the Exchange Notes to
be issued in the Exchange Offer and (C) it is acquiring the Exchange Notes
in its ordinary course of business. In addition, all such Holders of
Transfer Restricted Securities shall otherwise cooperate in the Company's
and the Guarantors' preparation of the Exchange Offer. Each Holder hereby
acknowledges and agrees that any Broker-Dealer and any such Holder using
the Exchange Offer to participate in a distribution of the securities to be
acquired in the Exchange Offer (1) could not under Commission policy as in
effect on the date of this Agreement rely on the position of the Commission
enunciated in Morgan Stanley and Co., Inc. (available June 5, 1991) and
Exxon Capital Holdings Corporation (available May 13, 1988), as interpreted
in the Commission's letter to Shearman & Sterling dated July 2, 1993, and
similar no-action letters (including, if applicable, any no-action letter
obtained pursuant to clause (i) above), and (2) must comply with the
registration and prospectus delivery requirements of the Act in connection
with a secondary resale transaction and that such a secondary resale
transaction must be covered by an effective registration statement
containing the selling security holder information required by Item 507 or
508, as applicable, of Regulation S-K if the resales are of Exchange Notes
obtained by such Holder in exchange for Subordinated Notes acquired by such
Holder directly from the Company or an affiliate thereof.
(iii) Prior to effectiveness of the Exchange Offer Registration
Statement, the Company and the Guarantors shall provide a supplemental
letter to the Commission (A) stating that the Company and the Guarantors
are registering the Exchange Offer in reliance on the position of the
Commission enunciated in Exxon Capital Holdings Corporation (available May
13, 1988), Morgan Stanley and Co., Inc. (available June 5, 1991) and, if
applicable, any no-action letter obtained pursuant to clause (i) above, (B)
including a representation that neither the Company nor any Guarantor has
entered into any arrangement or understanding with any Person to distribute
the Exchange Notes to be received in the Exchange Offer and that, to the
best of the Company's and each Guarantor's information and belief, each
Holder participating in the Exchange Offer is acquiring the Exchange Notes
in its ordinary course of business and has no arrangement or understanding
with any Person to participate in the distribution of the Exchange Notes
received in the Exchange Offer and (C) any other undertaking or
representation required by the Commission as set forth in any no-action
letter obtained pursuant to clause (i) above.
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(b) Shelf Registration Statement. In connection with the Shelf Registration
Statement, the Company and the Guarantors shall comply with all the provisions
of Section 6(c) below and shall use their respective best efforts to effect such
registration to permit the sale of the Transfer Restricted Securities being sold
in accordance with the intended method or methods of distribution thereof (as
indicated in the information furnished to the Company pursuant to Section 4(b)
hereof), and pursuant thereto the Company and the Guarantors will prepare and
file with the Commission a Registration Statement relating to the registration
on any appropriate form under the Act, which form shall be available for the
sale of the Transfer Restricted Securities in accordance with the intended
method or methods of distribution thereof within the time periods and otherwise
in accordance with the provisions hereof.
(c) General Provisions. In connection with any Registration Statement and
any related Prospectus required by this Agreement to permit the sale or resale
of Transfer Restricted Securities (including, without limitation, any Exchange
Offer Registration Statement and the related Prospectus, to the extent that the
same are required to be available to permit sales of Broker-Dealer Transfer
Restricted Securities by Restricted Broker-Dealers), the Company and the
Guarantors shall:
(i) use their respective best efforts to keep such Registration
Statement continuously effective and provide all requisite financial
statements (including, if required by the Act or any regulation thereunder,
financial statements of the Guarantors) for the period specified in Section
3 or 4 of this Agreement, as applicable. Upon the occurrence of any event
that would cause any such Registration Statement or the Prospectus
contained therein (A) to contain a material misstatement or omission or (B)
not to be effective and usable for resale of Transfer Restricted Securities
during the period required by this Agreement, the Company and the
Guarantors shall file promptly an appropriate amendment to such
Registration Statement, (1) in the case of clause (A), correcting any such
misstatement or omission, and (2) in the case of clauses (A) and (B) use
their respective best efforts to cause such amendment to be declared
effective and such Registration Statement and the related Prospectus to
become usable for their intended purpose(s) as soon as practicable
thereafter. Notwithstanding the foregoing, if the Board of Directors of the
Company determines in good faith that it is in the best interests of the
Company and the Guarantors not to disclose the existence of or facts
surrounding any proposed or pending material corporate transaction
involving the Company or the Guarantors, the Company and the Guarantors may
allow the Shelf Registration Statement or the Exchange Offer Registration
Statement to fail to be effective and usable as a result of such
nondisclosure for up to 60 days during the three year period of
effectiveness required by Section 4 hereof, but in no event for any period
in excess of 30 consecutive days, provided, that in the event the Exchange
Offer is Consummated, the Company and the Guarantors shall not allow the
Exchange Offer Registration Statement to fail to be effective and usable
for a period in excess of 30 days during the one year period of
effectiveness required by Section 3 hereof;
(ii) prepare and file with the Commission such amendments and
post-effective amendments to the Registration Statement as may be necessary
to keep the Registration Statement effective for applicable period set
forth in Section 3 or 4 hereof, or such shorter period as will terminate
when all Transfer Restricted Securities covered by such Registration
Statement have been sold; cause the Prospectus to be supplemented by any
required Prospectus supplement, and as so supplemented to be filed pursuant
to Rule 424 under the Act, and to comply fully with Rules 424, 430A and
462, as applicable, under the Act in a timely manner; and comply with the
provisions of the Act with respect to the disposition of all securities
covered by such Registration Statement during the applicable period in
accordance with the intended method or methods of
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distribution by the sellers thereof set forth in such Registration
Statement or supplement to the Prospectus;
(iii) advise the underwriter(s), if any, and selling Holders promptly
and, if requested by such Persons, confirming such advice in writing, (A)
when the Prospectus or any Prospectus supplement or post-effective
amendment has been filed, and, with respect to any Registration Statement
or any post-effective amendment thereto, when the same has become
effective, (B) of any request by the Commission for amendments to the
Registration Statement or amendments or supplements to the Prospectus or
for additional information relating thereto, (C) of the issuance by the
Commission of any stop order suspending the effectiveness of the
Registration Statement under the Act or of the suspension by any state
securities commission of the qualification of the Transfer Restricted
Securities for offering or sale in any jurisdiction, or the initiation of
any proceeding for any of the preceding purposes, (D) of the existence of
any fact or the happening of any event that makes any statement of a
material fact made in the Registration Statement, the Prospectus, any
amendment or supplement thereto or any document incorporated by reference
therein untrue, or that requires the making of any additions to or changes
in the Registration Statement in order to make the statements therein not
misleading, or that requires the making of any additions to or changes in
the Prospectus in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, including,
without limitation, under circumstances described in Section 6(c)(i) above.
If at any time the Commission shall issue any stop order suspending the
effectiveness of the Registration Statement, or any state securities
commission or other regulatory authority shall issue an order suspending
the qualification or exemption from qualification of the Transfer
Restricted Securities under state securities or Blue Sky laws, the Company
and the Guarantors shall use their respective best efforts to obtain the
withdrawal or lifting of such order at the earliest possible time;
(iv) furnish to each selling Holder named in any Registration
Statement or Prospectus and each of the underwriter(s) in connection with
such sale, if any, before filing with the Commission, copies of any
Registration Statement or any Prospectus included therein or any amendments
or supplements to any such Registration Statement or Prospectus (including
all documents incorporated by reference after the initial filing of such
Registration Statement), which documents will be subject to the review and
comment of such Holders and underwriter(s) in connection with such sale, if
any, for a period of at least two Business Days, and the Company will not
file any such Registration Statement or Prospectus or any amendment or
supplement to any such Registration Statement or Prospectus (including all
such documents incorporated by reference) to which the selling Holders of
the Transfer Restricted Securities covered by such Registration Statement
or the underwriter(s) in connection with such sale, if any, shall
reasonably object within two Business Days after the receipt thereof. A
selling Holder or underwriter, if any, shall be deemed to have reasonably
objected to such filing if such Registration Statement, amendment,
Prospectus or supplement, as applicable, as proposed to be filed, contains
a material misstatement or omission or fails to comply with the applicable
requirements of the Act;
(v) promptly prior to the filing of any document that is to be
incorporated by reference into a Registration Statement or Prospectus,
provide copies of such document to the selling Holders and to the
underwriter(s) in connection with such sale, if any, make the Company's and
the Guarantors' representatives available for discussion of such document
and other customary due diligence matters, and include such information in
such document prior to the filing thereof as such selling Holders or
underwriter(s), if any, reasonably may request;
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(vi) make available at reasonable times for inspection by the selling
Holders, any underwriter participating in any disposition pursuant to such
Registration Statement and any attorney or accountant retained by such
selling Holders or any of such underwriter(s), all relevant financial and
other records, pertinent corporate documents and properties of the Company
and the Guarantors and cause the Company's and the Guarantors' officers,
directors and employees to supply all relevant information reasonably
requested by any such Holder, underwriter, attorney or accountant in
connection with such Registration Statement or any post-effective amendment
thereto subsequent to the filing thereof and prior to its effectiveness;
(vii) if requested by any selling Holders or the underwriter(s) in
connection with such sale, if any, promptly include in any Registration
Statement or Prospectus, pursuant to a supplement or post-effective
amendment if necessary, such information as such selling Holders and
underwriter(s), if any, may reasonably request to have included therein,
including, without limitation, information relating to the "Plan of
Distribution" of the Transfer Restricted Securities, information with
respect to the principal amount of Transfer Restricted Securities being
sold to such underwriter(s), the purchase price being paid therefor and any
other terms of the offering of the Transfer Restricted Securities to be
sold in such offering; and make all required filings of such Prospectus
supplement or post-effective amendment as soon as practicable after the
Company is notified of the matters to be included in such Prospectus
supplement or post-effective amendment;
(viii) furnish to each selling Holder and each of the underwriter(s)
in connection with such sale, if any, without charge, at least one copy of
the Registration Statement, as first filed with the Commission, and of each
amendment thereto, including all documents incorporated by reference
therein and all exhibits (including exhibits incorporated therein by
reference);
(ix) deliver to each selling Holder and each of the underwriter(s), if
any, without charge, as many copies of the Prospectus (including each
preliminary prospectus) and any amendment or supplement thereto as such
Persons reasonably may request; the Company and the Guarantors hereby
consent to the use (in accordance with law) of the Prospectus and any
amendment or supplement thereto by each of the selling Holders and each of
the underwriter(s), if any, in connection with the offering and the sale of
the Transfer Restricted Securities covered by the Prospectus or any
amendment or supplement thereto;
(x) enter into such agreements (including an underwriting agreement)
and make such representations and warranties and take all such other
actions in connection therewith in order to expedite or facilitate the
disposition of the Transfer Restricted Securities pursuant to any
Registration Statement contemplated by this Agreement as may be reasonably
requested by any Holder of Transfer Restricted Securities or underwriter in
connection with any sale or resale pursuant to any Registration Statement
contemplated by this Agreement, and in such connection, whether or not an
underwriting agreement is entered into and whether or not the registration
is an Underwritten Registration, the Company and the Guarantors shall:
(A) furnish to each selling Holder and each underwriter, if any,
in such substance and scope as they may reasonably request and as are
customarily made by issuers to underwriters in primary underwritten
offerings, upon the effectiveness of the Shelf Registration Statement
and to each Restricted Broker-Dealer upon Consummation of the Exchange
Offer:
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(1) a certificate, dated the date of Consummation of the
Exchange Offer or the date of effectiveness of the Shelf
Registration Statement, as the case may be, signed on behalf of
the Company and each Guarantor by (x) the President or any Vice
President and (y) a principal financial or accounting officer of
the Company and such Guarantor, confirming, as of the date
thereof, the matters set forth in the first paragraph and in
subsections (d) and (e) of Section 7 of the Purchase Agreement
and such other similar matters as the Holders, underwriter(s)
and/or Restricted Broker Dealers may reasonably request;
(2) an opinion, dated the date of Consummation of the
Exchange Offer or the date of effectiveness of the Shelf
Registration Statement, as the case may be, of counsel for the
Company and the Guarantors covering matters similar to those set
forth in paragraph (b) of Section 7 of the Purchase Agreement and
such other matter as the Holders, underwriters and/or Restricted
Broker Dealers may reasonably request, and in any event including
a statement to the effect that, although such counsel has not
independently verified the accuracy, completeness or fairness of
such statements, such counsel does not believe that the
applicable Registration Statement, at the time such Registration
Statement or any post-effective amendment thereto became
effective and, in the case of the Exchange Offer Registration
Statement, as of the date of Consummation of the Exchange Offer,
contained (other than the financial statements therein, as to
which such counsel need express no opinion) an untrue statement
of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein
not misleading, or that the Prospectus contained in such
Registration Statement as of its date and, in the case of the
opinion dated the date of Consummation of the Exchange Offer, as
of the date of Consummation, contained (other than the financial
statements therein, as to which such counsel need express no
opinion) an untrue statement of a material fact or omitted to
state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were
made, not misleading; and
(3) a customary comfort letter, dated as of the date of
effectiveness of the Shelf Registration Statement or the date of
Consummation of the Exchange Offer, as the case may be, from the
Company's and the Guarantors' independent accountants, in the
customary form and covering matters of the type customarily
covered in comfort letters to underwriters in connection with
primary underwritten offerings, and affirming the matters set
forth in the comfort letters delivered pursuant to Section 7 of
the Purchase Agreement, without exception;
(B) set forth in full or incorporate by reference in the
underwriting agreement, if any, in connection with any sale or resale
pursuant to any Shelf Registration Statement the indemnification
provisions and procedures of Section 8 hereof with respect to all
parties to be indemnified pursuant to said Section; and
(C) deliver such other documents and certificates as may be
reasonably requested by the selling Holders, the underwriter(s), if
any, and Restricted Broker Dealers, if any, to evidence compliance
with clause (A) above and with any customary conditions contained in
the underwriting agreement or other agreement entered into by the
Company and the Guarantors pursuant to this clause (x).
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<PAGE>
The above shall be done at each closing under such underwriting or similar
agreement, as and to the extent required thereunder, and if at any time the
representations and warranties of the Company and the Guarantors contemplated in
(A)(1) above cease to be true and correct, the Company and the Guarantors shall
so advise the underwriter(s), if any, the selling Holders and each Restricted
BrokerDealer promptly and if requested by such Persons, shall confirm such
advice in writing;
(xi) prior to any public offering of Transfer Restricted Securities,
cooperate with the selling Holders, the underwriter(s), if any, and their
respective counsel in connection with the registration and qualification of
the Transfer Restricted Securities under the securities or Blue Sky laws of
such jurisdictions as the selling Holders or underwriter(s), if any, may
request and do any and all other acts or things necessary or advisable to
enable the disposition in such jurisdictions of the Transfer Restricted
Securities covered by the applicable Registration Statement; provided,
however, that neither the Company nor any Guarantor shall be required to
register or qualify as a foreign corporation where it is not now so
qualified or to take any action that would subject it to the service of
process in suits or to taxation, other than as to matters and transactions
relating to the Registration Statement, in any jurisdiction where it is not
now so subject;
(xii) issue, upon the request of any Holder of Subordinated Notes
covered by any Shelf Registration Statement contemplated by this Agreement,
Exchange Notes having an aggregate principal amount equal to the aggregate
principal amount of Subordinated Notes surrendered to the Company by such
Holder in exchange therefor or being sold by such Holder; such Exchange
Notes to be registered in the name of such Holder or in the name of the
purchaser(s) of such Notes, as the case may be; in return, the Subordinated
Notes held by such Holder shall be surrendered to the Company for
cancellation;
(xiii) in connection with any sale of Transfer Restricted Securities
that will result in such securities no longer being Transfer Restricted
Securities, cooperate with the selling Holders and the underwriter(s), if
any, to facilitate the timely preparation and delivery of certificates
representing Transfer Restricted Securities to be sold and not bearing any
restrictive legends; and to register such Transfer Restricted Securities in
such denominations and such names as the Holders or the underwriter(s), if
any, may request at least two Business Days prior to such sale of Transfer
Restricted Securities;
(xiv) use their respective best efforts to cause the disposition of
the Transfer Restricted Securities covered by the Registration Statement to
be registered with or approved by such other governmental agencies or
authorities as may be necessary to enable the seller or sellers thereof or
the underwriter(s), if any, to consummate the disposition of such Transfer
Restricted Securities, subject to the proviso contained in clause (xi)
above;
(xv) subject to Section 6(c)(i), if any fact or event contemplated by
Section 6(c)(iii)(D) above shall exist or have occurred, prepare a
supplement or post-effective amendment to the Registration Statement or
related Prospectus or any document incorporated therein by reference or
file any other required document so that, as thereafter delivered to the
purchasers of Transfer Restricted Securities, the Prospectus will not
contain an untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(xvi) provide a CUSIP number for all Transfer Restricted Securities
not later than the effective date of a Registration Statement covering such
Transfer Restricted Securities and provide
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<PAGE>
the Trustee under the Indenture with printed certificates for the Transfer
Restricted Securities which are in a form eligible for deposit with The
Depository Trust Company;
(xvii) cooperate and assist in any filings required to be made with
the NASD and in the performance of any due diligence investigation by any
underwriter (including any "qualified independent underwriter") that is
required to be retained in accordance with the rules and regulations of the
NASD, and use their respective reasonable best efforts to cause such
Registration Statement to become effective and approved by such
governmental agencies or authorities as may be necessary to enable the
Holders selling Transfer Restricted Securities to consummate the
disposition of such Transfer Restricted Securities;
(xviii) not later than the effective date of the Registration
Statement, cause all Transfer Restricted Securities covered by such
Registration Statement to be listed on the New York Stock Exchange,
American Stock Exchange or the Nasdaq National Market, if so requested by
the Holders of a majority in aggregate principal amount of Notes covered
thereby or the underwriters, if any;
(xix) otherwise use their respective best efforts to comply with all
applicable rules and regulations of the Commission, and make generally
available to its security holders with regard to any applicable
Registration Statement, as soon as practicable, a consolidated earnings
statement meeting the requirements of Rule 158 (which need not be audited)
covering a twelve-month period beginning after the effective date of the
Registration Statement (as such term is defined in paragraph (c) of Rule
158 under the Act);
(xx) cause the Indenture to be qualified under the TIA not later than
the effective date of the first Registration Statement required by this
Agreement and, in connection therewith, cooperate with the Trustee and the
Holders of Notes to effect such changes to the Indenture as may be required
for such Indenture to be so qualified in accordance with the terms of the
TIA; and execute and use its best efforts to cause the Trustee to execute,
all documents that may be required to effect such changes and all other
forms and documents required to be filed with the Commission to enable such
Indenture to be so qualified in a timely manner;
(xxi) provide promptly to each Holder upon request each document filed
with the Commission pursuant to the requirements of Section 13 or Section
15(d) of the Exchange Act; and
(xxii) cause the Transfer Restricted Securities covered by the
Registration Statement to be rated with the appropriate rating agencies, if
so requested by the Holders of a majority in aggregate principal amount of
Notes covered thereby or the underwriters, if any.
(d) Restrictions on Holders. Each Holder agrees by acquisition of a
Transfer Restricted Security that, upon receipt of the notice referred to in
Section 6(c)(i) or any notice from the Company of the existence of any fact of
the kind described in Section 6(c)(iii)(D) hereof, such Holder will forthwith
discontinue disposition of Transfer Restricted Securities pursuant to the
applicable Registration Statement until such Holder's receipt of the copies of
the supplemented or amended Prospectus contemplated by Section 6(c)(xv) hereof,
or until it is advised in writing by the Company (the "Advice") that the use of
the Prospectus may be resumed, and has received copies of any additional or
supplemental filings that are incorporated by reference in the Prospectus. If so
directed by the Company, each Holder will deliver to the Company (at the
Company's expense) all copies, other than permanent file copies then in such
14
<PAGE>
Holder's possession, of the Prospectus covering such Transfer Restricted
Securities that was current at the time of receipt of either such notice. In the
event the Company shall give any such notice, the time period regarding the
effectiveness of such Registration Statement set forth in Section 3 or 4 hereof,
as applicable, shall be extended by the number of days during the period from
and including the date of the giving of such notice pursuant to Section 6(c)(i)
or Section 6(c)(iii)(D) hereof to and including the date when each selling
Holder covered by such Registration Statement shall have received the copies of
the supplemented or amended Prospectus contemplated by Section 6(c)(xv) hereof
or shall have received the Advice.
7. REGISTRATION EXPENSES
(a) All expenses incident to the Company's and the Guarantors' performance
of or compliance with this Agreement will be borne by the Company and the
Guarantors, regardless of whether a Registration Statement becomes effective,
including without limitation: (i) all registration and filing fees and expenses
(including filings made by any Purchaser or Holder with the NASD (and, if
applicable, the fees and expenses of any "qualified independent underwriter" and
its counsel) that may be required by the rules and regulations of the NASD);
(ii) all fees and expenses of compliance with federal securities and state Blue
Sky or securities laws; (iii) all expenses of printing (including printing
certificates for the Exchange Notes to be issued in the Exchange Offer and
printing of Prospectuses), messenger and delivery services and telephone; (iv)
all fees and disbursements of counsel for the Company, the Guarantors and,
subject to Section 7(b) below, the Holders of Transfer Restricted Securities;
(v) all application and filing fees in connection with listing the Notes on a
national securities exchange or automated quotation system pursuant to the
requirements hereof; and (vi) all fees and disbursements of independent
certified public accountants of the Company and the Guarantors (including the
expenses of any special audit and comfort letters required by or incident to
such performance).
The Company will, in any event, bear its and the Guarantors' internal
expenses (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expenses of
any annual audit and the fees and expenses of any Person, including special
experts, retained by the Company or the Guarantors.
(b) In connection with any Registration Statement required by this
Agreement (including, without limitation, the Exchange Offer Registration
Statement and the Shelf Registration Statement), the Company and the Guarantors
will reimburse the Purchasers and the Holders of Transfer Restricted Securities
being tendered in the Exchange Offer and/or resold pursuant to the "Plan of
Distribution" contained in the Exchange Offer Registration Statement or
registered pursuant to the Shelf Registration Statement, as applicable, for the
reasonable fees and disbursements of not more than one counsel, who shall be
Latham & Watkins or such other counsel chosen by the Holders of a majority in
principal amount of the Transfer Restricted Securities for whose benefit such
Registration Statement is being prepared, provided that such fees and
disbursements shall not exceed $30,000 in the aggregate.
8. INDEMNIFICATION
(a) The Company and the Guarantors will, jointly and severally, indemnify
and hold harmless each Holder against any losses, claims, damages or
liabilities, joint or several, to which it may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) (i) arise out of or are based upon an untrue statement or
alleged untrue statement of material fact contained in any Registration
Statement or any amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact necessary
to
15
<PAGE>
make the statements therein not misleading or (ii) arise out of or are based
upon an untrue statement or alleged untrue statement of material fact contained
in any preliminary Prospectus or Prospectus or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading, and will
reimburse each Holder for any legal or other expenses reasonably incurred by it
in connection with investigating or defending any such action or claim as such
expenses are incurred; provided, however, that neither the Company nor any of
the Guarantors shall be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
any Registration Statement, preliminary Prospectus or Prospectus, or any such
amendment or supplement in reliance upon and in conformity with written
information furnished to the Company or any of the Guarantors by or on behalf of
any of the Holders expressly for inclusion therein.
(b) Each Holder will, severally and not jointly, indemnify and hold
harmless the Company and the Guarantors against any losses, claims, damages or
liabilities to which the Company or any of the Guarantors may become subject,
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) (i) arise out of or are based upon
an untrue statement or alleged untrue statement of material fact contained in
any Registration Statement or any amendment or supplement thereto, or arise out
of or are based upon the omission or alleged omission to state therein a
material fact necessary to make the statements therein not misleading or (ii)
arise out of or are based upon an untrue statement or alleged untrue statement
of material fact contained in any preliminary Prospectus or Prospectus or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in any Registration Statement, preliminary Prospectus or
Prospectus, or any such amendment or supplement in reliance upon and in
conformity with written information furnished to the Company or any of the
Guarantors by such Holder expressly for use therein; and will reimburse the
Company and the Guarantors for any legal or other expenses reasonably incurred
by the Company or the Guarantors in connection with investigating or defending
any such action or claim as such expenses are incurred.
(c) Promptly after receipt by an indemnified party under subsection (a) or
(b) above of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under such subsection, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying party shall
not relieve it from any liability which it may have to any indemnified party
otherwise than under such subsection. In case any such action shall be brought
against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it shall wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party (who shall not, except with the
consent of the indemnified party, be counsel to the indemnifying party), and,
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party under such subsection for any legal expenses of
other counsel or any other expenses, in each case subsequently incurred by such
indemnified party, in connection with the defense thereof other than reasonable
costs of investigation. No indemnifying party shall, without the written consent
of the indemnified party, effect the settlement or compromise of, or consent to
the entry of any judgment with respect to, any pending or threatened action or
claim in respect of which indemnification or contribution may be sought
thereunder unless such
16
<PAGE>
settlement, compromise or judgment (i) includes an unconditional release of the
indemnified party from all liability arising out of such action or claim and
(ii) does not include a statement as to, or an admission of, fault, culpability
or a failure to act, by or on behalf of any indemnified party.
(d) If the indemnification provided for in this Section 8 is unavailable to
or insufficient to hold harmless an indemnified party under subsection (a) or
(b) above in respect of any losses, claims, damages or liabilities (or actions
in respect thereof) referred to therein, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities (or actions in respect thereof)
in such proportion as is appropriate to reflect the relative benefits received
by the Company and the Guarantors from the Company's sale of the Subordinated
Notes, on the one hand, and any Holder, on the other, from such Holder's sale of
Transfer Restricted Securities. If, however, the allocation provided by the
immediately preceding sentence is not permitted by applicable law or if the
indemnified party failed to give the notice required under subsection (c) above,
then each indemnifying party shall contribute to such amount paid or payable by
such indemnified party in such proportion as is appropriate to reflect not only
such relative benefits but also the relative fault of the Company and the
Guarantors, on the one hand, and of such Holder, on the other, in connection
with the statements or omissions which resulted in such losses, claims, damages
or liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative benefits received by the Company and the
Guarantors, on the one hand, and any Holder, on the other, shall be deemed to be
in the same proportion as the total net proceeds from the sale of the
Subordinated Notes (before deducting expenses) received by the Company bear to
the total proceeds received by such Holder upon its sale of Subordinated Notes.
The relative fault shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company and the Guarantors on the one hand or the Holders on the
other and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Company, the
Guarantors and each Holder of Transfer Restricted Securities agree that it would
not be just and equitable if contribution pursuant to this subsection (d) were
determined by pro rata allocation (even if the Holders were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to above in this
subsection (d). The amount paid or payable by an indemnified party as a result
of the losses, claims, damages or liabilities (or actions in respect thereof)
referred to above in this subsection (d) shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this subsection (d), no Holder shall be required to contribute any
amount in excess of the amount by which the total received by such Holder with
respect to the sale of its Subordinated Notes pursuant to a Registration
Statement exceeds the sum of (a) the amount paid by such Holder for such
Subordinated Notes plus (b) the amount of any damages which such Holder has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. The Holders' obligations in this
subsection (d) to contribute are several in proportion to the respective
principal amount of Notes held by each of the Holders hereunder and not joint.
(e) The obligations of the Company and the Guarantors under this Section 8
shall be in addition to any liability which the Company and the Guarantors may
otherwise have and shall extend, upon the same terms and conditions, to each
officer and director of such Holder, if any, and to each person, if any, who
controls any Holder within the meaning of the Act. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to indemnification from any person who was not
guilty of such fraudulent misrepresentation.
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<PAGE>
9. RULE 144A
The Company and each Guarantor hereby agrees with each Holder, for so long
as any Transfer Restricted Securities remain outstanding and during any period
in which the Company or such Guarantor is not subject to Section 13 or 15(d) of
the Securities Exchange Act, to make available, upon request of any Holder of
Transfer Restricted Securities, to any Holder or beneficial owner of Transfer
Restricted Securities in connection with any sale thereof and any prospective
purchaser of such Transfer Restricted Securities designated by such Holder or
beneficial owner, the information required by Rule 144A(d)(4) under the Act in
order to permit resales of such Transfer Restricted Securities pursuant to Rule
144A.
10. UNDERWRITTEN REGISTRATIONS
No Holder may participate in any Underwritten Registration hereunder unless
such Holder (a) agrees to sell such Holder's Transfer Restricted Securities on
the basis provided in customary underwriting arrangements entered into in
connection therewith and (b) completes and executes all reasonable
questionnaires, powers of attorney, and other documents required under the terms
of such underwriting arrangements.
11. SELECTION OF UNDERWRITERS
For any Underwritten Offering, the investment banker or investment bankers
and manager or managers for any Underwritten Offering that will administer such
offering will be selected by the Holders of a majority in aggregate principal
amount of the Transfer Restricted Securities included in such offering;
provided, that such investment bankers and managers must be reasonably
satisfactory to the Company. Such investment bankers and managers are referred
to herein as the "underwriters."
12. MISCELLANEOUS
(a) Remedies. Each Holder, in addition to being entitled to exercise all
rights provided herein, in the Indenture, the Purchase Agreement or granted by
law, including recovery of liquidated or other damages, will be entitled to
specific performance of its rights under this Agreement. The Company and the
Guarantors agree that monetary damages would not be adequate compensation for
any loss incurred by reason of a breach by them of the provisions of this
Agreement and hereby agree to waive the defense in any action for specific
performance that a remedy at law would be adequate.
(b) No Inconsistent Agreements. Neither the Company nor any Guarantor will,
on or after the date of this Agreement, enter into any agreement with respect to
its securities that is inconsistent with the rights granted to the Holders in
this Agreement or otherwise conflicts with the provisions hereof. Except as set
forth in that certain Amended and Restated Stockholders Agreement, dated as of
February 18, 1996, neither the Company nor any Guarantor has previously entered
into any agreement granting any registration rights with respect to its
securities to any Person. The rights granted to the Holders hereunder do not in
any way conflict with and are not inconsistent with the rights granted to the
holders of the Company's and the Guarantors' securities under any agreement in
effect on the date hereof.
(c) Adjustments Affecting the Notes. Neither the Company nor any Guarantor
will take any action, or voluntarily permit any change to occur, with respect to
the Notes that would materially and adversely affect the ability of the Holders
to Consummate any Exchange Offer.
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<PAGE>
(d) Amendments and Waivers. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to or departures from
the provisions hereof may not be given unless (i) in the case of Section 5
hereof and this Section 12(d)(i), the Company has obtained the written consent
of Holders of all outstanding Transfer Restricted Securities and (ii) in the
case of all other provisions hereof, the Company has obtained the written
consent of Holders of a majority of the outstanding principal amount of Transfer
Restricted Securities. Notwithstanding the foregoing, a waiver or consent to
departure from the provisions hereof that relates exclusively to the rights of
Holders whose securities are being tendered pursuant to the Exchange Offer and
that does not affect directly or indirectly the rights of other Holders whose
securities are not being tendered pursuant to such Exchange Offer may be given
by the Holders of a majority of the outstanding principal amount of Transfer
Restricted Securities subject to such Exchange Offer.
(e) Notices. All notices and other communications provided for or permitted
hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records of the
Registrar under the Indenture, with a copy to the Registrar under the
Indenture; and
(ii) if to the Company or the Guarantors:
Outsourcing Solutions Inc.
300 Galleria Parkway
Suite 690
Atlanta, GA 30339
Telecopier No.: (770) 988-2910
Attention: Allen M. Capsuto, Chief Financial Officer
With a copy to:
White & Case
1155 Avenue of the Americas
New York, NY 10036
Telecopier No.: (212) 819-7817
Attention: Frank L. Schiff
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when receipt
acknowledged, if telecopied; and on the next business day, if timely delivered
to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
(f) Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of each of the parties, including
without limitation and without the need for an express assignment, subsequent
Holders of Transfer Restricted Securities; provided, however, that this
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<PAGE>
Agreement shall not inure to the benefit of or be binding upon a successor or
assign of a Holder unless and to the extent such successor or assign acquired
Transfer Restricted Securities directly from such Holder.
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.
(j) Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(k) Entire Agreement. This Agreement is intended by the parties as a final
expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted with respect to the Transfer
Restricted Securities. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
[signature page follows]
20
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
OUTSOURCING SOLUTIONS INC
By /s/ Tyler T. Zachem
------------------------------
Name: Tyler T. Zachem
Title: Vice President
CFC SERVICES CORP.
By /s/ Tyler T. Zachem
------------------------------
Name: Tyler T. Zachem
Title: Vice President
A.M. MILLER & ASSOCIATES, INC.
By /s/ Tyler T. Zachem
------------------------------
Name: Tyler T. Zachem
Title: Assistant Secretary
THE CONTINENTAL ALLIANCE, INC.
By /s/ Tyler T. Zachem
------------------------------
Name: Tyler T. Zachem
Title: Vice President
ALASKA FINANCIAL SERVICES, INC.
By /s/ Tyler T. Zachem
------------------------------
Name: Tyler T. Zachem
Title: Vice President
21
<PAGE>
SOUTHWEST CREDIT SERVICES, INC.
By /s/ Tyler T. Zachem
------------------------------
Name: Tyler T. Zachem
Title: Vice President
ACCOUNT PORTFOLIOS, INC.
By: /s/ Tyler T. Zachem
------------------------------
Name: Tyler T. Zachem
Title: Assistant Secretary
ACCOUNT PORTFOLIOS G.P., INC.
By /s/ Tyler T. Zachem
------------------------------
Name: Tyler T. Zachem
Title: Assistant Secretary
ACCOUNT PORTFOLIOS, L.P.
By Account Portfolios G.P., Inc.,
its general partner
By /s/ Tyler T. Zachem
------------------------------
Name: Tyler T. Zachem
Title: Assistant Secretary
22
<PAGE>
PERIMETER CREDIT, L.P.
By Account Portfolios G.P., Inc.,
its general partner
By: /s/ Tyler T. Zachem
------------------------------
Name: Tyler T. Zachem
Title: Assistant Secretary
GULF STATE CREDIT, L.P.
By Account Portfolios G.P., Inc.,
its general partner
By /s/ Tyler T. Zachem
------------------------------
Name: Tyler T. Zachem
Title: Assistant Secretary
PAYCO AMERICAN CORPORATION
By /s/ Tyler T. Zachem
------------------------------
Name: Tyler T. Zachem
Title: Assistant Secretary
PAYCO-GENERAL AMERICAN CREDITS,
INC.
By /s/ Tyler T. Zachem
------------------------------
Name: Tyler T. Zachem
Title: Assistant Secretary
NATIONAL ACCOUNT SYSTEMS, INC.
By /s/ Tyler T. Zachem
------------------------------
Name: Tyler T. Zachem
Title: Assistant Secretary
23
<PAGE>
UNIVERSITY ACCOUNTING SERVICE, INC.
By /s/ Tyler T. Zachem
------------------------------
Name: Tyler T. Zachem
Title: Assistant Secretary
ASSET RECOVERY & MANAGEMENT
CORP.
By /s/ Tyler T. Zachem
------------------------------
Name: Tyler T. Zachem
Title: Assistant Secretary
INDIANA MUTUAL CREDIT ASSOCIATION,
INC.
By /s/ Tyler T. Zachem
------------------------------
Name: Tyler T. Zachem
Title: Assistant Secretary
FURST AND FURST, INC.
By /s/ Tyler T. Zachem
------------------------------
Name: Tyler T. Zachem
Title: Assistant Secretary
JENNIFER LOOMIS & ASSOCIATES, INC.
By /s/ Tyler T. Zachem
------------------------------
Name: Tyler T. Zachem
Title: Assistant Secretary
FM SERVICES CORPORATION
By /s/ Tyler T. Zachem
------------------------------
Name: Tyler T. Zachem
Title: Assistant Secretary
24
<PAGE>
QUALINK, INC.
By /s/ Tyler T. Zachem
------------------------------
Name: Tyler T. Zachem
Title: Assistant Secretary
PROFESSIONAL RECOVERIES INC.
By /s/ Tyler T. Zachem
------------------------------
Name: Tyler T. Zachem
Title: Assistant Secretary
PAYCO AMERICAN INTERNATIONAL
CORP.
By /s/ Tyler T. Zachem
------------------------------
Name: Tyler T. Zachem
Title: Assistant Secretary
GOLDMAN, SACHS & CO.
By /s/ Goldman, Sachs & Co.
------------------------------
(Goldman, Sachs & Co.)
CHASE SECURITIES INC.
By /s/ Tom Walker
------------------------------
Name: Tom Walker
Title: Managing Director
On behalf of each of the Purchasers
25
<PAGE>
EXHIBIT 5.1
November __, 1996
Outsourcing Solutions Inc.,
and the Guarantors
c/o Outsourcing Solutions Inc.
300 Galleria Parkway
Suite 690
Atlanta, Georgia 30339
Gentlemen:
We have acted as special counsel to each of Outsourcing Solutions Inc.
(the "Company"), and the Guarantors, in connection with the Registration
Statement on Form S-4 (the "Registration Statement"), to be filed with the
Securities Exchange Commission in connection with the registration under the
Securities Act of 1933, as amended, of $100 million aggregate principal amount
of 11% Series B Senior Subordinated Notes due 2006 of the Company (the "New
Notes"), and the guarantees of the New Notes by the Guarantors (the "New
Guarantees"), to be offered and issued by the Company, and the Guarantors
under an Indenture dated as of November 6, 1996 by and among the Company, the
Guarantors and Wilmington Trust Company, as Trustee.
Upon the basis of the foregoing, we are of the opinion that, upon issuance
thereof in the manner described in the Registration Statement, (a) the New Notes
will be valid and binding obligations of the Company, except as the
enforceability thereof may be limited by bankruptcy, insolvency, reorganization
or other similar laws affecting the enforcement of creditors' rights generally
and by general equitable principles (regardless of whether the issue of
enforceability is considered in a proceeding in equity or at law) and (b) the
New Guarantees will be valid and binding obligations of the Guarantors, except
as the enforceability thereof may be limited by bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of creditors'
rights generally and by general equitable
<PAGE>
WHITE & CASE
Outsourcing Solutions Inc.
Page 2
principles (regardless of whether the issue of enforceability is considered in a
proceeding in equity or at law).
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to this firm under the heading
"Legal Matters" in the Prospectus which is part of the Registration Statement.
Very truly yours,
/s/ WHITE & CASE
-------------------
White & Case
<PAGE>
[White & Case letterhead]
November __, 1996
Outsourcing Solutions Inc.
300 Galleria Parkway
Suite 690
Atlanta, Georgia 30039
Ladies and Gentlemen:
We have acted as your special counsel in connection with the
transactions described in the Registration Statement on Form S-4 (Registration
No.____________) (the "Registration Statement") filed with the Securities and
Exchange Commission (the "Commission") pursuant to the Securities Act of 1933,
as amended (the "Securities Act"), on November___, 1996 by Outsourcing Solutions
Inc., a Delaware corporation (the "Company"), and described in the Company's
Offer to Exchange 11% Series B Senior Subordinated Notes due 2006 (the "New
Notes") for all outstanding 11% Senior Subordinated Notes due 2006 (the "Old
Notes") set forth in the Prospectus (the "Prospectus") contained within the
Registration Statement. Capitalized terms used but not otherwise defined herein
shall have the meaning ascribed thereto in the Registration Statement.
Our opinion is based on an examination of the Registration Statement,
the Prospectus, and such other documents, corporate records and materials as we
have deemed necessary or appropriate for the purposes of this opinion. We
assume that all transactions relating to the exchange pursuant to the Exchange
Offer will be carried out in accordance with the terms of the governing
documents without any amendments thereto or waiver of any terms thereof, and
that such documents represent the entire agreement of the parties thereto. We
understand the relevant facts to be as follows:
The Old Notes were originally issued and sold on November 6, 1996 in a
transaction not registered under the Securities Act, in reliance upon the
exemptions provided in Rule 144A, Regulation D and Regulation S under the
Securities Act. Accordingly, the Old Notes are generally subject to substantial
transfer restrictions unless such notes are
<PAGE>
registered pursuant to the Securities Act or unless an applicable exemption from
the registration requirements of the Securities Act is available. Pursuant to a
Registration Rights Agreement dated November 6, 1996 (the "Registration Rights
Agreement") by and among the Company, the Guarantors and the Initial Purchasers
with respect to the Old Notes, the Company agreed to file within 45 days of the
initial sales of the Old Notes to the Initial Purchasers the registered Exchange
Offer pursuant to which holders of the Old Notes would be offered an opportunity
to exchange their Old Notes for the New Notes which would be issued without
legends restricting the transfer thereof and cause such filing to become
effective within 150 days after the date of such filing. Alternatively, under
certain circumstances, the Company agreed to file a Shelf Registration Statement
covering resales of the Old Notes and to cause such Shelf Registration statement
to be declared effective under the Securities Act. Failure of the Company to
comply with the requirements of the Registration Rights Agreement could result
in the Company becoming obligated to pay Liquidated Damages to the holders of
the Old Notes up to a maximum of $0.50 per week per $1,000 in principal amounts
of the Old Notes; the New Notes will not be subject to such Liquidated Damages.
In general, the New Notes will be freely transferable after the Exchange Offer
without further registration under the Securities Act. Except as noted above,
the terms of the New Notes are identical to those of the Old Notes.
Based on the foregoing and subject to the assumptions, qualifications
and limitations contained herein, we hereby confirm that the statements set
forth in the Prospectus under the heading "Certain U.S. Federal Income Tax
Consequences" constitute our opinion with respect to the material United States
Federal income tax consequences of the exchange pursuant to the Exchange Offer,
and the ownership and disposition of the Old Notes or the New Notes by holders
who hold such notes as capital assets. The possibility exists that contrary
positions may be taken by the Internal Revenue Service and that a court may
agree with such contrary position.
The foregoing opinion is specific to the transactions and the
documents referred to herein, and is based upon the facts known to us as of the
date hereof.
The foregoing opinion is predicated upon the Code, the regulations
thereunder, the administrative and judicial interpretations of the Code and
regulations, in each case as in effect on the date hereof. Any change in
applicable law or in any of the facts or other assumptions upon which we have
relied, may adversely affect such opinion.
We hereby consent to the filing with the Securities and Exchange
Commission of this opinion as an exhibit to Outsourcing Solutions Inc.'s
Registration Statement on Form S-4 relating to the exchange of the Old Notes for
the New Notes and to the reference
<PAGE>
to our firm under the heading "Certain U.S. Federal Income Tax Consequences" in
the Prospectus. In giving such consent, we do not thereby admit that we are in
the category of persons whose consent is required under Section 7 of the
Securities Act.
Very truly yours,
/s/ White & Case
<PAGE>
=================================
AMENDED AND RESTATED STOCKHOLDERS AGREEMENT
Dated as of February 16, 1996
By and Among
OSI HOLDINGS CORP.
THE MDC ENTITIES,
RAINBOW TRUST ONE (FORMERLY ACCOUNT
PORTFOLIOS TRUST ONE),
RAINBOW TRUST TWO (FORMERLY ACCOUNT
PORTFOLIOS TRUST TWO),
CHEMICAL EQUITY ASSOCIATES, L.P.,
THE CLIPPER ENTITIES,
THE MANAGEMENT STOCKHOLDERS
and
THE NON-MANAGEMENT STOCKHOLDERS
=================================
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I CERTAIN DEFINITIONS............................................ 2
ss. 1.1 Certain Definitions.......................................... 2
ARTICLE II TRANSFER OF SHARES............................................. 4
ss. 2.1 Restrictions.................................................. 4
ss. 2.2 Permitted Transfers........................................... 5
ss. 2.3 Sales by MDC Subject to Tag-Along Rights...................... 6
ss. 2.4 Grant to MDC of Bring-Along Rights............................ 7
ss. 2.5 Call Upon Termination of Management Stockholder's
Employment.................................................... 8
ss. 2.6 Grant of Preemptive Rights to the other Stockholders Upon
Sale to MDC................................................... 11
ss. 2.7 Registration Rights........................................... 11
ARTICLE III BOARD OF DIRECTORS OF THE COMPANY.............................. 14
ss. 3.1 Board of Directors............................................ 14
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE
COMPANY AND THE STOCKHOLDERS................................... 15
ss. 4.1 Representations and Warranties of the Stockholders............ 15
ss. 4.2 Representations and Warranties of the Company................. 16
ARTICLE V MISCELLANEOUS.................................................. 17
ss. 5.1 Entire Agreement.............................................. 17
ss. 5.2 Captions...................................................... 17
ss. 5.3 Counterparts.................................................. 17
ss. 5.4 Notices....................................................... 17
ss. 5.5 Successors and Assigns........................................ 19
ss. 5.6 Governing Law................................................. 19
ss. 5.7 Submission to Jurisdiction.................................... 19
ss. 5.8 Benefits Only to Parties...................................... 20
ss. 5.9 Termination................................................... 20
ss. 5.10 Publicity..................................................... 21
(i)
<PAGE>
Page
----
ss. 5.11 Confidentiality............................................... 21
ss. 5.12 Fees; Expenses................................................ 21
ss. 5.13 Amendments; Waivers........................................... 22
SCHEDULE A
(ii)
<PAGE>
AMENDED AND RESTATED STOCKHOLDERS AGREEMENT
AMENDED AND RESTATED STOCKHOLDERS AGREEMENT (this "Agreement"),
dated as of February 16, 1996, by and among OSI Holdings Corp., a Delaware
corporation (the "Company"), McCown De Leeuw & Co. III, L.P., a California
limited partnership, McCown De Leeuw & Co. Offshore (Europe) III, L.P., a
Bermuda limited partnership, McCown De Leeuw & Co. III Offshore (Asia), L.P., a
Bermuda limited partnership, Gamma Fund LLC, a California limited liability
company (each individually, an "MDC Entity," collectively the "MDC Entities" and
collectively together with their Related Persons (as such term is defined in
Section 1.1), "MDC"), Rainbow Trust One (formerly Account Portfolios Trust One),
a trust organized and qualified under the laws of Georgia ("APT-1"), Rainbow
Trust Two (formerly Account Portfolios Trust Two), a trust organized and
qualified under the laws of Georgia ("APT-2" and together with APT-1, "APT"),
Chemical Equity Associates, L.P. ("CEA"), the Clipper Entities (as defined
below), the individuals listed on Schedule A attached hereto under the heading
"Management Stockholders" (each individually, a "Management Stockholder" and
collectively, the "Management Stockholders," it being understood that any other
member of the management of the Company who becomes a stockholder of the Company
(including through the receipt of Call Shares (as defined below)) shall be a
Management Stockholder) and the Persons listed in Schedule A under the heading
"Non-Management Stockholders" (each individually a "Non-Management Stockholder"
and collectively the "Non-Management Stockholders") (each of MDC, APT, the
Management Stockholders and the Non-Management Stockholders is hereinafter
referred to as a "Stockholder," it being understood and agreed that any holder
of Common Stock of the Company during the term of this Agreement shall become a
party to this Agreement and shall be referred to within the term "Stockholder").
W I T N E S S E T H :
WHEREAS, MDC, APT, CEA, the Clipper Entities, the Management
Stockholders and the Non-Management Stockholders own shares of Common Stock of
the Company; and
WHEREAS, the Stockholders each desire to grant to the others certain
rights in connection with the shares of Common Stock now or hereafter owned by
them (collectively, with any shares of Common Stock hereafter issued by the
Company during the term of this Agreement the "Shares") as set forth herein.
<PAGE>
NOW, THEREFORE, in consideration of the mutual covenants herein set
forth and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
ss. 1.1 Certain Definitions. For purposes of this Agreement, the
following terms shall have the following meanings:
(a) "Affiliate" shall mean, with respect to any Person, any other
Person directly or indirectly controlling or controlled by or under direct
or indirect common control with such specified Person. For purposes of
this definition, "control" (including, with correlative meanings, the
terms "controlling," "controlled by" and "under common control with"), as
used with respect to any Person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the
management or policies of such Person, whether through the ownership of
voting securities, by agreement or otherwise.
(b) "business day" shall mean any day except a Saturday, a Sunday or
other day on which commercial banks are required or authorized to close in
New York, New York or Atlanta, Georgia.
(c) "Call Shares" shall mean collectively (i) restricted shares of
Common Stock granted, or (ii) shares of Common Stock received upon the
exercise of options granted, to certain key employees of the Company (or
the Company's Subsidiaries) pursuant to any Company stock option or stock
award plan.
(d) "Clipper Entities" shall mean Clipper Capital Associates, L.P.
("Clipper") and certain Affiliates of Clipper party hereto.
(e) "Common Stock" shall mean the voting and non-voting shares of
common stock, par value $.01 per share, of the Company.
(f) "IPO" shall mean an initial public offering of the voting Common
Stock.
-2-
<PAGE>
(g) "New Securities" shall mean any common stock of the Company of
any class, or any preferred stock or other equity securities of the
Company, whether authorized now or in the future, and any rights, options
or warrants to purchase any such stock or securities, and securities
(including, without limitation, debt obligations) of any type whatsoever
that are, or may become, convertible into or exchangeable for any such
stock or securities, in each case issued after the date hereof.
(h) "Person" shall mean and include an individual, a partnership, a
joint venture, a corporation, a trust, an unincorporated organization and
a government or other department or agency thereof.
(i) "Related Persons" shall mean with respect to (i) any MDC Entity,
(x) any partnership with the same controlling general partner as such MDC
Entity and (y) any of the partners of such MDC Entity which receive Shares
upon a distribution to any such partners by any such MDC Entity in
connection with a liquidation or other winding-up of such MDC Entity, (ii)
CEA or any Clipper Entity, (x) any partnership with the same controlling
general partner as CEA or such Clipper Entity, as the case may be, and (y)
any of the partners of CEA or such Clipper Entity, as the case may be,
which receives Shares upon a distribution to any such partners by CEA or
such Clipper Entity, as the case may be, in connection with a liquidation
or winding up of CEA or such Clipper Entity, as the case may be, and (iii)
any Stockholder which is a corporation, partnership or limited liability
company, any Affiliate of such Stockholder so long as such Affiliate is a
partnership, a corporation, a limited liability company or a trust.
(j) "Subsidiary" shall mean, with respect to any Person, any
corporation, association or other business entity of which more than 50%
of the total voting power of shares of capital stock or other equity
interests entitled (without regard to the occurrence of any contingency)
to vote in the election of directors or other managing authority thereof
is at the time owned or controlled, directly or indirectly, by such Person
and its Subsidiaries.
(k) "Vested Stock Options" shall mean vested stock options for the
Common Stock granted to certain key employees of the Company pursuant any
Company stock option plan.
-3-
<PAGE>
ARTICLE II
TRANSFER OF SHARES
ss. 2.1 Restrictions. (a) No Stockholder shall sell, assign, pledge,
or in any manner, transfer any of the Shares or any right or interest therein,
to any Person (each such action, a "Transfer") except as permitted by this
Agreement.
(b) From and after the date hereof, all stock certificates
representing Shares held by any of the Stockholders shall bear a legend which
shall state as follows:
The shares represented by this certificate are subject to certain
restrictions against transfer set forth in a Stockholders Agreement
dated as of September 21, 1995, as amended and restated on January
10, 1996 and on February 16, 1996. A copy of such Stockholders
Agreement has been filed in the registered office of the Company in
the State of Delaware, where the same may be inspected daily during
business hours.
(c) In addition to the legend required by Section 2.1(b) above, all
stock certificates representing Shares held by any of the Stockholders shall
bear a legend which shall state as follows:
The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended (the "Securities Act"),
and such shares may not be offered, sold, pledged or otherwise
transferred except (1) pursuant to an exemption from, or in a
transaction not subject to, the registration requirements under the
Securities Act or (2) pursuant to an effective registration statement
under the Securities Act, in each case in accordance with any
applicable securities laws of any State of the United States.
(d) In addition to the legends required by Sections 2.1(b) and (c)
above, all stock certificates representing Call Shares shall bear a legend which
shall state as follows:
The shares represented by this certificate are also subject to the
Management Call as described in Section 2.5 of the Stockholders
Agreement referred to above.
Any Call Shares transferred by a Management Stockholder in a Permitted Transfer
described in Section 2.2(a)(i) or (ii) shall remain Call Shares of the
transferee and
-4-
<PAGE>
certificates representing such shares shall bear the legend required by this
Section 2.1(d).
(e) The Company agrees that it will not cause or permit the Transfer
of any Shares to be made on its books unless the Transfer is permitted by this
Agreement and has been made in accordance with the terms hereof.
ss. 2.2 Permitted Transfers. (a) Notwithstanding anything to the
contrary contained herein, a Stockholder may at any time effect any of the
following Transfers (each a "Permitted Transfer" and each transferee, a
"Permitted Transferee"):
(i) A Stockholder's Transfer of any or all Shares owned by such
Stockholder following such Stockholder's death by trust instrument, will
or intestacy to such Stockholder's legal representative, heir or legatee.
(ii) A Stockholder's Transfer of any or all Shares owned by such
Stockholder as a gift or gifts during such Stockholder's lifetime to such
Stockholder's spouse, children, grandchildren or a trust or other legal
entity for the benefit of any Stockholder or any of the foregoing,
provided that such Stockholder retains voting control of the Shares so
transferred.
(iii) A Stockholder's Transfer of any or all Shares owned by it to
its Related Person.
(iv) A Transfer by a Stockholder which is made pursuant to Section
2.3, 2.4, 2.5, 2.6 or 2.7 hereof.
(v) A Transfer by a Stockholder to the Company.
(vi) With respect to MDC, a Transfer by MDC to any Person, provided,
that immediately after such Transfer MDC collectively owns not less than a
majority of the outstanding shares of Common Stock of the Company.
(vii) With respect to APT, a Transfer by APT to any of its
beneficiaries.
(viii) With respect to APT, a Transfer by APT to the Company
pursuant to the Pledge Agreement dated the date hereof among APT and the
Company.
-5-
<PAGE>
(ix) With respect to Peter C. Rosvall ("Rosvall"), a Transfer to
Willard Fancher, Raymond Henning and Global Ventures, Inc., provided that
the aggregate amount of all such Transfers shall not exceed 16,400 Shares.
(b) In any such Transfer referred to above in Section 2.2(a) (other
than a public offering pursuant to Section 2.7 hereof in which event this
Agreement shall terminate in accordance with the provisions of Section 5.9
hereof), the Permitted Transferee shall receive and hold such Shares subject to
the provisions of this Agreement as if such Permitted Transferee were an
original signatory hereto and shall be deemed to be a party to this Agreement.
ss. 2.3 Sales by MDC Subject to Tag-Along Rights. (a) In the event
that MDC proposes to effect a Transfer (other than a Permitted Transfer
described in Sections 2.2(a)(iii) or (vi) above) of any of the Shares owned by
it (the "MDC Stock"), then MDC shall promptly give written notice (the "MDC
Notice") to the Company and the other Stockholders at least thirty days prior to
the closing of such Transfer. The MDC Notice shall describe in reasonable detail
the proposed Transfer including, without limitation, the name of, and the number
of shares of MDC Stock to be purchased by, the transferee, the purchase price of
each share of MDC Stock to be sold, any other significant terms of such sale and
the date such proposed sale is expected to be consummated, it being understood
that if such proposed Transfer by MDC is (i) in connection with an IPO or (ii)
in connection with another public offering pursuant to a registration statement
filed under Section 2.7 (in which case the piggyback rights provided for in
Section 2.7(a) shall apply), the subsequent provisions of this Section 2.3 shall
not apply except that if such proposed Transfer is in connection with an IPO the
subsequent provisions of this Section 2.3 shall apply to, and give rights to,
the other Stockholders; provided that if MDC is a selling stockholder in the IPO
solely by virtue of the fact that it is undertaking to provide the
over-allotment option in connection with such IPO, then the subsequent
provisions of this Section 2.3 shall apply to, and give rights to, all
Stockholders other than the Management Stockholders; and provided further,
however, that in connection with any such IPO, the Company shall use its best
efforts to cause the applicable Shares to be registered or qualified to the
extent required to permit the sale or other Transfer thereof as contemplated
pursuant to this Section 2.3.
(b) Each Stockholder shall have the right, exercisable upon
irrevocable written notice to MDC within fifteen days after receipt of the MDC
Notice, to participate in such sale of MDC Stock on the same terms and
conditions applicable to the MDC Transfer as set forth in the MDC Notice,
including, without limitation, the making of all representations, warranties,
indemnifications (including participating in any escrow arrangements) and
similar agreements (it being understood that each Stockholder's indemnification
obligation will be limited to its pro rata portion of the
-6-
<PAGE>
purchase price paid in connection with such sale), and to sell all or any
portion of the number of the Shares owned by it as determined in accordance with
the calculation set forth below. Each Stockholder other than MDC electing to
participate in the sale described in the MDC Notice (each a "Participant") shall
indicate in its notice of election to MDC the maximum number of its Shares it
desires to sell in such sale (which number may be in excess of the number of
Shares set forth in the MDC Notice). Each such Participant shall be entitled to
sell a "pro rata portion" of such maximum number. To the extent one or more of
the Stockholders exercise such right of participation in accordance with the
terms and conditions set forth in this Section 2.3, the number of shares of MDC
Stock that MDC may sell in the transaction shall be correspondingly reduced. For
purposes of this Section 2.3, "pro rata portion" shall mean for each Participant
a fraction the numerator of which is the number of Shares of MDC Stock proposed
to be sold in the MDC Notice and the denominator of which is the sum of (A) the
total number of Shares owned by MDC immediately prior to the sale proposed in
the MDC Notice and (B) the total number of Shares desired to be sold by all of
the Participants electing to participate in the sale. Not later than five days
prior to the date scheduled for such sale, MDC shall provide notice to each
Participant of the "pro rata portion" of Shares to be sold by such Participant
in such sale.
(c) Any Participant shall effect its participation in the sale by
delivering on the date scheduled for such sale to MDC for delivery to the
prospective transferee one or more certificates, in proper form for transfer,
which represent the number of Shares which such Participant is entitled to sell
in accordance with this Section 2.3. Such stock certificate or certificates that
any Participant delivers to MDC shall be delivered on such date to such
transferee in consummation of the sale of the Shares pursuant to the terms and
conditions specified in the MDC Notice, and MDC shall concurrently therewith
remit to each such Participant that portion of the sale proceeds to which such
Participant is entitled by reason of its participation in such sale. MDC's sale
of Shares in any sale proposed in an MDC Notice shall be effected on the terms
and conditions set forth in such MDC Notice.
(d) The exercise or non-exercise of the rights of the Stockholders
hereunder to participate in one or more sales of Shares made by MDC shall not
adversely affect their rights to participate in subsequent sales of Shares
subject to this Section 2.3.
(e) In no event shall MDC receive special consideration or a control
premium in connection with any sale contemplated by this Section 2.3.
(f) Notwithstanding any of the provisions of this Section 2.3,
holders of Class B Non-Voting Common Shares of the Company shall not have any of
the rights set forth in this Section 2.3 if the exercise of such rights violates
any applicable
-7-
<PAGE>
laws or regulations, including, without limitation, Section 4 of the Bank
Holding Company Act of 1956, as amended and any regulations or orders issued by
the Board of Governors of the Federal Reserve System thereunder.
ss. 2.4 Grant to MDC of Bring-Along Rights. (a) Each time the
Stockholders of the Company meet, or act by written consent in lieu of meeting,
for the purpose of approving a "Sale of the Business" (as such term is
hereinafter defined), each Stockholder agrees to vote all of its Shares, and to
sell all of its Shares, as directed by MDC. In order to effect the foregoing
covenant, each Stockholder hereby grants to MDC with respect to all of such
Stockholder's Shares an irrevocable proxy (which is deemed to be coupled with an
interest) for the term of this Agreement with respect to any Stockholder vote or
action by written consent to effect the Sale of the Business. As used herein,
"Sale of the Business" shall mean any transaction or series of transactions
(whether structured as a stock sale, merger, consolidation, reorganization,
asset sale or otherwise) negotiated on an arm's-length basis, which results in
the sale or transfer of all or substantially all of the assets or shares of
capital stock of the Company to an unaffiliated bona fide third party in which
all consideration payable to holders of the Common Stock is distributed pro rata
pursuant to stock ownership.
(b) In furtherance of its covenants in Section 2.4(a), each
Stockholder hereby agrees to cooperate fully with MDC and the purchaser in any
such Sale of the Business and, to execute and deliver all documents (including
purchase agreements) and instruments as MDC and the purchaser request to effect
such Sale of the Business, including, without limitation, the making of all
representations, warranties and indemnifications (including participating in any
escrow arrangements) and similar arrangements (it being understood that each
Stockholder's indemnification obligation will be limited to its pro rata portion
of the purchase price paid in connection with such Sale of the Business), but
excluding (i) representations, warranties and indemnifications to be made by
each Stockholder in its respective individual capacity (other than
representations, warranties and indemnifications relating to existence and good
standing, ownership of, and title to, the Shares, authorization, validity and
enforceability of agreements and no conflicts with agreements) (ii) employment
agreements and (iii) covenants not to compete (the determination of whether or
not to enter into any such agreements being in the sole and absolute discretion
of each Stockholder). MDC agrees that upon such Sale of the Business each
Stockholder will receive its pro rata share of the consideration paid by the
purchaser determined on the basis of such Stockholder's Share ownership.
(c) In no event shall MDC receive special consideration or a control
premium in connection with a sale contemplated by this Section 2.4.
-8-
<PAGE>
ss. 2.5 Call Upon Termination of Management Stockholder's
Employment. (a) Notwithstanding any other provision of this Agreement to the
contrary, upon the death, disability, retirement or termination of employment
(each a "Call Event") of any Management Stockholder employed immediately prior
to such Call Event by the Company or any of the Company's Subsidiaries, the
Company shall, on the terms and subject to the conditions set forth in this
Section 2.5, have the right (the "Management Call"), at the option of the
Company, to purchase all but not less than all of the Call Shares and Vested
Stock Options held by such Management Stockholder, and any Permitted Transferee
of Call Shares or Vested Stock Options of such Management Stockholder pursuant
to Section 2.2(a)(i) or (ii), by delivering written notice to such Management
Stockholder or his or her Permitted Transferees, within 60 days after the
occurrence of the Call Event, at the prices set forth below.
(b) If the employment of a Management Stockholder is terminated upon
death, disability, termination or resignation after a date which is five years
from the date hereof or voluntary retirement from full-time employment with the
Company or its Subsidiaries at age 59-1/2 or greater after a minimum of five
years continuous full-time employment with the Company or its Subsidiaries since
the initial date of employment, then the offering price for the Call Shares or
Vested Stock Options offered to the Company pursuant to this Section 2.5 shall
be equal to the fair market value of such Shares or Vested Stock Options at such
time as determined in good faith by the Board of Directors of the Company
(without discount for lack of marketability or minority interest).
(c) If the employment of a Management Stockholder is terminated (i)
by the Company or any Subsidiary of the Company without "cause" (as hereinafter
defined) or (ii) as a result of the resignation of such Management Stockholder
either (A) with the consent of the Company or (B) for "good reason" (as
hereinafter defined), in the case of both clauses (i) and (ii), prior to a date
which is five years from the date hereof then the offering price for the Call
Shares and Vested Stock Options offered to the Company pursuant to this Section
2.5 shall be an amount equal to the greater of (i) the purchase price originally
paid for such Shares and Vested Stock Options by such Management Stockholder and
(ii) the Book Value of such Shares and Vested Stock Options. For purposes of
this Section 2.5, "Book Value" per Share shall mean an amount equal to $12.50
per share of the Company plus or minus, as the case may be, the positive or
negative changes in the stockholders' equity per share of Common Stock of the
Company (calculated in accordance with generally accepted accounting principles,
consistently applied) from the date of the consummation of this Agreement until
the last day of the month immediately preceding the month in which the Call
Event occurs. "Book Value" per Vested Stock Option shall mean the "Book Value"
per share (as calculated above) less the exercise price in respect of such
Vested Stock Option. For purposes of this Section 2.5 "good reason" shall mean
the occurrence of
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any of the following events, except for the occurrence of such an event in
connection with the termination of a Management Stockholder's employment by the
Company or any of its Subsidiaries for cause: (i) a significant reduction in the
authorities, duties or responsibilities of such Management Stockholder; or (ii)
a failure to pay base salary after the due date thereof provided that the
Company shall have received written notice of such failure to pay from such
Management Stockholder and shall not have paid (or caused to be paid) such base
salary amount within 20 days of such notice, a reduction in base salary, the
reduction or discontinuance of any incentive compensation plan or the taking of
any action which materially adversely affects such Management Stockholder's
participation in or benefits under any fringe benefit provided to such
Management Stockholder; provided that the actions referred to in clause (ii)
above (other than with respect to a failure to pay, or reduction in, base
salary) shall not constitute "good reason" events if such actions were taken by
the Company or its Subsidiaries as part of an overall plan by the Company or its
Subsidiaries and made applicable to the same extent to all executives of the
Company or its Subsidiaries.
(d) If the employment of a Management Stockholder is terminated by
the Company or any Subsidiary "for cause" or as a result of the resignation of
such Management Stockholder without the consent of the Company, other than for
"good reason" as defined in Section 2.5(c) above, in each case, prior to a date
which is five years from the date hereof, then the offering price for the Call
Shares or Vested Stock Options held by such Management Stockholder offered to
the Company pursuant to this Section 2.5 shall be an amount equal to the lesser
of (i) the purchase price originally paid for such Shares and Vested Stock
Options by such Management Stockholder and (ii) the Book Value (as previously
defined) of such Shares and Vested Stock Options. For purposes of this Section
2.5, a Stockholder shall be deemed to have been terminated "for cause" if his
employment was terminated for: (i) embezzlement, theft or other misappropriation
of any property of the Company or any Subsidiary, (ii) gross or willful
misconduct resulting in substantial loss to the Company or any Subsidiary or
substantial damage to the reputation of the Company or any Subsidiary, (iii) any
act involving moral turpitude which results in a conviction for a felony
involving moral turpitude, fraud or misrepresentation, (iv) gross neglect of his
assigned duties to the Company or any Subsidiary, (v) gross breach of his
fiduciary obligations to the Company or any Subsidiary, (vi) a breach of his
covenant not to compete with the Company or its Subsidiaries, or (vii) any
chemical dependence which materially affects the performance of his duties and
responsibilities to the Company or any Subsidiary; provided that in the case of
the misconduct set forth in clauses (iv) and (vii) above, such misconduct shall
continue for a period of 30 days following written notice thereof by the Company
to the Management Stockholder.
(e) If the Company shall elect to exercise the Management Call in
accordance with this Section 2.5, the closing of the purchase by the Company
shall take
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place no later than 45 days after the exercise of the Management Call, which
time in the case of the death of a Management Stockholder may be extended to
provide for probate of such Stockholder's estate. On the date scheduled for such
closing, the price for the Shares subject to the Management Call, determined in
accordance with this Section 2.5, shall be paid in full to the Management
Stockholder holding such Shares (including, if applicable, such Shares held by
any Permitted Transferee of such Management Stockholder pursuant to Section
2.2(a)(i) or (ii)) by the Company against delivery of a certificate or
certificates, as the case may be, representing the purchased Shares in proper
form for transfer. In connection with such closing, such Management Stockholder
shall warrant to the Company good and marketable title to the purchased Shares,
free and clear of all claims, liens, charges, encumbrances and security
interests of any nature whatsoever except those under this Agreement.
ss. 2.6 Grant of Preemptive Rights to the other Stockholders Upon
Sale to MDC. The Company hereby grants to the other Stockholders preemptive
rights to purchase a portion of New Securities that the Company may from time to
time after the date hereof propose to issue to MDC and its Affiliates at the
same price (the "Preemptive Price") offered to MDC and its Affiliates (which
price shall be a per share price equal to the fair market value of the New
Securities as determined in good faith by the Board of Directors of the
Company); provided that it is understood that if the New Securities (or any
portion thereof) is non-voting common stock of the Company then such preemptive
right, in the case of all Stockholders other than CEA and the Clipper Entities,
shall be the right to purchase voting common stock of the Company rather than
non-voting common stock of the Company; and provided further that regardless of
whether the New Securities (or any portion thereof) is voting or non-voting
common stock of the Company then the preemptive right, in the case of CEA and
the Clipper Entities, shall be the right to purchase non-voting common stock of
the Company. In the event (and on each occasion) that the Company shall decide
to undertake an issuance of New Securities to MDC and/or its Affiliates, the
Company will give all Stockholders written notice (a "Preemptive Notice") of the
Company's decision, describing the type of New Securities, the Preemptive Price,
and the general terms upon which the Company has decided to issue the New
Securities (including, without limitation, the expected timing of such issuance
which will in no event exceed 60 days). Each of the other Stockholders shall
have 10 business days from the date on which it receives the Preemptive Notice
to agree to purchase its pro rata portion of such New Securities for the
Preemptive Price and upon the general terms specified in the Preemptive Notice
by giving written notice to the Company and stating therein the quantity of New
Securities to be purchased by such Stockholder. If, in connection with such a
proposed issuance of New Securities, any such Stockholders shall for any reason
fail or refuse to give such written notice to the Company within such 10-day
period, such Stockholder shall, for all purposes of this Section 2.6, be deemed
to have refused (in that particular instance only) to purchase any of such New
Securities and to have
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waived (in that particular instance only) all of its rights under this Section
2.6 to purchase any of such New Securities.
ss. 2.7 Registration Rights. (a) If the Company intends (other than
in connection with an IPO) to register Shares on Form S-1, Form S-2 or Form S-3
or any corresponding form applicable at the time under the Securities Act as
then in effect (or any similar statute then in effect), the Company will give
written notice to each Stockholder of its intention to do so, at least 15 days
prior to the time of the filing of any registration statement or qualification
papers, and at the written request of any Stockholder given within 10 days after
receipt of any such notice (which request shall specify the number of Shares
intended to be sold or disposed of by such Stockholder and shall describe the
nature of any proposed sale or other disposition thereof which may include a
distribution over a reasonable period of time), the Company will use its best
efforts to cause such Shares to be registered or qualified to the extent
required (in the opinion of the Company's counsel) to permit the sale or other
disposition thereof (in accordance with the methods described by such
Stockholder) (such right of each Stockholder to participate in the proposed
offering, a "piggy-back right"). The number of Shares that any Stockholder
intends to sell shall be subject to underwriters' cutbacks resulting from the
underwriters' conclusion that the inclusion of all of the Shares requested to be
included in the proposed offering would materially adversely affect the
distribution of Shares in such offering or the market price of the Company's
Common Stock if such Common Stock is publicly traded. Such underwriters'
cutbacks shall be made on a pro rata basis by multiplying the number of Shares
that each Stockholder desires to sell in the proposed offering by a fraction the
numerator of which shall be the number of Shares that the underwriters deem
appropriate to sell in the proposed offering and the denominator of which shall
be the total number of Shares that all of the Stockholders initially desire to
sell in the proposed offering.
(b) All out-of-pocket expenses, disbursements and fees in connection
with any action to be taken under this Section 2.7 shall be borne by the
Company, including the reasonable fees and expenses of one counsel for all
participating Stockholders except in connection with a registration on Form S-3
(or such corresponding form applicable at the time under the Securities Act) in
which case the fees and expenses of counsel, if any, for participating
Stockholders shall be for each participating Stockholder's own account, provided
that the foregoing expenses shall in no event include the underwriters' discount
in connection with an offering.
(c) In the event of any registration under the provisions of this
Section 2.7, the Company, to the extent permitted by law, will indemnify any
Stockholder participating in such registration, its respective officers,
directors and trustees, if any, and each Person, if any, who controls such
Stockholder within the meaning of Section 15 of the Securities Act, against all
losses, claims, damages and lia-
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bilities caused by any untrue statement of a material fact contained in the
registration statement or prospectus (and as amended or supplemented if the
Company shall have furnished any amendments or supplements thereto), or caused
by any omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading and will reimburse
such Stockholder, its officers, directors and trustees and any Person, if any,
who controls such Stockholder within the meaning of Section 15 of the Securities
Act, against any legal or other expenses reasonably incurred by such
Stockholder, officer, director or Person in connection with investigating or
defending any such losses, claims, damages and liabilities, except insofar as
such losses, claims, damages or liabilities are caused by any untrue statement
or omission contained in information furnished in writing to the Company by such
Stockholder participating in such registration or by underwriters expressly for
use therein. The obligation of the Company under this Section 2.7 to register
securities for any of the Stockholders shall be subject to the condition that
each such Stockholder and the underwriters involved in the offering shall
furnish to the Company in writing such information as shall be reasonably
requested by the Company for use in connection with the preparation of any such
registration statement or prospectus and, to the extent permitted by law, shall
indemnify the Company, its directors and officers, any other underwriter, the
other Stockholders participating in such registration and each Person, if any,
who controls the Company, any other underwriter or such other Stockholders,
within the meaning of Section 15 of the Securities Act, against all losses,
claims, damages and liabilities caused by any untrue statement or omission
contained in information so furnished in writing to the Company by such
Stockholder or such underwriter expressly for use therein.
(d) If the indemnification provided for in this Section 2.7 from the
indemnifying party is unavailable to any indemnified party hereunder in respect
of any losses, claims, damages or liabilities referred to herein, then the
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities in such proportion as is
appropriate to reflect the relative fault of the indemnifying party and
indemnified parties in connection with the actions which resulted in such
losses, claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative fault of such indemnifying party and indemnified
parties shall be determined by reference to, among other things, whether any
action in question, including any untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact, has been
made by, or relates to information supplied by, such indemnifying party or
indemnified parties, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action. The amount paid
or payable by a party under this Section 2.7 as a result of the losses, claims,
damages and liabilities referred to above shall be deemed to include any legal
or other fees or expenses reasonably incurred by such party in connection with
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any investigation or proceeding. The parties hereto agree that it would not be
just and equitable if contribution pursuant to this Section 2.7(d) were
determined by pro rata allocation or by any other method of allocation which
does not take account of the equitable considerations referred to herein.
(e) As expeditiously as possible after the effectiveness of any
registration statement pursuant to this Section 2.7 and prior to such date as
shall be certified to the Company as the date upon which the Transfer
contemplated by such registration statement will be effected by any
participating Stockholder, the Company will deliver in exchange for certificates
representing Shares so registered bearing the legends set forth in Section 2.1,
certificates therefor not bearing such legends as shall be required to effect
such Transfer. In the event that the proposed Transfer is not made as
contemplated by any such participating Stockholder, by acceptance thereof such
Stockholder shall be deemed to have agreed that it will deliver such
certificates not bearing such legends to the Company in exchange for new
certificates bearing the legends set forth in Section 2.1 if the Company shall
request and the Company agrees that it will make such exchange.
(f) The registration rights provided in this Section 2.7 shall
terminate after an IPO as to any Stockholder which can immediately sell all of
its Shares in a single sale pursuant to Rule 144 under the Securities Act.
(g) Each of the Stockholders agrees that in connection with any
public offering (including an IPO), such Stockholder will not, without the prior
written consent of the Company, directly or indirectly, offer to sell, sell,
contract to sell (including, without limitation, any short sale), grant any
option for the sale of, acquire any option to dispose of, or otherwise dispose
of any Shares for a period of 180 days following the date of the consummation of
such public offering.
ARTICLE III
BOARD OF DIRECTORS OF THE COMPANY
ss. 3.1 Board of Directors. (a) Each Stockholder agrees to vote all
of the voting Shares held by such Stockholder so as to elect and maintain a
Board of Directors of the Company (the "Board") composed of the following: (i)
David B. Kreiss, or if he ceases to be Chief Executive Officer of the Company,
the successor Chief Executive Officer of the Company, (ii) one person designated
by McCown De Leeuw & Co. III, L.P., (iii) two persons designated by McCown De
Leeuw & Co. Offshore (Europe) III, L.P., (iv) one person designated by McCown De
Leeuw & Co. III Offshore (Asia), L.P., (v) two persons designated by APT (one
person if APT shall
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hold less than 20% of the outstanding Common Stock at any time), (vi) Rosvall,
but only so long as Rosvall (together with any Permitted Transferees of Rosvall
pursuant to Section 2.2(a) (ii) of this Agreement) shall continue to own at
least 280,000 shares of Stock, (vii) within one year of the date of this
Agreement, two persons who shall be "independent directors" designated by McCown
De Leeuw & Co. III, L.P. in consultation with the Chief Executive Officer of the
Company and APT and (viii) within one year of the date of this Agreement, one
person who shall be an "independent director" designated by McCown De Leeuw &
Co. III Offshore (Asia), L.P. in consultation with the Chief Executive Officer
of the Company and APT. In addition, notwithstanding the above, each Stockholder
agrees to vote all of the voting Shares held by such Stockholder so as to elect
at any time requested to do so the following persons to the Board: (i) one
person designated by McCown De Leeuw & Co. III, L.P., (ii) two persons
designated by McCown De Leeuw & Co. Offshore (Europe) III, L.P. and (iii) one
person designated by McCown De Leeuw & Co. III Offshore (Asia), L.P.
(b) In the event that any director designated by any Stockholder for
any reason ceases to serve as a director during his term of office, the
resulting vacancy on the Board shall be filled by a director designated by such
Stockholder.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE
COMPANY AND THE STOCKHOLDERS
ss. 4.1 Representations and Warranties of the Stockholders. (a) Each
Stockholder represents and warrants, severally and not jointly, that: (i) such
Stockholder is acquiring, or has acquired, the shares of Common Stock for
investment for such Stockholder's own account and not with a view to, or for the
resale in connection with, the distribution or other disposition thereof; (ii)
such Stockholder will not, during the term of this Agreement, directly or
indirectly, offer, transfer, sell, assign, pledge, hypothecate or otherwise
dispose of any shares of Common Stock except in accordance with this Agreement;
(iii) such Stockholder (A) has either (1) preexisting personal or business
relationships with the Company, or any of its respective officers, directors or
any of its respective Affiliates or (2) such knowledge and experience in
financial and business matters such that such Stockholder is capable of
evaluating the merits and risks relating to the purchase of shares of Common
Stock under this Agreement, or such Stockholder has been advised by a
representative possessing such knowledge and experience who is unaffiliated with
or who is not compensated, directly or indirectly, by the Company or any of its
Affiliates, or (B) is a Trust, the beneficiaries of which are Persons meeting
the requirements of (1) and/or
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(2) of clause (iii)(A) above; (iv) such Stockholder has been given an
opportunity which such Stockholder deems adequate to obtain information and
documents relating to the Company and to ask questions of and receive answers
from representatives of the Company concerning such Stockholder's investment in
the Common Stock of the Company; (v) such Stockholder's financial condition is
such that such Stockholder can afford to bear the economic risk of holding the
Common Stock for an indefinite period of time; such Stockholder has adequate
means of providing for such Stockholder's current needs and contingencies and
has no need for such Stockholder's investment in the Common Stock to be liquid;
and (vi) such Stockholder can afford to suffer a complete loss of such
Stockholder's investment in the Common Stock.
(b) Each Stockholder further acknowledges that such Stockholder has
been advised by the Company that: (i) the offer and sale of the Common Stock has
not been registered under the Securities Act of 1933 (the "1933 Act"), but is
intended to be exempt from registration pursuant to Section 4(2) of the 1933 Act
and the rules promulgated thereunder by the Securities and Exchange Commission,
and that the Shares cannot be sold, pledged, assigned or otherwise disposed of
unless the same is subsequently registered under the 1933 Act or an exemption
from such registration is available; (ii) it is anticipated that there will not
be any public market for the Shares in the foreseeable future; (iii) a
restrictive legend in the form set forth in Section 2.1 shall be placed on the
certificates representing the Shares; and (iv) a notation shall be made in the
appropriate records of the Company indicating that the Shares are subject to
restrictions on transfer and if the Company should at some time in the future
engage the services of a stock transfer agent, appropriate stop transfer
restrictions will be issued to such transfer agent with respect to the Shares.
(c) Each Stockholder further represents and warrants that (i) such
Stockholder has full right, power and authority to execute, deliver and perform
this Agreement; (ii) all actions necessary or required to be taken by or on the
part of such Stockholder to execute, deliver and perform this Agreement and to
consummate the transactions contemplated by this Agreement have been duly
authorized and approved by all necessary or required action of such Stockholder
and have been validly taken; and (iii) this Agreement has been duly executed and
delivered by such Stockholder and is a valid and binding agreement of such
Stockholder enforceable in accordance with its terms, except to the extent that
its enforceability may be subject to applicable bankruptcy, reorganization,
insolvency, moratorium and similar laws affecting the enforcement of creditors'
rights generally and by general principles of equity.
ss. 4.2 Representations and Warranties of the Company. The Company
represents and warrants that (i) it has the corporate power and authority to
execute, deliver and perform this Agreement; (ii) all actions necessary or
required to be taken by or on the part of the Company to execute, deliver and
perform this Agreement and
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to consummate the transactions contemplated by this Agreement have been duly
authorized and approved by all necessary or required action of the Company and
have been validly taken; and (iii) this Agreement has been duly executed and
delivered by the Company and is a valid and binding agreement of the Company
enforceable in accordance with its terms, except to the extent that its
enforceability may be subject to applicable bankruptcy, reorganization,
insolvency, moratorium and similar laws affecting the enforcement of creditors'
rights generally and by general principles of equity.
ARTICLE V
MISCELLANEOUS
ss. 5.1 Entire Agreement. This Agreement contains the entire
agreement between the parties hereto with respect to the subject matter hereof
and supersedes all prior arrangements or understandings (whether written or
oral) with respect thereto.
ss. 5.2 Captions. The Article and Section captions used herein are
for reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
ss. 5.3 Counterparts. For the convenience of the parties, any number
of counterparts of this Agreement may be executed by the parties hereto and each
such executed counterpart shall be deemed to be an original instrument.
ss. 5.4 Notices. All notices, consents, requests, instructions,
approvals and other communications provided for herein and all legal process in
regard hereto shall be validly given, made or served, if in writing and
delivered by personal delivery, overnight courier, telecopier or registered or
certified mail, return-receipt requested and postage prepaid addressed as
follows:
If to the Company, to:
OSI Holdings Corp.
c/o McCown De Leeuw & Co.
101 East 52nd Street, 31st Floor
New York, New York 10022
Attention: David E. King
Tel.: (212) 355-5500
Fax: (212) 355-6283 or (212) 355-6945
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with copies to White & Case
if to White & Case, to:
White & Case
1155 Avenue of the Americas
New York, New York 10036
Attention: Frank L. Schiff, Esq.
Tel.: (212) 819-8752
Fax: (212) 354-8113
if to APT-1, to:
c/o HBR Capital
Two Ravinia Drive
Suite 1750
Atlanta, Georgia 30346
Attention: Mr. Frank J. Hanna III
Tel.: (770) 901-5805
Fax: (770) 901-5815
with a copy to Troutman Sanders LLP
if to APT-2, to:
c/o HBR Capital
Two Ravinia Drive
Suite 1750
Atlanta, Georgia 30346
Attention: Mr. David G. Hanna
Tel.: (770) 901-5805
Fax: (770) 901-5815
with a copy to Troutman Sanders LLP
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if to Troutman Sanders LLP, to:
Troutman Sanders
Nationsbank Plaza
600 Peachtree Street, N.E.
Atlanta, Georgia 30308
Attention: Robert W. Grout, Esq.
Tel.: (404) 885-3000
Fax: (404) 885-3900
if to any of the Management Stockholders or the Non-Management
Stockholders, to the addresses set forth opposite each of their
names on Schedule A attached hereto,
or to such other address as any such party hereto may, from time to time,
designate in writing to all other parties hereto, and any such communication
shall be deemed to be given, made or served as of the date so delivered or, in
the case of any communication delivered by mail, as of the date so received.
ss. 5.5 Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the Company, the Stockholders and their respective
heirs, devisees, legal representatives, successors, permitted assigns and other
permitted transferees. The rights of a Stockholder under this Agreement may not
be assigned or otherwise conveyed by any Stockholder except in connection with a
Transfer of Shares which is in compliance with this Agreement.
ss. 5.6 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO SUCH STATE'S CHOICE OF LAW PROVISIONS.
ss. 5.7 Submission to Jurisdiction. (a) Each of the parties hereto
hereby irrevocably acknowledges and consents that any legal action or proceeding
brought with respect to any of the obligations arising under or relating to this
Agreement may be brought in the courts of the State of New York or in the United
States District Court for the Southern District of New York, as the party
bringing such action or proceeding may elect, and each of the parties hereto
hereby irrevocably submits to and accepts with regard to any such action or
proceeding, for itself and in respect of its property, generally and
unconditionally, the jurisdiction of the aforesaid courts. Subject to Section
5.7(b), the foregoing shall not limit the rights of any party to serve process
in any other manner permitted by law. The foregoing consents to jurisdiction
shall not constitute general consents to service of process in the State of New
York for any
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purpose except as provided above and shall not be deemed to confer rights on any
Person other than the respective parties to this Agreement.
(b) The parties hereto agree that any judgment obtained by any party
hereto or its successors or assigns in any action, suit or proceeding referred
to above may, in the discretion of such party (or its successors or assigns), be
enforced in any jurisdiction, to the extent permitted by applicable law.
(c) The parties hereto agree that the remedy at law for any breach
of this Agreement may be inadequate and that should any dispute arise concerning
the sale or disposition of any Shares or the voting thereof or any other similar
matter hereunder, this Agreement shall be enforceable in a court of equity by an
injunction or a decree of specific performance. Such remedies shall, however, be
cumulative and nonexclusive, and shall be in addition to any other remedies
which the parties hereto may have.
(d) The parties hereto agree that the prevailing party or parties,
as the case may be, in any action, suit, arbitration or other proceeding arising
out of or with respect to this Agreement or the transactions contemplated hereby
shall be entitled to reimbursement of all costs of litigation, including
reasonable attorneys' fees, from the non-prevailing party. For purposes of this
Section 5.7(e), each of the "prevailing party" and the "non-prevailing party" in
any action, suit, arbitration or other proceeding shall be the party designated
as such by the court, arbitrator or other appropriate official presiding over
such action, suit, arbitration or other proceeding, such determination to be
made as a part of the judgment rendered thereby.
ss. 5.8 Benefits Only to Parties. Nothing expressed by or mentioned
in this Agreement is intended or shall be construed to give any Person, other
than the parties hereto and their respective successors or permitted assigns,
any legal or equitable right, remedy or claim under or in respect of this
Agreement or any provision herein contained, this Agreement and all conditions
and provisions hereof being intended to be and being for the sole and exclusive
benefit of the parties hereto and their respective successors and permitted
assigns, and for the benefit of no other Person.
ss. 5.9 Termination. This Agreement shall terminate upon the
happening of any one of the following events:
(a) the voluntary or involuntary dissolution of the Company;
(b) the consummation of an IPO, except that (i) the rights of the
Stockholders under Section 2.7 shall survive such termination and (ii) the
rights
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of the Stockholders under Section 2.3 shall survive such termination for a
period of two years; and
(c) the tenth anniversary of the date of this Agreement, unless this
Agreement has been renewed or extended by a written instrument on or prior
to such date;
provided, however, the provisions of Section 4.1 (other than clause (a)(ii)
thereof) shall survive any termination of this Agreement.
ss. 5.10 Publicity. Except as otherwise required by applicable laws
or regulations, none of the parties hereto shall issue or cause to be issued any
press release or make or cause to be made any other public statement in each
case relating to or connected with or arising out of this Agreement or the
matters contained herein, without obtaining the prior approval of MDC and the
Company to the contents and the manner of presentation and publication thereof.
ss. 5.11 Confidentiality. Each of the parties hereto hereby agrees
that throughout the term of this Agreement it shall keep (and shall cause its
directors, officers, trustees, employees, representatives and outside advisors
and its affiliates to keep) all non-public information relating to the Company
(including any such information received prior to the date hereof) confidential
except information which (i) becomes known to such Stockholder from a source,
other than the Company, its directors, officers, employees, representatives or
outside advisors, which source is not obligated to the Company to keep such
information confidential or (ii) becomes generally available to the public
through no breach of this Agreement by any party hereto. Each of the parties
hereto agrees that such non-public information (a) shall be communicated only to
those of its trustees, directors, officers, employees, representatives, outside
advisors and affiliates who need to know such non-public information and (b)
will not be used by such party or its trustees, directors, officers, employees,
representatives, outside advisors or affiliates either to compete with the
Company or to conduct itself in a manner inconsistent with the antitrust laws of
the United States or any state. Notwithstanding the foregoing, a party hereto
may disclose non-public information if required to do so by a court of competent
jurisdiction or by any governmental agency; provided, however, that prompt
notice of such required disclosure be given to the Company prior to the making
of such disclosure so that the Company may seek a protective order or other
appropriate remedy. In the event that such protective order or other remedy is
not obtained, the party hereto required to disclose the non-public information
will disclose only that portion which such party is advised by opinion of
counsel is legally required to be disclosed and will request that confidential
treatment be accorded such portion of the non-public information.
-21-
<PAGE>
ss. 5.12 Fees; Expenses. The parties hereto acknowledge that MDC
Management Company III, L.P. (or its successors or assigns) shall receive from
the Company, on behalf of the Company and its Subsidiaries, an ongoing
management fee (not to exceed $300,000 per year) as set forth in the Advisory
Services Agreement, dated as of September 21, 1995, between the Company (on
behalf of the Company and its Subsidiaries) and MDC Management Company III,
L.P., in each case plus reimbursement for its out-of-pocket expenses. The
Company shall reimburse each of the respective board representatives who are not
employees of the Company for their travel and out-of-pocket expenses incurred in
connection with their serving on the Company's board of directors.
ss. 5.13 Amendments; Waivers. No provision of this Agreement may be
amended, modified or waived without approval of 80% of the holders of the Common
Stock; provided that no such amendment or waiver of a provision of this
Agreement which adversely affects the rights of APT, Rosvall, Heller, CEA, any
Clipper Entity or any of the Management Stockholders in a manner that does not
adversely affect all other Stockholders equally may be made without such
Stockholders' consent; provided that each of the Management Stockholders and APT
shall be considered as a group with the determination by the holders of a
majority of the outstanding Shares held by (i) the Management Stockholders to be
binding on all Management Stockholders and (ii) APT to be binding on each of
APT-1 and APT-2.
-22-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first set forth above.
OSI HOLDINGS CORP.
By /s/ David E. King
---------------------------
Name: David E. King
Title: Secretary & Treasurer
McCOWN De LEEUW & CO. III, L.P.
By MDC Management Company III,
L.P., its general partner
By /s/ David E. King
---------------------------
Name: David E. King
Title: General Partner
McCOWN De LEEUW & CO. OFFSHORE
(EUROPE) III, L.P.
By MDC Management Company IIIE,
L.P., its general partner
By /s/ David E. King
---------------------------
Name: David E. King
Title: General Partner
<PAGE>
McCOWN De LEEUW & CO. III OFFSHORE
(ASIA), L.P.
By MDC Management Company IIIA,
L.P., its general partner
By /s/ David E. King
---------------------------
Name: David E. King
Title: General Partner
GAMMA FUND, LLC
By /s/ David E. King
---------------------------
Name: David E. King
Title: Member
RAINBOW TRUST ONE
By /s/ Frank J. Hanna, III
---------------------------
Name: Frank J. Hanna, III
Title: Trustee
RAINBOW TRUST TWO
By /s/ Frank J. Hanna, III
---------------------------
Name: David G. Hanna
Title: Trustee
THE MANAGEMENT STOCKHOLDERS
/s/ David B. Kreiss
--------------------------------
Name: David B. Kreiss
/s/ Gregory M. Shelton
--------------------------------
Name: Gregory M. Shelton
<PAGE>
/s/ Willard L. Fancher
--------------------------------
Name: Willard L. Fancher
/s/ Gerald Weinberg
--------------------------------
Name: Gerald Weinberg
THE NON-MANAGEMENT STOCKHOLDERS
/s/ Peter C. Rosvall
--------------------------------
Name: Peter C. Rosvall
/s/ Alan M. Miller
--------------------------------
Name: Alan M. Miller
HELLER FINANCIAL, INC.
By: /s/ Steven Laux
---------------------------
Name: Steven Laux
Title: Assistant Vice President
/s/ R. Hunt Greene
--------------------------------
Name: R. Hunt Greene
GLOBAL VENTURES, INC.
By: /s/ C.L. Jeffrey
---------------------------
Name: C.L. Jeffrey
Title: President
<PAGE>
CHEMICAL EQUITY ASSOCIATES, L.P.
By: CHEMICAL VENTURE PARTNERS,
its General Partner
By: /s/ Michael R. Hannon
---------------------------
Name: Michael R. Hannon
Title: Principal
CLIPPER CAPITAL ASSOCIATES, L.P.
By: CLIPPER CAPITAL ASSOCIATES, INC.,
its General Partner
By: /s/ Eugene P. Lynch
---------------------------
Name: Eugene P. Lynch
Title: Attorney-in-Fact
CLIPPER/MERCHANT PARTNERS, L.P.
By: CLIPPER CAPITAL ASSOCIATES, L.P.,
its General Partner
By: CLIPPER CAPITAL ASSOCIATES, INC.,
its General Partner
By: /s/ Eugene P. Lynch
---------------------------
Name: Eugene P. Lynch
Title: Attorney-in-Fact
<PAGE>
CLIPPER/MERBAN, L.P.
By: CLIPPER CAPITAL ASSOCIATES, L.P.,
its General Partner
By: CLIPPER CAPITAL ASSOCIATES, INC.,
its General Partner
By: /s/ Eugene P. Lynch
---------------------------
Name: Eugene P. Lynch
Title: Attorney-in-Fact
CLIPPER EQUITY PARTNERS I, L.P.
By: CLIPPER CAPITAL ASSOCIATES, L.P.,
its General Partner
By: CLIPPER CAPITAL ASSOCIATES, INC.,
its General Partner
By: /s/ Eugene P. Lynch
---------------------------
Name: Eugene P. Lynch
Title: Attorney-in-fact
CLIPPER/EUROPEAN RE, L.P.
By: CLIPPER CAPITAL ASSOCIATES, L.P.,
its General Partner
By: CLIPPER CAPITAL ASSOCIATES, INC.,
its General Partner
By: /s/ Eugene P. Lynch
---------------------------
Name: Eugene P. Lynch
Title: Attorney-in-fact
<PAGE>
CS FIRST BOSTON MERCHANT
INVESTMENTS 1995/96, L.P.
By: MERCHANT CAPITAL, INC.,
its General Partner
By: /s/ Eugene P. Lynch
---------------------------
Name: Eugene P. Lynch
Title: Attorney-in-Fact
<PAGE>
SCHEDULE A
MANAGEMENT AND NON-MANAGEMENT STOCKHOLDERS
Management Stockholders
David B. Kreiss
Gregory M. Shelton
Gerald Weinberg
Willard L. Fancher
Address for Management Stockholders
David B. Kreiss
5605 Lake Island Drive
Atlanta, GA 30327
Gregory M. Shelton
6136 Kenbrook Drive
Acworth, GA 30101
Gerald Weinberg
c/o A.M. Miller & Associates, Inc.
3033 Excelsior Blvd.
Minneapolis, MN 55416
Willard L. Fancher
P.O. Box 92090
Anchorage, AK 99509
Non-Management Stockholders
Peter C. Rosvall
Alan M. Miller
Heller Financial, Inc.
R. Hunt Greene
Global Ventures, Inc.
Chemical Equity Associates, L.P.
Clipper Capital Associates, L.P.
Clipper/Merchant Partners, L.P.
Clipper/Merban, L.P.
Clipper Equity Partners I, L.P.
<PAGE>
SCHEDULE A
Page 2
Clipper/European RE, L.P.
CS First Boston Merchant
Investments 1995/96, L.P.
Address for Non-Management Stockholders
Peter C. Rosvall
13661 62nd Ave. N.E.
Kirkland, WA 98034
Alan M. Miller
c/o A.M. Miller & Associates, Inc.
3033 Excelsior Blvd.
Minneapolis, MN 55416
Heller Financial, Inc.
500 West Monroe Street
Chicago, IL 60661
Attn: Steven Laux
R. Hunt Greene
865 Partenwood Rd.
Long Lake, MN 55356
Global Venture, Inc.
1325 Fourth Avenue
Seattle, WA 98101
Attention: C.L. Jeffrey
Chemical Equity Associates, L.P.
c/o Chemical Venture Partners
270 Park Avenue, 5th Floor
New York, NY 10017
Attention: Michael Hannon
Any Clipper Entity
c/o Clipper Capital Associates, L.P.
12 East 49th Street, 30th Floor
New York, NY 10017
Attention: Eugene Lynch
<PAGE>
ACKNOWLEDGEMENT
The undersigned, David Burton, hereby acknowledges receipt of the
Amended and Restated Stockholders Agreement (the "Stockholders Agreement"),
dated as of February 16, 1996, by and among OSI Holdings Corp. and various
stockholders of OSI Holdings Corp. attached hereto and hereby agrees to be bound
by all of the terms and provisions of the Stockholders Agreement as a Management
Stockholder (as such term is defined in the Stockholders Agreement).
IN WITNESS WHEREOF, the undersigned has executed this
acknowledgement as of March 19, 1996.
/s/ David Burton
---------------------------
David Burton
<PAGE>
ACKNOWLEDGEMENT
The undersigned, Raymond A. Henning, hereby acknowledges receipt of
the Amended and Restated Stockholders Agreement (the "Stockholders Agreement"),
dated as of February 16, 1996, by and among OSI Holdings Corp. and various
stockholders of OSI Holdings Corp. attached hereto and hereby agrees to be bound
by all of the terms and provisions of the Stockholders Agreement as a Management
Stockholder (as such term is defined in the Stockholders Agreement).
IN WITNESS WHEREOF, the undersigned has executed this
acknowledgement as of February 16, 1996.
/s/ Raymond A. Henning
---------------------------
Raymond A. Henning
<PAGE>
ACKNOWLEDGEMENT
The undersigned, Steven Berg, hereby acknowledges receipt of the
Amended and Restated Stockholders Agreement (the "Stockholders Agreement"),
dated as of February 16, 1996, by and among OSI Holdings Corp. and various
stockholders of OSI Holdings Corp. attached hereto and hereby agrees to be bound
by all of the terms and provisions of the Stockholders Agreement as a Management
Stockholder (as such term is defined in the Stockholders Agreement).
IN WITNESS WHEREOF, the undersigned has executed this
acknowledgement as of March 19, 1996.
/s/ Steven Berg
---------------------------
Steven Berg
<PAGE>
ACKNOWLEDGEMENT
MLQ Investors, L.P. ("MLQ") hereby acknowledges receipt of the
Amended and Restated Stockholders Agreement (the "Stockholders Agreement"),
dated as of February 16, 1996, by and among OSI Holdings Corp. and various
stockholders of OSI Holdings Corp. attached hereto and hereby agrees to be bound
by all of the terms and provisions of the Stockholders Agreement as a
Non-Management Stockholder (as such term is defined in the Stockholders
Agreement).
IN WITNESS WHEREOF, MLQ has caused this acknowledgement to be
executed by an officer thereunto duly authorized, as of May 17, 1996.
MLQ INVESTORS, L.P.
By: MLQ Investors, Inc., its
general partner
By: /s/ Peter T. Cirenza
---------------------------
Name: Peter T. Cirenza
Title: Vice President
Acknowledged and Agreed:
OSI HOLDINGS CORP.
By: /s/ Tyler T. Zachem
---------------------------
Name: Tyler T. Zachem
Title: Vice President
<PAGE>
McCOWN De LEEUW & CO. III, L.P.
By MDC Management Company III,
L.P., its general partner
By: /s/ David E. King
---------------------------
Title: General Partner
McCOWN De LEEUW & CO. OFFSHORE
(EUROPE) III, L.P.
By MDC Management Company IIIE,
L.P., its general partner
By: /s/ David E. King
---------------------------
Title: General Partner
McCOWN De LEEUW & CO. III
(ASIA), L.P.
By MDC Management Company IIIA,
L.P., its general partner
By: /s/ David E. King
---------------------------
Title: General Partner
GAMMA FUND, LLC
By: /s/ David E. King
---------------------------
Title: Member
<PAGE>
ADVISORY SERVICES AGREEMENT
THIS ADVISORY SERVICES AGREEMENT (the "Agreement") is entered into
as of this 21st day of September, 1995, by and between OSI Holdings Corp. (on
behalf of itself and its subsidiaries), a Delaware corporation (the "Company"),
and MDC Management Company III, L.P., a California limited partnership ("MDC").
WHEREAS, contemporaneously with the execution and delivery of this
Agreement the Company and certain subsidiaries of the Company have acquired all
of the partnership interests in Account Portfolios, L.P., Perimeter Credit, L.P.
and Gulf State Credit, L.P. (the "Acquisition"); and
WHEREAS, the execution and delivery of this Agreement is a material
condition to the consummation of the Acquisition.
NOW, THEREFORE, in consideration of the mutual promises of the
parties hereinafter set forth, MDC and the Company hereto agree as follows:
1. Retention as Management Advisor. Subject to each of the terms,
conditions and provisions of this Agreement, the Company and its subsidiaries
hereby retain MDC and MDC hereby agrees to be retained by the Company and its
subsidiaries to perform those financial and managerial functions set forth in
Section 4 of this Agreement.
2. Term.
2.1 Subject to the provisions for termination set forth herein, this
Agreement shall be from the date hereof through September 21, 2005, and
automatically renewable annually thereafter unless MDC receives 30 days notice
of the termination prior to the renewal date.
2.2 The Company, by written notice to MDC, authorized by a majority
of the directors other than those who are partners, principals or employees of
MDC (or an affiliate of MDC), may terminate this Agreement for justifiable
cause, which shall mean any of the following events: material breach by MDC of
any of its obligations hereunder; misappropriation by MDC of funds or property
of
<PAGE>
the Company or other willful breach in the course of the consultancy; any
attempt by MDC to secure personal profit related to the business of the Company
and not fairly disclosed to and approved by the Board of Directors or gross
neglect by MDC in the fulfillment of its obligations hereunder.
2.3 MDC, by thirty (30) days' prior written notice to the Company,
may terminate this Agreement at any time.
3. Compensation.
3.1 Upon execution and delivery of this Agreement, the Company shall
pay MDC a transaction fee of $1,600,000 for services rendered on behalf of the
Company and its subsidiaries in connection with the Acquisition.
3.2 As compensation to MDC for its management and advisory services
to the Company and its subsidiaries under this Agreement, the Company, on behalf
of itself and its subsidiaries, agrees to pay MDC a fee in the amount of three
hundred thousand dollars ($300,000) per year. Such fee shall be payable in
arrears in equal quarterly installments, on or before the last day of March,
June, September and December, commencing on December 31, 1995.
3.3 MDC shall also be entitled to be reimbursed by the Company for
all reasonable out-of-pocket costs and expenses incurred by MDC and any of its
partners, employees or affiliates in connection with (i) providing the Services
under this Agreement, or (ii) serving as a member of the Board of Directors or
as an officer of the Company including, without limitation, all travel expenses.
Reimbursement shall be provided upon receipt by the Company of invoices from MDC
with respect to such costs and expenses.
4. Duties as Management Advisor. MDC's duties as a financial and
management consultant to the Company and its subsidiaries under the provisions
of this Agreement shall include providing services in obtaining equity, debt,
lease and acquisition financing, as well as providing other financial and
consulting services for the operation and growth of the Company at any time
during the term of this Agreement (the "Services"). Such Services shall be
rendered upon the reasonable request of the Company. MDC shall devote as much
time as reasonably necessary to the affairs of the Company.
-2-
<PAGE>
5. Decisions. The Company reserves the right to make all decisions
with regard to any matter upon which MDC has rendered its advice and
consultation, and there shall be no liability to MDC for any such advice
accepted by the Company pursuant to the provisions of this Agreement.
6. Authority of Management Advisor. MDC shall have authority only to
act as a consultant and advisor to the Company. MDC shall have no authority to
enter into any agreement or to make any representation, commitment or warranty
binding upon the Company or to obtain or incur any right, obligation or
liability on behalf of the Company.
7. Independent Contractor. Except as may be expressly provided
elsewhere in this Agreement, MDC shall act as an independent contractor and
shall have complete charge of its personnel engaged in the performance of the
Services.
8. Books and Records. MDC's books and records with respect to the
Services and any reimbursable costs ("Books and Records") shall be kept at MDC's
office located at 3000 Sand Hill Road, Building 3, Suite 290, Menlo Park,
California 94025. The Books and Records shall be kept in accordance with
recognized accounting principles and practices, consistently applied, and shall
be made available for the Company or the Company's representatives' inspection
and copying at all times during regular office hours. MDC shall not be required
to maintain the Books and Records for more than three (3) years after
termination of this Agreement.
9. Confidential Information.
9.1 The parties acknowledge that during the course of provision of
the Services, the Company may disclose confidential information to MDC or its
affiliated companies. MDC shall treat such information as the Company's
confidential property and safeguard and keep secret all such information about
the Company, including reports and records, customer lists, trade lists, trade
practices, and prices pertaining to the Company's business coming to the
attention or knowledge of MDC because of any activities conducted by MDC under
or pursuant to this Agreement.
9.2 MDC shall exercise its best efforts and shall cause any of its
affiliated companies to exercise their best efforts to prevent any confidential
information from being disclosed to third parties, except as necessarily
required in the performance of the Services and except under terms of
-3-
<PAGE>
confidentiality satisfactory to the Company. This obligation shall remain in
effect until the Company shall release MDC or its affiliated companies from
their obligations under this paragraph 9, but in no event later than three (3)
years after the completion of the Services. MDC shall not use any of the
Company's confidential information in any way that is detrimental to the
interests of the Company, directly or indirectly, either during the term of this
Agreement or at any time thereafter.
10. Indemnification. The Company agrees to indemnify and hold MDC
and its partners, officers, directors and agents harmless from damages, losses
or expenses (including, without limitation, reasonable attorneys' fees and
expenses) incurred or paid directly or indirectly, by MDC as a result or arising
out of any actions taken by MDC in connection with the performance of the
Services under this Agreement except to the extent that such actions resulted
solely from the gross negligence or willful misconduct of MDC. The Company
hereby further agrees to reimburse MDC for all reasonable fees and expenses
(including attorneys fees) incurred in connection with defending any such claim
to which MDC is a party, as such fees and expenses are incurred by MDC.
11. Notices and Communications.
11.1 All communications relating to the day-to-day activities
necessary to render the Services shall be exchanged between the respective
representatives of the Company and MDC, who will be designated by the parties
promptly upon commencement of the Services.
11.2 All other notices, demands, and communications required or
permitted hereunder shall be in writing and shall be delivered personally to the
respective representatives of the Company and MDC set forth below or shall be
mailed by registered mail, postage prepaid, return receipt requested. Notices,
demands and communications hereunder shall be effective: (i) If delivered
personally, on delivery; or (ii) if mailed, forty-eight (48) hours after deposit
thereof in the United States mail addressed to the party to whom such notice,
demand, or communication is given. Until changed by written notice, all such
notices, demands and communications shall be addressed as follows:
-4-
<PAGE>
If to the Company: OSI Holdings Corp.
c/o David B. Kreiss
5605 Lake Island Drive
Atlanta, GA 30327
Tel: (404) 250-0707
Fax: (404) 250-0707
If to MDC: McCown De Leeuw & Co.
101 East 52nd Street
31st Floor
New York, New York 10022
Attn: Mr. Tyler Zachem
Tel: (212) 355-5500
Fax: (212) 355-6283 or
(212) 355-6945
With copies to: McCown De Leeuw & Co.
3000 Sand Hill Road
Building 3, Suite 290
Menlo Park, CA 94025
Attn: Mr. Steven A.
Zuckerman
Tel: (415) 854-6000
Fax: (415) 854-0853
12. Assignments. MDC shall not assign this Agreement in whole or in
part without the prior written consent of the Company, provided, however, that
such consent shall not be unreasonably withheld with respect to assignments to
MDC's affiliates or wholly-owned subsidiaries; and provided further, that any
such assignment shall not relieve MDC of any of its obligations under this
Agreement.
Subject to the foregoing, all the terms and conditions contained
herein shall inure to the benefit of and shall be binding upon the parties
hereto and their respective heirs, personal representatives, successors and
assigns.
13. Applicable Law and Severability. This document shall, in all
respects, be governed by the laws of the State of Delaware applicable to
agreements executed and to be wholly performed within the State of Delaware.
Nothing contained herein shall be construed so as to require the commission of
any act contrary to law, and wherever there is any conflict between any
provisions contained herein and any contrary present or future statute, law,
ordinance or regulation, the latter shall prevail, but the provision of this
document which is affected shall be curtailed and
-5-
<PAGE>
limited only to the extent necessary to bring it within the requirements of the
law.
14. Further Assurances. Each of the parties hereto shall execute and
deliver any and all additional papers, documents and other assurances, and shall
do any and all acts and things reasonably necessary in connection with the
performance of their obligations hereunder and to carry out the intent of the
parties hereto.
15. Attorneys' Fees. In the event any action is instituted by a
party to enforce any of the terms and provisions contained herein, the
prevailing party in such action shall be entitled to such reasonable attorneys'
fees, costs and expenses as may be fixed by the court.
16. Time of the Essence. Time is of the essence of this Agreement
and all the terms, provisions, covenants and conditions hereof.
17. Captions. The captions appearing at the commencement of the
paragraphs hereof are descriptive only and for convenience and reference. Should
there be any conflicts between any such caption and the paragraph at the head of
which it appears, the paragraph and not such caption shall control and govern in
the construction of this document.
18. Modifications or Amendments. No amendment, change or
modification of this document shall be valid unless it is in writing and signed
by all the parties hereto and expressly states that an amendment, change or
modification of this Agreement is intended.
19. Separate Counterparts. This document may be executed in one or
more separate counterparts, each of which, when so executed, shall be deemed to
be an original. Such counterparts shall, together, constitute and be one and the
same instrument.
20. Entire Agreement. This Agreement shall constitute the entire
understanding and agreement between the parties hereto and shall supersede any
and all letters of intent, whether written or oral, pertaining to the subject
matter of this Agreement.
-6-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized officers on the date first appearing above.
OSI HOLDINGS CORP.
By: /s/ David B. Kreiss
---------------------------
Name: David B. Kreiss
Title: President
MDC MANAGEMENT COMPANY III, L.P.,
a California limited partnership
By: /s/ David E. King
---------------------------
General Partner
-7-
<PAGE>
MASTER SERVICES AGREEMENT
THIS SERVICES AGREEMENT is made and entered into as of the 1st day of
October, 1992, by and between ACCOUNT PORTFOLIOS, L.P., a Georgia limited
partnership ("Client") and HBR CAPITAL, LTD., a Georgia corporation ("HBR").
W I T N E S S E T H :
WHEREAS, HBR is a corporation which provides management and investment
services; and
WHEREAS, Client desires that HBR provide certain management and
investment services on the terms and conditions hereinafter set forth;
NOW, THEREFORE, for and in consideration of the covenants and
conditions hereinafter set forth, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
mutually agree as follows:
ARTICLE 1
TERM
This Agreement shall commence as of the date hereof and shall continue
for a period of one (1) year (hereinafter, sometimes referred to as the "Initial
Term"). Thereafter, this Agreement shall renew for successive one (1) year
periods unless at least sixty (60) days prior to the end of the Initial Term or
any renewal thereof (as the case may be) notice of termination shall be given by
either party to the other. As used herein, the "Term" of this Agreement means
the Initial Term and all renewals thereof.
ARTICLE 2
SERVICES
HBR shall render, or shall cause to be rendered, to Client all of the
management and investment services described on Exhibit A attached hereto and
made a part hereof
<PAGE>
(as said Exhibit A may, from time to time, be amended in a writing executed by
both HBR and Client).
ARTICLE 3
COMPENSATION
3.1 Fees. Client shall pay to HBR a fee equal to Seventy Five Thousand
Dollars ($75,000.00) per month for the first six months and Fifty Thousand
Dollars ($50,000.00) per month thereafter as compensation for the management and
investment services provided by HBR pursuant to this Agreement.
3.2 Invoices. HBR shall invoice the Client monthly for all amounts
payable hereunder, and such invoice shall be payable in thirty (30) days. The
balance of any payment to be made by Client to HBR pursuant to this Agreement
not paid when due, shall bear interest at an annual rate equal to the Prime
Rate, as adjusted, and shall be payable upon demand. As used herein, "Prime
Rate" means the prime rate per annum as announced from time to time in the Wall
Street Journal under "Money Rates," in effect on the first day of a calendar
quarter, and adjusted to such rate in effect on the first day of each subsequent
calendar quarter.
ARTICLE 4
CLIENT'S REPRESENTATIONS AND WARRANTIES
As an inducement to HBR to enter into this Agreement, Client hereby
makes the following representations and warranties to HBR (which representations
and warranties shall survive the execution of this Agreement and shall continue
at all times during the Term hereof):
4.1 Organization. Client is a limited partnership duly organized,
validly existing and in good standing under the laws of the State of Georgia,
and has all requisite power and authority to conduct its business and own,
operate and lease its properties as and in the places where such business is now
conducted and such properties are now owned, leased or operated, and is
qualified as a foreign limited partnership in all jurisdictions in which the
character of its activities makes qualification necessary.
4.2 Binding Obligation and Authority. This Agreement has been duly
executed and constitutes the valid obligation of Client enforceable in
accordance with
-2-
<PAGE>
its terms. The execution and delivery of this Agreement, and the consummation of
the transactions provided for in this Agreement, by Client will not conflict
with, or result in a breach of, any relevant law or regulations or violate any
order, writ, injunction or decree of any court, administrative agency or
governmental body. The execution, delivery and performance of this Agreement and
the performance of its duties hereunder will not conflict with the Articles of
Limited Partnership or Partnership Agreement of Client.
4.3 Liability of Client. Notwithstanding any other provision herein,
Client shall be responsible for its own liabilities, debts and contracts, and
HBR does not assume and shall not be responsible for any such debt, liability,
contract or other obligation of Client. Client does hereby agree to indemnify
HBR and hold it harmless from any claim, liability, expense or cost of defense
of any kind or nature whatsoever (other than those solely resulting from HBR's
gross negligence, willful misconduct or failure to exercise good faith) arising
from or out of this Agreement, or the operations of the Client.
ARTICLE 5
HBR'S REPRESENTATIONS AND WARRANTIES
HBR represents and warrants to Client (which representations and
warranties shall survive the execution of this Agreement shall continue at all
times during the Term hereof) as follows:
5.1 Organization. HBR is a corporation duly organized, validly
existing and in good standing under the laws of the State of Georgia.
5.2 Valid and Binding Agreement. This Agreement has been duly executed
and delivered and constitutes the valid and binding obligation of HBR,
enforceable in accordance with its terms subject, however, to creditors' rights
in general and the exercise of judicial discretion.
5.3 Binding Obligations. The execution and delivery of this Agreement,
and the consummation of the transactions provided for in this Agreement, by HBR
will not conflict with, or result in a breach of, any relevant law or
regulations or violate any order, writ, injunction or decree of any court,
administrative agency or governmental body to which HBR is subject.
-3-
<PAGE>
5.4 Authority. The execution, delivery and performance of this
Agreement and the performance of its duties hereunder shall not conflict with
the Articles of Incorporation or By-laws of HBR.
ARTICLE 6
INDEMNIFICATION
6.1 Indemnification by Client. Client shall indemnify, defend and hold
harmless HBR and its officers, directors, shareholders, employees and agents
against any and all liabilities, claims, damages, actions, causes of action,
losses, costs and expenses (collectively, the "Claims") it, they, or any of them
may incur which arise out of or due to a breach of any representation, warranty
or undertaking of Client contained herein or any other action or failure to act
of Client. Any such Claims of HBR, or sums which HBR shall be required to pay in
this respect, shall be immediately paid by Client to HBR. The obligations of
Client set forth in this Section 6.1 shall include the payment of any and all
interest, penalties and reasonable attorneys' fees incurred by HBR in connection
with the defense or satisfaction of any Claims. HBR shall promptly advise Client
of the assertion of any claim which might give rise to a Claim against Client;
HBR shall have the right to defend such Claims with counsel of its choice at
Client's sole cost; provided, that HBR shall consult with Client during the
course of such defense; provided further, however, that in the event HBR shall
not exercise its right to defend such Claims, such defense shall be undertaken
by Client at its sole expense. This indemnification shall not apply to any Claim
arising out of or due to the gross negligence or willful misconduct of HBR.
6.2 Indemnification by HBR. HBR shall indemnify, defend and hold
harmless Client and its officers, directors, shareholders, employees and agents
against any and all liabilities, claims, damages, actions, causes of action,
losses, costs and expenses (collectively, the "Claims") it, they, or any of them
may incur which arise out of or due to a breach of any representation, warranty
or undertaking of HBR contained herein or any other action or failure to act of
HBR. Any such Claims of Client, or sums which Client shall be required to pay in
this respect, shall be immediately paid by HBR to Client. The obligations of HBR
set forth in this Section 6.2 shall include the payment of any and all interest,
penalties and reasonable attorneys' fees incurred by Client in connection with
the defense or satisfaction of any Claims. Client shall promptly advise HBR of
the assertion of any claim which might give rise to a Claim against HBR; Client
shall have the right to defend such Claims with counsel of its choice at HBR's
sole cost; provided, that Client shall consult with HBR during the course of
such defense; provided further, however, that in the event Client shall not
exercise its right to defend such Claims, such defense shall be undertaken by
HBR at
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<PAGE>
its sole expense. This indemnification shall not apply to any Claim arising out
of or due to the gross negligence or willful misconduct of Client.
ARTICLE 7
RELATIONSHIP OF PARTIES
Any implication in this Agreement to the contrary notwithstanding, in
performing its services hereunder, HBR shall act solely as an independent
contractor. Nothing in this Agreement shall be construed to establish a
partnership, joint venture or agency between HBR and Client. No provision
contained herein shall be construed as authorizing or empowering either party to
assume or create any obligation or responsibility whatsoever, express or
implied, on behalf, or in the name, of the other party in any manner, or to make
any representation, warranty or commitment on behalf of the other party, except
as shall be provided for herein. In no event shall either party be liable for
(i) any loss incurred by the other party in the course of its operations, or
(ii) any debts, obligations or liabilities of the other party, whether due or to
become due. All activities of HBR hereunder shall be conducted in its own name
(except where Client's consent or participation is reasonably required, in which
event Client shall, as the case may be, consent or participate).
ARTICLE 8
DEFAULT; REMEDIES
In the event either party shall breach any term or condition of this
Agreement and shall fail to cure such breach within fifteen (15) days from the
date of written notice from the non-breaching party specifying such breach, the
non-breaching party may terminate this Agreement and the breaching party shall,
in the event of any such termination, pay to non-breaching party any fees or
other payments due to the non-breaching party as of the date of termination, and
the non-breaching party may pursue any remedy available to it at law or equity.
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<PAGE>
ARTICLE 9
TERMINATION
Subject to Article 8 hereof, this Agreement may be terminated prior to
the expiration of the Term set forth in Article 1 hereof only by mutual written
agreement of the parties.
ARTICLE 10
BOOKS AND RECORDS
HBR shall keep, in a form reasonably acceptable to Client, books of
account and records of its activities, collections and expenditures pursuant to
this Agreement. Said books of account and records of HBR shall be available for
inspection by any officer of Client upon reasonable request and with reasonable
advance notice.
ARTICLE 11
NONDISCLOSURE
HBR, in the course of its activities pursuant to this Agreement, will
have access to, and will have disclosed to it, trade secrets, proprietary
information and other confidential information concerning, inter alia, customer
lists and business affairs of Client. These constitute valuable business assets
of Client, any of which, if used, applied or disclosed, even in part, will cause
substantial and irreparable damage to Client's business and asset value.
Accordingly, HBR shall not, during the term of this Agreement, use, apply or
disclose any of these trade secrets or proprietary information without Client's
prior written consent. Moreover, HBR shall not, during the term of this
Agreement and for a period of one (1) year thereafter, use, apply or disclose
any other confidential information without Client's prior written consent. If
HBR shall not comply with these restrictions, Client shall, in addition to any
other rights and remedies it may have, be entitled to enjoin and restrain HBR
from violating or continuing to violate them. Also, in the event this Agreement
shall be terminated, HBR agrees that, if requested by Client, HBR shall
acknowledge that it has received the disclosures and is under the obligations
referred to in this Article 11.
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<PAGE>
ARTICLE 12
MISCELLANEOUS PROVISIONS
12.1 Interpretation. This Agreement shall be subject to, and
interpreted in accordance with, the laws of the State of Georgia.
12.2 Severability. If any term, covenant, condition or provision of
this Agreement, or the application thereof to any person or circumstance, shall,
to any extent, be invalid or unenforceable, the remainder of this Agreement, or
the application of such term or provision to persons or circumstances other than
those as to which it is invalid or unenforceable, shall not be affected thereby,
and each term, covenant, condition and provision of this Agreement shall be
valid and be enforced to the fullest extent permitted by law.
12.3 Headings. Any title or heading is inserted only for convenience,
and is in no way to be construed as a part of this Agreement or as a limitation
on the scope of the particular provision to which they refer.
12.4 Entire Agreement. This Agreement shall constitute the entire
agreement between the parties, and no variance or modification thereof shall be
valid and enforceable unless in writing and signed by the parties hereto.
12.5 Notices. All notices to be given pursuant to this Agreement shall
be in writing and shall be deemed to have been fully given when deposited in the
United States Mail, registered or certified, return receipt requested, postage
prepaid, and addressed as follows:
If to HBR at:
HBR Capital, Ltd.
Two Ravinia Drive
Suite 1750
Atlanta, Georgia 30346
If to Client at:
Account Portfolios, L.P.
Two Ravinia Drive
Suite 1750
Atlanta, Georgia 30346
or any other address as may be given at any time, and from time to time, by HBR,
to Client, or to HBR by Client, in accordance with this Section 12.5.
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<PAGE>
12.6 Successors and Assigns. This Agreement shall be binding upon, and
shall inure to the benefit of, the successors and assigns of the respective
parties (unless cancelled pursuant to the terms of this Agreement).
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<PAGE>
IN WITNESS WHEREOF, the parties have caused their duly authorized
officers to execute and deliver this Agreement all as of the date first above
written.
HBR CAPITAL, LTD.
By: /s/ Frank J. Hanna, III
-----------------------------
Title: C.E.O.
--------------------------
ACCOUNT PORTFOLIOS, L.P.
BY: AP Management, Inc.,
General Partner
By: /s/ David G. Hanna
-----------------------------
Title: President
--------------------------
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<PAGE>
EXHIBIT A
HBR shall perform the following services to Client:
1) It will advise Client on the purchase of new portfolios;
2) It will manage and provide oversight for Client operations;
3) It will perform the accounting and financial functions for Client;
4) It will examine new opportunities for Client; and
5) It will ensure the Client performs regulatory compliance.
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<PAGE>
LEASE
THIS LEASE made and entered into this 12 day of July, 1979, between NOVA, a
partnership, hereinafter called Lessor, and PAYCO AMERICAN CORPORATION, a
Delaware corporation, hereinafter called Lessee;
WITNESSETH:
WHEREAS, Lessor proposes to construct improvements to be used solely by
Lessee as more particularly described in Exhibit A attached hereto and
incorporated herein by reference as if fully set forth, and which improvements
shall be located upon a parcel of land described on Exhibit B attached hereto,
located in the City of Brookfield on Executive Drive, which is part of the
Southeast One-quarter of Section 27, Town 7 North, Range 20 East, City of
Brookfield, Waukesha County, Wisconsin, containing 4.974 acres. The improvements
consisting of a three story office building of approximately 66,708 square feet
shall be completed as expeditiously as possible by Lessor in accordance with the
plans and specifications approved by the parties.
NOW THEREFORE, in consideration of the premises and of the mutual benefits
to be derived therefrom, it is agreed as follows:
1. Lessor hereby leases, demises and rents unto the Lessee, and Lessee
hereby leases, take and hires of and from the Lessor, the demised premises
including all easements, rights
<PAGE>
of way and other rights appurtenant thereto.
2. Lessor shall at its sole expense complete construction and improvement
of the demised premises as contemplated by the provisions hereof contained in
Exhibit A. Construction of the demised premises shall commence as soon as
possible and the work shall be completed in accordance with the plans and
specifications and requirements hereof and be ready for occupancy on or before
February 1, 1980. (completion date). The issuance of an occupancy permit by the
City of Brookfield shall satisfy the requirements that the premises are ready
for occupancy by Lessee.
Lessor warrants that the construction of the building and other
improvements shall be performed in a good and workmanlike manner and that the
materials, equipment and other building facilities and parking lot furnished in
connection therewith shall be free of defects.
Lessee may enter the demised premises during the construction period for
the purpose of inspecting the premises as to progress and completion in
accordance with plans and specifications, installing signs, fixtures, and
equipment, provided such activity shall be done only in such manner so as not to
interfere with the construction.
3. This Lease shall be for a term of twenty (20) years commencing on the
later of either the 1st day of February, 1980, or the first day of the month
following the month during which
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<PAGE>
the demised premises become ready for occupancy as required by Article 2 hereof,
and ending twenty (20) years after the date of commencement, unless sooner
terminated as hereinafter set forth.
The Lessee shall pay an annual rental of Four Hundred Thousand and 00/100
($400,000.00) Dollars payable in equal monthly installments of Thirty-three
Thousand Three Hundred Thirty three and 33/100 ($33,333.33) Dollars on the first
day of each and every month, in advance. In the event the Lessee commences its
occupancy of the leased premises on a day other than the first day of the month
(whether before or after the stated commencement date of the term hereof), the
rental for that month shall be prorated and adjusted accordingly.
At the end of the third year of this lease, the annual rental shall be
adjusted to reflect the changes in the cost of living. However, no adjustment
shall reduce the rental below that charged during the first three year period.
The basis for computing such adjustment shall be the Consumer Price Index -
United States, all items and major group figures for urban wage earners and
clerical workers or items (based on 1967 equals 100) published monthly by the
"Monthly Labor Review" by the Bureau of Labor Statistics of the United States
Department of Labor ("index"). The computation shall be made by multiplying
$400,000.00 by a fraction the numerator of which shall be the
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<PAGE>
index figure for the month prior to the month in which the adjustment commences
and the denominator of which shall be the index figure for the month in which
this Lease commences. In the event that the Bureau of Labor Statistics shall
cease to publish the index, then a similar index by any other branch or
department of the United States shall be used. The result of this computation
shall then be divided by 12 and commencing the 37th month of this lease the
adjusted rental shall be paid. Annually thereafter, at 12 month intervals, the
annual rental shall be adjusted in accordance with the adjustment in the
Consumer Price Index or other comparable index. However, in no event shall any
annual increase in rentals exceed 5% of the rentals charged in the prior 12
month period.
4. It is agreed that the leased premises shall be used by the Lessee as a
general office building and that Lessee shall, with Lessor's prior written
consent, have the right to sublease out portions of the building to qualified,
responsible tenants requiring office space. Written consent to such subleasing
shall not be unreasonably withheld.
5. The Lessor shall be responsible for repair, replacement and maintenance
of the structural portions of the leased premises, which include the foundation
and exterior walls but exclude the roof. Except as provided in this paragraph
and except to the extent required to satisfy the warranty obligations undertaken
by Lessor
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<PAGE>
under Article 2 hereof, the Lessor shall have no obligation, after Lessee has
taken possession of the demised premises, to make any alterations, improvements
or repairs of any kind on or about said demised premises or the building or
buildings thereon or of which they are a part, or the equipment, fixtures,
plumbing, appliances, or machinery in, upon or serving same, or the streets,
alleys, areas, area-ways or passages adjoining or appurtenant thereto. The
Lessee covenants and agrees at its own expense throughout the term:
(A) to maintain and keep every part of demised premises, including fixtures
and appurtenances situated therein in good and substantial order and repair; and
(B) to comply with all laws and orders of municipal, state and other
governmental authorities pertaining to the demised premises or the use of the
demised premises.
6. Lessee shall pay and discharge as and when the same become due and prior
to delinquency all taxes, assessments, levies and other charges, general and
special, which are or may be during the term hereof, levied, assessed, imposed
or charged against the demised premises and any personal property owned by the
Lessor but used by the Lessee in connection with its use of the demised premises
and situated thereon, provided, however, that the
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<PAGE>
Lessee during the first calendar year of the original term of this Lease and the
last calendar year of the original term or the final extension thereof shall be
obligated to pay only a prorata portion of said real estate taxes due and
payable for such year based upon the part of the year the Lessee occupies the
demised premises, and shall only be obligated to pay those installments of
special assessments (using the longest amortization term available) coming due
during the term of this lease.
The Lessee may in good faith contest any tax assessed which it is obligated
to pay under the terms of this Lease if it shall give the Lessor a bond for such
amount and guaranteed by such surety as may be satisfactory to the Lessor. The
Lessor shall give the Lessee copies of all notices of levy or change or proposed
change in tax rate or assessment within 30 days after receipt by Lessor, upon
failure of which the Lessor shall pay any amount by which any tax or assessment
is increased from the amount formerly in effect. The Lessor at its option, may
require Lessee to pay over to Lessor an amount equal to 1/12th of the estimated
annual real estate taxes which may be due and payable during any lease year.
Lessor shall adjust the amount of such payments upon the municipality rendering
the real estate tax bill
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<PAGE>
and in the event that Lessee has paid an insufficient amount to cover the total
amount due, then Lessee shall, upon demand, pay the additional sum. In the event
that Lessee has paid an amount in excess of the amount necessary to cover the
general real estate tax liability, then Lessee shall receive a credit against
the following year's estimated taxes for such over payment.
7. Lessee covenants and agrees at its own expense throughout the term to
keep the demised premise's and any fixtures, appliances and appurtenances owned
by Lessor and situated therein, insured against loss by fire with extended
coverage at "actual cash value" and "full replacement cost" endorsement, as said
terms are used in the standard form of fire insurance policy (an 80%
co-insurance clause being permissible). Lessee shall also keep the demised
premises and its operations insured against loss on account of public liability
in the amount of Three Hundred Thousand Dollars ($300,000) for damages to
property and Five Hundred Thousand Dollars ($500,000) for injury to one person,
and subject to said limit as to one person, One Million Dollars ($1,000,000) for
injury to more than one person in or about the demised premises. All such
insurance policies shall be written in the names of and covering both Lessor and
Lessee, and shall be written with reputable insurance companies licensed or
authorized to
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<PAGE>
do business in the state in which the demised premises are located. The Lessee
shall furnish to the Lessor certificates of insurance by such carriers
evidencing the required coverage and the agreement of the carrier to give the
Lessor 10 days prior written notice of any policy cancellation or termination.
The Lessor at its option, may require Lessee to pay over to Lessor an amount
equal to 1/12th of the estimated annual premiums which may be due and payable
during any lease year. Lessor shall adjust the amount of such payments upon the
insurance company rendering the premium notice and in the event that Lessee has
paid an insufficient amount to cover the total amount due, the Lessee shall,
upon demand, pay the additional sum. In the event that Lessee has paid an amount
in excess of the amount necessary to cover the insurance premium, then Lessee
shall receive a credit against the following year's estimated premium for such
over payment.
8. Upon the termination of this agreement, the Lessee may remove any trade
fixtures and equipment owned by it or placed upon the premises by it, other than
fixtures installed to replace those presently in the premises, provided,
however, that the Lessee leaves the premises in the same condition or repair and
tenantability as they were at the time of the making of this agreement prior to
the addition of such trade fixtures.
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<PAGE>
9. The Lessee shall pay for all utilities, including gas, electricity,
sewer and water as well as any other services used therein during the term of
this Lease.
10. Lessee agrees to save the Lessor harmless and indemnified from all
loss, damage, liability or expense incurred or claimed by reason of Lessee's
neglect or use of the premises, or by reason of any injury or property damage to
any person or property on the premises described herein, except such as is
caused by the negligence of the Lessor, and Lessee further agrees to pay all
legal expenses, including a reasonable attorney's fee, incurred by the Lessor by
reason of the commencement of legal proceedings to enforce any of the provisions
of this lease, and resulting in a decree or award in favor of the Lessor.
The Lessor shall not be liable, and the Lessee hereby waives all claims
against the Lessor, for any injury, loss or damage, by theft or otherwise, or
damage either to person or property, sustained by the Lessee or other persons,
whether due to the building or any part or appurtenances thereof becoming out of
repair, or arising from bursting of pipes or resulting from steam, electricity,
gas, odors, water, rain or snow which may leak or come from any part of the
building or adjoining premises, or due to the happening of any accident in or
about the building,
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<PAGE>
or to pipes or appurtenances, or plumbing works therein, or from any other cause
whatsoever, unless caused by the negligence of the Lessor.
11. In case the demised premises are damaged by fire or other casualty, the
Lessor covenants and agrees, subject to the right of cancellation hereinafter
set forth, promptly to repair or restore the same and obtain certificates
approving all such repairs from all public authorities having jurisdiction,
subject to reasonable delays in collection of insurance funds or due to
restrictions on or inability to obtain labor or materials, or due to other
causes or conditions beyond the control of the Lessor. Prompt repair or
restoration shall be deemed to allow a reasonable time for the parties to make a
survey and determination of the extent of the damage and the probable cost of
necessary repairs and restoration and to prepare suitable plans and
specifications for and to repair or restore the demised premises in accordance
with such determination.
In the event the damage to the demised premises is of such nature and
extent as to require expenditures for repairing and restoration in excess of 25%
but less than 50% of the replacement value of the improvements upon the demised
premises as last determined for fire insurance purposes, Lessor shall have
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<PAGE>
120 days from the date the damage occurs or if 50% of such replacement value,
then Lessor shall have 210 days from the date the damage occurs to repair and
restore the demised premises to a condition substantially equal to or better in
every respect than their condition prior to such damage. Lessor shall submit to
Lessee full information obtained by it as to the cost of repairing and restoring
the demised premises. If all repairs and restoration are not substantially
completed within the time limits herein stated, then Lessee may at its option
terminate this Lease on written notice given 30 days after expiration of the
applicable time limit. Expenditures for repairing and restoration shall include
the cost of decorating and refurbishing but shall exclude damage to personal
property owned by Lessee.
If the demised premises are untenantable for Lessee's purposes in whole or
in part due to damage by fire or other casualty, or the repair of such damage,
Lessee's obligation to pay rent and taxes shall be abated proportionately from
the date of such damage until the demised premises are repaired or restored, and
any unearned rent paid by Lessee shall be refunded or credited upon rent
subsequently payable by Lessee if this Lease continues in effect. In the event
damage to the premises is 75% or more of the replacement value of the
improvements, the Lessor may cancel this lease.
12. In the event that the building or the demised premises or any
substantial portion of the demised premises shall be
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<PAGE>
taken or condemned by any competent authority for any public use or purpose, or
in the event that prior to such taking or condemnation Lessor deems it expedient
to sell the premises to such public Authority, the term of this Lease shall end
upon the first to occur of sale of the premises or the date when the possession
of the portion so taken shall be required for such use or purpose, and the
Lessee shall have no claim against the Lessor and shall not be entitled to any
portion of the amount which may be awarded as damages or paid as a result of
such condemnation proceedings. In the event of termination of this Lease as
herein provided, the rental shall be apportioned to the date of such
termination.
13. The Lessee shall not assign this Lease without the consent in writing
of Lessor. Such consent shall not be unreasonably withheld. It is understood and
agreed however, that if the Lessee shall be declared bankrupt, shall have a
receiver appointed of its property, which receiver shall not be discharged in 30
days, or shall Lessee make an assignment for the benefit of creditors, or its
rights hereunder shall be taken under execution, it shall be construed as an
assignment of this lease within the meaning hereof and Lessor shall have the
right to terminate this Lease upon the happening of the foregoing event. In the
event, however, that Lessee is the subject or involved in a merger or
consolidation,
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<PAGE>
this Lease will not be construed as being assigned and the fact of such merger
or consolidation will not constitute a breach resulting in a termination of this
Lease at the option of Lessor.
14. The Lessee covenants and agrees to pay and discharge all reasonable
costs, attorneys, fees and expenses that shall be paid and incurred by the said
Lessor in enforcing the covenants and agreements of this Lease on account of
Lessee's default hereunder.
15. The Lessor may at all reasonable times enter said premises to inspect
same, but agrees to maintain confidential; and not to use or divulge any
proprietary information of Lessee disclosed during such inspection.
16. In case the Lessee shall vacate or abandon said premises, or shall
default in any of its covenants herein, and said default shall not be cured
within ten (10) days after notice thereof in writing from the Lessor, the Lessor
is hereby authorized to reenter said premises, to eject the Lessee, and take
full possession of said premises, to terminate this Lease at its option and to
release and let said premises on such terms as to Lessor shall seem best, to
remove from said premises all personal property of the Lessee, and to store the
same to the account and at the expense and risk of the Lessee, and to sell said
property or any part thereof, and out of the proceeds to pay all expenses of so
removing, storing
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<PAGE>
and selling the same, and all sums which shall then be in arrears or past due
for rent; and that no such act or acts of the Lessor shall be construed as
cancellation of this Lease or waiver of the right of the Lessor to collect rent
hereunder for the remainder of said term, except said exercise of its option to
terminate the same; and that in case the Lessor shall determine that any action
or proceeding at law or otherwise is necessary to enforce the terms and
conditions hereof, the Lessee agrees that a reasonable attorney's fee and the
necessary costs and disbursements thereof may be allowed and taxed against it.
17. That no sign, advertisement or notice will be placed or painted on any
part of the outside or inside of said building or leased premises except in such
manner, style and places as approved in writing by the Lessor and the City of
Brookfield, which approval shall not be unreasonably withheld, and the Lessor
reserves the right to remove all others at the expense of Lessee.
18. At all times during the term of this Lease the Lessee shall and may
peaceably and quietly hold and enjoy the demised premises free from molestation,
invasion or disturbance.
19. If because of Lessor's breach of or default under any of the terms,
covenants and provisions hereof it shall become unlawful for the Lessee to use
and operate the demised premises for the principal use then in effect, and if
such
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<PAGE>
unlawfulness shall continue for at least 90 days, the Lessee shall have the
right at anytime thereafter while such unlawfulness continues to terminate this
Lease upon 10 days' written notice to the Lessor and the payment of all rent and
other charges required to be paid by Lessee under this Lease up to the date of
such termination.
20. That the Lessor shall have the right to enter the leased premises
during twelve (12) months prior to the termination of this Lease, to show the
same to prospective tenants, and to place on doors and windows the usual notice
that the premises are for rent, upon giving reasonable prior notice to Lessee.
21. This Lease shall be subject and subordinate at all times to the lien of
any mortgages or ground rents now or hereafter placed on the demised premises
without the necessity of any further instrument or act on the part of Lessee to
effect such subordination, provided that the holder of any such mortgage shall
on behalf of itself, its successors and assigns agree that Lessee shall have the
quiet enjoyment of the demised premises for the term of this Lease in accordance
with every provision hereof, so long as Lessee shall fully and faithfully
perform all of the terms, covenants and conditions of this lease on its part to
be
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<PAGE>
performed, irrespective of Lessor's default. Lessee covenants and agrees to
execute and deliver upon demand such further instrument or instruments
evidencing such subordination of this Lease upon the foregoing terms as shall be
desired by any mortgagee or proposed mortgagee or by any person entitled
thereto.
22. Except as other provision may herein specifically be made, in the event
that either Lessee or Lessor as the obligated party after 10 days' written
notice from the other party, fails or refuses to make any of the payments when
due as required of such obligor by this Lease (other than the payment of the
rent reserved hereunder), or to do or cause to be done promptly any and all of
the acts and things in this Lease provided to be done by such obligor, then the
other party shall have the right (but shall be under no obligation to the
obligor to do so) to advance any and all sums of money or do or cause to be done
any and all acts and things necessary or proper to be done or performed by the
obligor, and in such event the obligor covenants and agrees forthwith upon
demand to repay to such other party any and all sums so advanced or expended to
do or cause to be done any and all such acts and things.
In the event that the obligor fails within 10 days after written demand by
the other party to repay (or, if
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applicable, to allow a deduction from rental) any sum advanced by the other
party pursuant to the foregoing provisions, there shall be added to the sum to
be repaid interest thereon from the date of demand to the date of repayment at
the rate of 10% per annum.
The Lessee may (but shall not be obligated to) from time to time make such
payments on account of mortgages or deeds or trust or other encumbrances on or
liens against the Lessor's estate as may be necessary in the Lessee's judgment
for the protection of the Lessee's estate. The Lessee in making any such
payments shall be subrogated as against the Lessor to the rights of the parties
to whom such payments are made, and if the Lessor shall after notice fail to
repay any amount so paid, the Lessee shall also have the right to deduct the
amount so paid, with legal interest thereon, from the rental thereafter
accruing, until fully reimbursed.
23. All notices, consents, demands and requests which may be or are
required to be given by either party to the other, shall be in writing, and
shall be sent by United States registered or certified mail, with return receipt
requested, addressed as follows:
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<PAGE>
TO LESSOR: NOVA, A Partnership
6523 North Sidney Place
Milwaukee, WI 53209
TO LESSEE: PAYCO AMERICAN CORPORATION
2401 North Mayfair Rd.
Milwaukee, WI 53226
The date shown on the return receipt as of the date of which said registered or
certified mail is received by the addressee shall be conclusively deemed to be
the date on which a notice, consent, demand or request is given or made. The
above address or a party may be changed at any time or from time to time by
notice given by said party to the other party in the manner hereinabove
provided.
24. Simultaneously with or subsequent to the execution hereof, the parties
hereto shall, at the option of either party, execute a short form lease for
recording purposes, and, in such event, the terms thereof shall constitute a
part of this Lease as fully as though recited at length herein.
25. This Lease and all the covenants, terms, provisions and conditions
herein contained shall inure to the benefit, and be binding upon the Lessor and
Lessee, their respective successors and assigns.
IN WITNESS WHEREOF, the Lessor and Lessee have caused this lease agreement
to be executed by persons duly authorized and their (or its) corporate seal(s)
to be hereunto affixed, the day and year first above written.
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<PAGE>
NOVA, a Partnership
By /s/ Dennis A. Welsh
-----------------------------------
Dennis A. Welsh, Partner
By /s/ Clyde E. Pemble
-----------------------------------
Clyde E. Pemble, Partner
PAYCO AMERICAN CORPORATION
By /s/ Joseph Treleven
-----------------------------------
President
<PAGE>
SECOND AGREEMENT MODIFYING LEASE
THIS AGREEMENT made and entered into this 30 day of December, 1986, between
BROOKFIELD INVESTMENT CO., a general partnership, hereinafter called "Lessor",
and PAYCO AMERICAN CORPORATION, a Delaware corporation, hereinafter called
"Lessee".
W I T N E S S E T H:
WHEREAS, on July 12, 1979, NOVA, a partnership, as Lessor, and Payco
American Corporation, as Lessee, entered into a lease covering certain premises
in the City of Brookfield, Waukesha County, Wisconsin, which lease was assigned
on the 12th day of March, 1980, by NOVA to Brookfield Investment Co., as
Successor Lessor, and
WHEREAS, on December 31, 1979, Brookfield Investment Co. and Payco American
Corporation entered into an agreement to become effective upon NOVA's assignment
of its lease to Brookfield Investment Co., and
WHEREAS, in paragraph five of the agreement of December 31, 1979,
Brookfield Investment Co. extended to Payco the right to terminate the lease at
the end of the 120th month of the initial term, upon the payment of a
termination fee equal to six months rental as charged by the Lessor to Lessee
during the tenth year of the lease, and
WHEREAS, this elective termination date was determined to be January 31,
1990, and
WHEREAS, in exchange for waiving this right and other good and valuable
consideration, Payco desires to change this elective termination date from
January 31, 1990, to January 31, 1993.
<PAGE>
NOW, THEREFORE, in consideration of the premises and of the mutual benefits
to be derived therefrom, it is agreed as follows:
1. Paragraph five of the agreement of December 31, 1979, is revoked.
2. Lessee shall have the option to terminate the lease of July 12, 1979,
under the following terms and conditions:
After January 1, 1992, and prior to January 31, 1992, Lessee shall have the
right to elect to terminate the lease effective January 31, 1993. This
election must be made in writing. Lessee shall also be required to pay a
cancellation fee equal to six months rent, based on the total rental and
required lease payments due and owing under the terms of the lease for the
period from February 1, 1992, to January 31, 1993. The effective date of
termination shall be at the end of January 1993. To make the election
effective, the fee must be paid to Lessor on or before January 31, 1993.
The payment of the cancellation fee shall not relieve Lessee of its
obligation under the terms of the lease to pay rent which is a separate
obligation from the payment of the cancellation fee. Time is of the essence
with respect to the exercise of the election to terminate the lease and pay
the cancellation fee. The election and cancellation fee must be personally
delivered to or sent postage prepaid to the Lessor at the address that the
rent is then being paid.
<PAGE>
3. All of the remaining terms and conditions of the lease of July 12, 1979,
the agreement of December 31, 1979, and the assignment of March 12, 1980, are
hereby ratified, approved and confirmed between Lessor and Lessee.
IN WITNESS WHEREOF, the parties have hereunto set their hands and seals the
day and year first above/written.
BROOKFIELD INVESTMENT CO.-Lessor
By: /s/ Neal R. Sparby
----------------------------------
Authorized Partner
/s/ John E. Multhauf
----------------------------------
Authorized Partner
PAYCO AMERICAN CORPORATION-Lessee
By: /s/ Dennis Punches
----------------------------------
President
<PAGE>
THIRD AMENDMENT TO LEASE AGREEMENT
BY AND BETWEEN
BROOKFIELD INVESTMENT CO.,
AS LANDLORD, AND
PAYCO GENERAL AMERICAN CREDITS, INC.
AS TENANT
THIS THIRD AMENDMENT TO LEASE AGREEMENT, by and between Brookfield
Investment Co., a General Partnership ("Landlord") and Payco General American
Credits, Inc. ("Tenant") is executed and to become effective on this 25th day of
January, 1996.
WHEREAS, Brookfield Investment Co., as Landlord, and Payco General American
Credits, Inc., as Tenant, have heretofore entered into that certain Office
Building Lease Agreement, dated July 12, 1979 and Amended December 30, 1986,
(the "Lease"), under and pursuant to the terms of which Tenant has leased
certain office space ("Premises") in that certain office building commonly known
as "180" ("Building"), which is located at 180 N. Executive Drive, in the City
of Brookfield, Waukesha County, Wisconsin, as more particularly described in the
Lease; and
WHEREAS, Landlord and Tenant desire to amend the Lease in order to evidence
their agreements with respect to the following:
NOW, THEREFORE, for and in consideration of the mutual covenants contained
herein and in the Lease, the parties hereby covenant and agree that the Lease is
amended as follows:
1. Defined Terms. Terms defined in the Lease and delineated herein by
initial capital letters shall have the same meaning ascribed thereto in the
Lease, except to the extent that the meaning of such term is specifically
modified by the provisions hereof. In addition, other terms not defined in the
Lease but defined herein will, when delineated with initial capital letters have
the meanings ascribed hereto in this Amendment. Terms and phrases which are not
delineated by initial capital letters shall have the meanings commonly ascribed
thereto.
<PAGE>
2. Expiration Date. As used herein, the term "Expiration Date" shall mean
an extended period of eleven (11) months from April 1, 2000 to February 28,
2005, for a portion of the Premises described below.
3. Premises. As used herein the terms "Premises shall mean the portion of
the space located on the 1st Floor, and shall be referred to as Suite 100 for
all purposes, including, without limitation, the determination of the Tenant's
share of Basic Costs. The Premises shall contain a total of Approximately 6,125
square feet of Rentable Area.
4. Base Rent. Base Rent for the Extension Period shall be equal to the
monthly rent remitted for the month of March, year 2000, adjusted by the CPI
provision within the lease.
LANDLORD:
BROOKFIELD INVESTMENT CO.
a Wisconsin General Partnership
By: /s/ Neal R. Sparby
----------------------------------
Neal R. Sparby
TENANT:
PAYCO GENERAL AMERICAN CREDITS, INC.
By: /s/ William W. Kagel
----------------------------------
William W. Kagel
<PAGE>
LEASE
THIS LEASE, made and entered into this 27 day of April, 1984, between
PERC0M INVESTMENT COMPANY, a general partnership, hereinafter called "Lessor",
and PAYCO AMERICAN CORPORATI0N, a Delaware corporation, hereinafter called
"Lessee".
WITNESSETH:
WHEREAS, the leasehold premises, which are the subject of this Lease, are
commonly known as 2520 South 170th Street, New Berlin, Wisconsin, and consist of
a one-story office/warehouse building of approximately 19,222 square feet,
located on 2.392 acres of land in the City of New Berlin, more particularly
described and shown on a plat of survey attached hereto and marked "Exhibit A".
NOW, THEREFORE, in consideration of the premises and of the mutual
benefits to be derived therefrom, it is agreed as follows:
1. Lessor hereby leases, demises and rents unto the Lessee, and Lessee
hereby leases, takes and hires of and from the Lessor, the demised premises,
above described, including all easements, rights of way and other rights
appurtenant thereto.
2. This Lease shall be for a term of twenty (20) years, commencing on the
first day of May, 1984, and ending on midnight of the 30th day of April, in the
year 2004, unless sooner terminated as hereinafter set forth.
<PAGE>
3. Lessee shall have the option to terminate the Lease under the following
terms and conditions: After the first ninety (90) months of the Lease term have
expired, Lessee shall have the following calendar month in which to make an
election to terminate the Lease at the end of one hundred two (102) months.
This e1ection must be in writing, a copy sent to Washington National Retirement
Plan, Lessor's mortgagee. Lessee shall also be required to pay a cancellation
penalty equal to one (1) full year's rent based on the rental due and owing
under the terms of the Lease for the ninety-first (91st) through one hundred
second (102nd) months of occupancy, or the sum of One Hundred Thirty-five
Thousand and 00/100 ($135,000.00) Dollars, whichever is greater. The effective
date of the termination would be at the end of the one hundred second (102nd)
month subsequent to commencement of the Lease. To make the election effective,
the penalty must be paid to Lessor on or before the last day of the one hundred
second (102nd) month. The payment of this penalty shall not relieve Lessee of
its obligation under the terms of the Lease to pay rent during the ninety-first
(91st) through one hundred second (102nd) months. Time is of the essence with
respect to the exercise of the election to terminate the Lease and pay the
penalty. The election and penalty payment must be personally delivered to, or
sent postage prepaid, to one of the managing partners of Lessor at the address
of the partnership where the rent is then being paid.
4. The Lessee shall pay a base annual rental of One Hundred Two Thousand
Five Hundred Fifteen and 25/100 ($102,515.25) Dollars, payable in equal monthly
installments of Eight Thousand Five Hundred
<PAGE>
Forty-two and 94/100 ($8,542.94) Dollars on the first day of each, and every
month, in advance.
At the end of the third year of this Lease, the base annual renta1 shall
be adjusted to reflect that changes in the cost of living. However, no
adjustment shall reduce the rental below that charged during the first
three-year period. The basis for computing such adjustment shall be the Consumer
Price Index - United States, all items and major group figures for urban wage
earners and clerical workers or items (based on 1967 equals 100), published
monthly by the "Monthly Labor Review" by the Bureau of Labor Statistics of the
<PAGE>
United States Department of Labor ("index"). The computation shall be made by
multiplying One Hundred Two Thousand Five Hundred Fifteen and 25/100
($102,515.25) Dollars by a fraction, the numerator of which shall be the index
figure for the month prior to the month in which the adjustment commences and
the denominator of which shall be the index figure for the month in which this
Lease commences. In the event that the Bureau of Labor Statistics shall cease to
publish the index, then a similar index by any other branch or department of the
United States shall be used. The result of this computation shall then be
divided by twelve (12), and commencing the thirty-seventh (37th) month of this
Lease, the adjusted base rental shall be paid. Annually thereafter, at twelve
(12) month intervals, the base annual rental shall be adjusted in accordance
with the adjustment in the Consumer Price Index or other comparable index.
However, in no event shall any annual increase in base rentals exceed five (5%)
percent of the rental charged in the prior twelve (12) month period.
5. It is agreed that the leased premises shall be used by the Lessee as a
general office building and that Lessee shall, with Lessor's prior written
consent, and, if required, the consent of Lessor's mortgagee, have the right to
sublease out portions of the building to qualified, responsible tenants
requiring office space. In the event of such sublease, Lessee's obligation to
pay rent under the terms and conditions of this Lease, shall not be relieved and
Lessee shall remain liable under its full obligation, pursuant to
<PAGE>
the terms of this Lease. Written consent to such subleasing shall not be
unreasonably withheld.
6. The Lessor shall have no obligation, to make any alterations,
improvements or repairs of any kind on or about the demised premises or the
building or buildings thereon, or of which they are a part, or the equipment,
fixtures, plumbing, appliances, or machinery in, upon or serving same, or the
streets, alleys, areas, area-ways or passages adjoining or appurtenant thereto.
Without limitation, Lessee covenants and agrees at its own expense throughout
the term:
(A) to maintain and keep every part of demised premises, including
fixtures and appurtenances situated thereon in good and substantial order and
repair; and
(B) to comply with all laws and orders of municipal, state and other
governmental authorities pertaining to the demised premises or the use of the
demised premises.
7. Lessee shall pay and discharge as and when the same become due and
prior to delinquency all taxes, assessments, levies and other charges, general
and special, which are or may be during the term hereof, levied, assessed,
imposed or charged against the demised premises and any personal property owned
by the Lessor but used by the Lessee in connection with its use of the demised
premises and situated thereon, provided, however, that the Lessee during the
first calendar year of the original term of this Lease and the last
<PAGE>
calendar year of the original term or the final extension thereof shall be
obligated to pay only a prorata portion of said real estate taxes due and
payable for such year based upon the part of the year the Lessee occupies the
demised premises, and shall only be obligated to pay those installments of
special assessments (using the longest amortization term available) coming due
during the term of this Lease.
The Lessee may in good faith contest any tax assessed which it is
obligated to pay under the terms of this Lease if it shall give the Lessor a
bond for such amount and guaranteed by such surety as may be satisfactory to the
Lessor. The Lessor shall give the Lessee copies of all notices of levy or change
or proposed change in tax rate or assessment within thirty (30) days after
receipt by Lessor. The Lessor at its option, may require Lessee to pay over to
Lessor an amount equal to one-twelfth (1/12th) of the estimated annual real
estate taxes which may be due and payable during any lease year. Lessor shall
adjust the amount of such payments upon the municipality rendering the real
estate tax bill, and in the event that Lessee has paid an insufficient amount to
cover the total amount due, then Lessee shall, upon demand, pay the additional
sum. In the event that Lessee has paid an amount in excess of the amount
necessary to cover the general real estate tax
<PAGE>
liability, then Lessee shall receive a credit against the following year's
estimated taxes for such overpayment.
8. Lessee covenants and agrees at its own expense throughout the term to
provide and maintain policies of insurance upon the premises in amounts and with
companies acceptable to Lessor, having a Best Insurance Guide rate of 5A+ or
better, licensed to transact business in the State of Wisconsin and, in
connection with casualty insurance, with mortgagee clauses in favor of and with
losses payable to Lessor and its mortgagee, as follows:
(A) Fire and extended coverage insurance upon all improvements upon the
premises in the amount of the full insurable value thereof, with full
replacement cost endorsement;
(B) General comprehensive public liability insurance in such amounts as
Lessor may from time to time determine as appropriate, but in no event less than
$3,000,000/3,000,000/500,000;
(C) Rent loss or business interruption insurance in such amounts as may be
required by Lessor, but in no event less than $175,000;
(D) Workmen's compensation insurance, if Lessor has any employees on or
about the premises;
(E) Insurance, (including steam boiler and pressure vessel insurance), as
may be required by reason of the uses to which the premises are being devoted;
<PAGE>
(F) Should any part of the premises be used for the sale or dispensing of
beer, wine, spirits or other alcoholic beverages, so-called "dram shop" or
"innkeeper's liability" insurance shall be carried against claims or liability
arising directly or indirectly to persons or property on account of such sale or
dispensing, including in such coverage, loss of means of support, in such amount
as may be required by law or as Lessor may require, but in no event less than
$5,000,000 single limit coverage; and
(G) Such other insurance and coverage as Lessor may require or as may be
customarily carried by persons owning and operating properties of the same type
and usage as the leasehold premises.
9. Upon the termination of this agreement, the Lessee may remove any trade
fixtures and equipment owned by it or placed upon the premises by it, other than
fixtures installed to replace those presently in the premises, provided,
however, that the Lessee leaves the premises in the same condition or repair and
tenantability as they were at the time of the making of this agreement prior to
the addition of such trade fixtures.
10. The Lessee shall pay for all utilities, including gas, electricity,
sewer and water, as well as any other services used therein during the term of
this Lease.
11. Lessee agrees to save the Lessor harmless and indemnified from all
loss, damage, liability or expense incurred or claimed by reason of Lessee's
neglect or use of the premises, or by reason
<PAGE>
of any injury or property damage to any person or property on the premises
described herein, except such as is caused by the negligence of the Lessor, and
Lessee further agrees to pay all legal expenses, including a reasonable
attorney's fee, incurred by the Lessor by reason of the commencement of legal
proceedings to enforce any of the provisions of this lease, and resulting in a
decree or award in favor of the Lessor.
The Lessor shall not be liable, and the Lessee hereby waives all claims
against the Lessor, for any injury, loss or damage, by theft or otherwise, or
damage either to person or property, sustained by the Lessee or other persons,
whether due to the building or any part or appurtenances thereof becoming out of
repair, or arising from bursting of pipes or resulting from steam, electricity,
gas, odors, water, rain or snow which may leak or come from any part of the
building or adjoining premises, or due to the happening of any accident in or
about the building, or to pipes or appurtenances, or plumbing works therein, or
from any other cause whatsoever, unless caused by the negligence of the Lessor.
12. In case the demised premises are damaged by fire or other casualty,
the Lessor covenants and agrees, subject to the right of cancellation
hereinafter set forth, promptly to repair or restore the same and obtain
certificates approving all such repairs from all public authorities having
jurisdiction, subject to reasonable delays in collection of insurance funds or
due to restrictions on or inability
<PAGE>
to obtain labor or materials, or due to other causes or conditions beyond the
control of the Lessor. Prompt repair or restoration shall be deemed to allow a
reasonable time for the parties to make a survey and determination of the extent
of the damage and the probable cost of necessary repairs and restoration and to
prepare suitable plans and specifications for and to repair or restore the
demised premises in accordance with such determination.
In the event the damage to the demised premises is of such nature and
extent as to require expenditures for repairing and restoration in excess of
25%, but less than 50% of the replacement value of the improvements upon the
demised premises as last determined for fire insurance purposes, Lessor shall
have one hundred twenty (120) days from the date the damage occurs or if 50% of
such replacement value, then Lessor shall have two hundred ten (210) days from
the date the damage occurs to repair and restore the demised premises to a
condition substantially equal to or better in every respect than their condition
prior to such damage. Lessor shall submit to Lessee full information obtained by
it as to the cost of repairing and restoring the demised premises. If all
repairs and restoration are not substantially completed within the time limits
herein stated, then Lessee may at its option terminate this Lease on written
notice given thirty (30) days after expiration of the applicable time limit.
Expenditures for repairing and restoration shall include the cost of decorating
and refurbishing, but shall exclude damage to personal property owned by Lessee.
<PAGE>
If the demised premises are untenantable for Lessee's purposes in whole or in
part due to damage by fire or other casualty, or the repair of such damage,
Lessee's obligation to pay rent and taxes shall be abated proportionately from
the date of such damage until the demised premises are repaired or restored, and
any unearned rent paid by Lessee shall be refunded or credited upon rent
subsequently payable by Lessee if this Lease continues in effect.
13. In the event that the building or the demised premises shall be taken
or condemned by any competent authority for any public use or purpose, or in the
event that prior to such taking or condemnation, Lessor deems it expedient to
sell the premises to such public authority, the term of this Lease shall end
upon the first to occur of sale of the premises or the date when the possession
of the portion so taken shall be required for such use or purpose, and the
Lessee shall have no claim against the Lessor and shall not be entitled to any
portion of the amount which may be awarded as damages or paid as a result of
such condemnation proceedings. In the event of termination of this Lease as
herein provided, the rental shall be apportioned to the date of such
termination.
14. The Lessee shall not assign this Lease without the consent in writing
of Lessor and, if required, Lessor's mortgagee, which consent shall not be
unreasonably withheld. Such consent shall not be unreasonably withheld. It is
understood and agreed, however, that if the Lessee shall be declared bankrupt,
shall have a receiver appointed of its property, which receiver shall not be
discharged in thirty (30) days,
<PAGE>
or shall Lessee make an assignment for the benefit of creditors, or its rights
hereunder shall be taken under execution, it shall be construed as an assignment
of this Lease within the meaning hereof and Lessor shall have the right to
terminate this Lease upon the happening of the foregoing event. In the event,
however, that Lessee is the subject or involved in a merger or consolidation,
this Lease will not be construed as being assigned in the event that the
resulting corporation of such merger or consolidation has total assets and a net
worth after such consolidation or merger equal to or greater than that of the
Lessee immediately prior to such consolidation or merger. Notwithstanding the
foregoing, such act shall require the consent of Lessor and Lessor's mortgagee,
which consent shall not be unreasonably withheld.
15. The Lessee covenants and agrees to pay and discharge all reasonable
costs, attorneys' fees and expenses that shall be paid and incurred by the said
Lessor in enforcing the covenants and agreements of this Lease on account of
Lessee's default hereunder.
16. The Lessor may at all reasonable times enter said premises to inspect
same, but agrees to maintain confidentiality; and not to use or divulge any
proprietary information of Lessee disclosed during such inspection.
17. In case the Lessee shall vacate or abandon said premises, or shall
default in any of its covenants herein, and said default shall not be cured
within ten (10) days after notice thereof
<PAGE>
in writing from the Lessor, the Lessor is hereby authorized to reenter said
premises, to eject the Lessee, and take full possession of said premises, to
terminate this Lease at its option and to release and let said premises on such
terms as to Lessor shall seem best, to remove from said premises all personal
property of the Lessee, and to store the same to the account and at the expense
and risk of the Lessee, and to sell said property or any part thereof, and out
of the proceeds to pay all expenses of so removing, storing and selling the
same, and all sums which shall then be in arrears or past due for rent; and that
no such act or acts of the Lessor shall be construed as cancellation of this
Lease or waiver of the right of the Lessor to collect rent hereunder for the
remainder of said term, except said exercise of its option to terminate the
same; and that in case the Lessor shall determine that any action or proceeding
at law or otherwise is necessary to enforce the terms and conditions hereof, the
Lessee agrees that a reasonable attorney's fee and the necessary costs and
disbursements thereof may be allowed and taxed against it.
18. That no sign, advertisement or notice will be placed or painted on any
part of the outside or inside of said building or leased premises, except in
such manner, style and places as approved in writing by the Lessor and the City
of New Berlin, Wisconsin, which approval shall not be unreasonably withheld, and
the Lessor reserves the right to remove all others at the expense of Lessee.
<PAGE>
19. At all times during the term of this Lease, the Lessee shall and may
peaceably and quietly hold and enjoy the demised premises free from molestation,
invasion or disturbance.
20. That the Lessor shall have the right to enter the leased premises
during twelve (12) months prior to the termination of this Lease, to show the
same to prospective tenants, and to place on doors and windows the usual notice
that the premises are for rent, upon giving reasonable prior notice to Lessee.
21. This Lease shall be subject and subordinate at all times to the lien
of any mortgages or ground rents now or hereafter placed on the demised
premises without the necessity of any further instrument or act on the part of
Lessee to effect such subordination, provided that the holder of any such
mortgage shall on behalf of itself, its successors and assigns, agree that
Lessee shall have the quiet enjoyment of the demised premises for the term of
this Lease in accordance with every provision hereof, so long as Lessee shall
fully and faithfully perform all of the terms, covenants and conditions of this
Lease on its part to be performed, irrespective of Lessor's default. Lessee
covenants and agrees to execute and deliver upon demand such further instrument
or instruments evidencing such subordination of this Lease upon the foregoing
terms as shall be desired by any mortgagee or proposed mortgagee or by any
person entitled thereto.
22. Except as other provisions may herein specifically be made, in the
event that either Lessee or Lessor as the obligated
<PAGE>
party, after ten (10) days' written notice from the other party, fails or
refuses to make any of the payments when due as required of such obligor by this
Lease (other than the payment of the rent reserved hereunder), or to do or cause
to be done promptly any and all of the acts and things in this Lease provided to
be done by such obligor, then the other party shall have the right, (but shall
be under no obligation to the obligor to do so), to advance any and all sums of
money or do or cause to be done any and all acts and things necessary or proper
to be done or performed by the obligor, and in such event, the obligor covenants
and agrees forthwith upon demand to repay to such other party any and all sums
so advanced or expended to do or cause to be done any and all such acts and
things.
In the event that the obligor fails within ten (10) days after written
demand by the other party to repay (or, if applicable, to allow a deduction from
rental) any sum advanced by the other party pursuant to the foregoing
provisions, there shall be added to the sum to be repaid interest thereon from
the date of demand to the date of repayment at the rate of ten (10%) percent per
annum.
The Lessee may, (but shall not be obligated to), from time to time, make
such payments on account of mortgages or deeds or trust or other encumbrances on
or liens against the Lessor's estate as may be necessary in the Lessee's
judgment for the protection of the Lessee's estate. The Lessee in making any
such payments shall be subrogated as against the Lessor to the rights of the
parties to whom
<PAGE>
such payments are made, and if the Lessor shall after notice fail to repay any
amount so paid, the Lessee shall also have the right to deduct the amount so
paid, with legal interest thereon, from the rental thereafter accruing, until
fully reimbursed.
23. All notices, consents, demands and requests which may be or are
required to be given by either party to the other, shall be in writing, and
shall be sent by United States registered or certified mail, with return receipt
requested, addressed as follows:
TO LESSOR: PERCOM INVESTMENT COMPANY
180 N. Executive Drive
Brookfield, WI 53005
TO LESSEE: PAYCO AMERICAN CORPORATION
180 N. Executive Drive
Brookfield, WI 53005
The date shown on the return receipt as of the date of which said registered or
certified mail is received by the addressee shall be conclusively deemed to be
the date on which a notice, consent, demand or request is given or made. The
above address or a party may be changed at any time, or from time to time by
notice given by said party to the other party in the manner hereinabove
provided.
24. Simultaneously with or subsequent to the execution hereof, the parties
hereto shall, at the option of either party, execute a short form lease for
recording purposes, and, in such event, the terms thereof shall constitute a
part of this Lease as fully as though recited at length herein.
25. This Lease and all the covenants, terms, provisions and conditions
herein contained shall inure to the benefit, and be
<PAGE>
binding upon the Lessor and Lessee, their respective successors and assigns.
26. Lessor agrees that should it at any time offer the property for sale
and receive an acceptable offer to purchase the premises, it will notify Lessee
in writing, attaching an exact copy of the offer. Lessee shall then have thirty
(30) days from receipt of such offer to make a similar offer as to price, terms
and conditions with respect to the purchase of the premises. If Lessee does not
make such an offer within thirty (30) days, or prior thereto indicates its
intention not to make such an offer, then Lessor shall be free to sell the
premises to such third-party bona fide purchaser on the same terms and
conditions as submitted by the original offer. If there are any changes or
modifications to the original offer, Lessee must be informed of such changes and
be given ten (10) days to make a similar offer based on such changes or
modifications. This right of first refusal shall exist only during the period in
which this Lease is in effect.
IN WITNESS WHEREOF, the Lessor and Lessee have caused this lease agreement
to be executed by the persons duly authorized on the day and year first above
written.
PERCOM INVESTMENT COMPANY, a General
Partnership, Lessor
By /s/ Neal R. Sparby
-----------------------------------
Neal R. Sparby, Authorized Partner
By /s/ John E. Multhauf
-----------------------------------
John E. Multhauf, Authorized Partner
<PAGE>
PAYCO AMERICAN CORPORATION, Lessee
By /s/ Dennis Punches
----------------------------------
President
<PAGE>
PLAN OF SURVEY
For: Douglas C. Boone
--------------------------------------------------------------------------
DESCRIPTION:
Lot 2, Certified Survey Map No. 3976, recorded in Volume 31, pages 51-54,
Document number 1150746, Waukesha County records, being a part of the Northwest
1/4 of Section 10, Town 6 North, Range 20 East, City of
New Berlin, Waukesha County, Wisconsin.
[Map showing bearings of Wisconsin State Plane Coordinate System, South Zone
Grid.]
<PAGE>
MODIFICATION OF LEASE
THIS MODIFICATION OF LEASE is made and entered into this 17 day of
February, 1987, by and between PERCOM INVESTMENT COMPANY, a general partnership,
hereinafter called "Lessor", and PAYCO AMERICAN CORPORATION, a Delaware
corporation, hereinafter called "Lessee.
W I T N E S S E T H:
WHEREAS, on August 5, 1983, Lessor and Lessee entered into a lease
covering the premises commonly known as 2520 South 170th Street, New Berlin,
Wisconsin, consisting of a one-story office/warehouse building of approximately
19,222 square feet, and
WHEREAS, pursuant to the request of Lessee, Lessor has agreed to construct
approximately 17,500 additional square feet to the existing leasehold premises.
This addition is to provide for the accommodation of Lessee's requirements and
is designed to accommodate Lessee's specialized needs, and
WHEREAS, the parties desire to modify the above lease to cover the
additional improvements and to compensate Lessor for incurring the additional
costs required to provide these improvements.
NOW, THEREFORE, in consideration of the premises and of the mutual
benefits to be derived therefrom, it is agreed as follows:
1. Lessor hereby leases, demises and rents unto the Lessee, and Lessee
hereby leases, takes and hires of and from the Lessor the additional
improvements, including all easements, rights of way and other rights
appurtenant thereto. Lessor shall at its sole expense complete construction of
the required
<PAGE>
improvements as specified by the provisions of Exhibit A attached hereto and
made part of this lease modification. In the event the Lessee request additional
leasehold improvements, any costs in excess of $810,000 shall be paid by Lessee.
Lessee shall have the right to audit all cost related to construction. Work will
be completed in accordance with plans, specifications and requirements hereof
and shall be ready for occupancy on or about April 1, 1987. In the event that
the premises are ready for occupancy prior to April 1, 1987, Lessee's obligation
to pay rent shall commence as of the date that the premises are so ready. Rent
shall be prorated for such partial month. In the event that the premises are
ready for occupancy after April 1, 1987, any partial month's rent shall likewise
be prorated. In the event that the premises are partially available for
occupancy and Lessee wished to utilize such space, Lessor and Lessee shall agree
upon a suitable prorated rent for such partial occupancy. The issuance of an
occupancy permit by the City of New Berlin shall satisfy the requirements that
the premises are ready for occupancy by Lessee, except in the case of partial
occupancy prior to the commencement of the lease for storage purposes. Lessor
warrants that the construction of the improvements shall be performed in a good
and workmanlike manner and that the materials, equipment and other building
facilities including exterior improvements furnished in connection therewith
shall be free of defects. Lessee may enter the demised premises during the
construction period for the purpose of inspecting the premises as to progress
and completion in accordance with plans
- 2 -
<PAGE>
and specifications, and for the purpose of installing fixtures and equipment and
any additional specialized leasehold improvements that Lessee may require,
provided such activity shall be done only in such manner so as not to interfere
with the construction.
2. The existing lease as modified by this lease shall be the controlling
instrument governing leasehold interests between the parties. The term of the
lease shall remain the same, terminating on the 30th day of April, 2004. The
existing rental shall be increased by the sum of Ninety-six Thousand Two Hundred
Fifty Dollars ($96,250.00) annually on the effective date of occupancy if such
occupancy is on the first day of the month and, if during the month, effective
the first day of the month following such occupancy. This annual increase in
rental shall be paid in monthly installments of Eight Thousand Twenty and
83/100ths Dollars ($8,020.83) each and shall form part of the base annual rental
as set forth in paragraph four of the lease dated April 27, 1984.
3. Commencing on May 1, 1988, the base annual rental as originally set
forth in the lease of April 27, 1984, together with the additional base annual
rental as set forth in this modification shall be adjusted to reflect the
changes in the cost of living. This adjustment shall be computed on the same
basis as is provided for in paragraph four of the lease of April 27, 1984,
including the method of payment and the limitation as to any annual increase.
4. The provisions of paragraph three of the lease of
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<PAGE>
April 27, 1984, relating to Lessee's option to terminate the lease are hereby
revoked and the following terms and conditions are hereby substituted:
Subsequent to March 31, 1993, Lessee shall have the following month of
April, 1993, in which to make an election to terminate the lease effective
midnight March 31, 1994. This election must be in writing, with a copy
sent to Lessor's underlying first mortgagee. The lessee shall also be
required to pay a cancellation fee equal to one year's rent based on the
rental due and owing under the terms of the lease and this modification.
The fee shall be based on the rental and any required tenant charges for
the twelve (12) months immediately preceding the effective termination
date. The effective termination date in the event of election would be
midnight March 31, 1994. To make the election effective, the fee must be
paid to Lessor on or before the effective termination date. The payment of
this cancellation fee shall not relieve the Lessee of its obligations
under the terms of the lease and is in addition to any rental or other
charges due pursuant to the lease and this modification. Time is of the
essence with respect to the exercise of the election to terminate the
lease and pay the cancellation fee. The election and the cancellation fee
must be personally delivered to, or sent postage prepaid, to one of the
managing partners of
-4-
<PAGE>
Lessor at the address of the partnership where the rent is then being
paid.
5. In the event that the interest rate required to paid by Lessor on the
indebtedness incurred to finance the additional improvements currently evidenced
by a second mortgage at any time during the term of this lease exceeds the rate
of ten (10%) percent per annum, the annual base rental shall be increased by the
sum of Four Thousand Dollars ($4,000.00), payable in monthly installments for
each fifty (50) basis points of increase in the interest rate over ten (10%)
percent per annum. Said rental increase shall become effective the month
following the effective date of the mortgage rate adjustment. In the event that
the annual base rental is increased at any time during the term of this lease as
a result of this paragraph, should there subsequently be a decrease in the same
mortgage interest rate, the annual base rental shall correspondingly be
decreased, except that in no event shall such rent be less than Ninety-six
Thousand Two Hundred Fifty Dollars ($96,250.00) per annum. Written evidence of
adjustments in the Lessor's mortgage rate shall be furnished to Lessee within
ten (10) days of receipt from Lessor's mortgagee.
6. All of the terms and conditions of the lease of April 27, 1984, not in
conflict or superseded by the terms of this modification of lease are hereby
ratified, approved and confirmed and all of Lessor's and Lessee's rights, duties
and obligations as set forth in the lease of April 27, 1984, shall be
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<PAGE>
in effect and apply to the landlord-tenant relationship between the parties
governing the additional improvements.
IN WITNESS WHEREOF, the Lessor and Lessee have caused this lease agreement
to be executed by the persons duly authorized on the day and year first above
written.
PERCOM INVESTMENT COMPANY,
A General Partnership, Lessor
By /s/ Neal R. Sparby
--------------------------------------
Neal R. Sparby, Authorized Partner
By /s/ John E. Multhauf
--------------------------------------
John E. Multhauf, Authorized Partner
PAYCO AMERICAN CORPORATION, Lessee
By /s/ Dennis Punches
--------------------------------------
President
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<PAGE>
LEASE
THIS LEASE made and entered into this first day of June, 1984,
between DENNIS A. WELSH, an individual, hereinafter called "Lessor", and PAYCO
AMERICAN CORPORATION, a Delaware corporation, hereinafter called "Lessee";
WITNESSETH:
WHEREAS, Lessor proposes to construct improvements to be used solely
by Lessee as more particularly described on Exhibit A, (plans and
specifications), attached hereto and incorporated herein by reference, and which
improvements shall be located on a parcel of land described on Exhibit B,
attached hereto, located in the City of Westlake Village, Los Angeles County,
State of California.
The improvements shall consist of an office building, which shall be
completed as expeditiously as possible by Lessor in accordance with the plans
and specifications approved by the parties and the tenant finishing allowance,
which is marked Exhibit A and attached hereto.
NOW, THEREFORE, in consideration of the premises and of the mutual
benefits to be derived therefrom, it is agreed as follows:
1. Lessor hereby leases, demises and rents unto the Lessee, and Lessee
hereby leases, takes and hires of and from the Lessor, the demised premises,
including all easements, rights of way and other rights appurtenant thereto.
2. Lessor shall, at his sole expense, complete construction and
improvement of the demised premises as specified by the provisions hereof
contained in Exhibit A. Construction of the demised premises shall commence as
soon as possible and the work shall be completed
<PAGE>
in accordance with the plans, specifications and requirements hereof and be
ready for occupancy on or before January 1, 1985, (completion date). The
issuance of an occupancy permit by the City of Westlake Village shall satisfy
the requirements that the premises are ready for occupancy by Lessee.
Lessor warrants that the construction of the building and other
improvements shall be performed in a good and workmanlike manner and that the
materials, equipment and other building facilities and parking lot furnished in
connection therewith shall be free of defects.
Lessee may enter the demised premises during the construction period
for the purpose of inspecting the premises as to progress and completion in
accordance with plans and specifications, installing signs, fixtures, and
equipment, provided such activity shall be done only in such manner so as not to
interfere with the construction.
3. This lease shall be for a term of twenty (20) years, commencing on
the later of either the first day of January, 1985, or the first day of the
month following the month during which the demised premises become ready for
occupancy as required by Paragraph 2 hereof, and ending twenty (20) years after
the date of commencement, unless sooner terminated as hereinafter set forth.
The Lessee shall have the option to terminate this lease under the
following terms and conditions: After the first 84 months of the lease term have
expired, the Lessee shall have the following calendar month in which to make an
election to terminate the lease at the end of 96 months. This election must be
in writing and
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<PAGE>
delivered to Lessor. Lessee shall also be required to pay a cancellation penalty
equal to one (1) full year's rent, based on the rental due and owing under the
terms of the lease for the 85th through the 96th months of occupancy, or the sum
of $280,000, whichever is greater. The effective date or termination shall be at
the end of the 96th month subsequent to commencement of the lease. To make the
election effective, the penalty must be paid to the Lessor on or before the last
day of the 96th month. The payment of this penalty shall not relieve Lessee of
its obligation under the terms of the lease to pay rent during the 84th through
96th months. Time is of the essence with respect to the exercise of the election
to terminate the lease and pay the penalty. The election and penalty must be
personally delivered to or sent postage prepaid, to the Lessor at the address
that the rent is then being paid.
4. The Lessee shall pay a base annual rental of Two Hundred Eighty
Thousand and 00/100 Dollars ($280,000.00), payable in equal monthly installments
of Twenty-three Thousand Three Hundred Thirty-three and 33/100 Dollars
($23,333.33), on the first day of each and every month, in advance.
In the event that the interest rate required to be paid by Lessor on
its underlying first mortgage indebtedness at any time during the term of this
lease exceeds the rate of Thirteen (13%) percent per annum, the annual base
rental shall increase by the sum of Three Thousand Seven Hundred and 00/100
Dollars ($3,900.00), payable monthly, for each twenty-five (25) basis points of
increase in the interest rate over Thirteen (13%) percent. Such rental increase
shall become effective the month following the effective
-3-
<PAGE>
date of the mortgage rate adjustment. In the event that the annual base rental
is increased at any time during the term of this lease, should there
subsequently be a decrease in the mortgage interest rate, the annual base rental
shall correspondingly be decreased. Written evidence of adjustments in the
Lessor's mortgage rate shall be furnished to Lessee within ten (10) days of
receipt from Lessor's mortgagee.
At the end of the third year of this lease, the base annual rental
shall be adjusted to reflect the changes in the cost of living. However, no
adjustment shall reduce the rental below that charged during the first
three-year period. The basis for computing such adjustment shall be the Consumer
Price Index - United States, all items and major group figures for urban wage
earners and clerical workers or items (based on 1967 equals 100), published
monthly by the "Monthly Labor Review" by the Bureau of Labor Statistics of the
United States Department of Labor ("index"). The computation shall be made by
multiplying the initial base annual rental by a fraction, the numerator of which
shall be the index figure for the month prior to the month in which the
adjustment commences and the denominator of which shall be the index figure for
the month in which this lease commences. In the event that the Bureau of Labor
Statistics shall cease to publish the index, then a similar index by any other
branch or department of the United States shall be used. The result of this
computation shall then be divided by twelve (12), and commencing the forty-ninth
(49th) month of the Lease, the adjusted base rental shall be paid. Annually
thereafter, at twelve (12) month
-4-
<PAGE>
intervals, the base annual rental shall be adjusted in accordance with the
adjustment in the Consumer Price Index or other comparable index. However, in no
event shall any annual increase in base rentals, exclusive of any adjustment
occasioned by an increase in interest rates as specified above, exceed five (5%)
percent of the rental charged in the prior twelve (12) month period.
5. It is agreed that the leased premises shall be used by the Lessee
as a general office building and that Lessee shall, with Lessor's prior written
consent, and, if required, the consent of Lessor's mortgagee, have the right to
sublease out portions of the building to qualified, responsible tenants
requiring office space. In the event of such sublease, Lessee's obligation to
pay rent under the terms and conditions of this lease shall not be relieved and
Lessee shall remain liable under its full obligation, pursuant to the terms of
this lease. Written consent to such subleasing shall not be unreasonably
withheld.
6. The Lessor shall have no obligation, after Lessee has taken
possession of the demised premises, to make any alterations, improvements or
repairs of any kind on or about the demised premises or the building or
buildings thereon, or of which they are a part, or the equipment, fixtures,
plumbing, appliances, or machinery in, upon or serving same, or the streets,
alleys, areas, area-ways or passages adjoining or appurtenant thereto. Without
limitation, Lessee covenants and agrees at its own expense throughout the term:
(A) to maintain and keep every part of demised premises, including
fixtures and appurtenances situated thereon in good and substantial order and
repair; and
-5-
<PAGE>
(B) to comply with all laws and orders of municipal, state and other
governmental authorities pertaining to the demised premises or the use of the
demised premises.
7. Lessee shall pay and discharge as and when the same become due and
prior to delinquency, all taxes, assessments, levies and other charges, general
and special, which are or may be during the term hereof, levied, assessed,
imposed or charged against the demised premises and any personal property owned
by the Lessor but used by the Lessee in connection with its use of the demised
premises and situated thereon, provided, however, that the Lessee during the
first calendar year of the original term of this lease and the last calendar
year of the original term or the final extension thereof shall be obligated to
pay only a pro rata portion of said real estate taxes due and payable for such
year based upon the part of the year the Lessee occupies the demised premises,
and shall only be obligated to pay those installments of special assessments
(using the longest amortization term available) coming due during the term of
this Lease.
The Lessee may in good faith contest any tax assessed which it is
obligated to pay under the terms of this lease if it shall give the Lessor a
bond for such amount and guaranteed by such surety as may be satisfactory to the
Lessor. The Lessor shall give the Lessee copies of all notices of levy or change
or proposed change in tax rate or assessment within thirty (30) days after
receipt by Lessor. The Lessor at its option, may require Lessee to pay over to
Lessor an amount equal to one-twelfth (1/12th) of the estimated annual real
estate taxes which may be due and payable during any lease year. Lessor shall
adjust the amount of such payments upon the municipality
-6-
<PAGE>
rendering the real estate tax bill, and in the event that Lessee has paid an
insufficient amount to cover the total amount due, then Lessee shall, upon
demand, pay the additional sum. In the event that Lessee has paid an amount in
excess of the amount necessary to cover the general real estate tax liability,
then Lessee shall receive a credit against the following year's estimated taxes
for such overpayment.
8. Lessee covenants and agrees at its own expense throughout the term
to provide and maintain policies of insurance upon the premises in amounts and
with companies acceptable to Lessor, having a Best Insurance Guide rate of 5A+
or better, licensed to transact business in the State of California and, in
connection with casualty insurance, with mortgagee clauses in favor of and with
losses payable to Lessor and its mortgagee, as follows:
(A) Fire and extended coverage insurance upon all improvements upon
the premises in the amount of the full insurable value thereof, with full
replacement cost endorsement;
(B) General comprehensive public liability insurance in such amounts
as Lessor may from time to time determine as appropriate, but in no event less
than $2,000,000/2,000,000/500,000;
(C) Rent loss or business interruption insurance in such amounts as
may be required by Lessor.
(D) Such other insurance and coverage as Lessor may require or as may
be customarily carried by persons owning and operating properties of the same
type and usage as the leasehold premises.
9. Upon the termination of this agreement, the Lessee may remove any
trade fixtures and equipment owned by it or placed upon
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<PAGE>
the premises by it, other than fixtures installed to replace those presently in
the premises, provided, however, that the Lessee leaves the premises in the same
condition or repair and tenantability as they were at the time of the making of
this agreement prior to the addition of such trade fixtures.
10. The Lessee shall pay for all utilities, including gas electricity,
sewer and water, as well as any other services used therein during the term of
this lease.
11. Lessee agrees to save the Lessor harmless and indemnified from all
loss, damage, liability or expense incurred or claimed by reason of Lessee's
neglect or use of the premises, or by reason of any injury or property damage to
any person or property on the premises described herein, except such as is
caused by the negligence of the Lessor, and Lessee further agrees to pay all
legal expenses, including a reasonable attorney's fee, incurred by the Lessor by
reason of the commencement of legal proceedings to enforce any of the provisions
of this lease, and resulting in a decree or award in favor of the Lessor.
The Lessor shall not be liable, and the Lessee hereby waives all
claims against the Lessor, for any injury, loss or damage, by theft or
otherwise, or damage either to person or property, sustained by the Lessee or
other persons, whether due to the building or any part or appurtenances thereof
becoming out of repair, or arising from bursting of pipes or resulting from
steam, electricity, gas, odors, water, rain or snow which may leak or come from
any part of the building or adjoining premises, or due to the happening of any
accident in or about the building, or to pipes or appurtenances,
-8-
<PAGE>
or plumbing works therein, or from any other cause whatsoever, unless caused by
the negligence of the Lessor.
12. In case the demised premises are damaged by fire or other
casualty, the Lessor covenants and agrees, subject to the right of cancellation
hereinafter set forth, promptly to repair or restore the same and obtain
certificates approving all such repairs from all public authorities having
jurisdiction, subject to reasonable delays in collection of insurance funds or
due to restrictions on or inability to obtain labor or materials, or due to
other causes or conditions beyond the control of the Lessor. Prompt repair or
restoration shall be deemed to allow a reasonable time for the parties to make a
survey and determination of the extent of the damage and the probable cost of
necessary repairs and restoration and to prepare suitable plans and
specifications for and to repair or restore the demised premises in accordance
with such determination.
In the event the damage to the demised premises is of such nature and
extent as to require expenditures for repairing and restoration in excess of
25%, but less than 50% of the replacement value of the improvements upon the
demised premises as last determined for fire insurance purposes, Lessor shall
have one hundred twenty (120) days from the date the damage occurs or if 50% of
such replacement value, then Lessor shall have two hundred ten (210) days from
the date the damage occurs to repair and restore the demised premises to a
condition substantially equal to or better in every respect than their condition
prior to such damage. Lessor shall submit to Lessee full information obtained by
it as to the cost of repairing and restoring the demised premises. If all
repairs and restoration are
-9-
<PAGE>
not substantially completed within the time limits herein stated, then Lessee
may at its option terminate this lease on written notice given thirty (30) days
after expiration of the applicable time limit. Expenditures for repairing and
restoration shall include the costs of decorating and refurbishing, but shall
exclude damage to personal property owned by Lessee.
If the demised premises are untenantable for Lessee's purposes in
whole or in part due to damage by fire or other casualty, or the repair of such
damage, Lessee's obligation to pay rent and taxes shall be abated
proportionately from the date of such damage until the demised premises are
repaired or restored, and any unearned rent paid by Lessee shall be refunded or
credited upon rent subsequently payable by Lessee if this lease continues in
effect.
13. In the event that the building or the demised premises shall be
taken or condemned by any competent authority for any public use or purpose, or
in the event that prior to such taking or condemnation, Lessor deems it
expedient to sell the premises to such public authority, the term of this lease
shall end upon the first to occur of sale of the premises or the date when the
possession of the portion so taken shall be required for such use or purpose,
and the Lessee shall have no claim against the Lessor and shall not be entitled
to any portion of the amount which may be awarded as damages or paid as a result
of such condemnation proceedings. In the event of termination of this lease as
herein provided, the rental shall be apportioned to the date of such
termination.
14. The Lessee shall not assign this lease without the consent in
writing of Lessor, and, if required, Lessor's mortgagee,
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<PAGE>
which consent shall not be unreasonably withheld. Such consent shall not be
unreasonably withheld. It is understood and agreed, however, that if the Lessee
shall be declared bankrupt, shall have a receiver appointed of its property,
which receiver shall not be discharged in thirty (30) days, or shall Lessee make
an assignment for the benefit of creditors, or its rights hereunder shall be
taken under execution, it shall be construed as an assignment of this lease
within the meaning hereof and lessor shall have the right to terminate this
lease upon the happening of the foregoing event. In the event, however, that
Lessee is the subject or involved in a merger or consolidation, this lease will
not be construed as being assigned in the event that the resulting corporation
of such merger or consolidation has total assets and a net worth after such
consolidation or merger equal to or greater than that of the Lessee immediately
prior to such consolidation or merger. Notwithstanding the foregoing, such act
shall require the consent of Lessor and Lessor's mortgagee, which consent shall
not be unreasonably withheld.
15. The Lessee covenants and agrees to pay and discharge all
reasonable costs, attorneys' fees and expenses and shall be paid and incurred by
the said Lessor in enforcing the covenants and agreements of this lease on
account of Lessee's default hereunder.
16. The Lessor may at all reasonable times enter said premises to
inspect same, but agrees to maintain confidentiality; and not to use or divulge
any proprietary information of Lessee disclosed during such inspection.
17. In case the Lessee shall vacate or abandon said premises, or shall
default in any of its covenants herein, and said
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<PAGE>
default shall not be cured within ten (10) days after notice thereof in writing
from the Lessor, the Lessor is hereby authorized to reenter said premises to
eject the Lessee, and take full possession of said premises, to terminate this
lease at its option and to release and let said premises on such terms as to
Lessor shall seem best, to remove from said premises all personal property of
the Lessee, and to store the same to the account and at the expense and risk of
the Lessee, and to sell said property or any part thereof, and out of the
proceeds to pay all expenses of so removing, storing and selling the same, and
all sums which shall then be in arrears or past due for rent; and that no such
act or acts of the Lessor shall be construed as cancellation of this lease or
waiver of the right of the Lessor to collect rent hereunder for the remainder of
said term, except said exercise of its option to terminate the same; and that in
case the Lessor shall determine that any action or proceeding at law or
otherwise is necessary to enforce the terms and conditions hereof, the Lessee
agrees that a reasonable attorney's fee and the necessary costs and
disbursements thereof may be allowed and taxed against it.
18. That no sign, advertisement or notice will be placed or painted on
any part of the outside or inside of said building or leased premises, except in
such manner, style and places as approved in writing by the Lessor and the City
of Westlake Village, California, which approval shall not be unreasonably
withheld, and the Lessor reserves the right to remove all others at the expense
of Lessee.
19. At all times during the term of this lease, the Lessee shall and
may peaceably and quietly hold and enjoy the demised premises free from
molestation, invasion or disturbance.
-12-
<PAGE>
20. That the Lessor shall have the right to enter the leased premises
during twelve (12) months prior to the termination of this lease, to show the
same to prospective tenants, and to place on doors and windows the usual notice
that the premises are for rent, upon giving reasonable prior notice to Lessee.
21. This Lease shall be subject and subordinate at all times to the
lien of any mortgages or ground rents now or hereafter placed on the demised
premises without the necessity of any further instrument or act on the part of
Lessee to effect such subordination, provided that the holder of any such
mortgage shall on behalf of itself, its successors and assigns, agree that
Lessee shall have the quiet enjoyment of the demised premises for the term of
this lease in accordance with every provision hereof, so long as Lessee shall
fully and faithfully perform all of the terms, covenants and conditions of this
lease on its part to be performed, irrespective of Lessor's default. Lessee
covenants and agrees to execute and deliver upon demand such further instrument
or instruments evidencing such subordination of this lease upon the foregoing
terms as shall be desired by any mortgagee or proposed mortgagee or by any
person entitled thereto.
22. Except as other provisions may herein specifically be made, in the
event that either Lessee or Lessor as the obligated party, after ten (10) days'
written notice from the other party, fails or refuses to make any of the
payments when due as required of such obligor by this lease (other than the
payment of the rent reserved hereunder), or to do or cause to be done promptly
any and all of the acts and things in this lease provided to be done by such
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<PAGE>
obligor, then the other party shall have the right, (but shall be under no
obligation to the obligor to do so), to advance any and all sums of money or do
or cause to be done any and all acts and things necessary or proper to be done
or performed by the obligor and in such event, the obligor covenants and
agrees forthwith upon demand to repay to such other party any and all sums so
advanced or expended to do or cause to be done any and all such acts and things.
In the event that the obligor fails within ten (10) days after written
demand by the other party to repay (or, if applicable, to allow a deduction from
rental) any sum advanced by the other party pursuant to the foregoing
provisions, there shall be added to the sum to be repaid interest thereon from
the date of demand to the date of repayment at the rate of ten (10%) percent per
annum.
The Lessee may, (but shall not be obligated to), from time to time,
make such payments on account of mortgages or deeds or trust or other
encumbrances on or liens against the Lessor's estate as may be necessary in the
Lessee's judgment for the protection of the Lessee's estate. The Lessee in
making any such payments shall be subrogated as against the Lessor to the rights
of the parties to whom such payments are made, and if the Lessor shall after
notice fail to repay any amount so paid, the Lessee shall also have the right to
deduct the amount so paid, with legal interest thereon, from the rental
thereafter accruing, until fully reimbursed.
23. All notices, consents, demands and requests which may be or are
required to be given by either party to the other, shall be in writing, and
shall be sent by United States registered or certified mail, with return receipt
requested, addressed as follows:
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<PAGE>
TO LESSOR: Dennis A. Welsh
Inland Development Corp.
7311 West Green Tree Road
Milwaukee, WI 53223
TO LESSEE: Payco American Corporation
180 North Executive Drive
Brookfield, WI 53005
The date shown on the return receipt as of the date of which said registered or
certified mail is received by the addressee shall be conclusively deemed to be
the date on which a notice, consent, demand or request is given or made. The
above address or a party may be changed at any time, or from time to time by
notice given by said party to the other party in the manner hereinabove
provided.
24. Simultaneously with or subsequent to the execution hereof, the
parties hereto shall, at the option of either party, execute a short form lease
for recording purposes, and, in such event, the terms thereof shall constitute a
part of this lease as fully as though recited at length herein.
25. This lease and all the covenants, terms, provisions and conditions
herein contained shall inure to the benefit, and be binding upon the Lessor and
Lessee, their respective successors and assigns.
26. Lessor agrees that should it at any time offer the property for
sale and receive an acceptable offer to purchase the premises, it will notify
Lessee in writing, attaching an exact copy of the offer. Lessee shall then have
thirty (30) days from receipt of such offer to make a similar offer as to price,
terms and conditions with respect to the purchase of the premises. If Lessee
does not make such an offer within thirty (30) days, or prior thereto indicates
its intention not to make such an offer, then Lessor shall be free
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<PAGE>
to sell the premises to such third party bona fide purchaser on the same terms
and conditions as submitted by the original offer. If there are any changes or
modifications to the original offer, Lessee must be informed of such changes and
be given ten (10) days to make a similar offer based on such changes or
modifications. This right of first refusal shall exist only during the period in
which this lease is in effect.
IN WITNESS WHEREOF, the Lessor and Lessee have caused this lease
agreement to be executed by the persons duly authorized on the day and year
first above written.
/s/ Dennis A. Welsh (SEAL)
-----------------------------
Dennis A. Welsh, Lessor
PAYCO AMERICAN CORPORATION, Lessee
by /s/ Dennis Punches
---------------------------------
President
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<PAGE>
AMENDMENT
TO
LEASE
The Lease between Payco American Corporation ("Payco") dated June 1,
1984, as Lessee, and Dennis A. Welsh ("Welsh") as Lessor and as assigned by
Welsh to Westlake Investment Company ("Westlake") is hereby amended as follows:
1. Paragraph number four (4) is amended to provide that the base
annual rental effective April 1, 1993, shall be Two Hundred Sixty-five Thousand
Sixty-eight and 00/100 ($265,068.00) Dollars payable in equal monthly
installments of Twenty-two Thousand Eighty-nine and 00/100 ($22,089.00) Dollars
each on the first day of each and every month commencing on April 1, 1993.
2. Paragraph number four (4) of the lease is further amended to
provide that should the underlying first mortgage covering the leasehold
premises as in effect on April 1, 1993, be subjected to an interest rate
increase at any time during the term of the lease whereby the mortgage interest
rate is in excess of twelve and five-eighths (12-5/8ths%) percent per annum, the
monthly rental payment shall be increased to cover the cost of such increase in
excess of twelve and five-eighths (12-5/8ths%) percent per annum.
3. Paragraph number four (4) shall further be amended to provide that
the base annual rental effective April 1, 1994, shall be subject to an
adjustment to reflect the change in the cost of living. However, no adjustment
shall reduce the rental below that charged for the annual period commencing
April 1, 1993. The base for computing such adjustment shall be the Consumer
Price Index - All Urban Consumers - United States (based on 1982-84 =100),
published by the United States Department of Labor, Bureau of Labor Statistics.
The computation shall be made by multiplying the initial base annual rental as
set forth in this amendment by a fraction, the numerator of which shall be the
index figure for the last reporting period prior to the month in which the
adjustment commences and the denominator of which shall be the index figure for
the last reporting period for the month in which this lease amendment commences
(April 1, 1993). In the event that the Bureau of Labor Statistics shall cease to
publish the index, then a similar index by any other branch or department of the
United States shall be used. The result of this computation shall be divided by
twelve and commencing April 1, 1994, the adjusted base rental shall be paid.
Annually thereafter, at twelve month intervals, the base annual rental shall be
adjusted in accordance with the adjustment in the Consumer Price Index or other
comparable index. However, in no event shall any annual increase in base
rentals, exclusive of any adjustment occasioned by an increase in interest rates
as specified above, exceed five (5%) percent of the rental charged in the prior
twelve month period.
<PAGE>
4. All of the rest of the terms and conditions of the lease dated June
1, 1984, above referred to are hereby ratified, approved and confirmed.
Executed this 30 day of December, 1992.
WESTLAKE INVESTMENT COMPANY, Lessor
/s/ Neal Sparby
------------------------------------
Neal Sparby, managing Partner
/s/ John E. Multhauf
------------------------------------
John E. Multhauf, Managing Partner
PAYCO AMERICAN CORPORATION, Lessee
Dennis Punches
------------------------------------
President
<PAGE>
LEASE
THIS LEASE, made and entered into this 14 day of July, 1986, between
DUBLIN INVESTMENT COMPANY, a Wisconsin general partnership, hereinafter called
"Lessor", and PAYCO AMERICAN CORPORATION, a Delaware corporation, hereinafter
called "Lessee".
WITNESSETH:
WHEREAS, the leasehold premises which are the subject of this Lease
consist of a two-story brick and glass commercial office building of
approximately forty-three thousand (43,000) square feet in size located at 5626
Frantz Road, Dublin, Ohio, with a surfaced parking lot sufficient for not less
than four hundred eighty-five (485) cars, the real estate being more
particularly described on Exhibit A attached hereto.
NOW, THEREFORE, in consideration of the premises and of the mutual
benefits to be derived therefrom, it is agreed as follows:
1. Lessor hereby leases, demises and rents unto Lessee, and Lessee
hereby leases, takes and hires of and from the Lessor, the demised premises,
above described, including all easements, rights of way and other rights
appurtenant thereto.
2. This Lease shall be for a term of twenty (20) years commencing on
the first day of June, 1987, and ending on midnight of the 31st day of May, in
the year 2007, unless sooner terminated as hereinafter set forth. If Lessee
shall be given physical occupancy of the premises, prior to the commencement of
the Lease, such occupancy shall not affect the term of the Lease, and
<PAGE>
Lessee agrees to pay to Lessor the per diem rental charge for early occupancy
equal to l/365ths of the annual base rental. If the commencement date of the
Lease is deferred because of Lessor's inability to give occupancy to Lessee, the
term of the Lease shall commence on the first day of the month following the
date of initial occupancy by Lessee, and the termination date shall
correspondingly be extended.
3. Lessee shall have the option to terminate the Lease under the
following terms and conditions: After the first sixty (60) months of the Lease
term have expired, Lessee shall have the following calendar month (time being of
the essence) to make an election to terminate the Lease at the end of the
seventy-second (72nd) month. This election must be in writing, a copy of which
will be sent to Lessor's mortgagee. Lessee shall be required to pay a
cancellation penalty equal to one (1) full year's rent, based on all rental due
and owing under the terms of the Lease, for the twelve (12) month period prior
to the effective date of termination. The effective date of termination would be
at the end of the seventy-second (72nd) month. The payment of this penalty shall
not relieve Lessee of its obligation under the terms of the Lease to pay the
rent to the effective date of termination. The election must be personally
delivered to, or sent postage prepaid, to one of the managing partners of Lessor
at the address of the partnership where the rent is then being paid. The penalty
is payable in one lump sum in cash on the last day of the seventy-second (72nd)
month.
-2-
<PAGE>
4. (A) The Lessee shall pay a base annual rental of Four Hundred Fifty
Thousand Dollars ($450,000.00), payable in equal monthly installments of
Thirty-seven Thousand Five Hundred Dollars ($37,500.00) each, on the first day
of each and every month, in advance.
(B) At the end of the twelfth (12th) month of the term, the base
annual rental shall be adjusted in the amount of the increase in the Consumer
Price Index ("CPI") for United States, All Items and Major Group Figures for
Urban Wage Earners and Clerical Workers or Items (1967 = 100). The computation
shall be made by multiplying $450,000.00 by a fraction the numerator of which
shall be the index figure for the month prior to the month in which the
adjustment commences and the denominator of which shall be the index figure for
the month prior to the month in which the Lease commences. In the event that the
Bureau of Labor Statistics shall cease to publish the index, then a similar
index by any other branch or department of the United States shall be used. The
result of this computation shall then be divided by twelve (12) and commencing
the thirteenth (13th) month of the Lease, the adjusted base rental shall be
paid. Annually thereafter, at twelve (12) month intervals, the base annual
rental shall be adjusted in accordance with the adjustment in the CPI or other
comparable index. The maximum increase in rental for any twelve (12) month
period shall be five (5%) percent over the initial base annual rental. Increases
at the end of each twelve (12) months of the term thereafter, shall be limited
to the amount of the sum of the increase in the CPI
-3-
<PAGE>
during the twelve (12) month period preceding, plus the amount which the
increase in the CPI during any twelve (12) month term exceeded five (5%) percent
to the extent the excess has not previously been applied, but in no event, is
the increase at the end of any twelve (12) month period to exceed five (5%)
percent.
(C) In the event that the interest rate required to be paid by Lessor
on its underlying first mortgage indebtedness covering the premises at any time
during the term of this Lease exceeds the agreed rate of 9 3/4 percent, the
annual base rental shall increase by the sum of Six Thousand Five Hundred
Dollars ($6,500.00) for each twenty-five (25) basis points of increase in the
interest rate over 9 3/4 percent. Such rental increase shall become effective
the month following the effective date of the mortgage rate adjustment. This
increased rental shall be payable in monthly installments. In the event that the
annual base rental is increased at any time during the term of this Lease,
should there subsequently be a decrease in the underlying mortgage interest
rate, the annual base rental shall correspondingly be decreased, however not to
an amount less than that specified as the base rental and any CPI adjustments as
set forth in paragraphs 4.(A) and (B) above. Written evidence of adjustments in
the Lessor's mortgage rate, together with the proposed base rental adjustment,
shall be furnished to Lessee within ten (10) days of any effective date of
interest rate adjustment by Lessor's mortgagee.
5. It is agreed that the leased premises shall be used by the Lessee
as a general office building and that Lessee shall
-4-
<PAGE>
with Lessor's prior written consent, and, if required, the consent of Lessor's
mortgagee, to have the right to sublease out portions of the building to
qualified, responsible tenants, requiring office space or at Lessee's option the
entire premises to Payco-General American Credits, Inc. In the event of such
sublease, Lessee's obligation to pay rent under the terms and conditions of this
Lease, shall not be relieved and Lessee shall remain liable under its full
obligation, pursuant to the terms of this Lease. Written consent to such
subleasing shall not be unreasonably withheld.
6. The Lessor shall have no obligation to make alterations,
improvements or repairs of any kind on or about the demised premises or the
building or buildings thereon, or of which they are a part, or the equipment,
fixtures, plumbing, appliances, or machinery in, upon or serving same, or the
streets, alleys, areas, area-ways or passages adjoining or appurtenant thereto.
Without limitation, Lessee covenants and agrees at its own expense throughout
the term:
(A) to maintain and keep every part of demised premises, including
fixtures and appurtenances situated thereon in good and substantial order and
repair; and
(B) to comply with all laws and orders of municipal, state and other
governmental authorities pertaining to the demised premises or the use of the
demised premises.
7. Lessee shall pay and discharge as and when the same become due and
prior to delinquency all taxes, assessments, levies and other charges, general
and special, which are or may
-5-
<PAGE>
be during the term hereof, levied, assessed, imposed or charged against the
demised premises and any personal property owned by the Lessor but used by the
Lessee in connection with its use of the demised premises and situated thereon,
provided, however, that the Lessee during the first calendar year of the
original term of this Lease and the last calendar year of the original term or
the final extension thereof shall be obligated to pay only a prorata portion of
said real estate taxes due and payable for such year based upon the part of the
year the Lessee occupies the demised premises, and shall only be obligated to
pay those installments of special assessments (using the longest amortization
term available) coming due during the term of this Lease.
The Lessee may in good faith contest any tax assessed which it is
obligated to pay under the terms of this Lease if it shall give the Lessor a
bond for such amount and guaranteed by such surety as may be satisfactory to the
Lessor. The Lessor shall give the Lessee copies of all notices of levy or change
or proposed change in tax rate or assessment within thirty (30) days after
receipt by Lessor. The Lessor at its option, may require Lessee to pay over to
Lessor an amount equal to one-twelfth (1/12th) of the estimated annual real
estate taxes which may be due and payable during any lease year. Lessor shall
adjust the amount of such payments upon the municipality rendering the real
estate tax bill, and in the event that Lessee has paid an insufficient amount to
cover the total amount due, then Lessee shall, upon demand, pay the additional
sum. In the event that
-6-
<PAGE>
Lessee has paid an amount in excess of the amount necessary to cover the
general real estate tax liability, then Lessee shall receive a credit against
the following year's estimated taxes for such overpayment.
8. Lessee covenants and agrees at its own expense throughout the term
to provide and maintain policies of insurance upon the premises in the amounts
and with companies acceptable to Lessor, licensed to transact business in the
State of Ohio, and, in connection with casualty insurance, with mortgagee
clauses in favor of and with losses payable to Lessor and its mortgagee, as
follows:
(A) Fire and extended coverage insurance upon all improvements upon
the premises in the amount of the full insurable value thereof, with full
replacement cost endorsement;
(B) General comprehensive public liability insurance in such amounts
as Lessor may from time to time determine as appropriate, but in no event less
than $3,000,000/3,000,000/500,000;
(C) Workmen's compensation insurance, if Lessor has any employees on
or about the premises;
(D) Such other insurance and coverage as Lessor may require or as may
be customarily carried by persons owning and operating properties of the same
type and usage as the leasehold premises .
9. Upon the termination of this agreement, the Lessee may remove any
trade fixtures and equipment owned by it or placed upon the premises by it,
other than fixtures installed to replace
-7-
<PAGE>
those presently in the premises, provided, however, that the Lessee leaves the
premises in the same condition or repair and tenantability as they were at the
time of the making of this agreement prior to the addition of such trade
fixtures.
10. The Lessee shall pay for all utilities, including gas,
electricity, sewer and water, as well as any other services used therein during
the term of this Lease.
11. Lessee agrees to save the Lessor harmless and indemnified from al1
loss, damage, liability or expense incurred or claimed by reason of Lessee's
neglect or use of the premises, or by reason of any injury or property damage to
any person or property on the premises described herein, except such as is
caused by the negligence of the Lessor, and Lessee further agrees to pay all
legal expenses, including a reasonable attorney's fee, incurred by the Lessor by
reason of the commencement of legal proceedings to enforce any of the provisions
of this Lease and resulting in a decree or award in favor of the Lessor.
The Lessor shall not be liable, and the Lessee hereby waives all
claims against the Lessor, for any injury, loss or damage, by theft or
otherwise, or damage either to person or property, sustained by the Lessee or
other persons, whether due to the building or any part or appurtenances thereof
becoming out of repair, or arising from bursting of pipes or resulting from
steam, electricity, gas, odors, water, rain or snow which may leak or come from
any part of the building or adjoining premises, or due to the happening of any
accident in or about the building, or to pipes or appurtenances, or plumbing
works therein, or from
-8-
<PAGE>
any other cause whatsoever, unless caused by the negligence of the Lessor.
12. In case the demised premises are damaged by fire or other
casualty, the Lessor covenants and agrees, subject to the right of cancellation
hereinafter set forth, promptly to repair or restore the same and obtain
certificates approving all such repairs from all public authorities having
jurisdiction, subject to reasonable delays in collection of insurance funds or
due to restrictions on or inability to obtain labor or materials, or due to
other causes or conditions beyond the control of the Lessor. Prompt repair or
restoration shall be deemed to allow a reasonable time for the parties to make a
survey and determination of the extent of the damage and the probable cost of
necessary repairs and restoration and to prepare suitable plans and
specifications for and to repair or restore the demised premises in accordance
with such determination.
In the event the damage to the demised premises is of such nature and
extent as to require expenditures for repairing and restoration in excess of
25%, but less than 50% of the replacement value of the improvements upon the
demised premises as later determined for fire insurance purposes, Lessor shall
have one hundred twenty (120) days from the date the damage occurs or if 50% of
such replacement value, then Lessor shall have two hundred ten (210) days from
the date the damage occurs to repair and restore the demised premises to a
condition substantially equal to or better in every respect than their condition
prior to such damage. Lessor shall submit to Lessee
-9-
<PAGE>
full information obtained by it as to the cost of repairing and restoring the
demised premises. If all repairs and restoration are not substantially completed
within the time limits herein stated, then Lessee may at its option terminate
this Lease on written notice given thirty (30) days after expiration of the
applicable time limit. Expenditures for repairing and restoration shall include
the cost of decorating and refurbishing, but shall exclude damage to personal
property owned by Lessee.
If the demised premises are untenantable for Lessee's purposes in
whole or in part due to damage by fire or other casualty, or the repair of such
damage, Lessee's obligation to pay rent and taxes shall be abated
proportionately from the date of such damage until the demised premises are
repaired or restored, and any unearned rent paid by Lessee shall be refunded or
credited upon rent subsequently payable by Lessee if this Lease continues in
effect.
13. In the event that the building or the demised premises shall be
taken or condemned by any competent authority for any public use or purpose, or
in the event that prior to such taking or condemnation, Lessor deems it
expedient to sell the premises to such public authority, the term of this Lease
shall end upon the first to occur of sale of the premises or the date when the
possession of the portion so taken shall be required for such use or purpose,
and the Lessee shall have no claim against the Lessor and shall not be entitled
to any portion of the amount which may be awarded as damages or paid as a result
of such
-10-
<PAGE>
condemnation proceedings. In the event of termination of this Lease as herein
provided, the rental shall be apportioned to the date of such termination.
14. The Lessee shall not assign this Lease without the consent in
writing of Lessor. Such consent shall not be unreasonably withheld. It is
understood and agreed, however, that if the Lessee shall be declared bankrupt,
shall have a receiver appointed of its property, which receiver shall not be
discharged in thirty (30) days, or shall Lessee make an assignment for the
benefit of creditors, or its rights hereunder shall be taken under execution, it
shall be construed as an assignment of this Lease within the meaning hereof and
Lessor shall have the right to terminate this Lease upon the happening of the
foregoing event. In the event, however, that Lessee is the subject or involved
in a merger or consolidation, this Lease will not be construed as being assigned
in the event that the resulting corporation of such merger or consolidation has
total assets and a net worth after such consolidation merger equal to or greater
than that of the Lessee immediately prior to such consolidation or merger.
Notwithstanding the foregoing, such act shall require the consent of Lessor and
Lessor's mortgagee, which consent shall not be unreasonably withheld.
15. The Lessee covenants and agrees to pay and discharge all
reasonable costs, attorneys' fees and expenses that shall be paid and incurred
by the said Lessor in enforcing the covenants and agreements of this Lease on
account of Lessee's default hereunder.
-11-
<PAGE>
16. The Lessor may at all reasonable times enter said premises to
inspect the same, but agrees to maintain confidentiality; and not to use or
divulge any proprietary information of Lessee disclosed during such inspection.
17. In case the Lessee shall vacate or abandon said premises, or
shall default in any of its covenants herein, and said default shall not be
cured within ten (10) days after notice thereof in writing from the Lessor, the
Lessor is hereby authorized to re-enter said premises, to eject the Lessee, and
take full possession of said premises, to terminate this Lease at its option and
to release and let said premises on such terms as to Lessor shall seem best, to
remove from said premises all personal property of the Lessee, and to store the
same to the account and at the expense and risk of the Lessee, and to sell said
property or any part thereof, and out of the proceeds to pay all expenses of so
removing, storing and selling the same, and all sums which shall then be in
arrears or past due for rent; and that no such act or acts of the Lessor shall
be construed as cancellation of this Lease or waiver of the right of the Lessor
to collect rent hereunder for the remainder of said term, except said exercise
of its option to terminate the same; and that in case the Lessor shall determine
that any action or proceeding at law or otherwise is necessary to enforce the
terms and conditions hereof, the Lessee agrees that a reasonable attorney's fee
and the necessary costs and disbursements thereof may be allowed and taxed
against it.
-12-
<PAGE>
18. That no sign, advertisement or notice will be placed or painted on
any part of the outside or inside of said building or leased premises, except in
such manner, style and places as approved in writing by the Lessor and the
Village of Dublin, Ohio, which approval shall not be unreasonably withheld, and
the Lessor reserves the right to remove all others at the expense of Lessee.
19. At all times during the term of this Lease, the Lessee shall and
may peaceably and quietly hold and enjoy the demised premises free from
molestation, invasion or disturbance.
20. That Lessor shall have the right to enter the leased premises
during twelve (12) months prior to the termination of this Lease, to show the
same to prospective tenants, and to place on doors and windows the usual notice
that the premises are for rent, upon giving reasonable prior notice to Lessee.
21. This Lease shall be subject and subordinate at all times to the
lien of any mortgages or ground rents now or hereafter placed on the demised
premises without the necessity of any further instrument or act on the part of
Lessee to effect such subordination, provided that the holder of any such
mortgage shall on behalf of itself, its successors and assigns, agree that
Lessee shall have the quiet enjoyment of the demised premises for the term of
this Lease in accordance with every provision hereof, so long as Lessee shall
fully and faithfully perform all of the terms, covenants and conditions of this
Lease on its part to be performed, irrespective of Lessor's default. Lessee
covenants and agrees to execute and deliver upon demand such further
-13-
<PAGE>
instrument or instruments evidencing such subordination of this Lease upon the
foregoing terms as shall be desired by any mortgagee or proposed mortgagee or by
any person entitled thereto.
22. Except as other provisions may herein specifically be made, in the
event that either Lessee or Lessor as the obligated party, after ten (10) days'
written notice from the other party, fails or refuses to make any of the
payments when due as required of such obligor by this Lease (other than the
payment of the rent reserved hereunder), or to do or cause to be done promptly
any and all of the acts and things in this Lease provided to be done by such
obligor, then the other party shall have the right, (but shall be under no
obligation to the obligor to do so), to advance any and all sums of money or do
or cause to be done any and all acts and things necessary or proper to be done
or performed by the obligor, and in such event, the obligor covenants and agrees
forthwith upon demand to repay to such other party any and all sums so advanced
or expended to do or cause to be done any and all such acts and things.
In the event that the obligor fails within ten (10) days after written
demand by the other party to repay (or, if applicable, to allow a deduction from
rental) any sum advanced by the other party pursuant to the foregoing
provisions, there shall be added to the sum to be repaid interest thereon from
the date of demand to the date of repayment at the rate of ten (10%) percent per
annum.
-14-
<PAGE>
The Lessee may, (but shall not be obligated to), from time to time,
make such payments on account of mortgages or deeds or trust or other
encumbrances on or liens against the Lessor's estate as may be necessary in the
Lessee's judgment for the protection of the Lessee's estate. The Lessee in
making any such payments shall be subrogated as against the Lessor to the rights
of the parties to whom such payments are made, and if the Lessor shall after
notice fail to repay any amount so paid, the Lessee shall also have the right to
deduct the amount so paid, with legal interest thereon, from the rental
thereafter accruing, until fully reimbursed.
23. All notices, consents, demands and requests which may be or are
required to be given by either party to the other, shall be in writing, and
shall be sent by United States registered or certified mail, with return receipt
requested, addressed as follows:
TO LESSOR: DUBLIN INVESTMENT COMPANY
180 N. Executive Drive
Brookfield, WI 53005
PAYCO AMERICAN CORPORATION
180 N. Executive Drive
Brookfield, WI 53005
The date shown on the return receipt as of the date of which said registered or
certified mail is received by the addressee shall be conclusively deemed to be
the date on which a notice, consent, demand or request is given or made. The
above address or a party may be changed at any time, or from time to time by
notice given by said party to the other party in the manner hereinabove
provided.
-15-
<PAGE>
24. Simultaneously with or subsequent to the execution hereof, the
parties hereto shall, at the option of either party, execute a short form lease
for recording purposes, and, in such event, the terms thereof shall constitute a
part of this Lease as fully as though recited at length herein.
25. This Lease and all the covenants, terms, provisions and conditions
herein contained shall inure to the benefit, and be binding upon the Lessor and
Lessee, their respective successors and assigns.
26. Lessor agrees that should it at any time offer the property for
sale and receive an acceptable offer to purchase the premises, it will notify
Lessee in writing, attaching an exact copy of the offer. Lessee shall then have
thirty (30) from receipt of such offer to make a similar offer as to price,
terms and conditions with respect to the purchase of the premises. If Lessee
does not make such an offer within thirty (30) days, or prior thereto indicate
its intention not to make such an offer, then Lessor shall be free to sell the
premises to such third-party bona fide purchaser on the same terms and
conditions as submitted by the original offer. If there are any changes or
modifications to the original offer, Lessee must be informed of such changes and
be given ten (10) days to make a similar offer based on such changes or
modifications. This right of first refusal shall exist only during the period in
which this Lease is in effect.
-16-
<PAGE>
IN WITNESS WHEREOF, the Lessor and Lessee have caused this Lease
Agreement to be executed by the persons duly authorized on the day and year
first above written.
DUBLIN INVESTMENT COMPANY
A Wisconsin General Partnership
Lessor
By: /s/Neal R. Sparby
----------------------
Authorized Partner
By: /s/William Kagel
----------------------
Authorized Partner
PAYCO AMERICAN CORPORATION
Lessee
By: /s/Dennis Punches
-----------------------
President
-17-
<PAGE>
ADDENDUM TO LEASE
THIS ADDENDUM is made to a Lease entered into on the 14 day of July, 1986,
between DUBLIN INVESTMENT COMPANY, a Wisconsin partnership, referred to as
"Lessor," and PAYCO AMERICAN CORPORATION, a Delaware corporation, referred to as
"Lessee."
WITNESSETH:
WHEREAS, the purpose of this Addendum to Lease is to establish terms
relating to the cost of leasehold improvements required by Payco American
Corporation beyond normal building standards. The specific leasehold
improvements are outlined in exhibits from The Daimler Group to the Dublin
Investment Company. The leasehold improvements relate to a forty-three thousand
(43,000) square foot building located in the Village of Dublin, County of
Franklin, State of Ohio, and
WHEREAS, at the time of entering into the Lease modified by this Addendum
the cost and extent of such leasehold improvements was unknown. Payco requests
have now been made known and the cost of land for additional parking, site
lighting, landscaping, cost for additional HVAC for computer facilities,
premiums for vinyl wallcoverings throughout the building, special electrical and
CRT computer wiring, extra plumbing because of dense occupancy, far exceed
normal building standards .
NOW, THEREFORE, in consideration of these additional leasehold improvements
and of the mutual benefits to be derived therefrom, it is agreed that Payco
American Corporation shall pay to the
<PAGE>
- 2 -
Dublin Investment Company, or its designee, a sum of four hundred nine thousand
dollars ($409,000) for such leasehold improvements as outlined above, after
Payco has reviewed such leasehold improvements and prior to the time that Payco
moves into the new facility.
IN WITNESS THEREOF, the Lessor and Lessee have caused this Addendum to
Lease to be executed this 14 day of May, 1987.
/s/Neal R. Sparby
---------------------------
Neal R. Sparby
Managing Partner
PAYCO AMERICAN CORPORATION
Lessee
By /s/Dennis Punches
-------------------------
President
<PAGE>
[letterhead of The Daimler Group]
July 10, 1966
To: Dublin Investment Company
Re: Leasehold Improvements above building standard
o Extra size of site to include ground parking, $490,000
landscaping, site lighting, etc.
3.5 acres at $140,000/acre
o Additional HVAC for computer facilities as $ 10,000
well as to compensate for large
quantity of employees.
o Premium for vinyl wallcovering throughout. $ 25,000
o CRT, computer wiring and special electrical $ 13,000
o Extra plumbing because of occupancy. $ 10,000
o Patio furniture $ 5,000
--------
Total $553,000
========
<PAGE>
LEASE
1. Parties. THIS LEASE (the "Lease") dated Oct. 15, 1986, is entered into
by and between Hacienda Investment Company, a Wisconsin general partnership
("Landlord"), whose address is 180 North Executive Drive, Brookfield, Wisconsin
53005, and Payco American Corporation, a Delaware corporation ("Tenant"), whose
address is 180 North Executive Drive, Brookfield Wisconsin 53005.
2. Premises. Landlord hereby leases to Tenant and Tenant hereby leases
from Landlord that certain Building (the "Building"), consisting of an entire
two-story office building, approximately 19,376 square feet in size, and the
real property upon which the Building is located consisting of approximately
1.508 acres of land in the City of Pleasanton, County of Alameda, State of
California, more particularly described on Exhibit A (the "Premises"), attached
hereto.
3. Definitions. The following terms shall have the following meanings in
this Lease.
A. Alterations. Any alterations, additions or improvements made in,
on or about the Building or the Premises after the Commencement Date, including,
but not limited to, lighting, heating, ventilating, air conditioning,
electrical, partitioning, drapery and carpentry installations.
B. Building. That certain Building described on Exhibit A located in
the City of Pleasanton, State of California, consisting of approximately 19,376
square feet.
C. CC&R's. Those certain covenants, conditions and restrictions
recorded as Instrument No. 85-14396 in the Official Records of Alameda County,
California, on January 24, 1985, as amended, incorporated herein by this
reference. Tenant hereby acknowledges that it has received and read a copy of
the CC&R's.
D. City. The City of Pleasanton, State of California.
E. Commencement Date. The Commencement Date of this Lease shall be
the first day of the Lease Term determined in accordance with Paragraph 4.A.
F. County. The County of Alameda, State of California.
G. HVAC. Heating, ventilating and air conditioning.
H. Interest Rate. Twelve percent (12%) per annum, however, in no
event to exceed the maximum rate of interest permitted by law.
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I. Landlord's Agents. Landlord's authorized agents, partners,
subsidiaries, directors, officers, and employees.
J. Rental. The rent payable pursuant to Paragraph 5.A., as adjusted
from time to time pursuant to the terms of this Lease.
K. Outside Area. All areas and facilities within the Property, but
outside the Building for the general use and convenience of Tenant, including,
without limitation, the parking areas, access and perimeter roads, sidewalks,
landscaped areas, service areas, trash disposal facilities, and similar areas
and facilities, and the exterior walls of the Building, subject to the
reasonable rules and regulations and changes therein from time to time
promulgated by Landlord governing the use of the Outside Area.
L. Real Estate Taxes. Any form of assessment, license, fee, rent
tax, levy, penalty (if a result of Tenant's delinquency), or tax (other than
net income, estate, succession, inheritance, transfer or franchise taxes),
imposed by any authority having the direct or indirect power to tax, or by any
city, county, state or federal government or any improvement or other district
or division thereof, whether such tax is: (i) determined by the area of the
Premises or any part thereof or the Rental and other sums payable hereunder by
Tenant, including, but not limited to, any gross income or excise tax levied by
any of the foregoing authorities with respect to receipt of such Rental or other
sums due under this Lease; (ii) upon any legal or equitable interest of Landlord
in the Premises or any part thereof; (iii) upon this transaction or any document
to which Tenant is a party creating or transferring any interest in the
Premises; (iv) levied or assessed in lieu of, in substitution for, or in
addition to, existing or additional taxes against the Premises whether or not
now customary or within the contemplation of the parties; or (v) surcharged
against the parking area.
M. Rent. Annual Rental plus any Additional Rent as defined in
paragraph 5.
N. Sublet. Any transfer, sublet, assignment, license or concession
agreement, change of ownership, mortgage, or hypothecation of this Lease or the
Tenant's interest in the Lease or in and to all or a portion of the Premises.
O. Subrent. Any consideration of any kind received, or to be
received, by Tenant from a subtenant if such sums are related to Tenant's
interest in this Lease or in the Premises, including, but not limited to, bonus
money and payments (in excess of fair market value for Tenant's assets including
its trade fixtures, equipment and other personal property, goodwill, general
intangibles, and any capital stock or other equity ownership of Tenant.
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P. Tenant's Personal Property. Tenant's trade fixtures, furniture,
equipment and other personal property in the Premises.
Q. Term. The term of this Lease set forth in Paragraph 4.A., as it
may be extended hereunder pursuant to any options to extend granted herein.
4. Lease Term.
A. Term. The Term of this Lease shall be for a period of twenty (20)
years, and beginning on June 1, 1987, provided that the Building is
Substantially Complete, and continuing until May 31, 2007. If the Building is
not Substantially Complete at the beginning of the above designated Term, the
commencement of the Term shall be extended to the 1st day of the month following
Substantial Completion, and the end of the Term shall be correspondingly
extended.
B. Substantial Completion. Substantial Completion shall be defined
to mean completion of the Building and all interior improvements set forth in
the working drawings therefor, in accordance with the working drawings,
excepting only Punch-Lists of Items, which shall include installation of all
necessary utilities to the Building (which shall include stubbing of telephone
service). Substantial Completion shall be evidenced by, or shall occur on, the
date the appropriate municipality signs off, pursuant to a final inspection, on
the building permit for the Building.
C. Cancellation. Tenant shall have the option to terminate the
Lease under the following terms and conditions: After the first eighty-four (84)
months of the Lease Term have expired, Tenant shall have the following calendar
month (time being of the essence) to make an election to terminate the Lease at
the end of the ninety-sixth (96th) month. This election must be in writing, a
copy of which will be sent to Landlord as well Landlord's mortgagee. Tenant
shall be required to pay a cancellation fee equal to one (1) full year's Rent,
based on the Rental due and owing under the terms of the Lease, for the twelve
(12) month period prior to the effective date of termination, Rent shall be the
total annual Rental as defined in paragraph 3.M. The effective date of
termination is at the end of the ninety-sixth (96th) month. The payment of this
fee shall not relieve Tenant of its obligation under the terms of the Lease to
pay the Rental to the effective date of termination. The election must be
personally delivered to, or sent postage prepaid, to one of the managing
partners of Landlord at the address of the partnership where the Rental is then
being paid and to the office of Landlord's mortgagee. The fee is payable in one
lump sum in cash on the last day of the ninety-sixth (96th) month.
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5. Rent.
A. Base Annual Rental. The Tenant shall pay to Landlord, in lawful
money of the United States, a base annual Rental of Two Hundred Seventy Thousand
and 00/100 ($270,000.00) Dollars, payable in equal monthly installments of
Twenty-two Thousand Five Hundred and 00/100 ($22,500.00) Dollars each, without
abatement, deduction, claim, offset, and without prior notice or demand, on the
first day of each and every month, in advance. In addition, Tenant shall be
obligated to pay as Additional Rent, Real Estate Taxes, repairs and maintenance
charges, Outside Area expenses, insurance premiums and such other items as
provided herein as Additional Rent, increases in Rent and Interest Rate
Adjustment.
B. Additional Rent. All monies required to be paid by Tenant under
this Lease, including, without limitation, Real Estate Taxes pursuant to
Paragraph 13., repair and maintenance charges pursuant to Paragraph 15., Outside
Area expenses pursuant to Paragraph 15.B., and insurance premiums pursuant to
Paragraph 19., shall be deemed Additional Rent.
C. Increases in Rent. At the end of the twelfth (12th) month of the
Term, the base annual Rental shall be adjusted in the amount of the increase in
the Consumer Price Index ("CPI") for All Urban Consumers, All Items, for the San
Francisco - Oakland Metropolitan Area (1967 = 100). The computation shall be
made by multiplying Two Hundred Seventy Thousand and 00/100 ($270,000.00)
Dollars by a fraction, the numerator of which shall be the index figure for the
month prior to the month in which the adjustment commences and the denominator
of which shall be the index figure for the month prior to the month in which
this Lease commences. In the event that the Bureau of Labor Statistics shall
cease to publish the index, then a similar index by any other branch or
department of the United States shall be used. The result of this computation
shall then be divided by twelve (12), and commencing the thirteenth (13th) month
of this Lease, the adjusted base Rental shall be paid. Annually thereafter, at
twelve (12) month intervals, the base annual Rental shall be adjusted in
accordance with the adjustment in the CPI or other comparable index. The maximum
increase in Rental for any twelve (12) month period shall be five percent (5%).
Increases, at the end of each twelve (12) months of the Term of the Lease shall
be limited to the amount of the sum of the increase in the CPI during the twelve
(12) month period preceding, plus the amount which the increase in the CPI
during any preceding twelve (12) month period exceeded five percent (5%) to the
extent the excess has not previously been applied, but in no event, is the
increase at the end of any twelve (12) month period to exceed five percent (5%).
D. Interest Rate Adjustment. In the event that the interest rate
required to be paid by Landlord on its underlying first mortgage indebtedness
covering the Premises at any time
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during the term of this Lease exceeds the agreed rate of nine and one-half
percent (9 1/2%), the base annual Rental shall be increased by the sum of Five
Thousand Two Hundred and 00/100 ($5,200.00) Dollars for each twenty-five (25)
basis points of increase in the interest rate over nine and one-half percent (9
1/2%). Such Rental increase shall become effective the month following the
effective date of the mortgage rate adjustment. This increased Rental shall be
payable in monthly installments. In the event that the base annual Rental is
increased at any time during the term of this Lease by virtue of this
subparagraph 5.D., should there subsequently be a decrease in the underlying
mortgage interest rate, the annual Rental shall correspondingly be decreased,
however not to an amount less than that specified as the base annual Rental,
plus any CPI adjustments and Additional Rent as set forth in subparagraphs 5.A.,
B., and C. above. Written evidence of adjustments in the Landlord's mortgage
rate, together with the proposed base Rental adjustment, shall be furnished to
Tenant within ten (10) days of any effective date of Interest Rate Adjustment by
Landlord's mortgagee.
6. Late Payment Charges. Tenant acknowledges that the late payment by
Tenant to Landlord of Rent and other charges provided for under this Lease will
cause Landlord to incur costs not contemplated by this Lease, the exact amount
of such costs being extremely difficult or impracticable to fix. Therefore, if
any installment of Rent or any other charge due from Tenant is not received by
Landlord within ten (10) days after the due date, Tenant shall pay to Landlord
an additional sum equal to five percent (5%) of the amount overdue as a late
charge. The parties agree that this late charge represents a fair and reasonable
estimate of the costs that Landlord will incur by reason of the late payment by
Tenant.
Initials: /s/ N.S. /s/ D.P.
-------------- ----------------
Landlord Tenant
7. Holding Over. If Tenant remains in possession of all or any part of the
Premises after the expiration of the Term, with or without the express or
implied consent of Landlord, such tenancy shall be from month-to-month only and
not a renewal hereof of any extension for any further Term, and in such case,
Rent and other monetary sums due hereunder shall be payable in the amount and at
the time applicable at the time of expiration and at the time specified in this
Lease and such month-to-month tenancy shall be subject to every other term,
covenant and agreement of this Lease.
8. Condition of Premises. Within ten (10) days after the commencement
date, Tenant shall conduct a walk-through inspection of the Premises with
Landlord and complete a Punch-List of Items needing additional work by Landlord.
Other than the items specified in the Punch-List, by taking possession of the
Premises, Tenant shall be deemed to have accepted the Premises in
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good, clean and completed condition and repair, subject to all applicable laws,
codes and ordinances. The Punch-List to be prepared by Tenant shall not include
any damage to the Premises caused by Tenant's move-in, which damage shall be
repaired or corrected by Tenant, at its expense. Tenant acknowledges that
neither Landlord nor its Agents have made any representations or warranties as
to the suitability or fitness of the Premises for the conduct of business or for
any other purpose, nor has Landlord or its Agents agreed to undertake any
Alterations or construct any Tenant Improvements to the Premises except as
expressly provided in this Lease. If Tenant fails to submit a Punch-List to
Landlord within such ten (10) day period, it shall be deemed that there are no
items needing additional work or repair. Landlord's contractor shall complete
all reasonable Punch-List Items, within thirty (30) days after the walk-through
inspection or as soon as practicable thereafter. Upon completion of such
Punch-List Items, Tenant shall approve such completed items in writing to
Landlord. If Tenant fails to approve such items within seven (7) days of
completion, such items shall be deemed approved by Tenant.
9. Use of the Premises.
A. Tenant's Use. Tenant shall use the Premises solely for general
office purposes and shall not use the Premises for any other purpose without
obtaining the prior written consent of Landlord. Tenant agrees that the Premises
is subject and this Lease is subordinate to the CC&R's. Tenant acknowledges that
it has read the CC&R's and knows the contents thereof. Throughout the Term,
Tenant shall faithfully and timely perform and comply with the CC&R's and any
modification or amendments thereof, including the payment by Tenant of any
Hacienda Business Park Owners' Association dues assessed against the Premises.
Tenant shall hold Landlord and its Agents harmless and indemnify Landlord and
its Agents against any loss, expenses, damage, attorneys' fees and costs of
liability arising out of or in connection with the failure of Tenant to so
perform or comply with the CC&R's.
B. Compliance. Tenant shall not use the Premises or suffer or permit
anything to be done in or about the Premises which will in any way conflict with
any law, statute, zoning restriction, ordinance or governmental law, rule,
regulation or requirement of duly constituted public authorities now in force or
which may hereafter be in force, or the requirements of the Board of Fire
Underwriters or other similar body, now or hereafter constituted relating to or
affecting the condition, use or occupancy of the Premises. Tenant shall
continuously and uninterruptedly conduct its business in the Premises during the
Term and shall not abandon the Premises. Tenant shall not commit any public or
private nuisance or any other act or thing which might or would disturb the
quiet enjoyment of any other tenant of Landlord or any occupant of nearby
property. Tenant shall place no loads upon the floors, walls or ceilings in
excess of the
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maximum designed load determined by Landlord or which endanger the structure;
nor place any harmful liquids in the drainage systems; nor dump or store waste
materials or refuse or allow such to remain outside the Building proper, except
in the enclosed trash areas provided. Tenant shall not store or permit to be
stored or otherwise place any other material of any nature whatsoever outside
the Building. In particular, Tenant, at its sole cost, shall comply with all
laws relating to the storage, use and disposal of hazardous, toxic or
radioactive matter, including those materials identified in Sections 66680
through 66685 of Title 22 of the California Administrative Code, Division 4,
Chapter 30 ("Title 22") as they may be amended from time to time (collectively
"Toxic Materials"). If Tenant does store, use or dispose of any Toxic Materials,
Tenant shall notify Landlord in writing at least ten (10) days prior to their
first appearance on the Premises.
10. Quiet Enjoyment. Landlord covenants that Tenant, upon performing the
terms, conditions and covenants of this Lease, shall have quiet and peaceful
possession of the Premises as against any person claiming the same by, through
or under Landlord.
11. Alterations. After the Commencement Date, Tenant shall not make or
permit any Alterations in, on or about the Premises, except for nonstructural
Alterations not exceeding Ten Thousand and 00/100 ($10,000.00) Dollars in cost,
without the prior written consent of Landlord, and according to plans and
specifications approved in writing by Landlord, which consent and approval shall
not be unreasonably withheld. Notwithstanding the foregoing Tenant shall not,
without the prior written consent of Landlord, make any:
(i) Alterations to the exterior of the Building.
(ii) Alterations to and penetrations of the roof of the Building;
and
(iii) Alterations visible from outside the Building, including the
Outside Area, to which Landlord may withhold Landlord's consent on wholly
aesthetic grounds.
All Alterations shall be installed at Tenant's sole expense, in compliance with
all applicable laws and the CC&R's, by a licensed contractor, shall be done in a
good and workmanlike manner conforming in quality and design with the Premises
existing as of the Commencement Date, and shall not diminish the value of either
the Building or the Premises. All Alterations made by Tenant shall be and become
the property of Landlord upon installation and shall not be deemed Tenant's
Personal Property; provided, however, that Landlord may, at its option, require
that Tenant, at Tenant's expense, remove any or all nonstructural Alterations
installed by Tenant and return the Premises to their condition as of the
Commencement Date of this Lease, normal wear and tear
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excepted and subject to the provisions of Paragraph 21. Notwithstanding any
other provision of this Lease, Tenant shall be solely responsible for the
maintenance and repair of any and all Alterations made by it to the Premises.
Tenant shall give Landlord written notice of Tenant's intention to perform work
on the Premises which might result in any claim of lien at least twenty (20)
days prior to the commencement of such work to enable Landlord to post and
record a Notice of Nonresponsibility or other notice deemed proper before the
commencement of any such work.
12. Surrender of Premises. Upon the expiration or earlier termination of
the Term, Tenant shall surrender the Premises to Landlord in its condition
existing as of the Commencement Date, normal wear and tear and fire or other
casualty excepted, with all interior areas cleaned. Tenant shall remove from the
Premises all of Tenant's Alterations required to be removed pursuant to
Paragraph 11., and all Tenant's Personal Property and repair any damage and
perform any restoration work caused by such removal. If Tenant fails to remove
such Alterations and Tenant's Personal Property, and such failure continues
after the termination of this Lease, Landlord may retain such property and all
rights of Tenant with respect to it shall cease, or Landlord may place all or
any portion of such property in public storage for Tenant's account. Tenant
shall be liable to Landlord for costs of removal of any such Alterations and
Tenant's Personal Property and storage and transportation costs of same, and the
cost of repairing and restoring the Premises, together with interest at the
Interest Rate from the date of expenditure by Landlord.
13. Real Property Taxes
A. Real Property Taxes and Assessments. Tenant shall pay and
discharge as and when the same become due and prior to delinquency all Real
Estate Taxes, which are or may be during the Term hereof, levied, assessed,
imposed or charged against the demised premises and any Personal Property owned
by the Landlord but used by the Tenant in connection with its use of the
Premises and situated thereon, provided, however, that the Tenant during the
first calendar year of the original Term of this Lease and the last calendar
year of the original Term or the final extension thereof shall be obligated to
pay only a prorata portion of said Real Estate Taxes due and payable for such
year based upon the part of the year the Tenant occupies the Premises, and shall
only be obligated to pay those installments of special assessments which the
municipality bills on an installment basis and which installments become due
during the Term of this Lease or any extensions thereof. The Tenant shall pay
for all of the foregoing Real Estate Taxes upon billing by Landlord regardless
of whether or not the land and Building are billed or assessed separately.
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B. Assessments. "Assessments" included within the definition of Real
Estate Taxes shall refer to any payment for assessment districts and other
funding mechanisms, including, but not limited to, improvement districts,
maintenance districts, landscaping and lighting districts, public utility
districts, special utility districts, special service zones or districts or any
combination thereof (collectively "Assessment Districts") for the construction,
alteration, expansion, improvement, completion, repair or services, as required
by the City or other governmental entity for construction of certain public
improvements ("Public Improvements") which shall benefit the Premises or
Hacienda Business Park. The Assessment Districts may include the following:
(1) Assessment District Number 1983-2, Hacienda Business Park;
(2) North Pleasanton Improvement District 1982-4, including the
portion formed for roadways;
(3) Assessment District Number 1982-6, North Pleasanton Fire
Protection;
(4) Assessment District 1984-1, Hopyard Road;
(5) Assessment District Number 1985-1 Chabot Drive Extension/East
Amador Relief Sewer/Santa Rita Road;
(6) North Pleasanton Water System Improvement District No. 1983-3;
(7) North Pleasanton Improvement District 1982-4 Interchanges;
(8) An assessment district for the extension of Chabot Drive from
Stoneridge Drive to Inglewood Drive;
(9) An assessment district to provide for extension of street
improvements on Stoneridge Drive from West Las Positas Boulevard to the Arroyo
Mocho Canal and from the Arroyo Mocho Canal to Santa Rita road; and
(10) An assessment district to provide for street improvements for
Baker Drive from Gibraltar Drive North to the cul-de-sac at the northern border
of Hacienda Business Park Phase I.
C. Tenant's Consent. Tenant hereby consents to the formation of any
Assessment District or improvement district formed for maintenance, utility
districts, landscaping or lighting districts, special service zones or other
improvements in Hacienda Business Park, and Tenant hereby waives the right of
notice and protest in with formation and continued existence of the same. Tenant
shall execute all documents, including, but not
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limited to, petitions and formal waivers of notice and protest of formation,
evidencing such consent and waiver upon request of Landlord or the City. Tenant
shall pay the Real Estate Taxes directly to the County unless directed in
writing to the contrary by Landlord.
D. Payment by Tenant. Tenant shall pay to Landlord as Additional
Rent all of the foregoing Real Estate Taxes, any personal property taxes
relating to the Premises assessed and billed to Landlord, within ten (10) days
of written notice of the amount so due. If Tenant fails to pay these taxes
within such time, Tenant shall pay to Landlord any penalty incurred by such late
payment.
E. Personal Property Taxes. Tenant shall pay prior to delinquency
all taxes assessed or levied against Tenant's Personal Property in, on or about
the Premises. When possible, Tenant shall cause such Personal Property to be
assessed and billed separately from the real or personal property of Landlord.
Tenant shall be entirely responsible for Personal Property Taxes billed to it
during the Term of the Lease including full taxes for the first and last year of
the Term of the Lease.
14. Utilities and Services. Tenant shall be responsible for and pay
promptly all charges for water, gas, electric, sewer, telephone, refuse pickup,
janitorial service and all other utilities, materials and services furnished
directly to the Premises or used by Tenant in, on or about the Premises during
the Term, together with any taxes thereon. Landlord shall not be liable in
damages or otherwise for any failure or interruption of any utility service or
other service furnished to the Premises, except that resulting from the act or
neglect of Landlord.
15. Repair and Maintenance.
A. Building. Without limitation, Tenant shall keep in good order,
condition and repair, structural parts of the Building, roof and subflooring, as
well as the HVAC system. Tenant shall, at all times at its own expense, clean,
keep and repair in good, safe and sanitary order, condition and repair, every
part of the Premises which obligation includes, without limitation, all plumbing
and sewerage facilities, fixtures, interior walls, floors, ceilings, interior
and exterior windows, doors, entrances, plate glass, electrical facilities and
equipment, including all lighting fixtures, lamps, fans and any exhaust
equipment and systems and any or automatic fire extinguisher equipment within
the Premises, electrical motors and all other appliances and equipment of every
kind and nature located in or about the Premises. Tenant shall also be
responsible for all pest control within the Premises.
B. Outside Area. Tenant shall maintain the Outside Area, lawns and
parking lot, including, without limitation, the cost of any policies of
insurance covering the Outside Area,
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Hacienda Business Owners' Association dues and the cost of labor, materials,
supplies and services used or consumed in operating, maintaining, managing,
repairing and replacing the Outside Area, including maintaining and repairing
landscaping, sprinkler systems, concrete walkways and paved parking areas,
maintaining and repairing property signs and site lighting and all utilities
provided to Outside Area.
C. Waiver. Tenant waives the provisions of Sections 1941 and 1942 of
the California Civil Code and any similar or successor law regarding Tenant's
right to make repairs and deduct the expenses of such repairs from the Rent due
under this Lease.
D. Compliance with Governmental Regulations. Tenant shall, at its
cost comply with, including the making by Tenant of any Alteration to the
Premises, all present and future regulations, rules, laws, ordinances, and
requirements of all governmental authorities (including, state, municipal,
county and federal governments and their departments, bureaus, boards and
officials) arising from the use or occupancy of, or applicable to, the Premises
or privileges appurtenant thereto.
16. Liens. Tenant shall keep the Premises free from any liens arising out
of any work performed, materials furnished or obligations incurred by or on
behalf of Tenant and hereby indemnifies and holds Landlord and its Agents
harmless from all liability and costs, including attorneys' fees and costs, in
connection with or arising out of any such lien or claim of lien. Tenant shall
cause any such lien imposed to be released of record by payment or posting of a
proper bond acceptable to Landlord within ten (10) days after written request by
Landlord. Tenant shall give Landlord written notice of Tenant's intention to
perform work on the Premises which might result in any claim of lien at least
ten (10) days prior to the commencement of such work to enable Landlord to post
and record a Notice of Nonresponsibility. If Tenant fails to so remove any such
lien within the prescribed ten (10) day period then Landlord may do so and
Tenant shall reimburse Landlord upon demand. Such reimbursement shall include
all sums incurred by Landlord including Landlord's reasonable attorneys' fees,
with interest thereon at the Interest Rate.
17. Landlord's Right to Enter the Premises. Tenant shall permit Landlord
and its Agents to enter the Premises at all reasonable times with reasonable
notice, except for emergencies in which case no notice shall be required, to
inspect the same, to post Notices of Nonresponsibility and similar notices, and
"For Sale" signs, to show the Premises to interested parties such as prospective
lenders and purchasers, to make necessary repairs, to discharge Tenant's
obligations hereunder when Tenant has failed to do so within a reasonable time
after written notice from Landlord, and at any reasonable time within one
hundred and eighty (180) days prior to the expiration of the Term, to place upon
the Premises ordinary "For Lease" signs and to show the
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Premises to prospective tenants. The above rights are subject to reasonable
security regulations of Tenant, and to the requirement that Landlord shall
at all times act in a manner to cause the least possible interference with
Tenant's business.
18. Signs. Landlord shall provide space for Tenant's identification sign
on an exterior monument sign in the Outside Area, and Tenant shall have the
right, at its expense, to place an identification sign on its door to the
Building. All costs of the monument sign shall be paid for by Tenant, as and
when billed by Landlord. Tenant shall have no right to maintain Tenant
identification signs in any other location in, on or about the Premises and
shall not display or erect any other Tenant identification sign, display or
other advertising material that is visible from the exterior of the Building.
The size, design, color and other physical aspects of the Tenant identification
sign shall be subject to the Landlord's written approval prior to installation,
which shall not be unreasonably withheld, the Design Guidelines established
pursuant to the CC&R's, and appropriate municipal or other governmental
approvals. The cost of the sign, its installation, maintenance and removal
expense shall be Tenant's sole expense. If Tenant fails to maintain its sign,
or, if Tenant fails to remove its sign upon termination of this Lease, Landlord
may do so at Tenant's expense and Tenant's reimbursement to Landlord for such
amounts shall be deemed Additional Rent.
19. Insurance.
A. Indemnification. Tenant hereby agrees to defend, indemnify and
hold harmless Landlord and its Agents from and against any and all damage, loss,
liability or expense including, without limitation, attorneys' fees and legal
costs suffered directly or by reason of any claim, suit or judgment brought by
or in favor of any person or persons for damage, loss or expense due to, but not
limited to, bodily injury and property damage sustained by such person or
persons which arises out of, is occasioned by or in any way attributable to the
use or occupancy of the Premises or any part thereof and adjacent areas by the
Tenant, the acts or omissions of the Tenant, its agents, employees or any
contractors brought onto the Premises by Tenant, except to the extent caused by
the negligence or willful misconduct of Landlord or its Agents. Tenant agrees
that the obligations assumed herein shall survive this Lease.
B. Tenant's Insurance. Tenant agrees to maintain in full force and
effect at all times during the Term, at its own expense, for the protection of
Tenant, policies of insurance issued by a responsible carrier, or carriers
acceptable to Landlord which afford the following coverages:
(i) Fire and extended coverage insurance ("All-Risk") upon all
improvements upon the Premises in the amount of the full insurable value
thereof, with full replacement cost
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endorsement. Such insurance policy shall name Landlord and Landlord's mortgagee
as additional insureds and should include (a) BFU-438, or comparable, lender's
loss payable endorsement.
(ii) Comprehensive general liability insurance in an amount not less
than Three Million and 00/l00ths ($3,000,000.00) Dollars combined single limit
for both bodily injury and property damage which includes blanket contractual
liability broad form property damage, personal injury, completed operations,
products liability, and fire damage legal (in an amount not less than
Twenty-five Thousand and no/l00ths ($25,000.00) Dollars).
(iii) "All-Risk" property insurance (including, without limitation,
vandalism, malicious mischief, inflation endorsement, sprinkler leakage
endorsement) on Tenant's Personal Property located on or in the Premises. Such
insurance shall be in the full amount of replacement costs, as the same may from
time to time increase as a result of inflation or otherwise and shall be in a
form providing coverage comparable to the coverage provided in the standard ISO
All-Risk form. Such insurance shall also include insurance against loss of rents
on an "All-Risk" basis in an amount equal to the monthly Rent and Additional
Rent, and any other sums payable under the Lease, for a period of at least
twelve (12) months commencing on the date of loss.
(iv) Certificates. Tenant shall deliver to Landlord at least thirty
(30) days prior to the time such insurance is first required to be carried by
Tenant, and thereafter at least thirty (30) days prior to the expiration of such
coverage, certificates of insurance evidencing the above coverage with limits of
not less than those specified above. The certificates shall expressly provide
that the interest of the Landlord therein shall not be affected by any breach of
Tenant, of any policy provision for which such certificates evidence coverage.
Further, all certificates shall expressly provide that not less than thirty (30)
days prior written notice shall be given to Landlord in the event of
cancellation of the coverages evidenced by such certificates.
(v) Insurance Requirements. All insurance shall be in a form
acceptable to Landlord and shall provide that such policies shall not be subject
to material alteration or cancellation except after at least thirty (30) days'
prior written notice to Landlord; and shall be primary as to Landlord. The
policy or policies, or duly executed certificates for them, together with
satisfactory evidence of payment of the premium thereon shall be deposited with
Landlord prior to the Commencement Date, and upon renewal of such policies, not
less than thirty (30) days prior to the expiration of the term of such coverage.
If Tenant fails to procure and maintain the insurance required hereunder,
Landlord may, but shall not be required to, order such insurance at Tenant's
expense and Tenant shall reimburse Landlord. Such reimbursement shall include
all sums
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incurred by Landlord including Landlord's reasonable attorneys' fees with
interest thereon at the Interest Rate.
(vi) Landlord's Disclaimer. Landlord and its Agents shall not be
liable for any loss or damage to persons or property resulting from fire,
explosion, falling plaster, glass, tile or sheetrock, steam, gas, electricity,
water or rain which may leak from any part of the Building, or from the pipes,
appliances or plumbing works therein or from the roof, street or subsurface or
whatsoever, unless caused by or due to the sole negligence or willful acts of
Landlord. Landlord and its Agents shall not be liable for interference with the
light, air, or any latent defect in the Premises. Tenant shall give prompt
written notice to Landlord in case of a casualty, accident or repair needed in
the Premises.
20. Waiver of Subrogation. Landlord and Tenant each hereby waive all
rights of recovery against the other on account of loss and damage occasioned to
such waiving party for its property or the property of others under its control
to the extent that such loss or damage is insured against under any insurance
policies which may be in force at the time of such loss or damage. Tenant and
Landlord shall, upon obtaining policies of insurance required hereunder, give
notice to the insurance carrier that the foregoing mutual waiver of subrogation
is contained in this Lease and Tenant and Landlord shall cause each insurance
policy obtained by such party to provide that the insurance company waives all
right of recovery by way of subrogation against either Landlord or Tenant in
connection with any damage covered by such policy.
21. Damage or Destruction.
A. Partial Damage - Insured. If the Premises are damaged by any
casualty which is covered under the "All-Risk" or fire and extended coverage
insurance carried by Tenant, pursuant to Paragraph 19.B.(i), then Landlord shall
restore such damage, provided such restoration can be completed within one
hundred and twenty (120) days after commencement of the work in the opinion of a
registered architect or engineer appointed by Landlord. Landlord shall exercise
its best efforts to expedite such construction and restoration and minimize the
effects of construction to the extent practical so as not to interfere with
Tenant's use of the Premises.
B. Partial Damage - Uninsured. If the Premises or the Building is
substantially damaged by risk not covered by Tenant's insurance required
pursuant to paragraph 19.B.(i) or if the restoration cannot be completed within
one hundred and twenty (120) days after commencement of work, in the opinion of
the registered architect or engineer appointed by Landlord, then Landlord shall
have the option either to: (i) repair or restore such damage, this Lease
continuing in full force and effect; or (ii) give notice to Tenant at any time
within thirty (30) days
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after such damage terminating this Lease as of the date to be specified in such
notice, which date shall not be less than thirty (30) days nor more than ninety
(90) days after giving such notice. If notice of termination is given, this
Lease shall expire and all interest of Tenant in the Premises shall terminate on
such date so specified in such notice, and the Rental shall be paid to the date
of such termination. However, said Rent shall be adjusted and determined by
Landlord by dividing the Rent payable by Tenant hereunder by the total square
footage of the Premises and multiplying the resulting quotient (the per square
foot rent) by the number of square footage which is used or occupied by the
Tenant during this Term.
C. Total Destruction. If the Premises or the Building is totally
destroyed or the Premises or Building, as the case may be, cannot be restored as
required herein under applicable laws and regulations or due to the presence of
hazardous factors such as earthquake faults, chemical waste and similar dangers,
notwithstanding the availability of insurance proceeds, this Lease shall be
terminated effective the date of the damage.
D. Landlord's Obligations. Landlord shall not be required to repair
any injury or damage by fire or other cause, or to make any restoration or
replacement of any panelings, decorations, partitions, railings, floor
coverings, office fixtures which are Alterations or Personal Property installed
in the Premises by Tenant or at the direct or indirect expense of Tenant. Tenant
shall be required to restore or replace same in the event of damage. Tenant
shall have no claim against Landlord for any damage suffered by reason of any
such damage, destruction, repair or restoration; nor shall Tenant have the right
to terminate this Lease as the result of any statutory provision now or
hereafter in effect pertaining to the damage and destruction of the Premises,
except as expressly provided herein.
E. Damage Near End of Term. Anything herein to the contrary
notwithstanding, if the Premises or the Building is destroyed or damaged during
the last twelve (12) months of the Term, then Landlord may, at its option,
cancel and terminate this Lease as of the date of the occurrence of such damage.
If Landlord does not elect to so terminate this Lease, the repair of such damage
shall be governed by the other provisions of this Paragraph.
F. Mortgagee Requirements. All repair and restoration obligations in
this Paragraph are subject to the requirements of Landlord's mortgagee.
22. Condemnation. If title to all of the Premises or so much thereof is
taken or apportioned for any public or quasi-public use under any statute or by
right of eminent domain so that reconstruction of the Premises will not, in
Landlord's and Tenant's mutual opinion, result in the Premises being reasonably
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suitable for Tenant's continued occupancy for the uses and purposes permitted by
this Lease, this Lease shall terminate as of the date that possession of the
Premises or part thereof be taken. A sale by Landlord to any authority having
the power of eminent domain, either under threat of condemnation or while
condemnation proceedings are pending, shall be deemed a taking under the power
of eminent domain for all purposes of this Paragraph. If any part of the
Premises or the Building is taken and the remaining part is reasonably suitable
for Tenant's continued occupancy for the purposes and uses permitted by this
Lease, this Lease shall, as to the part so taken, terminate as of the date that
possession of such part of the Premises or Building is taken. If the Premises is
so partially taken the Rent and other sums payable hereunder shall be reduced in
the same proportion that Tenant's use and occupancy is reduced. If the parties
disagree as to suitability of the Premises for Tenant's continued occupancy or
the amount of any applicable Rent reduction, the matter shall be resolved by
arbitration. No award for any partial or entire taking shall be apportioned.
Tenant assigns to Landlord its interest in any award which may be made in such
taking or condemnation, together with any and all rights of Tenant arising in or
to the same or any part thereof. Nothing contained herein shall be deemed to
give Landlord any interest in or require Tenant to assign to Landlord any
separate award made to Tenant for the taking of Tenant's Personal Property, for
the interruption of Tenant's business, or its moving costs, or for the loss of
its goodwill. No temporary taking of the Premises shall terminate this Lease or
give Tenant any right to any abatement of Rent. Any award made to Tenant by
reason of such temporary taking shall belong entirely to Tenant and Landlord
shall not be entitled to share therein. Each party agrees to execute and deliver
to the other all instruments that may be required to effectuate the provisions
of this Paragraph.
23. Assignment and Subletting.
A. Landlord's Consent. Tenant shall not enter into a Sublet without
Landlord's prior written consent, which consent shall not be unreasonably
withheld. Any attempted or purported Sublet without Landlord's prior written
consent shall be void and confer no rights upon any third person and, at
Landlord's election, shall terminate this Lease. Each Subtenant shall agree in
writing, for the benefit of Landlord, to assume, to be bound by, and to perform
the terms, conditions and covenants of this Lease to be performed by Tenant.
Notwithstanding anything contained herein, Tenant shall not be released from
personal liability for the performance of each term, condition and covenant of
this Lease by reason of Landlord's consent to a Sublet unless Landlord
specifically grants such release in writing.
B. Information to be Furnished. If Tenant desires at any time to
Sublet the Premises or any portion thereof, it shall first notify Landlord of
its desire to do so and shall submit in
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writing to Landlord: (i) the name of the proposed Subtenant; (ii) the nature of
the proposed Subtenant's business to be carried on in the Premises; (iii) the
terms and provisions of the proposed Sublet and a copy of the proposed Sublet
form containing a description of the subject premises; and (iv) such financial
information, including financial statements, as Landlord may reasonably request
concerning the proposed Subtenant.
C. Landlord's Alternatives. If Landlord consents to the Sublet,
Tenant may thereafter enter into a valid Sublet of the Premises or portion
thereof, upon the terms and conditions with the proposed Subtenant as set forth
in the information furnished by Tenant to Landlord pursuant to Paragraph 23.B.
D. Executed Counterpart. No Sublet shall be valid nor shall any
Subtenant take possession of the Premises until an executed counterpart of the
Sublet agreement has been delivered to Landlord.
E. Exempt Sublets. Notwithstanding the above, Landlord's prior
written consent shall not be required for an assignment of this Lease to a
subsidiary, affiliate or parent corporation of Tenant, or a corporation into
which Tenant merges or consolidates, if Tenant gives Landlord prior written
notice of the name of any such assignee, and if the assignee assumes, in
writing, all of Tenant's obligations under the Lease. An assignment or other
transfer of this Lease to a purchaser of all or substantially all of the assets
of Tenant shall be deemed a Sublet requiring Landlord's prior written consent.
24. Default.
A. Tenant's Default. A default under this Lease by Tenant shall
exist if any of the following events shall occur:
(i) If Tenant fails to pay Rental or Additional Rent or any other
sum required to be paid hereunder when due; provided, however, that Tenant may
cure such default at any time prior to a termination of this Lease by Landlord
by paying all Rent and other expenses or charges then due together with interest
at the Interest Rate from the due date through the date of payment; or
(ii) If Tenant shall have failed to perform any term, covenant or
condition of this Lease except those requiring the payment of money, and Tenant
shall have failed to cure such breach within twenty (20) days after written
notice from Landlord where such breach could reasonably be cured within the
twenty (20) day period; provided, however, that where such failure could not
reasonably be cured within the twenty (20) day period, that Tenant shall not be
in default if it commences such performance within the twenty (20) day period
and diligently thereafter prosecutes the same to completion; or
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(iii) If Tenant assigns its assets for the benefit of its creditors;
or
(iv) If the sequestration or attachment of or execution on any
material part of Tenant's Personal Property essential to the conduct of Tenant's
business occurs, and Tenant fails to obtain a return or release of such Personal
Property within thirty (30) days thereafter, or prior to sale pursuant to such
sequestration, attachment or levy, whichever is earlier; or
(v) If a court shall make or enter any decree or order other than
under the bankruptcy laws of the United States adjudging Tenant to be insolvent;
or approving as properly filed a petition seeking reorganization of Tenant, or
directly the winding up or liquidation of Tenant and such decree or order shall
have continued for a period of thirty (30) days; or
B. Remedies. Upon a default, Landlord shall have the following
remedies, in addition to all other rights and remedies provided by law or
otherwise provided in this Lease, to which Landlord may resort cumulatively or
in the alternative:
(i) Landlord may continue this Lease in full force and effect, and
this Lease shall continue in full force and effect as long as Landlord does not
terminate this Lease and Landlord shall have the right to collect Rent when due.
(ii) Landlord may terminate Tenant's right to possession of the
Premises at any time by giving written notice to that effect, and relet the
Premises or any part thereof. Tenant shall be liable immediately to Landlord for
all costs Landlord incurs in reletting the Premises or any part thereof,
including, without limitation, broker's commissions, expenses of cleaning and
redecorating the Premises required by the reletting and like costs. Reletting
may be for a period shorter or longer than the remaining term of this Lease. No
act by Landlord other than giving written notice to Tenant shall terminate this
Lease. Acts of maintenance, efforts to relet the Premises or the appointment of
a receiver on Landlord's initiative to protect Landlord's interest under this
Lease shall not constitute a termination of Tenant's right to possession. On
termination, Landlord has the right to remove all Tenant's Personal Property and
store same at Tenant's costs and to recover from Tenant as damages:
(a) The worth at the time of award of unpaid Rent and other
sums due and payable which had been earned at the time of termination; plus
(b) The worth at the time of award of the amount by which the
unpaid Rent and other sums due and payable which would have been payable after
termination until the time of award exceeds the amount of such Rent loss that
Tenant proves could have been reasonably avoided; plus
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(c) The worth at the time of award of the amount by which the
unpaid Rent and other sums due and payable for the balance of the Term after the
time of award exceeds the amount of such Rent loss that Tenant proves could be
reasonably avoided; plus
(d) Any other amount necessary which is to compensate Landlord
for all the detriment proximately caused by Tenant's failure to perform Tenant's
obligations under this Lease, or which, in the ordinary course of things, would
be likely to result therefrom, including, without limitation, any costs or
expenses incurred by Landlord: (i) in retaking possession of the Premises; (ii)
in maintaining, repairing, preserving, restoring, replacing, cleaning, altering
or rehabilitating the Premises or any portion thereof, including such acts for
reletting to a new tenant or tenants; (iii) for leasing commissions; or (iv) for
any other costs necessary or appropriate to relet the Premises; plus
(e) At Landlord's election, such other amounts in addition to
or in lieu of the foregoing as may be permitted from time to time by the laws of
the State of California.
The "worth at the time of award" of the amounts referred to in
Paragraphs 24.B.(ii)(a) and 24.B.(ii)(b) is computed by allowing interest at the
Interest Rate on the unpaid rent and other sums due and payable from the
termination date through the date of award. The "worth a the time of award" of
the amount referred to in Paragraph 24.B.(ii)(c) is computed by discounting such
amount at the discount rate of the Federal Reserve Bank of San Francisco at the
time of award plus one percent (1%).
(iii) Landlord may, with or without terminating this Lease, re-enter
the Premises and remove all persons and property from the Premises; such
property may be removed and stored in a public warehouse or elsewhere at the
cost of and for the account of Tenant. No re-entry or taking possession of the
Premises by Landlord pursuant to this Paragraph shall be construed as an
election to terminate this Lease unless a written notice of such intention is
given to Tenant.
C. Landlord's Default. Landlord shall not be deemed to be in default
in the performance of any obligation required to be performed by it hereunder
unless and until it has failed to perform such obligation within twenty (20)
days after receipt of written notice by Tenant to Landlord specifying the nature
of such default; provided, however, that if the nature of Landlord's obligation
is such that more than twenty (20) days are required for its performance, then
Landlord shall not be deemed to be in default if it shall commence after such
performance within such twenty (20) day period and thereafter diligently
prosecute the same to completion. But if Landlord defaults under this Lease,
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the Tenant will notify by registered or certified mail to any beneficiary of any
deed of trust or mortgagee of mortgage covering the Premises, and offer such
beneficiary or mortgagee sixty (60) days to cure the default, provided that such
beneficiary or mortgagee serves notice on Tenant within the initial twenty (20)
day period that it intends to cure the default within such sixty (60) day
period.
25. Subordination. This Lease is subject and subordinate to ground and
underlying leases, mortgages and deeds of trust (collectively "Encumbrances")
which may now affect the Premises, to the CC&R's and to all renewals,
modifications, consolidations, replacements and extensions thereof; provided,
however, if the holder or holders of any such Encumbrance ("Holder") shall
require that this Lease to be prior and superior thereto, within seven (7) days
of written request of Landlord to Tenant, Tenant shall execute, have
acknowledged and deliver any and all documents or instruments, in the form
presented to Tenant, which Landlord or Holder deems necessary or desirable for
such purposes. Landlord shall have the right to cause this Lease to be and
become and remain subject and subordinate to any and all Encumbrances which are
now or may hereafter be executed covering the Premises or any renewals,
modifications, consolidations, replacements or extensions thereof, for the full
amount of all advances made or to be made thereunder and without regard to the
time or character of such advances, together with interest thereon and subject
to all the terms and provisions thereof; provided only, that in the event of
termination of any such lease or upon the foreclosure of any such mortgage or
deed of trust, so long as Tenant is not in default, Holder agrees to recognize
Tenant's rights under this Lease as long as Tenant shall pay the Rent and
observe and perform all the provisions of this Lease to be observed and
performed by Tenant. Within ten (10) days after Landlord's written request,
Tenant shall execute any and all documents required by Landlord or the Holder
required to effectuate such subordination to make this Lease subordinate to any
lien of the Encumbrance. If Tenant fails to do so, if shall be deemed that this
Lease is so subordinated. Notwithstanding anything to the contrary set forth in
this Paragraph, Tenant hereby attorns and agrees to attorn to any entity
purchasing or otherwise acquiring the Premises at any sale or other proceeding
or pursuant to the exercise of any other rights, powers or remedies under such
Encumbrance.
26. Notices. Any notice or demand required or desired to be given under
this Lease shall be in writing and shall be personally served or in lieu of
personal service may be given by mail. If given by mail, such notice shall be
deemed to have been given when seventy-two (72) hours have elapsed from the time
when such notice was deposited in the United States mail, registered or
certified, and postage prepaid, addressed to the party to be served. At the date
of execution of this Lease, the addresses of Landlord and Tenant are as set
forth in Paragraph 1. After the Commencement Date, the address of Tenant shall
be the address of
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the Premises. Either party may change its address by giving notice of same
in accordance with this Paragraph.
27. Attorneys' Fees. If either party brings any action or legal proceeding
for damages for an alleged breach of any provision of this Lease, to recover
rent, or other sums due, to terminate the tenancy of the Premises or to enforce,
protect or establish any term, condition or covenant of this Lease or right of
either party, the prevailing party shall be entitled to recovery as a part of
such action or proceedings, or in a separate action brought for that purpose,
reasonable attorneys' fees and costs.
28. Estoppel Certificates. Tenant shall within seven (7) days following
written request by Landlord execute and deliver to Landlord any documents,
including Estoppel Certificates, in the form prepared by Landlord (a) certifying
that this Lease is unmodified and in full force and effect or, if modified,
stating the nature of such modification and certifying that this Lease, as to so
modified, is in full force and effect and the date to which the Rent and other
charges are paid in advance, if any, and (b) acknowledging that there are not,
to Tenant's knowledge, any uncured defaults on the part of Landlord, or, if
there are uncured defaults on the part of the Landlord, stating the nature of
such uncured defaults, and (c) evidencing the status of the Lease as may be
required either by a lender making a loan to Landlord to be secured by deed of
trust or mortgage covering the Building or a purchaser of the Building from
Landlord. Tenant's failure to deliver an Estoppel Certificate within seven (7)
days after delivery of Landlord's written request therefor shall be conclusive
upon Tenant (a) that this Lease is in full force and effect, without
modification except as may be represented by Landlord, (b) that there are now no
uncured defaults in Landlord's performance and (c) that no Rent has been paid in
advance. If Tenant fails to so deliver a requested Estoppel Certificate within
the prescribed time it shall be deemed that there exist no defaults under this
Lease on the part of Landlord, that the Rent is current and that Tenant has no
claims against Landlord.
29. Transfer of the Building by Landlord. In the event of any conveyance
of the Building and assignment by Landlord of this Lease, Landlord shall be and
is hereby entirely released from all liability under any and all of its
covenants and obligations contained in or derived from this Lease occurring
after the date of such conveyance and assignment, and Tenant agrees to attain to
such transferee provided such transferee assumes Landlord's obligations under
this Lease.
30. Landlord's Right to Perform Tenant's Covenants. If Tenant fails to
make any payment or perform any other act on its part to be made or performed
under this Lease, Landlord may, but shall not be obligated to and without
waiving or releasing Tenant from any obligation of Tenant under this Lease, make
such payment
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or perform such other act to the extent Landlord may deem desirable, and in
connection therewith, pay expenses and employ counsel. All sums so paid by
Landlord and all penalties, interest and costs in connection therewith shall be
due and payable by Tenant on the next day after any such payment by Landlord,
together with interest thereon at the Interest Rate from such date to the date
of payment by Tenant to Landlord, plus collection costs and attorneys' fees.
Landlord shall have the same rights and remedies for the nonpayment thereof as
in the case of default in the payment of Rent.
31. Acceptance. Delivery of this Lease, duly executed by Tenant,
constitutes an offer to lease the Premises, and under no circumstances shall
such delivery to be deemed to create an option or reservation to lease the
Premises for the benefit of Tenant. This Lease shall only become effective and
binding upon full execution hereof by Landlord and delivery of a signed copy to
Tenant.
32. Recording. Neither party shall record this Lease nor a short form
memorandum thereof.
33. Modifications for Lender. If, in connection with obtaining financing
for the Premises for any portion thereof, Landlord's lender shall request
reasonable modification to this Lease as a condition to such financing, Tenant
shall not unreasonably withhold, delay or defer its consent thereto, provided
such modifications do not materially adversely affect Tenant's rights hereunder.
34. General.
A. Captions. The captions and headings used in this Lease are for
the purpose of convenience only and shall not be construed to limit or extend
the meaning of any part of this Lease.
B. Executed Copy. Any fully executed copy of this Lease shall be
deemed an original for all purposes.
C. Time. Time is of the essence for the performance of each term,
condition and covenant of this Lease.
D. Separability. If one or more of the provisions contained herein,
except for the payment of Rental, is for any reason held to be invalid, illegal
or unenforceable in any respect, such invalidity, illegality, or
unenforceability shall not affect any other provision for this Lease, but this
Lease shall be construed as if such invalid, illegal or unenforceable provision
had not been contained herein.
E. Choice of Law. This Lease shall be construed and enforced in
accordance with the laws of the State of California. The language in all parts
of this Lease shall in all cases be
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construed as a whole according to its fair meaning and not strictly for or
against either Landlord or Tenant.
F. Gender; Singular, Plural. When the context of this Lease
requires, the neuter gender includes the masculine, the feminine, a partnership
or corporation or joint venture, and the singular includes the plural.
G. Binding Effect. The covenants and agreement contained in this
Lease shall be binding on the parties hereto and on their respective successors
and assigns to the extent this Lease is assignable.
H. Waiver. The waiver by Landlord of any breach of any term,
condition or covenant, of this Lease shall not be deemed to be a waiver of such
provision or any subsequent breach of the same or any other term, condition or
covenant of this Lease. The subsequent acceptance of Rent hereunder by Landlord
shall not be deemed to be a waiver of any preceding breach at the time of
acceptance of such payment. No covenant, term or condition of this Lease shall
be deemed to have been waived by Landlord unless such waiver is in writing
signed by Landlord.
I. Entire Agreement. This Lease is the entire agreement between the
parties, and there are no agreements or representations between the parties
except as expressed herein. Except as otherwise provided herein, no subsequent
change or addition to this Lease shall be binding unless in writing and signed
by the parties hereto.
J. Exhibits. All exhibits, amendments, riders and addendums attached
hereto are hereby incorporated herein and made a part hereof.
35. Financial Statements. Within one hundred and twenty (120) days after
the end of the fiscal year of Tenant, Tenant shall furnish to Landlord financial
and operating statements which include a complete financial statement of Tenant
including assets and liabilities along with profit and loss and operating
statements for the most recently ended fiscal year of Tenant. The foregoing
annual financial and operating statements shall be prepared and certified at the
expense of Tenant, pursuant to audit, by a firm of independent certified public
accountants satisfactory to Landlord. Such financial and operating statements
shall be prepared in accordance with generally accepted accounting principles
consistently applied. In the event any of said statements are not duly and
punctually furnished, or in the event of any other default hereunder, Landlord
may require that the same be prepared and certified, pursuant to audit, by a
firm of independent certified public accountants satisfactory to Landlord at
Tenant's expense; without limiting the foregoing, Landlord shall have the right
to audit or cause to be audited the books and records of Tenant at Tenant's
expense.
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36. No Merger. There shall be no merger of title if the interests of
Landlord in the Premises and Tenant under this Lease are held by one entity.
37. Mortgagee Protection. If Landlord defaults under this Lease, Tenant
will notify, by registered or certified mail, any beneficiary of a deed of trust
or mortgagee of a mortgage covering the Premises and offer such beneficiary or
mortgagee a reasonable opportunity to cure the default, including time to obtain
possession of the Premises by power of sale or a judicial foreclosure, if such
should provide necessary to effect a cure.
THIS LEASE is effective as of the date the last signature necessary to
execute the Lease shall have executed this Lease.
TENANT:
Dated Oct 15, 1986 Payco American Corporation,
A Delaware Corporation
By: /s/ Dennis Punches
----------------------------
President
LANDLORD:
Dated Oct 15, 1986 Hacienda Investment Company,
A Wisconsin General Partnership
By: /s/ Neal R. Sparby
-------------------------------------
Authorized Partner
By: /s/ William Kagel
-------------------------------------
Authorized Partner
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ADDENDUM TO LEASE
This Addendum to Lease ("Addendum"), made on this 23 day of Nov, l987 by
and between Hacienda Investment Company ("Landlord") and Payco American
Corporation ("Tenant"),
WITNESSETH:
WHEREAS, Landlord and Tenant entered into a LEASE dated the 15th day of
October, 1986 ("Lease"); and
WHEREAS, pursuant to Paragraph 4 (Lease Term), possession of the entire
Demised Premises was given to Tenant on the 18th day of September, 1987, and not
on the commencement date of the Lease,
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, the parties agree to modify the Lease in the following
respects:
1. Paragraph 4 (Lease Term), Section A. (Term) is modified to provide that
the twenty (20) year term of the Lease shall begin on October 1, 1987 and
continue until September 30, 2007, unless sooner terminated as provided in the
Lease (Paragraph 4, Section C. Cancellation).
2. Except as specifically modified herein, the Lease shall remain in full
force and effect. Where the terms of this Addendum conflict with the terms of
the Lease, the terms of this Addendum shall control.
IN WITNESS WHEREOF, the parties have executed this Addendum to Lease in
duplicate original on the day and year first above written.
LANDLORD: HACIENDA INVESTMENT COMPANY
By: /s/ Neal R. Sparby
-----------------------------
Neal R. Sparby
Authorized Partner
TENANT: PAYCO AMERICAN CORPORATION
By: /s/ Joseph G. Krakora
-----------------------------
Joseph G. Krakora
Senior Vice President
<PAGE>
FIRST AMENDMENT TO LEASE
This First Amendment to Lease ("Amendment") is an amendment to that Lease
dated October 15, l986 (the "Lease") between Hacienda Investment Company, a
Wisconsin general partnership ("Landlord") and Payco American Corporation, a
Delaware corporation ("Tenant") for those premises consisting of a building (the
"Building") to be constructed of approximately nineteen thousand three hundred
seventy-six (19,376) square feet upon real property in Pleasanton, California,
consisting of approximately one and 508/1000ths (1.508) acres (the "Premises")
as more particularly described in EXHIBIT A to the Lease. The defined terms in
this Amendment shall have the same meaning as the defined terms in the Lease.
The parties now agree to amend the Lease as follows:
I
The term "Property" in the second line of Paragraph 3.K on page 2 shall be
deleted and in its place shall be inserted the word "Premises."
II
The reference to the Assessment District set forth in Paragraph 13.B(3) on
page 9 shall be deleted and the following shall be substituted in its place,
"Assessment District No. 1986-4, North Pleasanton Fire Protection Refunding
District."
III
The last sentence of Paragraph 13.C on page 10 which reads as follows,
"Tenant shall pay the Real Estate Taxes directly to the County unless directed
in writing to the contrary by Landlord." shall be deleted.
<PAGE>
IV
The last sentence of Paragraph 24.C which begins on page 19 shall be
deleted. The sentence reads as follows:
But if Landlord defaults under this Lease, the Tenant will notify by
registered or certified mail to (sic) any beneficiary of any deed of trust
or mortgagee of mortgage covering the Premises, and offer such beneficiary
or mortgagee sixty (60) days to cure the default, provided that such
beneficiary of mortgagee serves notice on Tenant within the initial twenty
(20) day period that it intends to cure the default within such sixty (60)
day period.
V
The following paragraph shall be added to the Lease:
38. Covenants Running with the Land. Tenant acknowledges that the
Grant Deed and Rider to Grant Deed under which Landlord was granted title
to the Premises contained certain covenants running with the land. Tenant
acknowledges receipt of a copy of the Rider to Grant Deed and agrees to
observe and perform Landlord's covenants and be subject to the enforcement
provisions in the Grant Deed and the Rider thereto.
Except as amended herein, the Lease remains in full force and effect. This
Amendment has been executed this 19 day of December, 1986.
LANDLORD: TENANT:
Hacienda Investment Company, Payco American Corporation,
a Wisconsin general partnership a Delaware corporation
By /s/ Neal R. Sparby
---------------------------- By /s/ Dennis Punches
Authorized Partner ----------------------------
President
By____________________________
Authorized Partner /s/ Joseph Treleven
------------------------------
Secretary
<PAGE>
SECOND AMENDMENT TO LEASE AGREEMENT
BY AND BETWEEN
HACIENDA INVESTMENT COMPANY
AS LANDLORD, AND
PAYCO AMERICAN CORPORATION
AS TENANT
THIS SECOND AMENDMENT TO LEASE AGREEMENT, by and between Hacienda
Investment Company, a Wisconsin General Partnership ("Landlord") and Payco
American Corporation ("Tenant") executed and to become effective on this 8th day
of March, 1995.
WHEREAS, Hacienda Investment Company, as Landlord, and Payco American
Corporation, as Tenant, have heretofore entered into that certain Office
Building Lease Agreement, dated October 15, 1986 and Amended November 23, 1987,
under and pursuant to the terms of which Tenant has leased certain office space
("Premises"), which is located at 5933 Coronado Lane, in Pleasanton, Alameda
County, California, as more particularly described in the Lease;
WHEREAS, Landlord and Tenant desire to amend the Lease in order to
evidence their agreements with respect to the following:
NOW, THEREFORE, for and in consideration of the mutual covenants contained
herein and in the Lease, the parties hereby covenant and agree that the Lease is
amended as follows:
Cancellation. The option to terminate shall be removed in its entirety.
Base Rent. Base Rent for the Period commencing June 1, 1995, shall be
$13.94 per rentable square foot or $22,508.45 per month ($270,101.44 per annum).
Increases in Rent. Commencing September 30, 1996 adjustments in Base Rent
shall be determined by percentage of increase in Consumer Price Index ("CPI')
for All Urban Consumers, All Items, for United States City (1982-1984=100). The
numerator of the calculation shall be the index figure for the month prior to
the month in which the adjustment commences and the denominator of which shall
be the index figure for May of 1995.
<PAGE>
Tenant Improvement/Capital Allowance. Landlord shall provide an allowance
not to exceed $50,000 for Improvements to the premises. Invoices for work
completed must be provided with verification that work have been completed in an
acceptable manner.
LANDLORD:
Hacienda Investment Company,
a Wisconsin General Partnership
By: /s/ Neal R. Sparby
---------------------------------
Managing Partner
TENANT:
Payco American Corporation
By: /s/ William Kagel
---------------------------------
Senior Vice President
<PAGE>
Exhibit 10.9
EMPLOYMENT AGREEMENT
This Agreement is made as of the 27th day of August, 1996 between OSI
Holdings Corp., a Delaware corporation, with offices at 300 Galleria Parkway,
Atlanta, Georgia 30339 (the "Company"), and Timothy G. Beffa, an individual
residing in the State of Missouri (the "Employee").
R E C I T A L S
WHEREAS, the Company desires to secure the services and employment of
the Employee on behalf of the Company, and the Employee desires to enter into
employment with the Company, upon the terms and conditions hereinafter set
forth.
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, the parties hereto, each intending to be legally bound hereby,
agree as follows:
1. Employment. The Company hereby employs the Employee as Chief
Executive Officer of the Company, and the Employee accepts such employment for
the term of the employment specified in Section 3 below. During the Employment
Term (as defined below), the Employee shall serve as the Chief Executive Officer
of the Company, performing such duties as shall be reasonably required of such
an employee of the Company, and shall have such other powers and perform such
other additional executive duties as may from time to time be assigned to him by
the Board of Directors of the Company. During the Employment Term, the Employee
shall serve as a member of the Board of Directors of the Company. The Employee's
primary place of employment shall be St. Louis, Missouri. The Company and the
Employee each acknowledge that the Employee shall be required to travel
extensively in connection with the performance of his duties hereunder,
particularly during the first year of employment. The Company and the Employee
further acknowledge that the Company's headquarters shall be relocated to St.
Louis.
2. Performance. The Employee will serve the Company faithfully and to
the best of his ability and will devote substantially all of his time, energy,
experience and talents during regular business hours and as otherwise reasonably
necessary to such employment, to the exclusion of
<PAGE>
all other business activities; provided, however, that the Employee may continue
to serve on outside boards of directors of which he is a member as of the date
hereof.
3. Employment Term. The employment term shall begin on the date of
this Agreement and continue until the first anniversary date of this Agreement,
unless earlier terminated pursuant to Section 7 below (the "Employment Term").
The Employment Term may be extended by mutual agreement of the Company and the
Employee in accordance with Section 7 below.
4. Compensation.
(a) Salary. During the Employment Term, the Company shall pay the
Employee a base salary, payable in equal semimonthly installments, subject to
withholding and other applicable taxes, at an annual rate of Three Hundred
Thousand Dollars ($300,000.00).
(b) Bonus. For the period commencing on the date of this Agreement and
ending on December 31, 1996, the Company shall pay the Employee a guaranteed
bonus, subject to withholding and other applicable taxes, of $200,000, payable
on December 31, 1996. Commencing on January 1, 1997, the Employee shall be
eligible for an annual bonus of up to 100% of his base salary. Such annual bonus
shall be based on the satisfaction of performance targets (including, without
limitation, EBITDA, acquisitions and recruitment and development of senior
staff) established by the Board of Directors on or before December 31 of each
year for the next succeeding year.
(c) Stock Options. The Company shall grant on the date hereof to the
Employee options to purchase up to 2.5% of the Company's outstanding common
stock pursuant to the Company's 1995 Stock Option and Stock Award Plan (the
"Plan"). Such options shall vest upon the satisfaction of performance and
liquidity targets as set forth in the Plan.
(d) Medical and Dental Health Benefits. During the Employment Term,
the Employee shall be entitled to medical and dental heath benefits in
accordance with the Company's established practices with respect to its key
employees.
(e) Vacation; Sick Leave. During the Employment Term, the Employee
shall be entitled to vacation and sick
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<PAGE>
leave in accordance with the Company's established practices with respect to its
key employees.
(f) Automobile. The Company shall assume the Employee's lease
obligations with respect to his current automobile and pay for all gas, oil,
maintenance and insurance for such automobile.
5. Expenses. The Employee shall be reimbursed by the Company for all
reasonable expenses incurred by him in connection with the performance of his
duties hereunder in accordance with policies established by the Board from time
to time and upon receipt of appropriate documentation.
6. Secret Processes and Confidential Information. For the Employment
Term and thereafter, (a) the Employee will not divulge, transmit or otherwise
disclose (except as legally compelled by court order, and then only to the
extent required, after prompt notice to the Company of any such order), directly
or indirectly, other than in the regular and proper course of business of the
Company, any confidential knowledge or information with respect to the
operations or finances of the Company or with respect to confidential or secret
processes, services, techniques, customers or plans with respect to the Company
and (b) the Employee will not use, directly or indirectly, any confidential
information for the benefit of anyone other than the Company; provided, however,
that the Employee has no obligation, express or implied, to refrain from using
or disclosing to others any such knowledge or information which is or hereafter
shall become available to the public other than through disclosure by the
Employee. All new processes, techniques, know-how, inventions, plans, products,
patents and devices developed, made or invented by the Employee, alone or with
others, while an employee of the Company, shall be and become the sole property
of the Company, unless released in writing by the Company, and the Employee
hereby assigns any and all rights therein or thereto to the Company.
During the term of this Agreement and thereafter, Employee shall not
take any action to disparage or criticize to any third parties any of the
services of the Company or to commit any other action that injures or hinders
the business relationships of the Company.
All files, records, documents, memorandums, notes or other documents
relating to the business of Company, whether prepared by Employee or otherwise
coming into his possession in the course of the performance of his services
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<PAGE>
under this Agreement, shall be the exclusive property of Company and shall be
delivered to Company and not retained by Employee upon termination of this
Agreement for any reason whatsoever.
7. Termination. The employment of the Employee hereunder shall
automatically terminate at the end of the Employment Term, unless the parties
hereto mutually agree otherwise in writing, at least 30 days prior to expiration
of the Employment Term. The employment of the Employee hereunder may also be
terminated at any time by the Company with or without "cause". For purposes of
this Agreement, "cause" shall mean: (i) embezzlement, theft or other
misappropriation of any property of the Company or any subsidiary, (ii) gross or
willful misconduct resulting in substantial loss to the Company or any
subsidiary or substantial damage to the reputation of the Company or any
subsidiary, (iii) any act involving moral turpitude which results in a
conviction for a felony involving moral turpitude, fraud or misrepresentation,
(iv) gross neglect of his assigned duties to the Company or any subsidiary, (v)
gross breach of his fiduciary obligations to the Company or any subsidiary, or
(vi) any chemical dependence which materially affects the performance of his
duties and responsibilities to the Company or any subsidiary; provided that in
the case of the misconduct set forth in clauses (iv) and (vi) above, such
misconduct shall continue for a period of 30 days following written notice
thereof by the Company to the Employee.
8. Severance. If the Employee's employment is terminated by the
Company without "cause", the Employee shall be entitled to (i) receive an amount
equal to his total cash compensation (base salary plus bonus) for the year
preceding the Employee's termination, payable, at the Company's option, in a
lump sum on the date of termination or ratably over the one year period
following the date of termination and (ii) continue to receive the medical and
dental health benefits referred to in Section 4(c) for a period of one year
following the date of termination. If the Employee's employment is terminated by
the Company "for cause", the Employee shall not be entitled to severance
compensation. The Employee covenants and agrees that he will not, during the one
year period following the termination of the Employee's employment by the
Company, within any jurisdiction or marketing area in which the Company or any
of its Affiliates (as defined below) is doing business or is qualified to do
business, directly or indirectly own, manage, operate, control, be employed by
or participate in the ownership, management, operation or control of, or be
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<PAGE>
connected in any manner with, any business of the type and character engaged in
and competitive with that conducted by the Company or any of its Affiliates at
the time of such termination; provided, however, that ownership of securities of
2% or less of any class of securities of a public company shall not be
considered to be competition with the Company or any of its Affiliates. For the
purposes of this Section 8, the term "Affiliate" shall mean, with respect to the
Company, any person or entity which, directly or indirectly, owns or is owned
by, or is under common ownership with, the Company. The term "own" (including,
with correlative meanings, "owned by" and "under common ownership with") shall
mean the ownership of 50% or more of the voting securities (or their equivalent)
of a particular entity.
9. Notice. Any notices required or permitted hereunder shall be in
writing and shall be deemed to have been given when personally delivered or when
mailed, certified or registered mail, postage prepaid, to the following
addresses:
If to the Employee:
Timothy G. Beffa
2015 Kings Pointe Drive
St. Louis, Missouri 63005
If to the Company:
OSI Holdings Corp.
300 Galleria Parkway
Atlanta, Georgia 30339
With a copy to:
McCown De Leeuw & Co.
101 East 52nd Street
31st Floor
New York, New York 10022
Attention: David E. King
10. General.
(a) Governing Law; Jurisdiction. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of New York applicable to contracts executed and to be performed
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<PAGE>
entirely within said State. Any judicial proceeding brought against any of the
parties to this Agreement or any dispute arising out of this Agreement or any
matter related hereto may be brought in the courts of the State of New York or
in the United States District Court for the Southern District of New York, and,
by execution and delivery of this Agreement, each of the parties to this
Agreement accepts the jurisdiction of said courts, and irrevocably agrees to be
bound by any judgment rendered thereby in connection with this Agreement. The
foregoing consent to jurisdiction shall not be deemed to confer rights on any
person other than the respective parties to this Agreement.
(b) Assignability. The Employee may not assign his interest in or
delegate his duties under this Agreement. Notwithstanding anything else in this
Agreement to the contrary, the Company may assign this Agreement to and all
rights hereunder shall inure to the benefit of any person, firm or corporation
succeeding to all or substantially all of the business or assets of the Company
by purchase, merger or consolidation.
(c) Enforcement Costs. In the event that either the Company or the
Employee initiates an action or claim to enforce any provision or term of this
Agreement, the costs and expenses (including attorney's fees) of the prevailing
party shall be paid by the other party, such party to be deemed to have
prevailed if such action or claim is concluded pursuant to a court order or
final judgment which is not subject to appeal, a settlement agreement or
dismissal of the principle claims.
(d) Binding Effect. This Agreement is for the employment of Employee,
personally, and for the services to be rendered by him must be rendered by him
and no other person. This Agreement shall be binding upon and inure to the
benefit of the Company and its successors and assigns.
(e) Entire Agreement; Modification. This Agreement constitutes the
entire agreement of the parties hereto with respect to the subject matter hereof
and may not be modified or amended in any way except in writing by the parties
hereto.
(f) Duration. Notwithstanding the term of employment hereunder, this
Agreement shall continue for so long as any obligations remain under this
Agreement.
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<PAGE>
(g) Survival. The covenants set forth in Sections 6 and 7 of this
Agreement shall survive and shall continue to be binding upon Employee
notwithstanding the termination of this Agreement for any reason whatsoever. The
covenants set forth in Sections 6 and 7 of this Agreement shall be deemed and
construed as separate agreements independent of any other provision of this
Agreement. The existence of any claim or cause of action by Employee against
Company, whether predicated on this Agreement or otherwise, shall not constitute
a defense to the enforcement by Company of any or all covenants. It is expressly
agreed that the remedy at law for the breach or any such covenant is inadequate
and that injunctive relief shall be available to prevent the breach or any
threatened breach thereof.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound,
have hereunto executed this Agreement the day and year first written above.
OSI HOLDINGS CORP.
By: /s/ David E. King
---------------------------
Name: David E. King
Title: Secretary
EMPLOYEE
/s/ Timothy G. Beffa
------------------------------
TIMOTHY G. BEFFA
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<PAGE>
Exhibit 10.10
OSI Holdings Corp.
c/o McCown De Leeuw & Co
101 East 52nd Street
New York, New York 10022
January 12, 1996
Mr. Allen M. Capsuto
2224 Prince John Blvd.
Mississauga, Ontario L5K 2E9
Dear Allen:
This letter outlines the terms of your employment as the Senior Vice
President-Finance and Chief Financial Officer of OSI Holdings Corp. (the
"Company").
1. EMPLOYMENT. The Company hereby agrees to employ Allen M. Capsuto
(the "Executive"), and the Executive hereby agrees to serve the Company, on the
terms and conditions set forth herein.
2. TERM. The employment of the Executive by the Company as provided
in Section 1 will commence on January 22, 1996 (the "Effective Date"), and shall
expire on the second anniversary of the Effective Date (the "Term") unless
otherwise terminated pursuant to the provisions of this Agreement.
3. COMPENSATION AND RELATED MATTERS. As compensation and
consideration for the performance by the Executive of the Executive's duties and
responsibilities pursuant to this Agreement, the Company will pay the Executive
and the Executive agrees to accept in full payment for such performance the
amounts and benefits set forth below.
<PAGE>
(a) SALARY. During the term of the Executive's employment
hereunder, the Company shall pay to the Executive an annual base salary at a
rate of $200,000 commencing on the Effective Date or such higher rate as may
from time to time be determined by the Chief Executive Officer of the Company
and the Board of Directors of the Company (the "Board"), such salary to be paid
in substantially equal installments no less frequently than monthly. The
Company agrees to review this salary on an annual basis and may increase the
amount thereof from time to time in its sole discretion but it shall not
decrease such salary (including any increases) during the term of this
Agreement. Compensation of the Executive by salary payments shall not be deemed
exclusive and shall not prevent the Executive from participating in any other
compensation or benefit plan of the Company.
(b) BONUS. The Company agrees to pay the Executive a one-time
lump sum starting bonus of $75,000 within 10 days of the Effective Date. In
addition, during the term of the Executive's employment hereunder, the Executive
shall be entitled to receive a guaranteed annual bonus of $100,000 for the 1996
fiscal year and for 1997 an amount equal to 50% of the Executive's then annual
base salary (the "Target Bonus") provided that certain qualitative and
quantitative targets (the "Base Targets") to be mutually agreed upon by the
Board and senior management of the Company prior to the beginning of 1997 are
achieved. In the event such Base Targets are not achieved, the Executive shall
be entitled to receive (a) 80% of the Target Bonus if at least 90% but not more
than 94.9% of the Base Target is achieved, (b) 90% of the Target Bonus if at
least 95% but not more than 97.4% of the Base Target is achieved and (c) 95% of
the Target Bonus if at least 97.5% but not more than 99.9% of the Base Target is
achieved. Such annual bonuses shall be paid as soon as practical following the
end of each fiscal year.
(c) EXPENSES. During the term of the Executive's employment
hereunder, the Executive shall be reimbursed for all out-of-pocket business
expenses incurred by the Executive in fulfilling the Executive's duties and
responsibilities hereunder, which are incurred and accounted for in accordance
with the policies and procedures established by the Company.
(d) OTHER BENEFITS. The Company and the Executive acknowledge
that the Company is in the process of establishing an executive benefit program
for senior executives (the "Benefit Program") and that when such Benefit Program
is implemented, the Executive shall be entitled to participate in and receive
benefits thereunder. The Benefit Program will provide, among other things, long
and short-term disability benefits customary for an employee with the position
and compensation of the Executive. Until such Benefit Program is implemented,
the Company will pay for the Executive's premiums (up to $700 per month) for
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<PAGE>
disability coverage comparable to the coverage expected to be provided under the
Benefit Program.
(e) RELOCATION EXPENSES. The Company shall pay all documented
reasonable expenses incurred by the Executive in connection with the Executive's
relocation to the greater metropolitan area of Atlanta, Georgia, including,
without limitation, travel, moving, temporary housing, brokers' and attorney's
fees, mortgage application fees and closing points and fees. The Company also
shall reimburse the Executive for any loss (on a U.S. dollar, after tax basis)
incurred by him from the sale of his present residence, with such payment to be
made within 10 days of his presentation of a statement computing such loss in
reasonable detail, it being understood that in computing the amount to be
reimbursed, such computation shall give effect to federal, state and local
income taxes payable by the Executive on such amount. It is further understood
that in no event shall payments made to the Executive pursuant to the preceding
sentence exceed $70,000 in the aggregate.
4. OPTIONS. As of the Effective Date, the Executive shall be
granted under the Company's 1995 Stock Option and Stock Award Plan non-qualified
performance stock options to purchase such number of shares of the common stock
of the Company equal to 1% of the then outstanding shares of common stock on a
fully diluted basis. At such time as the Executive shall hold any shares of
common stock of the Company or vested options to acquire such shares the
Executive shall become a party to any shareholders agreement then in effect to
which all of the Company's executive shareholders are a party.
5. COMPENSATION UPON TERMINATION, DEATH OR DURING DISABILITY.
(a) If the Executive's employment is terminated by his
disability or death, the Company shall pay to the Executive or his legal
representative (i) any amounts due to the Executive under Section 3 through the
date of his disability or death, including any expenses owed pursuant to Section
3 and amounts under any bonus or compensation plan or program of the Company,
including the entire bonus guaranteed for 1996 pursuant to Section 3(b) hereof
if such amount has not previously been paid and thereafter the bonus for 1997
pursuant to Section 3(b), pro-rated to the date of termination, with such
amounts being paid within ten days following the date of the Executive's
disability or death (or in the case of the bonus for 1997, as soon as practical
after such amount can be determined) and (ii) any disability or death benefits
provided under any Benefit Plan in accordance with their terms, and the Company
shall, thereafter, have no further obligations to the Executive under this
Agreement.
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<PAGE>
(b) If (A) the Company shall terminate the Executive's
employment for any reason, other than Cause (as defined herein) or due to his
death or disability, or (B) the Executive shall terminate his employment for
Good Reason; then
(i) the Company shall pay the Executive his full base
salary through the date of termination at the rate then in effect and all other
unpaid amounts, if any, to which the Executive is entitled as of the date of
termination, including any amounts owed pursuant to Section 3 and amounts under
any bonus or compensation plan or program of the Company, including the entire
bonus guaranteed for 1996 pursuant to Section 3(b) hereof if such amount has not
previously been paid and thereafter the bonus for 1997 pursuant to Section 3(b),
pro-rated to the date of termination; and
(ii) in lieu of any further salary and bonus payments to the
Executive for periods subsequent to the date of termination, the Company shall
pay as liquidated damages to the Executive in equal monthly installments over a
six-month period commencing on the termination date (or in the case of payments
in respect of bonuses other than the bonus guaranteed for 1996, commencing as
soon as such amount can be determined), a lump sum amount equal to the sum of
(a) one-half of the Executive's full annual base salary at the rate then in
effect and (b) (1) if such termination occurs on or prior to December 31, 1996,
the amount of the bonus guaranteed for 1996 pursuant to Section 3(b) hereof, and
(2) if such termination occurs after December 31, 1996, then the amount of the
bonus payable for the year of such termination pursuant to Section 3(b) hereof,
pro-rated to the date of termination; and
(iii) the Company shall continue the participation of
the Executive for a period of six months in all medical, life and other employee
"welfare" benefit plans and programs in which the Executive was entitled to
participate immediately prior to the date of termination, provided that the
Executive's continued participation is possible under the general terms and
provisions of such plans and programs. In the event that the Executive's
participation in any such plan or program is barred, the Company shall arrange
to provide the Executive with benefits substantially similar to those which the
Executive would otherwise have been entitled to receive under such plans and
programs from which his continued participation is barred.
(c) If the Executive's employment is terminated by the Company
for Cause or by the Executive for other than Good Reason, the Company shall pay
the Executive his full base salary through the date of termination at a rate
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<PAGE>
then in effect and all other unpaid amounts, if any, to which the Executive is
entitled as of the date of termination, but in no event shall the Company be
obligated to make any payments to the Executive in respect of bonuses pursuant
to Section 3(b).
(d) The Executive shall not be required to mitigate the amount
of any payment provided for in this Section 5 by seeking other employment or
otherwise, nor shall the amount of any payment or benefit provided for in this
Section 5 be reduced by any compensation earned by the Executive as the result
of employment by another employer, by retirement benefits, by offset against any
amount claimed to be owed by the Executive to the Company, or otherwise.
(e) The obligations of the Company to make payments and provide
benefits under this Section 5 shall survive the termination of this Agreement.
(f) For purposes of this Agreement, termination for "Cause"
shall mean the termination of the Executive's employment for: (i) embezzlement,
theft or other misappropriation of any property of the Company or any of its
subsidiaries, (ii) gross or willful misconduct resulting in substantial loss to
the Company or any of its subsidiaries or substantial damage to the reputation
of the Company or any of its subsidiaries, (iii) any act involving moral
turpitude which if the subject of a criminal proceeding could reasonably result
in a conviction for a felony involving moral turpitude, fraud or
misrepresentation, (iv) gross neglect of his assigned duties to the Company or
any of its subsidiaries, (v) gross breach of his fiduciary obligations to the
Company or any of its subsidiaries, or (vi) any chemical dependence which
materially affects the performance of his duties and responsibilities to the
Company or any of its subsidiaries; provided that in the case of the misconduct
set out in such clauses (iv) or (vi) above, such misconduct shall continue for a
period of 30 days following written notice thereof by the Company to the
Executive. For purposes of this Agreement "Good Reason" shall mean the
occurrence of any of the following events, except for the occurrence of such an
event in connection with the termination of the Executive's employment by the
Company for Cause: (i) a significant reduction in the authority, duty or
responsibility of the Executive; or (ii) a reduction in base salary or level of
participation in any bonus plan, the reduction or discontinuance of any
incentive compensation plan or the taking of any action which materially
adversely affects the Executive's participation in or benefits under any Benefit
Program provided to the Executive; provided that the actions referred to in
clause (ii) above (other than with respect to a reduction in base salary or
level of participation in any bonus plan) shall not constitute "Good Reason"
events if such actions are taken by the Company as
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<PAGE>
part of an overall plan by the Company and made applicable to the Executive to
the same extent as to all other senior executives of the Company.
6. NON-COMPETE. The Executive covenants and agrees that, for a
period of six months after employment with the Company terminates, he will not,
within any jurisdiction or marketing area in which the Company or any of its
Affiliates (as defined below) is doing business, directly or indirectly own,
manage, operate, control, be employed by or participate in the ownership,
management, operation or control of, any business of the type and character
engaged in and competitive with that being conducted by the Company or any of
its Affiliates at the time of the termination of the Executive's employment;
PROVIDED, HOWEVER, ownership of securities representing 2% or less of any class
of securities of a public company shall in no event be a violation of this
covenant. For the purposes of this Section, the term "Affiliate" shall mean,
with respect to the Company, any person or entity which, directly or indirectly,
owns or is owned by, or is under common ownership with, the Company. The term
"own" (including, with correlative meanings, "owned by" and "under common
ownership with") shall mean the ownership of 50% or more of the voting
securities (or their equivalent) of a particular entity.
7. CONFIDENTIAL INFORMATION. During the Term and thereafter, (a)
the Executive will not divulge, transmit or otherwise disclose (except as
legally compelled by court order, subpoena, interrogatories, or similar demands
or processes), and then only to the extent required after prompt notice to the
Company of any such order, subpoena, interrogatories, or similar demand or
process), directly or indirectly, other than in the ordinary course of business
of the Company, any confidential information with respect to the operations or
finances of the Company or with respect to confidential or secret processes,
services, techniques, customers or plans with respect to the Company and (b) the
Executive will not use, directly or indirectly, any confidential information for
the benefit of anyone other than the Company; PROVIDED, HOWEVER, the Executive
has no obligation, express or implied, to refrain from divulging, transmitting
or otherwise disclosing to others any such information which is or hereafter
shall become available to the public other than through disclosure by the
Executive. All new processes, techniques, know-how, inventions, plans,
products, patents and devices developed, made or invented by the Executive,
alone or with others, while an employee of the Company, shall be and become the
sole property of the Company, unless released in writing by the Company, and the
Executive hereby assigns any and all rights therein or thereto to the Company.
-6-
<PAGE>
During the Term and for a period of six months after employment with
the Company terminates, the Executive shall not take any action to disparage or
criticize to any third parties any of the services of the Company or to commit
any other action that in any case materially injures or hinders the business
relationships of the Company.
All files, records, documents, memorandums, notes or other documents
relating to the business of the Company, whether prepared by the Executive or
otherwise coming into his possession in the course of the performance of his
duties under this Agreement, shall be the exclusive property of the Company and
shall be delivered to the Company and not retained by the Executive upon
termination of this Agreement for any reason whatsoever.
8. BINDING AGREEMENT. This Agreement and all rights to the
Executive hereunder shall inure to the benefit of and be enforceable by the
Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Executive should
die while any amounts would still be payable to him hereunder if he had
continued to live, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to the Executive's devisee,
legatee or other designee or, if there be no such designee, to the Executive's
estate.
9. NOTICE. Notices, demands and all other communications provided
for in this Agreement shall be in writing and shall be deemed to have been duly
given when delivered, if delivered personally, or (unless otherwise specified)
mailed by United States certified or registered mail, return receipt requested,
postage prepaid, and when received if delivered otherwise, addressed as follows:
If to the Executive:
2224 Prince John Blvd.
Mississauga, Ontario L5K 2E9
If to the Company:
c/o McCown De Leeuw & Co.
101 East 52nd Street
New York, NY 10022
-7-
<PAGE>
or to such other address as any party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.
10. GENERAL PROVISIONS. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing signed by the Executive and such officer of the Company as
may be specifically designated by the Board. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of New York without regard to its conflicts of law principles.
11. VALIDITY. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
12. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
13. ENTIRE AGREEMENT . This Agreement and the agreements described
herein set forth the entire agreement of the parties hereto in respect of the
subject matter contained herein and supersedes all prior agreements, promises,
covenants, arrangements, communications, representations or warranties, whether
oral or written, by any officer, employee or representative of any party hereto,
and any prior agreement of the parties hereto in respect of the subject matter
contained herein is hereby terminated and cancelled.
If the foregoing accurately reflect our agreement, kindly execute
where indicated below and return it to the undersigned.
Very truly yours,
OSI Holdings Corp.
By: /s/ DAVID B. KREISS
----------------------------
Name: David B. Kreiss
Title: Chief Executive Officer
-8-
<PAGE>
Agreed to and Accepted by:
/s/ ALLEN M. CAPSUTO
- ---------------------------
Allen M. Capsuto
Date: JANUARY 13, 1996
--------------------
-9-
<PAGE>
Exhibit 10.11
CONSULTING AGREEMENT
This Agreement is made as of the 13th day of August, 1996 between
Payco American Corporation, a Wisconsin corporation, with offices at 180 North
Executive Drive, Brookfield, Wisconsin 53005-6066 (the "Company"), and Dennis G.
Punches, an individual residing in the State of Florida (the "Consultant").
R E C I T A L S
WHEREAS, the Consultant is a founder and long-time employee of the
Company and is presently serving as Chairman of the Board of Directors of the
Company;
WHEREAS, during the term of his employment with the Company, the
Consultant has actively established and maintained relationships with the
Company's key customers and strategic partners;
WHEREAS, the Consultant possesses an intimate knowledge of the
business and affairs of the Company and its policies, procedures, methods and
personnel;
WHEREAS, OSI Holdings Corp., Boxer Acquisition Corp. and the Company
have executed and delivered an Agreement and Plan of Merger, dated as of the
date hereof (the "Merger Agreement");
WHEREAS, the Company desires to secure the continued services of the
Consultant on behalf of the Company after consummation of the transactions
contemplated by the Merger Agreement, and the Consultant desires to continue
providing such services to the Company, upon the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, the parties hereto, each intending to be legally bound hereby,
agree as follows:
1. Engagement, Duties. The Company hereby engages the Consultant to
provide such advisory and consulting services to the Company as shall be
mutually agreed between the Consultant and the Company from time to
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<PAGE>
time, and the Consultant accepts such engagement for the term specified in
Section 2 below (the "Term").
2. Effectiveness; Term. The Term shall begin at the Effective Time (as
defined in the Merger Agreement) and continue until the third anniversary date
of the Effective Time, unless earlier terminated by either party with thirty
days notice to the other.
3. Fee. The Company shall pay to the Consultant $150,000 on the third
anniversary date of the Effective Time.
4. Expenses. The Consultant shall be reimbursed by the Company for all
reasonable expenses incurred by him in connection with the performance of his
duties hereunder in accordance with Company policy and upon receipt of
appropriate documentation.
5. Independent Contractor. It is the express intention of the parties
that Consultant is an independent contractor and not an employee, agent, joint
venturer or partner of the Company. Nothing in this contract shall be
interpreted or construed as creating or establishing a relationship of employer
and employee between the Company and Consultant or any employee or agent of
Consultant.
6. Secret Processes and Confidential Information. For the Term and
thereafter, (a) the Consultant will not divulge, transmit or otherwise disclose
(except as legally compelled by court order, and then only to the extent
required, after prompt notice to the Company of any such order), directly or
indirectly, other than in the regular and proper course of business of the
Company, any confidential knowledge or information with respect to the
operations or finances of the Company or with respect to confidential or secret
processes, services, techniques, customers or plans with respect to the Company
and (b) the Consultant will not use, directly or indirectly, any confidential
information for the benefit of anyone other than the Company; provided, however,
that the Consultant has no obligation, express or implied, to refrain from using
or disclosing to others any such knowledge or information which is or hereafter
shall become available to the public other than through disclosure by the
Consultant. All new processes, techniques, know-how, inventions, plans,
products, patents and devices developed, made or invented by the Consultant,
alone or with others, while a consultant of the Company, shall be and become the
sole property of the Company, unless released in writing by
-2-
<PAGE>
the Company, and the Consultant hereby assigns any and all rights therein or
thereto to the Company.
During the term of this Agreement and thereafter, the Consultant shall
not take any action to disparage or criticize to any third parties any of the
services of the Company or to commit any other action that injures or hinders
the business relationships of the Company.
All files, records, documents, memorandums, notes or other documents
relating to the business of Company, whether prepared by the Consultant or
otherwise coming into his possession in the course of the performance of his
services under this Agreement, shall be the exclusive property of Company and
shall be delivered to the Company and not retained by the Consultant upon
termination of this Agreement for any reason whatsoever.
7. Notice. Any notices required or permitted hereunder shall be in
writing and shall be deemed to have been given when personally delivered or when
mailed, certified or registered mail, postage prepaid, to the following
addresses:
If to the Consultant:
c/o Payco American Corporation
180 North Executive Drive
Brookfield, Wisconsin 53005-6066
If to the Company:
Payco American Corporation
180 North Executive Drive
Brookfield, Wisconsin 53005-6066
-3-
<PAGE>
With a copy to:
McCown De Leeuw & Co.
101 East 52nd Street
31st Floor
New York, New York 10022
Attention: David E. King
The Company shall give the Consultant written notice of any default under this
Agreement and afford the Consultant fifteen days to cure such default.
8. General.
(a) Governing Law; Jurisdiction. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of New York applicable to contracts executed and to be performed
entirely within said State. Any judicial proceeding brought against any of the
parties to this Agreement or any dispute arising out of this Agreement or any
matter related hereto may be brought in the courts of the State of New York or
in the United States District Court for the Southern District of New York, and,
by execution and delivery of this Agreement, each of the parties to this
Agreement accepts the jurisdiction of said courts, and irrevocably agrees to be
bound by any judgment rendered thereby in connection with this Agreement. The
foregoing consent to jurisdiction shall not be deemed to confer rights on any
person other than the respective parties to this Agreement.
(b) Assignability. The Consultant may not assign his interest in or
delegate his duties under this Agreement. Notwithstanding anything else in this
Agreement to the contrary, the Company may assign this Agreement to and all
rights hereunder shall inure to the benefit of any person, firm or corporation
succeeding to all or substantially all of the business or assets of the Company
by purchase, merger or consolidation.
(c) Enforcement Costs. In the event that either the Company or the
Consultant initiates an action or claim to enforce any provision or term of this
Agreement, the costs and expenses (including attorney's fees) of the prevailing
party shall be paid by the other party, such party to be deemed to have
prevailed if such action or claim is concluded pursuant to a court order or
final judgment which is not subject to appeal, a settlement agreement or
dismissal of the principle claims.
-4-
<PAGE>
(d) Binding Effect. This Agreement is for the engagement of the
Consultant, personally, and for the services to be rendered by him must be
rendered by him and no other person. This Agreement shall be binding upon and
inure to the benefit of the Company and its successors and assigns.
(e) Entire Agreement; Modification. This Agreement constitutes the
entire agreement of the parties hereto with respect to the subject matter hereof
and may not be modified or amended in any way except in writing by the parties
hereto.
(f) Duration. Notwithstanding the term of engagement hereunder, this
Agreement shall continue for so long as any obligations remain under this
Agreement.
(g) Survival. The covenants set forth in Section 6 of this Agreement
shall survive and shall continue to be binding upon the Consultant as set forth
in such Sections notwithstanding the termination of this Agreement for any
reason whatsoever. The covenants set forth in Section 6 of this Agreement shall
be deemed and construed as separate agreements independent of any other
provision of this Agreement. The existence of any claim or cause of action by
the Consultant against Company, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by Company of any
or all covenants.
(h) Remedies. The parties recognize that the performance of the
obligations under Section 6 of this Agreement by the Consultant is special,
unique and extraordinary in character, and that in the event of the breach by
the Consultant of the terms and conditions of Section 6 of this Agreement, the
Company or any of its Affiliates shall be entitled to (a) institute and
prosecute proceedings in any court of competent jurisdiction to enforce the
specific performance hereof by the Consultant or to enjoin the Consultant from
engaging in any activities prohibited hereunder or (b) pursue any other remedy
available at law or in equity.
-5-
<PAGE>
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound,
have hereunto executed this Agreement the day and year first written above.
PAYCO AMERICAN CORPORATION
By: /s/ William W. Kagel
----------------------------
Name: William W. Kagel
Title: Senior Vice President
CONSULTANT
/s/ Dennis G. Punches
----------------------------
Dennis G. Punches
<PAGE>
Exhibit 10.12
EMPLOYMENT AGREEMENT
This Agreement is made as of the 13th day of August, 1996 between
Payco American Corporation, a Wisconsin corporation, with offices at 180 North
Executive Drive, Brookfield, Wisconsin 53005-6066 (the "Company"), and James R.
Bohmann, an individual residing in the State of Wisconsin (the "Employee").
R E C I T A L S
WHEREAS, the Employee has been and is presently in the employ of the
Company and is presently serving as Treasurer and Senior Vice President -
Corporate Development of the Company;
WHEREAS, the Employee possesses an intimate knowledge of the business
and affairs of the Company and its policies, procedures, methods and personnel;
WHEREAS, OSI Holdings Corp., Boxer Acquisition Corp. and the Company
have executed and delivered an Agreement and Plan of Merger, dated as of the
date hereof (the "Merger Agreement");
WHEREAS, the Company desires to secure the continued services and
employment of the Employee on behalf of the Company, and the Employee desires to
continue in the employment of the Company, upon the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, the parties hereto, each intending to be legally bound hereby,
agree as follows:
1. Employment. The Company hereby employs the Employee as Treasurer
and Senior Vice President - Corporate Development of the Company, and the
Employee accepts such employment for the term of the employment specified in
Section 3 below. During the Employment Term, the Employee shall serve as
Treasurer and Senior Vice President Corporate Development of the Company,
performing such duties as shall be reasonably required of an executive-level
employee of the Company, and shall have such other powers and
<PAGE>
perform such other additional executive duties as may from time to time be
assigned to him by the Company.
2. Performance. The Employee will serve the Company faithfully and to
the best of his ability and will devote substantially all of his time, energy,
experience and talents during regular business hours and as otherwise reasonably
necessary to such employment, to the exclusion of all other business activities.
3. Effectiveness; Employment Term. This Agreement shall become
effective at the Effective Time (as defined in the Merger Agreement) and
continue until the first anniversary date of the Effective Time, unless earlier
terminated pursuant to Section 7 below (the "Employment Term").
4. Compensation.
(a) Salary. During the Employment Term, the Company shall pay the
Employee a base salary, payable in equal monthly installments, subject to
withholding and other applicable taxes, at an annual rate of One Hundred
Seventy-Two Thousand Three Hundred Eight Dollars ($172,308). In addition, (i)
the Employee shall be entitled to receive such Employee's bonus compensation (or
portion thereof) for the Company's 1996 year in accordance with the past
practices of the Company and (ii) if applicable, the Employee shall be entitled
to receive such Employee's ratable percentage of bonus compensation, if any, for
the Company's 1997 year.
(b) Medical and Dental Health Benefits. During the Employment Term,
Employee shall be entitled to medical and dental heath benefits in accordance
with the Company's existing established policies for key employees.
(c) Vacation; Sick Leave. During the Employment Term, Employee shall
be entitled to vacation and sick leave in accordance with the Company's existing
established policies for key employees.
5. Expenses. During the term of this Agreement, the Employee shall be
reimbursed by the Company for all reasonable expenses incurred by him in
connection with the performance of his duties hereunder in accordance with
existing policies established by the Board from time to time and upon receipt of
appropriate documentation.
-2-
<PAGE>
6. Secret Processes and Confidential Information. For the Employment
Term and thereafter, (a) the Employee will not divulge, transmit or otherwise
disclose (except as legally compelled by court order, and then only to the
extent required, after prompt notice to the Company of any such order), directly
or indirectly, other than in the regular and proper course of business of the
Company, any confidential knowledge or information with respect to the
operations or finances of the Company, such as, but not limited to, client
lists, system documentation, financial documentation, and proposal information,
or with respect to confidential or secret processes, services, techniques,
customers or plans with respect to the Company and (b) the Employee will not
use, directly or indirectly, any confidential information for the benefit of
anyone other than the Company; provided, however, that the Employee has no
obligation, express or implied, to refrain from using or disclosing to others
any such knowledge or information which is or hereafter shall become available
to the public other than through disclosure by the Employee. All new processes,
techniques, know-how, inventions, plans, products, patents and devices
developed, made or invented by the Employee, alone or with others, while an
employee of the Company, shall be and become the sole property of the Company,
unless released in writing by the Company, and the Employee hereby assigns any
and all rights therein or thereto to the Company.
During the term of this Agreement and thereafter, Employee shall not
willfully take any action to disparage or criticize to any third parties any of
the services of the Company or to commit any other action that injures or
hinders the business relationships of the Company.
All files, records, documents, memorandums, notes or other documents
relating to the business of Company, whether prepared by Employee or otherwise
coming into his possession in the course of the performance of his services
under this Agreement, shall be the exclusive property of Company and shall be
delivered to Company and not retained by Employee upon termination of this
Agreement for any reason whatsoever.
7. Termination. The employment of the Employee hereunder shall
automatically terminate at the end of the Employment Term, as provided in
Section 3. The employment of the Employee hereunder may also be terminated at
any time by the Company with or without "cause". For purposes of this Agreement,
"cause" shall mean: (i) embezzlement, theft or other misappropriation of any
property of the Company or any
-3-
<PAGE>
subsidiary, (ii) gross or willful misconduct resulting in substantial loss to
the Company or any subsidiary or substantial damage to the reputation of the
Company or any subsidiary, (iii) any act involving moral turpitude which if the
subject of a criminal proceeding could reasonably result in a conviction for a
felony involving moral turpitude, fraud or misrepresentation, (iv) gross breach
of his fiduciary obligations to the Company or any subsidiary, (v) a breach of
his covenant not to compete, or (vi) any chemical dependence which materially
affects the performance of his duties and responsibilities to the Company or any
subsidiary.
8. Severance.
(a) Termination Without "Cause". If the Employee's employment is
terminated by the Company without "cause", the Employee shall be entitled to
receive his base salary and any unpaid bonus as provided in Section 4(a), for
the period from the date of termination until the first anniversary of the
Effective Time (the "Severance Period"), provided that if at any time during the
Severance Period the Employee shall obtain other employment, the Company's
obligation to pay severance under this Section 8(a) shall automatically be
reduced from the date of commencement of such other employment until the
termination of the Severance Period to an amount equal to the ratable difference
between the Employee's base salary and any unpaid bonus under Section 4(a) and
the base salary earned and any unpaid bonus by Employee in such other
employment. The Employee shall not be an employee of the Company during the
Severance Period, and except for such severance payment or as otherwise required
by law, shall not be entitled to any compensation or benefits under Section
4(a), 4(b) or 4(c) with respect to the Severance Period.
(b) Termination "For Cause". If the Employee's employment is
terminated by the Company "for cause", the Employee shall not be entitled to
severance compensation.
9. Notice. Any notices required or permitted hereunder shall be in
writing and shall be deemed to have been given when personally delivered or when
mailed, certified or registered mail, postage prepaid, to the following
addresses:
If to the Employee:
c/o Payco American Corporation
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<PAGE>
180 North Executive Drive
Brookfield, Wisconsin 53005-6066
If to the Company:
Payco American Corporation
180 North Executive Drive
Brookfield, Wisconsin 53005-6066
With a copy to:
McCown De Leeuw & Co.
101 East 52nd Street
31st Floor
New York, New York 10022
Attention: David E. King
10. General.
(a) Governing Law; Jurisdiction. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of New York applicable to contracts executed and to be performed
entirely within said State. Any judicial proceeding brought against any of the
parties to this Agreement or any dispute arising out of this Agreement or any
matter related hereto may be brought in the courts of the State of New York or
in the United States District Court for the Southern District of New York, and,
by execution and delivery of this Agreement, each of the parties to this
Agreement accepts the jurisdiction of said courts, and irrevocably agrees to be
bound by any judgment rendered thereby in connection with this Agreement. The
foregoing consent to jurisdiction shall not be deemed to confer rights on any
person other than the respective parties to this Agreement.
(b) Assignability. The Employee may not assign his interest in or
delegate his duties under this Agreement. Notwithstanding anything else in this
Agreement to the contrary, the Company may assign this Agreement to and all
rights hereunder shall inure to the benefit of any person, firm or corporation
succeeding to all or substantially all of the business or assets of the Company
by purchase, merger or consolidation.
(c) Enforcement Costs. In the event that either the Company or the
Employee initiates an action or claim to enforce any provision or term of this
Agreement, the costs and expenses (including attorney's fees) of the prevailing
-5-
<PAGE>
party shall be paid by the other party, such party to be deemed to have
prevailed if such action or claim is concluded pursuant to a court order or
final judgment which is not subject to appeal, a settlement agreement or
dismissal of the principle claims.
(d) Binding Effect. This Agreement is for the employment of Employee,
personally, and for the services to be rendered by him must be rendered by him
and no other person. This Agreement shall be binding upon and inure to the
benefit of the Company and its successors and assigns.
(e) Entire Agreement; Modification. This Agreement constitutes the
entire agreement of the parties hereto with respect to the subject matter hereof
and may not be modified or amended in any way except in writing by the parties
hereto.
(f) Duration. Notwithstanding the term of employment hereunder, this
Agreement shall continue for so long as any obligations remain under this
Agreement.
(g) Survival. The covenants set forth in Section 6 of this Agreement
shall survive and shall continue to be binding upon Employee as set forth in
such Sections notwithstanding the termination of this Agreement for any reason
whatsoever. The covenants set forth in Section 6 of this Agreement shall be
deemed and construed as separate agreements independent of any other provision
of this Agreement. The existence of any claim or cause of action by Employee
against Company, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by Company of any or all covenants.
(h) Remedies. The parties recognize that the performance of the
obligations under Section 6 of this Agreement by the Employee is special, unique
and extraordinary in character, and that in the event of the breach by the
Employee of the terms and conditions of Section 6 of this Agreement, the Company
or any of its Affiliates shall be entitled to (a) institute and prosecute
proceedings in any court of competent jurisdiction to enforce the specific
performance hereof by the Employee or to enjoin the Employee from engaging in
any activities prohibited hereunder or (b) pursue any other remedy available at
law or in equity.
-6-
<PAGE>
IN WITNESS WHEREOF, the parties hereto, intending to be legally
bound, have hereunto executed this Agreement the day and year first written
above.
PAYCO AMERICAN CORPORATION
By: /s/ Dennis G. Punches
-----------------------
Name: Dennis G. Punches
Title: Chairman
EMPLOYEE
/s/ James R. Bohmann
-----------------------
James R. Bohmann
<PAGE>
Exhibit 10.13
EMPLOYMENT AGREEMENT
This Agreement is made as of the 13th day of August, 1996 between
Payco American Corporation, a Wisconsin corporation, with offices at 180 North
Executive Drive, Brookfield, Wisconsin 53005-6066 (the "Company"), and Patrick
E. Carroll, an individual residing in the State of Wisconsin (the "Employee").
R E C I T A L S
WHEREAS, the Employee has been and is presently in the employ of the
Company and is presently serving as Senior Vice President - Sales of the
Company;
WHEREAS, the Employee possesses an intimate knowledge of the business
and affairs of the Company and its policies, procedures, methods and personnel;
WHEREAS, OSI Holdings Corp., Boxer Acquisition Corp. and the Company
have executed and delivered an Agreement and Plan of Merger, dated as of the
date hereof (the "Merger Agreement");
WHEREAS, the Company desires to secure the continued services and
employment of the Employee on behalf of the Company, and the Employee desires to
continue in the employment of the Company, upon the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, the parties hereto, each intending to be legally bound hereby,
agree as follows:
1. Employment. The Company hereby employs the Employee as Senior Vice
President - Sales of the Company, and the Employee accepts such employment for
the term of the employment specified in Section 3 below. During the Employment
Term, the Employee shall serve as Senior Vice President - Sales of the Company,
performing such duties as shall be reasonably required of an executive-level
employee of the Company, and shall have such other powers and perform such other
additional executive duties as may from time to time be assigned to him by the
Company.
<PAGE>
2. Performance. The Employee will serve the Company faithfully and to
the best of his ability and will devote substantially all of his time, energy,
experience and talents during regular business hours and as otherwise reasonably
necessary to such employment, to the exclusion of all other business activities.
3. Effectiveness; Employment Term. This Agreement shall become
effective at the Effective Time (as defined in the Merger Agreement) and
continue until the first anniversary date of the Effective Time, unless earlier
terminated pursuant to Section 7 below (the "Employment Term").
4. Compensation.
(a) Salary. During the Employment Term, the Company shall pay the
Employee a base salary, payable in equal monthly installments, subject to
withholding and other applicable taxes, at an annual rate of Two Hundred
Seventeen Thousand Nine Hundred Thirteen Dollars ($217,913). In addition, (i)
the Employee shall be entitled to receive such Employee's bonus compensation (or
portion thereof) for the Company's 1996 year in accordance with the past
practices of the Company and (ii) if applicable, the Employee shall be entitled
to receive such Employee's ratable percentage of bonus compensation, if any, for
the Company's 1997 year.
(b) Medical and Dental Health Benefits. During the Employment Term,
Employee shall be entitled to medical and dental heath benefits in accordance
with the Company's existing established policies for key employees.
(c) Vacation; Sick Leave. During the Employment Term, Employee shall
be entitled to vacation and sick leave in accordance with the Company's existing
established policies for key employees.
5. Expenses. During the term of this Agreement, the Employee shall be
reimbursed by the Company for all reasonable expenses incurred by him in
connection with the performance of his duties hereunder in accordance with
existing policies established by the Board from time to time and upon receipt of
appropriate documentation.
6. Secret Processes and Confidential Information. For the Employment
Term and thereafter, (a) the Employee will not divulge, transmit or otherwise
disclose (except as legally compelled by court order, and then only to the
extent
-2-
<PAGE>
required, after prompt notice to the Company of any such order), directly or
indirectly, other than in the regular and proper course of business of the
Company, any confidential knowledge or information with respect to the
operations or finances of the Company, such as, but not limited to, client
lists, system documentation, financial documentation, and proposal information,
or with respect to confidential or secret processes, services, techniques,
customers or plans with respect to the Company and (b) the Employee will not
use, directly or indirectly, any confidential information for the benefit of
anyone other than the Company; provided, however, that the Employee has no
obligation, express or implied, to refrain from using or disclosing to others
any such knowledge or information which is or hereafter shall become available
to the public other than through disclosure by the Employee. All new processes,
techniques, know-how, inventions, plans, products, patents and devices
developed, made or invented by the Employee, alone or with others, while an
employee of the Company, shall be and become the sole property of the Company,
unless released in writing by the Company, and the Employee hereby assigns any
and all rights therein or thereto to the Company.
During the term of this Agreement and thereafter, Employee shall not
willfully take any action to disparage or criticize to any third parties any of
the services of the Company or to commit any other action that injures or
hinders the business relationships of the Company.
All files, records, documents, memorandums, notes or other documents
relating to the business of Company, whether prepared by Employee or otherwise
coming into his possession in the course of the performance of his services
under this Agreement, shall be the exclusive property of Company and shall be
delivered to Company and not retained by Employee upon termination of this
Agreement for any reason whatsoever.
7. Termination. The employment of the Employee hereunder shall
automatically terminate at the end of the Employment Term, as provided in
Section 3. The employment of the Employee hereunder may also be terminated at
any time by the Company with or without "cause". For purposes of this Agreement,
"cause" shall mean: (i) embezzlement, theft or other misappropriation of any
property of the Company or any subsidiary, (ii) gross or willful misconduct
resulting in substantial loss to the Company or any subsidiary or substantial
damage to the reputation of the Company or any subsidiary, (iii) any act
involving moral turpitude which if
-3-
<PAGE>
the subject of a criminal proceeding could reasonably result in a conviction for
a felony involving moral turpitude, fraud or misrepresentation, (iv) gross
breach of his fiduciary obligations to the Company or any subsidiary, (v) a
breach of his covenant not to compete, or (vi) any chemical dependence which
materially affects the performance of his duties and responsibilities to the
Company or any subsidiary.
8. Severance.
(a) Termination Without "Cause". If the Employee's employment is
terminated by the Company without "cause", the Employee shall be entitled to
receive his base salary and any unpaid bonus as provided in Section 4(a), for
the period from the date of termination until the first anniversary of the
Effective Time (the "Severance Period"), provided that if at any time during the
Severance Period the Employee shall obtain other employment, the Company's
obligation to pay severance under this Section 8(a) shall automatically be
reduced from the date of commencement of such other employment until the
termination of the Severance Period to an amount equal to the ratable difference
between the Employee's base salary and any unpaid bonus under Section 4(a) and
the base salary and any unpaid bonus earned by Employee in such other
employment. The Employee shall not be an employee of the Company during the
Severance Period, and except for such severance payment or as otherwise required
by law, shall not be entitled to any compensation or benefits under Section
4(a), 4(b) or 4(c) with respect to the Severance Period.
(b) Termination "For Cause". If the Employee's employment is
terminated by the Company "for cause", the Employee shall not be entitled to
severance compensation.
9. Notice. Any notices required or permitted hereunder shall be in
writing and shall be deemed to have been given when personally delivered or when
mailed, certified or registered mail, postage prepaid, to the following
addresses:
If to the Employee:
c/o Payco American Corporation
180 North Executive Drive
Brookfield, Wisconsin 53005-6066
-4-
<PAGE>
If to the Company:
Payco American Corporation
180 North Executive Drive
Brookfield, Wisconsin 53005-6066
With a copy to:
McCown De Leeuw & Co.
101 East 52nd Street
31st Floor
New York, New York 10022
Attention: David E. King
10. General.
(a) Governing Law; Jurisdiction. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of New York applicable to contracts executed and to be performed
entirely within said State. Any judicial proceeding brought against any of the
parties to this Agreement or any dispute arising out of this Agreement or any
matter related hereto may be brought in the courts of the State of New York or
in the United States District Court for the Southern District of New York, and,
by execution and delivery of this Agreement, each of the parties to this
Agreement accepts the jurisdiction of said courts, and irrevocably agrees to be
bound by any judgment rendered thereby in connection with this Agreement. The
foregoing consent to jurisdiction shall not be deemed to confer rights on any
person other than the respective parties to this Agreement.
(b) Assignability. The Employee may not assign his interest in or
delegate his duties under this Agreement. Notwithstanding anything else in this
Agreement to the contrary, the Company may assign this Agreement to and all
rights hereunder shall inure to the benefit of any person, firm or corporation
succeeding to all or substantially all of the business or assets of the Company
by purchase, merger or consolidation.
(c) Enforcement Costs. In the event that either the Company or the
Employee initiates an action or claim to enforce any provision or term of this
Agreement, the costs and expenses (including attorney's fees) of the prevailing
party shall be paid by the other party, such party to be deemed to have
prevailed if such action or claim is concluded pursuant to a court order or
final judgment which is not
-5-
<PAGE>
subject to appeal, a settlement agreement or dismissal of the principle claims.
(d) Binding Effect. This Agreement is for the employment of Employee,
personally, and for the services to be rendered by him must be rendered by him
and no other person. This Agreement shall be binding upon and inure to the
benefit of the Company and its successors and assigns.
(e) Entire Agreement; Modification. This Agreement constitutes the
entire agreement of the parties hereto with respect to the subject matter hereof
and may not be modified or amended in any way except in writing by the parties
hereto.
(f) Duration. Notwithstanding the term of employment hereunder, this
Agreement shall continue for so long as any obligations remain under this
Agreement.
(g) Survival. The covenants set forth in Section 6 of this Agreement
shall survive and shall continue to be binding upon Employee as set forth in
such Sections notwithstanding the termination of this Agreement for any reason
whatsoever. The covenants set forth in Section 6 of this Agreement shall be
deemed and construed as separate agreements independent of any other provision
of this Agreement. The existence of any claim or cause of action by Employee
against Company, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by Company of any or all covenants.
(h) Remedies. The parties recognize that the performance of the
obligations under Section 6 of this Agreement by the Employee is special, unique
and extraordinary in character, and that in the event of the breach by the
Employee of the terms and conditions of Section 6 of this Agreement, the Company
or any of its Affiliates shall be entitled to (a) institute and prosecute
proceedings in any court of competent jurisdiction to enforce the specific
performance hereof by the Employee or to enjoin the Employee from engaging in
any activities prohibited hereunder or (b) pursue any other remedy available at
law or in equity.
-6-
<PAGE>
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound,
have hereunto executed this Agreement the day and year first written above.
PAYCO AMERICAN CORPORATION
By: /s/ Dennis G. Punches
---------------------------
Name: Dennis G. Punches
Title: Chairman
EMPLOYEE
/s/ Patrick E. Carroll
------------------------------
Patrick E. Carroll
<PAGE>
Exhibit 10.14
EMPLOYMENT AGREEMENT
This Agreement is made as of the 13th day of August, 1996 between
Payco American, a Wisconsin corporation, with offices at 180 North Executive
Drive, Brookfield, Wisconsin 53005-6066 (the "Company"), and William W. Kagel,
an individual residing in the State of Wisconsin (the "Employee").
R E C I T A L S
WHEREAS, the Employee has been and is presently in the employ of the
Company and is presently serving as Senior Vice President - Production of the
Company;
WHEREAS, the Employee possesses an intimate knowledge of the business
and affairs of the Company and its policies, procedures, methods and personnel;
WHEREAS, OSI Holdings Corp., Boxer Acquisition Corp. and the Company
have executed and delivered an Agreement and Plan of Merger, dated as of the
date hereof (the "Merger Agreement");
WHEREAS, the Company desires to secure the continued services and
employment of the Employee on behalf of the Company, and the Employee desires to
continue in the employment of the Company, upon the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, the parties hereto, each intending to be legally bound hereby,
agree as follows:
1. Employment. The Company hereby employs the Employee as Senior Vice
President - Production of the Company, and the Employee accepts such employment
for the term of the employment specified in Section 3 below. During the
Employment Term, the Employee shall serve as Senior Vice President - Production
of the Company, performing such duties as shall be reasonably required of an
executive-level employee of the Company, and shall have such other powers and
perform such other additional executive duties as may from time to time be
assigned to him by the Company.
<PAGE>
2. Performance. The Employee will serve the Company faithfully and to
the best of his ability and will devote substantially all of his time, energy,
experience and talents during regular business hours and as otherwise reasonably
necessary to such employment, to the exclusion of all other business activities.
3. Effectiveness; Employment Term. This Agreement shall become
effective at the Effective Time (as defined in the Merger Agreement) and
continue until the first anniversary date of the Effective Time, unless earlier
terminated pursuant to Section 7 below (the "Employment Term").
4. Compensation.
(a) Salary. During the Employment Term, the Company shall pay the
Employee a base salary, payable in equal monthly installments, subject to
withholding and other applicable taxes, at an annual rate of Two Hundred
Seventeen Thousand Nine Hundred Thirteen Dollars ($217,913). In addition, (i)
the Employee shall be entitled to receive such Employee's bonus compensation (or
portion thereof) for the Company's 1996 year in accordance with the past
practices of the Company and (ii) if applicable, the Employee shall be entitled
to receive such Employee's ratable percentage of bonus compensation, if any, for
the Company's 1997 year.
(b) Medical and Dental Health Benefits. During the Employment Term,
Employee shall be entitled to medical and dental heath benefits in accordance
with the Company's existing established policies for key employees.
(c) Vacation; Sick Leave. During the Employment Term, Employee shall
be entitled to vacation and sick leave in accordance with the Company's existing
established policies for key employees.
5. Expenses. During the term of this Agreement, the Employee shall be
reimbursed by the Company for all reasonable expenses incurred by him in
connection with the performance of his duties hereunder in accordance with
existing policies established by the Board from time to time and upon receipt of
appropriate documentation.
6. Secret Processes and Confidential Information. For the Employment
Term and thereafter, (a) the Employee will not divulge, transmit or otherwise
disclose (except as legally compelled by court order, and then only to the
extent
-2-
<PAGE>
required, after prompt notice to the Company of any such order), directly or
indirectly, other than in the regular and proper course of business of the
Company, any confidential knowledge or information with respect to the
operations or finances of the Company, such as, but not limited to, client
lists, system documentation, financial documentation, and proposal information,
or with respect to confidential or secret processes, services, techniques,
customers or plans with respect to the Company and (b) the Employee will not
use, directly or indirectly, any confidential information for the benefit of
anyone other than the Company; provided, however, that the Employee has no
obligation, express or implied, to refrain from using or disclosing to others
any such knowledge or information which is or hereafter shall become available
to the public other than through disclosure by the Employee. All new processes,
techniques, know-how, inventions, plans, products, patents and devices
developed, made or invented by the Employee, alone or with others, while an
employee of the Company, shall be and become the sole property of the Company,
unless released in writing by the Company, and the Employee hereby assigns any
and all rights therein or thereto to the Company.
During the term of this Agreement and thereafter, Employee shall not
willfully take any action to disparage or criticize to any third parties any of
the services of the Company or to commit any other action that injures or
hinders the business relationships of the Company.
All files, records, documents, memorandums, notes or other documents
relating to the business of Company, whether prepared by Employee or otherwise
coming into his possession in the course of the performance of his services
under this Agreement, shall be the exclusive property of Company and shall be
delivered to Company and not retained by Employee upon termination of this
Agreement for any reason whatsoever.
7. Termination. The employment of the Employee hereunder shall
automatically terminate at the end of the Employment Term, as provided in
Section 3. The employment of the Employee hereunder may also be terminated at
any time by the Company with or without "cause". For purposes of this Agreement,
"cause" shall mean: (i) embezzlement, theft or other misappropriation of any
property of the Company or any subsidiary, (ii) gross or willful misconduct
resulting in substantial loss to the Company or any subsidiary or substantial
damage to the reputation of the Company or any subsidiary, (iii) any act
involving moral turpitude which if
-3-
<PAGE>
the subject of a criminal proceeding could reasonably result in a conviction for
a felony involving moral turpitude, fraud or misrepresentation, (iv) gross
breach of his fiduciary obligations to the Company or any subsidiary, (v) a
breach of his covenant not to compete, or (vi) any chemical dependence which
materially affects the performance of his duties and responsibilities to the
Company or any subsidiary.
8. Severance.
(a) Termination Without "Cause". If the Employee's employment is
terminated by the Company without "cause", the Employee shall be entitled to
receive his base salary and any unpaid bonus as provided in Section 4(a), for
the period from the date of termination until the first anniversary of the
Effective Time (the "Severance Period"), provided that if at any time during the
Severance Period the Employee shall obtain other employment, the Company's
obligation to pay severance under this Section 8(a) shall automatically be
reduced from the date of commencement of such other employment until the
termination of the Severance Period to an amount equal to the ratable difference
between the Employee's base salary and any unpaid bonus under Section 4(a) and
the base salary and any unpaid bonus earned by Employee in such other
employment. The Employee shall not be an employee of the Company during the
Severance Period, and except for such severance payment or as otherwise required
by law, shall not be entitled to any compensation or benefits under Section
4(a), 4(b) or 4(c) with respect to the Severance Period.
(b) Termination "For Cause". If the Employee's employment is
terminated by the Company "for cause", the Employee shall not be entitled to
severance compensation.
9. Notice. Any notices required or permitted hereunder shall be in
writing and shall be deemed to have been given when personally delivered or when
mailed, certified or registered mail, postage prepaid, to the following
addresses:
If to the Employee:
c/o Payco American Corporation
180 North Executive Drive
Brookfield, Wisconsin 53005-6066
-4-
<PAGE>
If to the Company:
Payco American Corporation
180 North Executive Drive
Brookfield, Wisconsin 53005-6066
With a copy to:
McCown De Leeuw & Co.
101 East 52nd Street
31st Floor
New York, New York 10022
Attention: David E. King
10. General.
(a) Governing Law; Jurisdiction. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of New York applicable to contracts executed and to be performed
entirely within said State. Any judicial proceeding brought against any of the
parties to this Agreement or any dispute arising out of this Agreement or any
matter related hereto may be brought in the courts of the State of New York or
in the United States District Court for the Southern District of New York, and,
by execution and delivery of this Agreement, each of the parties to this
Agreement accepts the jurisdiction of said courts, and irrevocably agrees to be
bound by any judgment rendered thereby in connection with this Agreement. The
foregoing consent to jurisdiction shall not be deemed to confer rights on any
person other than the respective parties to this Agreement.
(b) Assignability. The Employee may not assign his interest in or
delegate his duties under this Agreement. Notwithstanding anything else in this
Agreement to the contrary, the Company may assign this Agreement to and all
rights hereunder shall inure to the benefit of any person, firm or corporation
succeeding to all or substantially all of the business or assets of the Company
by purchase, merger or consolidation.
(c) Enforcement Costs. In the event that either the Company or the
Employee initiates an action or claim to enforce any provision or term of this
Agreement, the costs and expenses (including attorney's fees) of the prevailing
party shall be paid by the other party, such party to be deemed to have
prevailed if such action or claim is concluded
-5-
<PAGE>
pursuant to a court order or final judgment which is not subject to appeal, a
settlement agreement or dismissal of the principle claims.
(d) Binding Effect. This Agreement is for the employment of Employee,
personally, and for the services to be rendered by him must be rendered by him
and no other person. This Agreement shall be binding upon and inure to the
benefit of the Company and its successors and assigns.
(e) Entire Agreement; Modification. This Agreement constitutes the
entire agreement of the parties hereto with respect to the subject matter hereof
and may not be modified or amended in any way except in writing by the parties
hereto.
(f) Duration. Notwithstanding the term of employment hereunder, this
Agreement shall continue for so long as any obligations remain under this
Agreement.
(g) Survival. The covenants set forth in Section 6 of this Agreement
shall survive and shall continue to be binding upon Employee as set forth in
such Sections notwithstanding the termination of this Agreement for any reason
whatsoever. The covenants set forth in Section 6 of this Agreement shall be
deemed and construed as separate agreements independent of any other provision
of this Agreement. The existence of any claim or cause of action by Employee
against Company, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by Company of any or all covenants.
(h) Remedies. The parties recognize that the performance of the
obligations under Section 6 of this Agreement by the Employee is special, unique
and extraordinary in character, and that in the event of the breach by the
Employee of the terms and conditions of Section 6 of this Agreement, the Company
or any of its Affiliates shall be entitled to (a) institute and prosecute
proceedings in any court of competent jurisdiction to enforce the specific
performance hereof by the Employee or to enjoin the Employee from engaging in
any activities prohibited hereunder or (b) pursue any other remedy available at
law or in equity.
-6-
<PAGE>
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound,
have hereunto executed this Agreement the day and year first written above.
PAYCO AMERICAN CORPORATION
By: /s/ Dennis G. Punches
----------------------------
Name: Dennis G. Punches
Title: Chairman
EMPLOYEE
/s/ William W. Kagel
-------------------------------
William W. Kagel
<PAGE>
Exhibit 10.15
EMPLOYMENT AGREEMENT
This Agreement is made as of the 13th day of August, 1996 between
Payco American Corporation, a Wisconsin corporation, with offices at 180 North
Executive Drive, Brookfield, Wisconsin 53005-6066 (the "Company"), and Alvin W.
Keeley, an individual residing in the State of Wisconsin (the "Employee").
R E C I T A L S
WHEREAS, the Employee has been and is presently in the employ of the
Company and is presently serving as Senior Vice President - Marketing of the
Company;
WHEREAS, the Employee possesses an intimate knowledge of the business
and affairs of the Company and its policies, procedures, methods and personnel;
WHEREAS, OSI Holdings Corp., Boxer Acquisition Corp. and the Company
have executed and delivered an Agreement and Plan of Merger, dated as of the
date hereof (the "Merger Agreement");
WHEREAS, the Company desires to secure the continued services and
employment of the Employee on behalf of the Company, and the Employee desires to
continue in the employment of the Company, upon the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, the parties hereto, each intending to be legally bound hereby,
agree as follows:
1. Employment. The Company hereby employs the Employee as Senior Vice
President - Marketing of the Company, and the Employee accepts such employment
for the term of the employment specified in Section 3 below. During the
Employment Term, the Employee shall serve as Senior Vice President - Marketing
of the Company, performing such duties as shall be reasonably required of an
executive-level employee of the Company, and shall have such other powers and
perform such other additional executive duties as may from time to time be
assigned to him by the Company.
-1-
<PAGE>
2. Performance. The Employee will serve the Company faithfully and to
the best of his ability and will devote substantially all of his time, energy,
experience and talents during regular business hours and as otherwise reasonably
necessary to such employment, to the exclusion of all other business activities.
3. Effectiveness; Employment Term. This Agreement shall become
effective at the Effective Time (as defined in the Merger Agreement) and
continue until the first anniversary date of the Effective Time, unless earlier
terminated pursuant to Section 7 below (the "Employment Term").
4. Compensation.
(a) Salary. During the Employment Term, the Company shall pay the
Employee a base salary, payable in equal monthly installments, subject to
withholding and other applicable taxes, at an annual rate of Two Hundred
Seventeen Thousand Nine Hundred Thirteen Dollars ($217,913). In addition, (i)
the Employee shall be entitled to receive such Employee's bonus compensation (or
portion thereof) for the Company's 1996 year in accordance with the past
practices of the Company and (ii) if applicable, the Employee shall be entitled
to receive such Employee's ratable percentage of bonus compensation, if any, for
the Company's 1997 year.
(b) Medical and Dental Health Benefits. During the Employment Term,
Employee shall be entitled to medical and dental heath benefits in accordance
with the Company's existing established policies for key employees.
(c) Vacation; Sick Leave. During the Employment Term, Employee shall
be entitled to vacation and sick leave in accordance with the Company's existing
established policies for key employees.
5. Expenses. During the term of this Agreement, the Employee shall be
reimbursed by the Company for all reasonable expenses incurred by him in
connection with the performance of his duties hereunder in accordance with
existing policies established by the Board from time to time and upon receipt of
appropriate documentation.
6. Secret Processes and Confidential Information. For the Employment
Term and thereafter, (a) the Employee will not divulge, transmit or otherwise
disclose (except as legally compelled by court order, and then only to the
extent
-2-
<PAGE>
required, after prompt notice to the Company of any such order), directly or
indirectly, other than in the regular and proper course of business of the
Company, any confidential knowledge or information with respect to the
operations or finances of the Company, such as, but not limited to, client
lists, system documentation, financial documentation and proposal information,
or with respect to confidential or secret processes, services, techniques,
customers or plans with respect to the Company and (b) the Employee will not
use, directly or indirectly, any confidential information for the benefit of
anyone other than the Company; provided, however, that the Employee has no
obligation, express or implied, to refrain from using or disclosing to others
any such knowledge or information which is or hereafter shall become available
to the public other than through disclosure by the Employee. All new processes,
techniques, know-how, inventions, plans, products, patents and devices
developed, made or invented by the Employee, alone or with others, while an
employee of the Company, shall be and become the sole property of the Company,
unless released in writing by the Company, and the Employee hereby assigns any
and all rights therein or thereto to the Company.
During the term of this Agreement and thereafter, Employee shall not
willfully take any action to disparage or criticize to any third parties any of
the services of the Company or to commit any other action that injures or
hinders the business relationships of the Company.
All files, records, documents, memorandums, notes or other documents
relating to the business of Company, whether prepared by Employee or otherwise
coming into his possession in the course of the performance of his services
under this Agreement, shall be the exclusive property of Company and shall be
delivered to Company and not retained by Employee upon termination of this
Agreement for any reason whatsoever.
7. Termination. The employment of the Employee hereunder shall
automatically terminate at the end of the Employment Term, as provided in
Section 3. The employment of the Employee hereunder may also be terminated at
any time by the Company with or without "cause". For purposes of this Agreement,
"cause" shall mean: (i) embezzlement, theft or other misappropriation of any
property of the Company or any subsidiary, (ii) gross or willful misconduct
resulting in substantial loss to the Company or any subsidiary or substantial
damage to the reputation of the Company or any subsidiary, (iii) any act
involving moral turpitude which if
-3-
<PAGE>
the subject of a criminal proceeding could reasonably result in a conviction for
a felony involving moral turpitude, fraud or misrepresentation, (iv) gross
breach of his fiduciary obligations to the Company or any subsidiary, (v) a
breach of his covenant not to compete, or (vi) any chemical dependence which
materially affects the performance of his duties and responsibilities to the
Company or any subsidiary.
8. Severance.
(a) Termination Without "Cause". If the Employee's employment is
terminated by the Company without "cause", the Employee shall be entitled to
receive his base salary and any unpaid bonus as provided in Section 4(a), for
the period from the date of termination until the first anniversary of the
Effective Time (the "Severance Period"), provided that if at any time during the
Severance Period the Employee shall obtain other employment, the Company's
obligation to pay severance under this Section 8(a) shall automatically be
reduced from the date of commencement of such other employment until the
termination of the Severance Period to an amount equal to the ratable difference
between the Employee's base salary and any unpaid bonus under Section 4(a) and
the base salary and any unpaid bonus earned by Employee in such other
employment. The Employee shall not be an employee of the Company during the
Severance Period, and except for such severance payment or as otherwise required
by law, shall not be entitled to any compensation or benefits under Section
4(a), 4(b) or 4(c) with respect to the Severance Period.
(b) Termination "For Cause". If the Employee's employment is
terminated by the Company "for cause", the Employee shall not be entitled to
severance compensation.
9. Notice. Any notices required or permitted hereunder shall be in
writing and shall be deemed to have been given when personally delivered or when
mailed, certified or registered mail, postage prepaid, to the following
addresses:
If to the Employee:
c/o Payco American Corporation
180 North Executive Drive
Brookfield, Wisconsin 53005-6066
-4-
<PAGE>
If to the Company:
Payco American Corporation
180 North Executive Drive
Brookfield, Wisconsin 53005-6066
With a copy to:
McCown De Leeuw & Co.
101 East 52nd Street
31st Floor
New York, New York 10022
Attention: David E. King
10. General.
(a) Governing Law; Jurisdiction. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of New York applicable to contracts executed and to be performed
entirely within said State. Any judicial proceeding brought against any of the
parties to this Agreement or any dispute arising out of this Agreement or any
matter related hereto may be brought in the courts of the State of New York or
in the United States District Court for the Southern District of New York, and,
by execution and delivery of this Agreement, each of the parties to this
Agreement accepts the jurisdiction of said courts, and irrevocably agrees to be
bound by any judgment rendered thereby in connection with this Agreement. The
foregoing consent to jurisdiction shall not be deemed to confer rights on any
person other than the respective parties to this Agreement.
(b) Assignability. The Employee may not assign his interest in or
delegate his duties under this Agreement. Notwithstanding anything else in this
Agreement to the contrary, the Company may assign this Agreement to and all
rights hereunder shall inure to the benefit of any person, firm or corporation
succeeding to all or substantially all of the business or assets of the Company
by purchase, merger or consolidation.
(c) Enforcement Costs. In the event that either the Company or the
Employee initiates an action or claim to enforce any provision or term of this
Agreement, the costs and expenses (including attorney's fees) of the prevailing
party shall be paid by the other party, such party to be deemed to have
prevailed if such action or claim is concluded pursuant to a court order or
final judgment which is not
-5-
<PAGE>
subject to appeal, a settlement agreement or dismissal of the
principle claims.
(d) Binding Effect. This Agreement is for the employment of Employee,
personally, and for the services to be rendered by him must be rendered by him
and no other person. This Agreement shall be binding upon and inure to the
benefit of the Company and its successors and assigns.
(e) Entire Agreement; Modification. This Agreement constitutes the
entire agreement of the parties hereto with respect to the subject matter hereof
and may not be modified or amended in any way except in writing by the parties
hereto.
(f) Duration. Notwithstanding the term of employment hereunder, this
Agreement shall continue for so long as any obligations remain under this
Agreement.
(g) Survival. The covenants set forth in Section 6 of this Agreement
shall survive and shall continue to be binding upon Employee as set forth in
such Sections notwithstanding the termination of this Agreement for any reason
whatsoever. The covenants set forth in Section 6 of this Agreement shall be
deemed and construed as separate agreements independent of any other provision
of this Agreement. The existence of any claim or cause of action by Employee
against Company, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by Company of any or all covenants.
(h) Remedies. The parties recognize that the performance of the
obligations under Section 6 of this Agreement by the Employee is special, unique
and extraordinary in character, and that in the event of the breach by the
Employee of the terms and conditions of Section 6 of this Agreement, the Company
or any of its Affiliates shall be entitled to (a) institute and prosecute
proceedings in any court of competent jurisdiction to enforce the specific
performance hereof by the Employee or to enjoin the Employee from engaging in
any activities prohibited hereunder or (b) pursue any other remedy available at
law or in equity.
-6-
<PAGE>
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound,
have hereunto executed this Agreement the day and year first written above.
PAYCO AMERICAN CORPORATION
By: /s/ Dennis G. Punches
-----------------------
Name: Dennis G. Punches
Title: Chairman
EMPLOYEE
/s/ Alvin W. Keeley
-----------------------
Alvin W. Keeley
-7-
<PAGE>
Exhibit 10.16
EMPLOYMENT AGREEMENT
This Agreement is made as of the 13th day of August, 1996 between
Payco American Corporation, a Wisconsin corporation, with offices at 180 North
Executive Drive, Brookfield, Wisconsin 53005-6066 (the "Company"), and Susan
Mathison, an individual residing in the State of Wisconsin (the "Employee").
R E C I T A L S
WHEREAS, the Employee has been and is presently in the employ of the
Company and is presently serving as Vice President - Administration and
Corporate Secretary of the Company;
WHEREAS, the Employee possesses an intimate knowledge of the business
and affairs of the Company and its policies, procedures, methods and personnel;
WHEREAS, OSI Holdings Corp., Boxer Acquisition Corp. and the Company
have executed and delivered an Agreement and Plan of Merger, dated as of the
date hereof (the "Merger Agreement");
WHEREAS, the Company desires to secure the continued services and
employment of the Employee on behalf of the Company, and the Employee desires to
continue in the employment of the Company, upon the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, the parties hereto, each intending to be legally bound hereby,
agree as follows:
1. Employment. The Company hereby employs the Employee as Vice
President - Administration and Corporate Secretary of the Company, and the
Employee accepts such employment for the term of the employment specified in
Section 3 below. During the Employment Term, the Employee shall serve as Vice
President - Administration and Corporate Secretary of the Company, performing
such duties as shall be reasonably required of an executive-level employee of
the Company, and shall have such other powers and perform such
<PAGE>
other additional executive duties as may from time to time be
assigned to him by the Company.
2. Performance. The Employee will serve the Company faithfully and to
the best of his ability and will devote substantially all of his time, energy,
experience and talents during regular business hours and as otherwise reasonably
necessary to such employment, to the exclusion of all other business activities.
3. Effectiveness; Employment Term. This Agreement shall become
effective at the Effective Time (as defined in the Merger Agreement) and
continue until the first anniversary date of the Effective Time, unless earlier
terminated pursuant to Section 7 below (the "Employment Term").
4. Compensation.
(a) Salary. During the Employment Term, the Company shall pay the
Employee a base salary, payable in equal monthly installments, subject to
withholding and other applicable taxes, at an annual rate of One Hundred Fifteen
Thousand Five Hundred Sixty-Three Dollars ($115,563). In addition, (i) the
Employee shall be entitled to receive such Employee's bonus compensation (or
portion thereof) for the Company's 1996 year in accordance with the past
practices of the Company and (ii) if applicable, the Employee shall be entitled
to receive such Employee's ratable percentage of bonus compensation, if any, for
the Company's 1997 year.
(b) Medical and Dental Health Benefits. During the Employment Term,
Employee shall be entitled to medical and dental heath benefits in accordance
with the Company's existing established policies for key employees.
(c) Vacation; Sick Leave. During the Employment Term, Employee shall
be entitled to vacation and sick leave in accordance with the Company's existing
established policies for key employees.
5. Expenses. During the term of this Agreement, the Employee shall be
reimbursed by the Company for all reasonable expenses incurred by him in
connection with the performance of his duties hereunder in accordance with
existing policies established by the Board from time to time and upon receipt of
appropriate documentation.
-2-
<PAGE>
6. Secret Processes and Confidential Information. For the Employment
Term and thereafter, (a) the Employee will not divulge, transmit or otherwise
disclose (except as legally compelled by court order, and then only to the
extent required, after prompt notice to the Company of any such order), directly
or indirectly, other than in the regular and proper course of business of the
Company, any confidential knowledge or information with respect to the
operations or finances of the Company, such as, but not limited to, client
lists, system documentation, financial documentation and proposal information,
or with respect to confidential or secret processes, services, techniques,
customers or plans with respect to the Company and (b) the Employee will not
use, directly or indirectly, any confidential information for the benefit of
anyone other than the Company; provided, however, that the Employee has no
obligation, express or implied, to refrain from using or disclosing to others
any such knowledge or information which is or hereafter shall become available
to the public other than through disclosure by the Employee. All new processes,
techniques, know-how, inventions, plans, products, patents and devices
developed, made or invented by the Employee, alone or with others, while an
employee of the Company, shall be and become the sole property of the Company,
unless released in writing by the Company, and the Employee hereby assigns any
and all rights therein or thereto to the Company.
During the term of this Agreement and thereafter, Employee shall not
willfully take any action to disparage or criticize to any third parties any of
the services of the Company or to commit any other action that injures or
hinders the business relationships of the Company.
All files, records, documents, memorandums, notes or other documents
relating to the business of Company, whether prepared by Employee or otherwise
coming into his possession in the course of the performance of his services
under this Agreement, shall be the exclusive property of Company and shall be
delivered to Company and not retained by Employee upon termination of this
Agreement for any reason whatsoever.
7. Termination. The employment of the Employee hereunder shall
automatically terminate at the end of the Employment Term, as provided in
Section 3. The employment of the Employee hereunder may also be terminated at
any time by the Company with or without "cause". For purposes of this Agreement,
"cause" shall mean: (i) embezzlement, theft or other misappropriation of any
property of the Company or any
-3-
<PAGE>
subsidiary, (ii) gross or willful misconduct resulting in substantial loss to
the Company or any subsidiary or substantial damage to the reputation of the
Company or any subsidiary, (iii) any act involving moral turpitude which if the
subject of a criminal proceeding could reasonably result in a conviction for a
felony involving moral turpitude, fraud or misrepresentation, (iv) gross breach
of his fiduciary obligations to the Company or any subsidiary, (v) a breach of
his covenant not to compete, or (vi) any chemical dependence which materially
affects the performance of his duties and responsibilities to the Company or any
subsidiary.
8. Severance.
(a) Termination Without "Cause". If the Employee's employment is
terminated by the Company without "cause", the Employee shall be entitled to
receive his base salary and any unpaid bonus as provided in Section 4(a), for
the period from the date of termination until the first anniversary of the
Effective Time (the "Severance Period"), provided that if at any time during the
Severance Period the Employee shall obtain other employment, the Company's
obligation to pay severance under this Section 8(a) shall automatically be
reduced from the date of commencement of such other employment until the
termination of the Severance Period to an amount equal to the ratable difference
between the Employee's base salary and any unpaid bonus under Section 4(a) and
the base salary and any unpaid bonus earned by Employee in such other
employment. The Employee shall not be an employee of the Company during the
Severance Period, and except for such severance payment or as otherwise required
by law, shall not be entitled to any compensation or benefits under Section
4(a), 4(b) or 4(c) with respect to the Severance Period.
(b) Termination "For Cause". If the Employee's employment is
terminated by the Company "for cause", the Employee shall not be entitled to
severance compensation.
9. Notice. Any notices required or permitted hereunder shall be in
writing and shall be deemed to have been given when personally delivered or when
mailed, certified or registered mail, postage prepaid, to the following
addresses:
If to the Employee:
c/o Payco American Corporation
-4-
<PAGE>
180 North Executive Drive
Brookfield, Wisconsin 53005-6066
If to the Company:
Payco American Corporation
180 North Executive Drive
Brookfield, Wisconsin 53005-6066
With a copy to:
McCown De Leeuw & Co.
101 East 52nd Street
31st Floor
New York, New York 10022
Attention: David E. King
10. General.
(a) Governing Law; Jurisdiction. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of New York applicable to contracts executed and to be performed
entirely within said State. Any judicial proceeding brought against any of the
parties to this Agreement or any dispute arising out of this Agreement or any
matter related hereto may be brought in the courts of the State of New York or
in the United States District Court for the Southern District of New York, and,
by execution and delivery of this Agreement, each of the parties to this
Agreement accepts the jurisdiction of said courts, and irrevocably agrees to be
bound by any judgment rendered thereby in connection with this Agreement. The
foregoing consent to jurisdiction shall not be deemed to confer rights on any
person other than the respective parties to this Agreement.
(b) Assignability. The Employee may not assign his interest in or
delegate his duties under this Agreement. Notwithstanding anything else in this
Agreement to the contrary, the Company may assign this Agreement to and all
rights hereunder shall inure to the benefit of any person, firm or corporation
succeeding to all or substantially all of the business or assets of the Company
by purchase, merger or consolidation.
(c) Enforcement Costs. In the event that either the Company or the
Employee initiates an action or claim to enforce any provision or term of this
Agreement, the costs and expenses (including attorney's fees) of the prevailing
-5-
<PAGE>
party shall be paid by the other party, such party to be deemed to have
prevailed if such action or claim is concluded pursuant to a court order or
final judgment which is not subject to appeal, a settlement agreement or
dismissal of the principle claims.
(d) Binding Effect. This Agreement is for the employment of Employee,
personally, and for the services to be rendered by him must be rendered by him
and no other person. This Agreement shall be binding upon and inure to the
benefit of the Company and its successors and assigns.
(e) Entire Agreement; Modification. This Agreement constitutes the
entire agreement of the parties hereto with respect to the subject matter hereof
and may not be modified or amended in any way except in writing by the parties
hereto.
(f) Duration. Notwithstanding the term of employment hereunder, this
Agreement shall continue for so long as any obligations remain under this
Agreement.
(g) Survival. The covenants set forth in Section 6 of this Agreement
shall survive and shall continue to be binding upon Employee as set forth in
such Sections notwithstanding the termination of this Agreement for any reason
whatsoever. The covenants set forth in Section 6 of this Agreement shall be
deemed and construed as separate agreements independent of any other provision
of this Agreement. The existence of any claim or cause of action by Employee
against Company, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by Company of any or all covenants.
(h) Remedies. The parties recognize that the performance of the
obligations under Section 6 of this Agreement by the Employee is special, unique
and extraordinary in character, and that in the event of the breach by the
Employee of the terms and conditions of Section 6 of this Agreement, the Company
or any of its Affiliates shall be entitled to (a) institute and prosecute
proceedings in any court of competent jurisdiction to enforce the specific
performance hereof by the Employee or to enjoin the Employee from engaging in
any activities prohibited hereunder or (b) pursue any other remedy available at
law or in equity.
-6-
<PAGE>
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound,
have hereunto executed this Agreement the day and year first written above.
PAYCO AMERICAN CORPORATION
By: /s/ Dennis G. Punches
-----------------------
Name: Dennis G. Punches
Title: Chairman
EMPLOYEE
/s/ Susan Mathison
-----------------------
Susan Mathison
-7-
<PAGE>
Exhibit 10.17
EMPLOYMENT AGREEMENT
This Agreement is made as of the 13th day of August, 1996 between
Payco American Corporation, a Wisconsin corporation, with offices at 180 North
Executive Drive, Brookfield, Wisconsin 53005-6066 (the "Company"), and David S.
Patterson, an individual residing in the State of
Wisconsin (the "Employee").
R E C I T A L S
WHEREAS, the Employee has been and is presently in the employ of the
Company and is presently serving as Executive Vice President and Chief Operating
Officer of the
Company;
WHEREAS, the Employee possesses an intimate knowledge of the
business and affairs of the Company and its policies, procedures, methods and
personnel;
WHEREAS, OSI Holdings Corp., Boxer Acquisition Corp. and the Company
have executed and delivered an Agreement and Plan of Merger, dated as of the
date hereof (the "Merger Agreement");
WHEREAS, the Company desires to secure the continued services and
employment of the Employee on behalf of the Company, and the Employee desires to
continue in the employment of the Company, upon the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and
promises contained herein, the parties hereto, each intending to be legally
bound hereby, agree as follows:
1. Employment. The Company hereby employs the Employee as Executive
Vice President and Chief Operating Officer of the Company, and the Employee
accepts such employment for the term of the employment specified in Section 3
below. During the Employment Term, the Employee shall serve as Executive Vice
President and Chief Operating Officer of the Company, performing such duties as
shall be reasonably required of an executive-level employee of the Company, and
shall have such other powers and perform such
<PAGE>
other additional executive duties as may from time to time be assigned to him by
the Company.
2. Performance. The Employee will serve the Company faithfully and
to the best of his ability and will devote substantially all of his time,
energy, experience and talents during regular business hours and as otherwise
reasonably necessary to such employment, to the exclusion of all other business
activities.
3. Effectiveness; Employment Term. This Agreement shall become
effective at the Effective Time (as defined in the Merger Agreement) and
continue until the first anniversary date of the Effective Time, unless earlier
terminated pursuant to Section 7 below (the "Employment Term").
4. Compensation.
(a) Salary. During the Employment Term, the Company shall pay the
Employee a base salary, payable in equal monthly installments, subject to
withholding and other applicable taxes, at an annual rate of Two Hundred Seven
Thousand Nine Hundred Dollars ($207,900). In addition, (i) the Employee shall be
entitled to receive such Employee's bonus compensation (or portion thereof) for
the Company's 1996 year in accordance with the past practices of the Company and
(ii) if applicable, the Employee shall be entitled to receive such Employee's
ratable percentage of bonus compensation, if any, for the Company's 1997 year.
(b) Medical and Dental Health Benefits. During the Employment Term,
Employee shall be entitled to medical and dental heath benefits in accordance
with the Company's existing established policies for key employees.
(c) Vacation; Sick Leave. During the Employment Term, Employee shall
be entitled to vacation and sick leave in accordance with the Company's existing
established policies for key employees.
5. Expenses. During the term of this Agreement, the Employee shall
be reimbursed by the Company for all reasonable expenses incurred by him in
connection with the performance of his duties hereunder in accordance with
existing policies established by the Board from time to time and upon receipt of
appropriate documentation.
-2-
<PAGE>
6. Secret Processes and Confidential Information. For the Employment
Term and thereafter, (a) the Employee will not divulge, transmit or otherwise
disclose (except as legally compelled by court order, and then only to the
extent required, after prompt notice to the Company of any such order), directly
or indirectly, other than in the regular and proper course of business of the
Company, any confidential knowledge or information with respect to the
operations or finances of the Company, such as, but not limited to, client
lists, system documentation, financial documentation, and proposal information,
or with respect to confidential or secret processes, services, techniques,
customers or plans with respect to the Company and (b) the Employee will not
use, directly or indirectly, any confidential information for the benefit of
anyone other than the Company; provided, however, that the Employee has no
obligation, express or implied, to refrain from using or disclosing to others
any such knowledge or information which is or hereafter shall become available
to the public other than through disclosure by the Employee. All new processes,
techniques, know-how, inventions, plans, products, patents and devices
developed, made or invented by the Employee, alone or with others, while an
employee of the Company, shall be and become the sole property of the Company,
unless released in writing by the Company, and the Employee hereby assigns any
and all rights therein or thereto to the Company.
During the term of this Agreement and thereafter, Employee shall not
willfully take any action to disparage or criticize to any third parties any of
the services of the Company or to commit any other action that injures or
hinders the business relationships of the Company.
All files, records, documents, memorandums, notes or other documents
relating to the business of Company, whether prepared by Employee or otherwise
coming into his possession in the course of the performance of his services
under this Agreement, shall be the exclusive property of Company and shall be
delivered to Company and not retained by Employee upon termination of this
Agreement for any reason whatsoever.
7. Termination. The employment of the Employee hereunder shall
automatically terminate at the end of the Employment Term, as provided in
Section 3. The employment of the Employee hereunder may also be terminated at
any time by the Company with or without "cause". For purposes of this Agreement,
"cause" shall mean: (i) embezzlement, theft or other misappropriation of any
property of the Company or any
-3-
<PAGE>
subsidiary, (ii) gross or willful misconduct resulting in substantial loss to
the Company or any subsidiary or substantial damage to the reputation of the
Company or any subsidiary, (iii) any act involving moral turpitude which if the
subject of a criminal proceeding could reasonably result in a conviction for a
felony involving moral turpitude, fraud or misrepresentation, (iv) gross breach
of his fiduciary obligations to the Company or any subsidiary, (v) a breach of
his covenant not to compete, or (vi) any chemical dependence which materially
affects the performance of his duties and responsibilities to the Company or any
subsidiary.
8. Severance.
(a) Termination Without "Cause". If the Employee's employment
is terminated by the Company without "cause", the Employee shall be entitled to
receive his base salary and any unpaid bonus as provided in Section 4(a), for
the period from the date of termination until the first anniversary of the
Effective Time (the "Severance Period"), provided that if at any time during the
Severance Period the Employee shall obtain other employment, the Company's
obligation to pay severance under this Section 8(a) shall automatically be
reduced from the date of commencement of such other employment until the
termination of the Severance Period to an amount equal to the ratable difference
between the Employee's base salary and any unpaid bonus under Section 4(a) and
the base salary and any unpaid bonus earned by Employee in such other
employment. The Employee shall not be an employee of the Company during the
Severance Period, and except for such severance payment or as otherwise required
by law, shall not be entitled to any compensation or benefits under Section
4(a), 4(b) or 4(c) with respect to the Severance Period.
(b) Termination "For Cause". If the Employee's employment is
terminated by the Company "for cause", the Employee shall not be entitled to
severance compensation.
9. Notice. Any notices required or permitted hereunder shall be in
writing and shall be deemed to have been given when personally delivered or when
mailed, certified or registered mail, postage prepaid, to the following
addresses:
If to the Employee:
c/o Payco American Corporation
-4-
<PAGE>
180 North Executive Drive
Brookfield, Wisconsin 53005-6066
If to the Company:
Payco American Corporation
180 North Executive Drive
Brookfield, Wisconsin 53005-6066
With a copy to:
McCown De Leeuw & Co.
101 East 52nd Street
31st Floor
New York, New York 10022
Attention: David E. King
10. General.
(a) Governing Law; Jurisdiction. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of New York applicable to contracts executed and to be performed
entirely within said State. Any judicial proceeding brought against any of the
parties to this Agreement or any dispute arising out of this Agreement or any
matter related hereto may be brought in the courts of the State of New York or
in the United States District Court for the Southern District of New York, and,
by execution and delivery of this Agreement, each of the parties to this
Agreement accepts the jurisdiction of said courts, and irrevocably agrees to be
bound by any judgment rendered thereby in connection with this Agreement. The
foregoing consent to jurisdiction shall not be deemed to confer rights on any
person other than the respective parties to this Agreement.
(b) Assignability. The Employee may not assign his interest in or
delegate his duties under this Agreement. Notwithstanding anything else in this
Agreement to the contrary, the Company may assign this Agreement to and all
rights hereunder shall inure to the benefit of any person, firm or corporation
succeeding to all or substantially all of the business or assets of the Company
by purchase, merger or consolidation.
(c) Enforcement Costs. In the event that either the Company or the
Employee initiates an action or claim to enforce any provision or term of this
Agreement, the costs and expenses (including attorney's fees) of the prevailing
-5-
<PAGE>
party shall be paid by the other party, such party to be deemed to have
prevailed if such action or claim is concluded pursuant to a court order or
final judgment which is not subject to appeal, a settlement agreement or
dismissal of the principle claims.
(d) Binding Effect. This Agreement is for the employment of
Employee, personally, and for the services to be rendered by him must be
rendered by him and no other person. This Agreement shall be binding upon and
inure to the benefit of the Company and its successors and assigns.
(e) Entire Agreement; Modification. This Agreement constitutes the
entire agreement of the parties hereto with respect to the subject matter hereof
and may not be modified or amended in any way except in writing by the parties
hereto.
(f) Duration. Notwithstanding the term of employment hereunder, this
Agreement shall continue for so long as any obligations remain under this
Agreement.
(g) Survival. The covenants set forth in Section 6 of this Agreement
shall survive and shall continue to be binding upon Employee as set forth in
such Sections notwithstanding the termination of this Agreement for any reason
whatsoever. The covenants set forth in Section 6 of this Agreement shall be
deemed and construed as separate agreements independent of any other provision
of this Agreement. The existence of any claim or cause of action by Employee
against Company, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by Company of any or all covenants.
(h) Remedies. The parties recognize that the performance of the
obligations under Section 6 of this Agreement by the Employee is special, unique
and extraordinary in character, and that in the event of the breach by the
Employee of the terms and conditions of Section 6 of this Agreement, the Company
or any of its Affiliates shall be entitled to (a) institute and prosecute
proceedings in any court of competent jurisdiction to enforce the specific
performance hereof by the Employee or to enjoin the Employee from engaging in
any activities prohibited hereunder or (b) pursue any other remedy available at
law or in equity.
-6-
<PAGE>
IN WITNESS WHEREOF, the parties hereto, intending to be legally
bound, have hereunto executed this Agreement the day and year first written
above.
PAYCO AMERICAN CORPORATION
By: /s/ Dennis G. Punches
-------------------------------
Name: Dennis G. Punches
Title: Chairman
EMPLOYEE
/s/ David S. Patterson
-------------------------------
David S. Patterson
-7-
<PAGE>
Exhibit 10.18
EMPLOYMENT AGREEMENT
This Agreement is made as of the 13th day of August, 1996 between
Payco American Corporation, a Wisconsin corporation, with offices at 180 North
Executive Drive, Brookfield, Wisconsin 53005-6066 (the "Company"), and Neal R.
Sparby, an individual residing in the State of Wisconsin (the "Employee").
R E C I T A L S
WHEREAS, the Employee has been and is presently in the employ of the
Company and is presently serving as President and Chief Executive Officer of the
Company;
WHEREAS, the Employee possesses an intimate knowledge of the business
and affairs of the Company and its policies, procedures, methods and personnel;
WHEREAS, OSI Holdings Corp., Boxer Acquisition Corp. and the Company
have executed and delivered an Agreement and Plan of Merger, dated as of the
date hereof (the "Merger Agreement");
WHEREAS, the Company desires to secure the continued services and
employment of the Employee on behalf of the Company, and the Employee desires to
continue in the employment of the Company, upon the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, the parties hereto, each intending to be legally bound hereby,
agree as follows:
1. Employment. The Company hereby employs the Employee as President
and Chief Executive Officer of the Company, and the Employee accepts such
employment for the term of the employment specified in Section 3 below. During
the Employment Term, the Employee shall serve as President and Chief Executive
Officer of the Company, performing such duties as shall be reasonably required
of an executive-level employee of the Company, and shall have such other powers
and perform such other additional executive duties as may from time to time be
assigned to him by the Company.
<PAGE>
2. Performance. The Employee will serve the Company faithfully and to
the best of his ability and will devote substantially all of his time, energy,
experience and talents during regular business hours and as otherwise reasonably
necessary to such employment, to the exclusion of all other business activities.
3. Effectiveness; Employment Term. This Agreement shall become
effective at the Effective Time (as defined in the Merger Agreement) and
continue until the first anniversary date of the Effective Time, unless earlier
terminated pursuant to Section 7 below (the "Employment Term").
4. Compensation.
(a) Salary. During the Employment Term, the Company shall pay the
Employee a base salary, payable in equal monthly installments, subject to
withholding and other applicable taxes, at an annual rate of Two Hundred
Forty-Six Thousand Four Hundred Thirteen Dollars ($246,413). In addition, (i)
the Employee shall be entitled to receive such Employee's bonus compensation (or
portion thereof) for the Company's 1996 year in accordance with the past
practices of the Company and (ii) if applicable, the Employee shall be entitled
to receive such Employee's ratable percentage of bonus compensation, if any, for
the Company's 1997 year.
(b) Medical and Dental Health Benefits. During the Employment Term,
Employee shall be entitled to medical and dental heath benefits in accordance
with the Company's existing established policies for key employees.
(c) Vacation; Sick Leave. During the Employment Term, Employee shall
be entitled to vacation and sick leave in accordance with the Company's existing
established policies for key employees.
5. Expenses. During the term of this Agreement, the Employee shall be
reimbursed by the Company for all reasonable expenses incurred by him in
connection with the performance of his duties hereunder in accordance with
existing policies established by the Board from time to time and upon receipt of
appropriate documentation.
6. Secret Processes and Confidential Information. For the Employment
Term and thereafter, (a) the Employee will not divulge, transmit or otherwise
disclose (except as legally compelled by court order, and then only to the
extent
-2-
<PAGE>
required, after prompt notice to the Company of any such order), directly or
indirectly, other than in the regular and proper course of business of the
Company, any confidential knowledge or information with respect to the
operations or finances of the Company, such as, but not limited to, client
lists, system documentation, financial documentation, and proposal information,
or with respect to confidential or secret processes, services, techniques,
customers or plans with respect to the Company and (b) the Employee will not
use, directly or indirectly, any confidential information for the benefit of
anyone other than the Company; provided, however, that the Employee has no
obligation, express or implied, to refrain from using or disclosing to others
any such knowledge or information which is or hereafter shall become available
to the public other than through disclosure by the Employee. All new processes,
techniques, know-how, inventions, plans, products, patents and devices
developed, made or invented by the Employee, alone or with others, while an
employee of the Company, shall be and become the sole property of the Company,
unless released in writing by the Company, and the Employee hereby assigns any
and all rights therein or thereto to the Company.
During the term of this Agreement and thereafter, Employee shall not
willfully take any action to disparage or criticize to any third parties any of
the services of the Company or to commit any other action that injures or
hinders the business relationships of the Company.
All files, records, documents, memorandums, notes or other documents
relating to the business of Company, whether prepared by Employee or otherwise
coming into his possession in the course of the performance of his services
under this Agreement, shall be the exclusive property of Company and shall be
delivered to Company and not retained by Employee upon termination of this
Agreement for any reason whatsoever.
7. Termination. The employment of the Employee hereunder shall
automatically terminate at the end of the Employment Term, as provided in
Section 3. The employment of the Employee hereunder may also be terminated at
any time by the Company with or without "cause". For purposes of this Agreement,
"cause" shall mean: (i) embezzlement, theft or other misappropriation of any
property of the Company or any subsidiary, (ii) gross or willful misconduct
resulting in substantial loss to the Company or any subsidiary or substantial
damage to the reputation of the Company or any subsidiary, (iii) any act
involving moral turpitude which if
-3-
<PAGE>
the subject of a criminal proceeding could reasonably result in a conviction for
a felony involving moral turpitude, fraud or misrepresentation, (iv) gross
breach of his fiduciary obligations to the Company or any subsidiary, (v) a
breach of his covenant not to compete, or (vi) any chemical dependence which
materially affects the performance of his duties and responsibilities to the
Company or any subsidiary.
8. Severance.
(a) Termination Without "Cause". If the Employee's employment is
terminated by the Company without "cause", the Employee shall be entitled to
receive his base salary and any unpaid bonus as provided in Section 4(a), for
the period from the date of termination until the first anniversary of the
Effective Time (the "Severance Period"), provided that if at any time during the
Severance Period the Employee shall obtain other employment, the Company's
obligation to pay severance under this Section 8(a) shall automatically be
reduced from the date of commencement of such other employment until the
termination of the Severance Period to an amount equal to the ratable difference
between the Employee's base salary and any unpaid bonus under Section 4(a) and
the base salary and any unpaid bonus earned by Employee in such other
employment. The Employee shall not be an employee of the Company during the
Severance Period, and except for such severance payment or as otherwise required
by law, shall not be entitled to any compensation or benefits under Section
4(a), 4(b) or 4(c) with respect to the Severance Period.
(b) Termination "For Cause". If the Employee's employment is
terminated by the Company "for cause", the Employee shall not be entitled to
severance compensation.
9. Notice. Any notices required or permitted hereunder shall be in
writing and shall be deemed to have been given when personally delivered or when
mailed, certified or registered mail, postage prepaid, to the following
addresses:
If to the Employee:
c/o Payco American Corporation
180 North Executive Drive
Brookfield, Wisconsin 53005-6066
-4-
<PAGE>
If to the Company:
Payco American Corporation
180 North Executive Drive
Brookfield, Wisconsin 53005-6066
With a copy to:
McCown De Leeuw & Co.
101 East 52nd Street
31st Floor
New York, New York 10022
Attention: David E. King
10. General.
(a) Governing Law; Jurisdiction. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of New York applicable to contracts executed and to be performed
entirely within said State. Any judicial proceeding brought against any of the
parties to this Agreement or any dispute arising out of this Agreement or any
matter related hereto may be brought in the courts of the State of New York or
in the United States District Court for the Southern District of New York, and,
by execution and delivery of this Agreement, each of the parties to this
Agreement accepts the jurisdiction of said courts, and irrevocably agrees to be
bound by any judgment rendered thereby in connection with this Agreement. The
foregoing consent to jurisdiction shall not be deemed to confer rights on any
person other than the respective parties to this Agreement.
(b) Assignability. The Employee may not assign his interest in or
delegate his duties under this Agreement. Notwithstanding anything else in this
Agreement to the contrary, the Company may assign this Agreement to and all
rights hereunder shall inure to the benefit of any person, firm or corporation
succeeding to all or substantially all of the business or assets of the Company
by purchase, merger or consolidation.
(c) Enforcement Costs. In the event that either the Company or the
Employee initiates an action or claim to enforce any provision or term of this
Agreement, the costs and expenses (including attorney's fees) of the prevailing
party shall be paid by the other party, such party to be deemed to have
prevailed if such action or claim is concluded pursuant to a court order or
final judgment which is not
-5-
<PAGE>
subject to appeal, a settlement agreement or dismissal of the
principle claims.
(d) Binding Effect. This Agreement is for the employment of Employee,
personally, and for the services to be rendered by him must be rendered by him
and no other person. This Agreement shall be binding upon and inure to the
benefit of the Company and its successors and assigns.
(e) Entire Agreement; Modification. This Agreement constitutes the
entire agreement of the parties hereto with respect to the subject matter hereof
and may not be modified or amended in any way except in writing by the parties
hereto.
(f) Duration. Notwithstanding the term of employment hereunder, this
Agreement shall continue for so long as any obligations remain under this
Agreement.
(g) Survival. The covenants set forth in Section 6 of this Agreement
shall survive and shall continue to be binding upon Employee as set forth in
such Sections notwithstanding the termination of this Agreement for any reason
whatsoever. The covenants set forth in Section 6 of this Agreement shall be
deemed and construed as separate agreements independent of any other provision
of this Agreement. The existence of any claim or cause of action by Employee
against Company, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by Company of any or all covenants.
(h) Remedies. The parties recognize that the performance of the
obligations under Section 6 of this Agreement by the Employee is special, unique
and extraordinary in character, and that in the event of the breach by the
Employee of the terms and conditions of Section 6 of this Agreement, the Company
or any of its Affiliates shall be entitled to (a) institute and prosecute
proceedings in any court of competent jurisdiction to enforce the specific
performance hereof by the Employee or to enjoin the Employee from engaging in
any activities prohibited hereunder or (b) pursue any other remedy available at
law or in equity.
-6-
<PAGE>
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound,
have hereunto executed this Agreement the day and year first written above.
PAYCO AMERICAN CORPORATION]
By: /s/ Dennis G. Punches
-----------------------
Name: Dennis G. Punches
Title: Chairman
EMPLOYEE
/s/ Neil R. Sparby
-----------------------
Neil R. Sparby
<PAGE>
Exhibit 10.19
EMPLOYMENT AGREEMENT
This Agreement is made as of the 13th day of August, 1996 between
Payco American Corporation, a Wisconsin corporation, with offices at 180 North
Executive Drive, Brookfield, Wisconsin 53005-6066, (the "Company"), and John P.
Stetzenbach, an individual residing in the State of
Wisconsin (the "Employee").
R E C I T A L S
WHEREAS, the Employee has been and is presently in the employ of the
Company and is presently serving as Vice President - Finance of the Company;
WHEREAS, the Employee possesses an intimate knowledge of the
business and affairs of the Company and its policies, procedures, methods and
personnel;
WHEREAS, OSI Holdings Corp., Boxer Acquisition Corp. and the Company
have executed and delivered an Agreement and Plan of Merger, dated as of the
date hereof (the "Merger Agreement");
WHEREAS, the Company desires to secure the continued services and
employment of the Employee on behalf of the Company, and the Employee desires to
continue in the employment of the Company, upon the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and
promises contained herein, the parties hereto, each intending to be legally
bound hereby, agree as follows:
1. Employment. The Company hereby employs the Employee as Vice
President - Finance of the Company, and the Employee accepts such employment for
the term of the employment specified in Section 3 below. During the Employment
Term, the Employee shall serve as Vice President Finance of the Company,
performing such duties as shall be reasonably required of an executive-level
employee of the Company, and shall have such other powers and perform such other
additional executive duties as may from time to time be assigned to him by the
Company.
<PAGE>
2. Performance. The Employee will serve the Company faithfully and
to the best of his ability and will devote substantially all of his time,
energy, experience and talents during regular business hours and as otherwise
reasonably necessary to such employment, to the exclusion of all other business
activities.
3. Effectiveness; Employment Term. This Agreement shall become
effective at the Effective Time (as defined in the Merger Agreement) and
continue until the first anniversary date of the Effective Time, unless earlier
terminated pursuant to Section 7 below (the "Employment Term").
4. Compensation.
(a) Salary. During the Employment Term, the Company shall pay the
Employee a base salary, payable in equal monthly installments, subject to
withholding and other applicable taxes, at an annual rate of One Hundred Thirty
Thousand Dollars ($130,000). In addition, (i) the Employee shall be entitled to
receive such Employee's bonus compensation (or portion thereof) for the
Company's 1996 year in accordance with the past practices of the Company and
(ii) if applicable, the Employee shall be entitled to receive such Employee's
ratable percentage of bonus compensation, if any, for the Company's 1997 year.
(b) Medical and Dental Health Benefits. During the Employment Term,
Employee shall be entitled to medical and dental heath benefits in accordance
with the Company's existing established policies for key employees.
(c) Vacation; Sick Leave. During the Employment Term, Employee shall
be entitled to vacation and sick leave in accordance with the Company's existing
established policies for key employees.
5. Expenses. During the term of this Agreement, the Employee shall
be reimbursed by the Company for all reasonable expenses incurred by him in
connection with the performance of his duties hereunder in accordance with
existing policies established by the Board from time to time and upon receipt of
appropriate documentation.
6. Secret Processes and Confidential Information. For the Employment
Term and thereafter, (a) the Employee will not divulge, transmit or otherwise
disclose (except as legally compelled by court order, and then only to the
extent
-2-
<PAGE>
required, after prompt notice to the Company of any such order), directly or
indirectly, other than in the regular and proper course of business of the
Company, any confidential knowledge or information with respect to the
operations or finances of the Company, such as, but not limited to, client
lists, system documentation, financial documentation and proposal information,
or with respect to confidential or secret processes, services, techniques,
customers or plans with respect to the Company and (b) the Employee will not
use, directly or indirectly, any confidential information for the benefit of
anyone other than the Company; provided, however, that the Employee has no
obligation, express or implied, to refrain from using or disclosing to others
any such knowledge or information which is or hereafter shall become available
to the public other than through disclosure by the Employee. All new processes,
techniques, know-how, inventions, plans, products, patents and devices
developed, made or invented by the Employee, alone or with others, while an
employee of the Company, shall be and become the sole property of the Company,
unless released in writing by the Company, and the Employee hereby assigns any
and all rights therein or thereto to the Company.
During the term of this Agreement and thereafter, Employee shall not
willfully take any action to disparage or criticize to any third parties any of
the services of the Company or to commit any other action that injures or
hinders the business relationships of the Company.
All files, records, documents, memorandums, notes or other documents
relating to the business of Company, whether prepared by Employee or otherwise
coming into his possession in the course of the performance of his services
under this Agreement, shall be the exclusive property of Company and shall be
delivered to Company and not retained by Employee upon termination of this
Agreement for any reason whatsoever.
7. Termination. The employment of the Employee hereunder shall
automatically terminate at the end of the Employment Term, as provided in
Section 3. The employment of the Employee hereunder may also be terminated at
any time by the Company with or without "cause". For purposes of this Agreement,
"cause" shall mean: (i) embezzlement, theft or other misappropriation of any
property of the Company or any subsidiary, (ii) gross or willful misconduct
resulting in substantial loss to the Company or any subsidiary or substantial
damage to the reputation of the Company or any subsidiary, (iii) any act
involving moral turpitude which if
-3-
<PAGE>
the subject of a criminal proceeding could reasonably result in a conviction for
a felony involving moral turpitude, fraud or misrepresentation, (iv) gross
breach of his fiduciary obligations to the Company or any subsidiary, (v) a
breach of his covenant not to compete, or (vi) any chemical dependence which
materially affects the performance of his duties and responsibilities to the
Company or any subsidiary.
8. Severance.
(a) Termination Without "Cause". If the Employee's employment
is terminated by the Company without "cause", the Employee shall be entitled to
receive his base salary and any unpaid bonus as provided in Section 4(a), for
the period from the date of termination until the first anniversary of the
Effective Time (the "Severance Period"), provided that if at any time during the
Severance Period the Employee shall obtain other employment, the Company's
obligation to pay severance under this Section 8(a) shall automatically be
reduced from the date of commencement of such other employment until the
termination of the Severance Period to an amount equal to the ratable difference
between the Employee's base salary and any unpaid bonus under Section 4(a) and
the base salary and any unpaid bonus earned by Employee in such other
employment. The Employee shall not be an employee of the Company during the
Severance Period, and except for such severance payment or as otherwise required
by law, shall not be entitled to any compensation or benefits under Section
4(a), 4(b) or 4(c) with respect to the Severance Period.
(b) Termination "For Cause". If the Employee's employment is
terminated by the Company "for cause", the Employee shall not be entitled to
severance compensation.
9. Notice. Any notices required or permitted hereunder shall be in
writing and shall be deemed to have been given when personally delivered or when
mailed, certified or registered mail, postage prepaid, to the following
addresses:
If to the Employee:
c/o Payco American Corporation
180 North Executive Drive
Brookfield, Wisconsin 53005-6066
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<PAGE>
If to the Company:
Payco American Corporation
180 North Executive Drive
Brookfield, Wisconsin 53005-6066
With a copy to:
McCown De Leeuw & Co.
101 East 52nd Street
31st Floor
New York, New York 10022
Attention: David E. King
10. General.
(a) Governing Law; Jurisdiction. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of New York applicable to contracts executed and to be performed
entirely within said State. Any judicial proceeding brought against any of the
parties to this Agreement or any dispute arising out of this Agreement or any
matter related hereto may be brought in the courts of the State of New York or
in the United States District Court for the Southern District of New York, and,
by execution and delivery of this Agreement, each of the parties to this
Agreement accepts the jurisdiction of said courts, and irrevocably agrees to be
bound by any judgment rendered thereby in connection with this Agreement. The
foregoing consent to jurisdiction shall not be deemed to confer rights on any
person other than the respective parties to this Agreement.
(b) Assignability. The Employee may not assign his interest in or
delegate his duties under this Agreement. Notwithstanding anything else in this
Agreement to the contrary, the Company may assign this Agreement to and all
rights hereunder shall inure to the benefit of any person, firm or corporation
succeeding to all or substantially all of the business or assets of the Company
by purchase, merger or consolidation.
(c) Enforcement Costs. In the event that either the Company or the
Employee initiates an action or claim to enforce any provision or term of this
Agreement, the costs and expenses (including attorney's fees) of the prevailing
party shall be paid by the other party, such party to be deemed to have
prevailed if such action or claim is concluded pursuant to a court order or
final judgment which is not
-5-
<PAGE>
subject to appeal, a settlement agreement or dismissal of the principle claims.
(d) Binding Effect. This Agreement is for the employment of
Employee, personally, and for the services to be rendered by him must be
rendered by him and no other person. This Agreement shall be binding upon and
inure to the benefit of the Company and its successors and assigns.
(e) Entire Agreement; Modification. This Agreement constitutes the
entire agreement of the parties hereto with respect to the subject matter hereof
and may not be modified or amended in any way except in writing by the parties
hereto.
(f) Duration. Notwithstanding the term of employment hereunder, this
Agreement shall continue for so long as any obligations remain under this
Agreement.
(g) Survival. The covenants set forth in Section 6 of this Agreement
shall survive and shall continue to be binding upon Employee as set forth in
such Sections notwithstanding the termination of this Agreement for any reason
whatsoever. The covenants set forth in Section 6 of this Agreement shall be
deemed and construed as separate agreements independent of any other provision
of this Agreement. The existence of any claim or cause of action by Employee
against Company, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by Company of any or all covenants.
(h) Remedies. The parties recognize that the performance of the
obligations under Section 6 of this Agreement by the Employee is special, unique
and extraordinary in character, and that in the event of the breach by the
Employee of the terms and conditions of Section 6 of this Agreement, the Company
or any of its Affiliates shall be entitled to (a) institute and prosecute
proceedings in any court of competent jurisdiction to enforce the specific
performance hereof by the Employee or to enjoin the Employee from engaging in
any activities prohibited hereunder or (b) pursue any other remedy available at
law or in equity.
-6-
<PAGE>
IN WITNESS WHEREOF, the parties hereto, intending to be legally
bound, have hereunto executed this Agreement the day and year first written
above.
PAYCO AMERICAN CORPORATION
By: /s/ Dennis G. Punches
-----------------------------
Name: Dennis G. Punches
Title: Chairman
EMPLOYEE
/s/ John P. Stetzenbach
-----------------------------
John P. Stetzenbach
<PAGE>
Exhibit 10.20
COVENANT NOT-TO-COMPETE AGREEMENT
THIS COVENANT NOT-TO-COMPETE AGREEMENT, dated August 13, 1996, is made
between Payco American Corporation, a Wisconsin corporation, with offices at 180
North Executive Drive, Brookfield, Wisconsin 53005-6066 (the "Company"), and
Dennis G. Punches, an individual residing in the State of Florida ("Punches").
R E C I T A L S
WHEREAS, Punches is a founder and long-time employee of the Company
and is presently serving as Chairman of the Board of Directors of the Company;
WHEREAS, during the term of his employment with the Company, Punches
has actively established and maintained relationships with the Company's key
customers and strategic partners;
WHEREAS, Punches possesses an intimate knowledge of the business and
affairs of the Company and its policies, procedures, methods and personnel;
WHEREAS OSI Holdings Corp., Boxer Acquisition Corp. and the Company
have entered into an Agreement and Plan of Merger, dated as of the date hereof
(the "Merger Agreement"), pursuant to which Boxer Acquisition Corp. will be
merged with and into the Company;
WHEREAS, Punches is willing to enter into the Consulting Agreement
dated as of the date hereof pursuant to which the Company will secure the
continued services of Punches on behalf of the Company;
WHEREAS, in order to provide reasonable assurances and to induce the
Company to enter into the Consulting Agreement with Punches, the Company and
Punches have agreed to enter into this Agreement for the consideration called
for hereby.
NOW, THEREFORE, the parties hereto hereby agrees as follows:
<PAGE>
1. Covenant Not-to-Compete. (a) Punches covenants and agrees that he
will not:
(i) for a period of three (3) years from the Effective Time (as
defined in the Merger Agreement), within North America (including Canada,
Mexico and Puerto Rico) and any other jurisdiction or marketing area in
which the Company or any of its Affiliates (as defined below) is doing
business or is qualified to do business as of the date of this Agreement,
directly or indirectly own, manage, operate, control, be employed by or
participate in the ownership, management, operation or control of, or be
connected in any manner with, any business of the type and character
engaged in and competitive with that currently conducted by the Company or
any of its Affiliates; provided, however, that Punches shall be permitted
to serve as a member of the Supervisory Board of Intrum Justitia. For these
purposes, ownership of securities of 5% or less of any class of securities
of a public company shall not be considered to be competition with the
Company or any of its Affiliates; or
(ii) other than Robert Duersten and Beverly Wortman, employ, solicit
for employment or otherwise contract for the services of any employee of
the Company or any of its Affiliates at the time of this Agreement or who
shall subsequently become an employee of the Company or any of its
Affiliates.
(b) For the purposes of this Section 1, the term "Affiliate" shall
mean, with respect to the Company, any person or entity which, directly or
indirectly, owns or is owned by, or is under common ownership with, the Company.
The term "own" (including, with correlative meanings, "owned by" and "under
common ownership with") shall mean the ownership of 50% or more of the voting
securities (or their equivalent) of a particular entity.
2. Effectiveness; Consideration for Covenant. This Agreement shall be
effective at the Effective Time. In consideration for Punches' entering into the
foregoing covenant, the Company will pay to Punches $3,000,000 at the Effective
Time.
3. Severability. It is the desire and intent of the parties to this
Agreement that the provisions of Section 1 shall be enforced to the fullest
extent permissible under the laws and public policies applied in each
jurisdiction in
-2-
<PAGE>
which enforcement is sought. If any particular provision or portion of Section 1
shall be adjudicated to be invalid or unenforceable, Section 1 shall be deemed
amended to delete therefrom such provision or portion adjudicated to be invalid
or unenforceable, such amendment to apply only with respect to the operation of
Section 1 in the particular jurisdiction in which such adjudication is made.
4. General.
(a) Governing Law; Jurisdiction. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of New York applicable to contracts executed and to be performed
entirely within said State. Any judicial proceeding brought against any of the
parties to this Agreement or any dispute arising out of this Agreement or any
matter related hereto may be brought in the courts of the State of New York or
in the United States District Court for the Southern District of New York, and,
by execution and delivery of this Agreement, each of the parties to this
Agreement accepts the jurisdiction of said courts, and irrevocably agrees to be
bound by any judgment rendered thereby in connection with this Agreement. The
foregoing consent to jurisdiction shall not be deemed to confer rights on any
person other than the respective parties to this Agreement.
(b) Assignability. Notwithstanding anything else in this Agreement to
the contrary, the Company may assign this Agreement to and all rights hereunder
shall inure to the benefit of any person, firm or corporation succeeding to all
or substantially all of the business or assets of the Company by purchase,
merger or consolidation.
(c) Enforcement Costs. In the event that either the Company or Punches
initiates an action or claim to enforce any provision or term of this Agreement,
the costs and expenses (including attorney's fees) of the prevailing party shall
be paid by the other party, such party to be deemed to have prevailed if such
action or claim is concluded pursuant to a court order or final judgment which
is not subject to appeal, a settlement agreement or dismissal of the principle
claims.
(d) Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the Company and its successors and assigns.
-3-
<PAGE>
(e) Entire Agreement; Modification. This Agreement constitutes the
entire agreement of the parties hereto with respect to the subject matter hereof
and may not be modified or amended in any way except in writing by the parties
hereto.
(f) Duration. This Agreement shall continue for so long as any
obligations remain under this Agreement.
(g) Survival. The covenants set forth in Section 1 of this Agreement
shall survive and shall continue to be binding upon Punches as set forth in such
Section. The existence of any claim or cause of action by Punches against the
Company, whether predicated on this Agreement or otherwise, shall not constitute
a defense to the enforcement by the Company of any or all covenants.
(h) Remedies. The parties recognize that the performance of the
obligations under Section 1 of this Agreement by Punches is special, unique and
extraordinary in character, and that in the event of the breach by Punches of
the terms and conditions of Section 1 of this Agreement, the Company or any of
its Affiliates shall be entitled to (a) institute and prosecute proceedings in
any court of competent jurisdiction to enforce the specific performance hereof
by Punches or to enjoin Punches from engaging in any activities prohibited
hereunder or (b) pursue any other remedy available at law or in equity.
(i) Notices. The Company shall give Punches written notice of any
default under this Agreement and afford Punches 15 days to cure such default.
-4-
<PAGE>
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound,
have hereunto executed this Agreement the day and year first written above.
PAYCO AMERICAN CORPORATION
By: /s/ William W. Kagel
-------------------------------
Name: William W. Kagel
Title: Senior Vice President
/s/ Dennis G. Punches
-----------------------------------
Dennis G. Punches
<PAGE>
Exhibit 10.21
COVENANT NOT-TO-COMPETE AGREEMENT
THIS COVENANT NOT-TO-COMPETE AGREEMENT, dated August 13, 1996, is
made between Payco American Corporation, a Wisconsin corporation, with offices
at 180 North Executive Drive, Brookfield, Wisconsin, 53005-6066, (the
"Company"), and James R. Bohmann, an individual residing in the State of
Wisconsin (the "Employee").
R E C I T A L S
WHEREAS OSI Holdings Corp., Boxer Acquisition Corp. and the Company
have entered into an Agreement and Plan of Merger, dated as of the date hereof
(the "Merger Agreement"), pursuant to which Boxer Acquisition Corp. will be
merged with and into the Company;
WHEREAS, the Employee has been and is presently in the employ of the
Company;
WHEREAS, the Employee possesses an intimate knowledge of the
business and affairs of the Company and its policies, procedures, methods and
personnel;
WHEREAS, the Employee is willing to enter into the Employment
Agreement dated as of the date hereof whereby the Company has secured the
continued services and employment of the Employee on behalf of the Company;
WHEREAS, in order to provide reasonable assurances and to induce the
Company to enter into the Employment Agreement with Employee, the Company and
Employee have agreed to enter into this Agreement for consideration called for
hereby;
NOW, THEREFORE, the parties hereto hereby agrees as follows:
1. Covenant Not-to-Compete. (a) The Employee covenants and agrees
that he will not:
(i) for a period of one (1) year from the Effective Time (as defined
in the Merger Agreement), within any jurisdiction or marketing area in
which the
<PAGE>
Company or any of its Affiliates (as defined below) is doing business or
is qualified to do business, directly or indirectly own, manage, operate,
control, be employed by or participate in the ownership, management,
operation or control of, or be connected in any manner with, any business
of the type and character engaged in and competitive with that currently
conducted by the Company or any of its Affiliates. For these purposes,
ownership of securities of 5% or less of any class of securities of a
public company shall not be considered to be competition with the Company
or any of its Affiliates; or
(ii) employ, solicit for employment or otherwise contract for the
services of any employee of the Company or any of its Affiliates at the
time of this Agreement, or who shall subsequently become an employee of
the Company or any of its Affiliates.
(b) For the purposes of this Section 1, the term "Affiliate" shall
mean, with respect to the Company, any person or entity which, directly or
indirectly, owns or is owned by, or is under common ownership with, the Company.
The term "own" (including, with correlative meanings, "owned by" and "under
common ownership with") shall mean the ownership of 50% or more of the voting
securities (or their equivalent) of a particular entity.
2. Effectiveness; Consideration for Covenant. This Agreement shall
become effective at the Effective Time. In consideration for Employee's entering
into the foregoing covenant, the Company will pay to the Employee $100,000 at
the Effective Time.
3. Severability. It is the desire and intent of the parties to this
Agreement that the provisions of Section 1 shall be enforced to the fullest
extent permissible under the laws and public policies applied in each
jurisdiction in which enforcement is sought. If any particular provision or
portion of Section 1 shall be adjudicated to be invalid or unenforceable,
Section 1 shall be deemed amended to delete therefrom such provision or portion
adjudicated to be invalid or unenforceable, such amendment to apply only with
respect to the operation of Section 1 in the particular jurisdiction in which
such adjudication is made.
4. General.
-2-
<PAGE>
(a) Governing Law; Jurisdiction. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of New York applicable to contracts executed and to be performed
entirely within said State. Any judicial proceeding brought against any of the
parties to this Agreement or any dispute arising out of this Agreement or any
matter related hereto may be brought in the courts of the State of New York or
in the United States District Court for the Southern District of New York, and,
by execution and delivery of this Agreement, each of the parties to this
Agreement accepts the jurisdiction of said courts, and irrevocably agrees to be
bound by any judgment rendered thereby in connection with this Agreement. The
foregoing consent to jurisdiction shall not be deemed to confer rights on any
person other than the respective parties to this Agreement.
(b) Assignability. Notwithstanding anything else in this Agreement
to the contrary, the Company may assign this Agreement to and all rights
hereunder shall inure to the benefit of any person, firm or corporation
succeeding to all or substantially all of the business or assets of the Company
by purchase, merger or consolidation.
(c) Enforcement Costs. In the event that either the Company or the
Employee initiates an action or claim to enforce any provision or term of this
Agreement, the costs and expenses (including attorney's fees) of the prevailing
party shall be paid by the other party, such party to be deemed to have
prevailed if such action or claim is concluded pursuant to a court order or
final judgment which is not subject to appeal, a settlement agreement or
dismissal of the principle claims.
(d) Binding Effect. This Agreement shall be binding upon and inure
to the benefit of the Company and its successors and assigns.
(e) Entire Agreement; Modification. This Agreement constitutes the
entire agreement of the parties hereto with respect to the subject matter hereof
and may not be modified or amended in any way except in writing by the parties
hereto.
(f) Duration. This Agreement shall continue for so long as any
obligations remain under this Agreement.
(g) Survival. The covenants set forth in Section 1 of this Agreement
shall survive and shall continue to be
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<PAGE>
binding upon Employee as set forth in such Section. The existence of any claim
or cause of action by Employee against Company, whether predicated on this
Agreement or otherwise, shall not constitute a defense to the enforcement by
Company of any or all covenants.
(h) Remedies. The parties recognize that the performance of the
obligations under Section 1 of this Agreement by the Employee is special, unique
and extraordinary in character, and that in the event of the breach by the
Employee of the terms and conditions of Section 1 of this Agreement, the Company
or any of its Affiliates shall be entitled to (a) institute and prosecute
proceedings in any court of competent jurisdiction to enforce the specific
performance hereof by the Employee or to enjoin the Employee from engaging in
any activities prohibited hereunder or (b) pursue any other remedy available at
law or in equity.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto, intending to be legally
bound, have hereunto executed this Agreement the day and year first written
above.
PAYCO AMERICAN CORPORATION
By: /s/ Dennis G. Punches
----------------------------
Name: Dennis G. Punches
Title: Chairman
EMPLOYEE
/s/ James R. Bohmann
----------------------------
James R. Bohmann
<PAGE>
Exhibit 10.22
COVENANT NOT-TO-COMPETE AGREEMENT
THIS COVENANT NOT-TO-COMPETE AGREEMENT, dated August 13, 1996, is made
between Payco American Corporation, a Wisconsin corporation, with offices at 180
North Executive Drive, Brookfield, Wisconsin, 53005-6066, (the "Company"), and
Patrick E. Carroll, an individual residing in the State of Wisconsin (the
"Employee").
R E C I T A L S
WHEREAS OSI Holdings Corp., Boxer Acquisition Corp. and the Company
have entered into an Agreement and Plan of Merger, dated as of the date hereof
(the "Merger Agreement"), pursuant to which Boxer Acquisition Corp. will be
merged with and into the Company;
WHEREAS, the Employee has been and is presently in the employ of the
Company;
WHEREAS, the Employee possesses an intimate knowledge of the business
and affairs of the Company and its policies, procedures, methods and personnel;
WHEREAS, the Employee is willing to enter into the Employment
Agreement dated as of the date hereof whereby the Company has secured the
continued services and employment of the Employee on behalf of the Company;
WHEREAS, in order to provide reasonable assurances and to induce the
Company to enter into the Employment Agreement with Employee, the Company and
Employee have agreed to enter into this Agreement for consideration called for
hereby;
NOW, THEREFORE, the parties hereto hereby agrees as follows:
1. Covenant Not-to-Compete. (a) The Employee covenants and agrees that
he will not:
(i) for a period of one (1) year from the Effective Time (as defined
in the Merger Agreement), within any jurisdiction or marketing area in
which the
<PAGE>
Company or any of its Affiliates (as defined below) is doing business or is
qualified to do business, directly or indirectly own, manage, operate,
control, be employed by or participate in the ownership, management,
operation or control of, or be connected in any manner with, any business
of the type and character engaged in and competitive with that currently
conducted by the Company or any of its Affiliates. For these purposes,
ownership of securities of 5% or less of any class of securities of a
public company shall not be considered to be competition with the Company
or any of its Affiliates; or
(ii) employ, solicit for employment or otherwise contract for the
services of any employee of the Company or any of its Affiliates at the
time of this Agreement, or who shall subsequently become an employee of the
Company or any of its Affiliates.
(b) For the purposes of this Section 1, the term "Affiliate" shall
mean, with respect to the Company, any person or entity which, directly or
indirectly, owns or is owned by, or is under common ownership with, the Company.
The term "own" (including, with correlative meanings, "owned by" and "under
common ownership with") shall mean the ownership of 50% or more of the voting
securities (or their equivalent) of a particular entity.
2. Effectiveness; Consideration for Covenant. This Agreement shall
become effective at the Effective Time. In consideration for Employee's entering
into the foregoing covenant, the Company will pay to the Employee $100,000 at
the Effective Time.
3. Severability. It is the desire and intent of the parties to this
Agreement that the provisions of Section 1 shall be enforced to the fullest
extent permissible under the laws and public policies applied in each
jurisdiction in which enforcement is sought. If any particular provision or
portion of Section 1 shall be adjudicated to be invalid or unenforceable,
Section 1 shall be deemed amended to delete therefrom such provision or portion
adjudicated to be invalid or unenforceable, such amendment to apply only with
respect to the operation of Section 1 in the particular jurisdiction in which
such adjudication is made.
4. General.
-2-
<PAGE>
(a) Governing Law; Jurisdiction. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of New York applicable to contracts executed and to be performed
entirely within said State. Any judicial proceeding brought against any of the
parties to this Agreement or any dispute arising out of this Agreement or any
matter related hereto may be brought in the courts of the State of New York or
in the United States District Court for the Southern District of New York, and,
by execution and delivery of this Agreement, each of the parties to this
Agreement accepts the jurisdiction of said courts, and irrevocably agrees to be
bound by any judgment rendered thereby in connection with this Agreement. The
foregoing consent to jurisdiction shall not be deemed to confer rights on any
person other than the respective parties to this Agreement.
(b) Assignability. Notwithstanding anything else in this Agreement to
the contrary, the Company may assign this Agreement to and all rights hereunder
shall inure to the benefit of any person, firm or corporation succeeding to all
or substantially all of the business or assets of the Company by purchase,
merger or consolidation.
(c) Enforcement Costs. In the event that either the Company or the
Employee initiates an action or claim to enforce any provision or term of this
Agreement, the costs and expenses (including attorney's fees) of the prevailing
party shall be paid by the other party, such party to be deemed to have
prevailed if such action or claim is concluded pursuant to a court order or
final judgment which is not subject to appeal, a settlement agreement or
dismissal of the principle claims.
(d) Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the Company and its successors and assigns.
(e) Entire Agreement; Modification. This Agreement constitutes the
entire agreement of the parties hereto with respect to the subject matter hereof
and may not be modified or amended in any way except in writing by the parties
hereto.
(f) Duration. This Agreement shall continue for so long as any
obligations remain under this Agreement.
(g) Survival. The covenants set forth in Section 1 of this Agreement
shall survive and shall continue to be
-3-
<PAGE>
binding upon Employee as set forth in such Section. The existence of any claim
or cause of action by Employee against Company, whether predicated on this
Agreement or otherwise, shall not constitute a defense to the enforcement by
Company of any or all covenants.
(h) Remedies. The parties recognize that the performance of the
obligations under Section 1 of this Agreement by the Employee is special, unique
and extraordinary in character, and that in the event of the breach by the
Employee of the terms and conditions of Section 1 of this Agreement, the Company
or any of its Affiliates shall be entitled to (a) institute and prosecute
proceedings in any court of competent jurisdiction to enforce the specific
performance hereof by the Employee or to enjoin the Employee from engaging in
any activities prohibited hereunder or (b) pursue any other remedy available at
law or in equity.
-4-
<PAGE>
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound,
have hereunto executed this Agreement the day and year first written above.
PAYCO AMERICAN CORPORATION
By: /s/ Dennis G. Punches
-----------------------------
Name: Dennis G. Punches
Title: Chairman
EMPLOYEE
/s/ Patrick E. Carroll
--------------------------------
Patrick E. Carroll
<PAGE>
Exhibit 10.23
COVENANT NOT-TO-COMPETE AGREEMENT
THIS COVENANT NOT-TO-COMPETE AGREEMENT, dated August 13, 1996, is
made between Payco American Corporation, a Wisconsin corporation, with offices
at 180 North Executive Drive, Brookfield, Wisconsin, 53005-6066, (the
"Company"), and William W. Kagel, an individual residing in the State of
Wisconsin (the "Employee").
R E C I T A L S
WHEREAS OSI Holdings Corp., Boxer Acquisition Corp. and the Company
have entered into an Agreement and Plan of Merger, dated as of the date hereof
(the "Merger Agreement"), pursuant to which Boxer Acquisition Corp. will be
merged with and into the Company;
WHEREAS, the Employee has been and is presently in the employ of the
Company;
WHEREAS, the Employee possesses an intimate knowledge of the
business and affairs of the Company and its policies, procedures, methods and
personnel;
WHEREAS, the Employee is willing to enter into the Employment
Agreement dated as of the date hereof whereby the Company has secured the
continued services and employment of the Employee on behalf of the Company;
WHEREAS, in order to provide reasonable assurances and to induce the
Company to enter into the Employment Agreement with Employee, the Company and
Employee have agreed to enter into this Agreement for consideration called for
hereby;
NOW, THEREFORE, the parties hereto hereby agrees as follows:
1. Covenant Not-to-Compete. (a) The Employee covenants and agrees
that he will not:
(i) for a period of one (1) year from the Effective Time (as defined
in the Merger Agreement), within any jurisdiction or marketing area in
which the
<PAGE>
Company or any of its Affiliates (as defined below) is doing business or
is qualified to do business, directly or indirectly own, manage, operate,
control, be employed by or participate in the ownership, management,
operation or control of, or be connected in any manner with, any business
of the type and character engaged in and competitive with that currently
conducted by the Company or any of its Affiliates. For these purposes,
ownership of securities of 5% or less of any class of securities of a
public company shall not be considered to be competition with the Company
or any of its Affiliates; or
(ii) employ, solicit for employment or otherwise contract for the
services of any employee of the Company or any of its Affiliates at the
time of this Agreement, or who shall subsequently become an employee of
the Company or any of its Affiliates.
(b) For the purposes of this Section 1, the term "Affiliate" shall
mean, with respect to the Company, any person or entity which, directly or
indirectly, owns or is owned by, or is under common ownership with, the Company.
The term "own" (including, with correlative meanings, "owned by" and "under
common ownership with") shall mean the ownership of 50% or more of the voting
securities (or their equivalent) of a particular entity.
2. Effectiveness; Consideration for Covenant. This Agreement shall
become effective at the Effective Time. In consideration for Employee's entering
into the foregoing covenant, the Company will pay to the Employee $100,000 at
the Effective Time.
3. Severability. It is the desire and intent of the parties to this
Agreement that the provisions of Section 1 shall be enforced to the fullest
extent permissible under the laws and public policies applied in each
jurisdiction in which enforcement is sought. If any particular provision or
portion of Section 1 shall be adjudicated to be invalid or unenforceable,
Section 1 shall be deemed amended to delete therefrom such provision or portion
adjudicated to be invalid or unenforceable, such amendment to apply only with
respect to the operation of Section 1 in the particular jurisdiction in which
such adjudication is made.
4. General.
-2-
<PAGE>
(a) Governing Law; Jurisdiction. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of New York applicable to contracts executed and to be performed
entirely within said State. Any judicial proceeding brought against any of the
parties to this Agreement or any dispute arising out of this Agreement or any
matter related hereto may be brought in the courts of the State of New York or
in the United States District Court for the Southern District of New York, and,
by execution and delivery of this Agreement, each of the parties to this
Agreement accepts the jurisdiction of said courts, and irrevocably agrees to be
bound by any judgment rendered thereby in connection with this Agreement. The
foregoing consent to jurisdiction shall not be deemed to confer rights on any
person other than the respective parties to this Agreement.
(b) Assignability. Notwithstanding anything else in this Agreement
to the contrary, the Company may assign this Agreement to and all rights
hereunder shall inure to the benefit of any person, firm or corporation
succeeding to all or substantially all of the business or assets of the Company
by purchase, merger or consolidation.
(c) Enforcement Costs. In the event that either the Company or the
Employee initiates an action or claim to enforce any provision or term of this
Agreement, the costs and expenses (including attorney's fees) of the prevailing
party shall be paid by the other party, such party to be deemed to have
prevailed if such action or claim is concluded pursuant to a court order or
final judgment which is not subject to appeal, a settlement agreement or
dismissal of the principle claims.
(d) Binding Effect. This Agreement shall be binding upon and inure
to the benefit of the Company and its successors and assigns.
(e) Entire Agreement; Modification. This Agreement constitutes the
entire agreement of the parties hereto with respect to the subject matter hereof
and may not be modified or amended in any way except in writing by the parties
hereto.
(f) Duration. This Agreement shall continue for so long as any
obligations remain under this Agreement.
(g) Survival. The covenants set forth in Section 1 of this Agreement
shall survive and shall continue to be
-3-
<PAGE>
binding upon Employee as set forth in such Section. The existence of any claim
or cause of action by Employee against Company, whether predicated on this
Agreement or otherwise, shall not constitute a defense to the enforcement by
Company of any or all covenants.
(h) Remedies. The parties recognize that the performance of the
obligations under Section 1 of this Agreement by the Employee is special, unique
and extraordinary in character, and that in the event of the breach by the
Employee of the terms and conditions of Section 1 of this Agreement, the Company
or any of its Affiliates shall be entitled to (a) institute and prosecute
proceedings in any court of competent jurisdiction to enforce the specific
performance hereof by the Employee or to enjoin the Employee from engaging in
any activities prohibited hereunder or (b) pursue any other remedy available at
law or in equity.
-4-
<PAGE>
IN WITNESS WHEREOF, the parties hereto, intending to be legally
bound, have hereunto executed this Agreement the day and year first written
above.
PAYCO AMERICAN CORPORATION
By: /s/ Dennis G. Punches
-----------------------------
Name: Dennis G. Punches
Title: Chairman
EMPLOYEE
/s/ William W. Kagel
-----------------------------
William W. Kagel
<PAGE>
Exhibit 10.24
COVENANT NOT-TO-COMPETE AGREEMENT
THIS COVENANT NOT-TO-COMPETE AGREEMENT, dated August 13, 1996, is made
between Payco American Corporation, a Wisconsin corporation, with offices at 180
North Executive Drive, Brookfield, Wisconsin, 53005-6066, (the "Company"), and
Alvin W. Keeley, an individual residing in the State of Wisconsin (the
"Employee").
R E C I T A L S
WHEREAS OSI Holdings Corp., Boxer Acquisition Corp. and the Company
have entered into an Agreement and Plan of Merger, dated as of the date hereof
(the "Merger Agreement"), pursuant to which Boxer Acquisition Corp. will be
merged with and into the Company;
WHEREAS, the Employee has been and is presently in the employ of the
Company;
WHEREAS, the Employee possesses an intimate knowledge of the business
and affairs of the Company and its policies, procedures, methods and personnel;
WHEREAS, the Employee is willing to enter into the Employment
Agreement dated as of the date hereof whereby the Company has secured the
continued services and employment of the Employee on behalf of the Company;
WHEREAS, in order to provide reasonable assurances and to induce the
Company to enter into the Employment Agreement with Employee, the Company and
Employee have agreed to enter into this Agreement for consideration called for
hereby;
NOW, THEREFORE, the parties hereto hereby agrees as follows:
1. Covenant Not-to-Compete. (a) The Employee covenants and agrees that
he will not:
(i) for a period of one (1) year from the Effective Time (as defined
in the Merger Agreement), within any jurisdiction or marketing area in
which the
<PAGE>
Company or any of its Affiliates (as defined below) is doing business or is
qualified to do business, directly or indirectly own, manage, operate,
control, be employed by or participate in the ownership, management,
operation or control of, or be connected in any manner with, any business
of the type and character engaged in and competitive with that currently
conducted by the Company or any of its Affiliates. For these purposes,
ownership of securities of 5% or less of any class of securities of a
public company shall not be considered to be competition with the Company
or any of its Affiliates; or
(ii) employ, solicit for employment or otherwise contract for the
services of any employee of the Company or any of its Affiliates at the
time of this Agreement, or who shall subsequently become an employee of the
Company or any of its Affiliates.
(b) For the purposes of this Section 1, the term "Affiliate" shall
mean, with respect to the Company, any person or entity which, directly or
indirectly, owns or is owned by, or is under common ownership with, the Company.
The term "own" (including, with correlative meanings, "owned by" and "under
common ownership with") shall mean the ownership of 50% or more of the voting
securities (or their equivalent) of a particular entity.
2. Effectiveness; Consideration for Covenant. This Agreement shall
become effective at the Effective Time. In consideration for Employee's entering
into the foregoing covenant, the Company will pay to the Employee $100,000 at
the Effective Time.
3. Severability. It is the desire and intent of the parties to this
Agreement that the provisions of Section 1 shall be enforced to the fullest
extent permissible under the laws and public policies applied in each
jurisdiction in which enforcement is sought. If any particular provision or
portion of Section 1 shall be adjudicated to be invalid or unenforceable,
Section 1 shall be deemed amended to delete therefrom such provision or portion
adjudicated to be invalid or unenforceable, such amendment to apply only with
respect to the operation of Section 1 in the particular jurisdiction in which
such adjudication is made.
4. General.
-2-
<PAGE>
(a) Governing Law; Jurisdiction. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of New York applicable to contracts executed and to be performed
entirely within said State. Any judicial proceeding brought against any of the
parties to this Agreement or any dispute arising out of this Agreement or any
matter related hereto may be brought in the courts of the State of New York or
in the United States District Court for the Southern District of New York, and,
by execution and delivery of this Agreement, each of the parties to this
Agreement accepts the jurisdiction of said courts, and irrevocably agrees to be
bound by any judgment rendered thereby in connection with this Agreement. The
foregoing consent to jurisdiction shall not be deemed to confer rights on any
person other than the respective parties to this Agreement.
(b) Assignability. Notwithstanding anything else in this Agreement to
the contrary, the Company may assign this Agreement to and all rights hereunder
shall inure to the benefit of any person, firm or corporation succeeding to all
or substantially all of the business or assets of the Company by purchase,
merger or consolidation.
(c) Enforcement Costs. In the event that either the Company or the
Employee initiates an action or claim to enforce any provision or term of this
Agreement, the costs and expenses (including attorney's fees) of the prevailing
party shall be paid by the other party, such party to be deemed to have
prevailed if such action or claim is concluded pursuant to a court order or
final judgment which is not subject to appeal, a settlement agreement or
dismissal of the principle claims.
(d) Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the Company and its successors and assigns.
(e) Entire Agreement; Modification. This Agreement constitutes the
entire agreement of the parties hereto with respect to the subject matter hereof
and may not be modified or amended in any way except in writing by the parties
hereto.
(f) Duration. This Agreement shall continue for so long as any
obligations remain under this Agreement.
(g) Survival. The covenants set forth in Section 1 of this Agreement
shall survive and shall continue to be
-3-
<PAGE>
binding upon Employee as set forth in such Section. The existence of any claim
or cause of action by Employee against Company, whether predicated on this
Agreement or otherwise, shall not constitute a defense to the enforcement by
Company of any or all covenants.
(h) Remedies. The parties recognize that the performance of the
obligations under Section 1 of this Agreement by the Employee is special, unique
and extraordinary in character, and that in the event of the breach by the
Employee of the terms and conditions of Section 1 of this Agreement, the Company
or any of its Affiliates shall be entitled to (a) institute and prosecute
proceedings in any court of competent jurisdiction to enforce the specific
performance hereof by the Employee or to enjoin the Employee from engaging in
any activities prohibited hereunder or (b) pursue any other remedy available at
law or in equity.
-4-
<PAGE>
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound,
have hereunto executed this Agreement the day and year first written above.
PAYCO AMERICAN CORPORATION
By: /s/ Dennis G. Punches
-----------------------
Name: Dennis G. Punches
Title: Chairman
EMPLOYEE
/s/ Alvin W. Keeley
-----------------------
Alvin W. Keeley
<PAGE>
Exhibit 10.25
COVENANT NOT-TO-COMPETE AGREEMENT
THIS COVENANT NOT-TO-COMPETE AGREEMENT, dated August 13, 1996, is made
between Payco American Corporation, a Wisconsin corporation, with offices at 180
North Executive Drive, Brookfield, Wisconsin, 53005-6066, (the "Company"), and
Susan Mathison, an individual residing in the State of Wisconsin (the
"Employee").
R E C I T A L S
WHEREAS OSI Holdings Corp., Boxer Acquisition Corp. and the Company
have entered into an Agreement and Plan of Merger, dated as of the date hereof
(the "Merger Agreement"), pursuant to which Boxer Acquisition Corp. will be
merged with and into the Company;
WHEREAS, the Employee has been and is presently in the employ of the
Company;
WHEREAS, the Employee possesses an intimate knowledge of the business
and affairs of the Company and its policies, procedures, methods and personnel;
WHEREAS, the Employee is willing to enter into the Employment
Agreement dated as of the date hereof whereby the Company has secured the
continued services and employment of the Employee on behalf of the Company;
WHEREAS, in order to provide reasonable assurances and to induce the
Company to enter into the Employment Agreement with Employee, the Company and
Employee have agreed to enter into this Agreement for consideration called for
hereby;
NOW, THEREFORE, the parties hereto hereby agrees as follows:
1. Covenant Not-to-Compete. (a) The Employee covenants and agrees that
he will not:
(i) for a period of one (1) year from the Effective Time (as defined
in the Merger Agreement), within any jurisdiction or marketing area in
which the
<PAGE>
Company or any of its Affiliates (as defined below) is doing business or is
qualified to do business, directly or indirectly own, manage, operate,
control, be employed by or participate in the ownership, management,
operation or control of, or be connected in any manner with, any business
of the type and character engaged in and competitive with that currently
conducted by the Company or any of its Affiliates. For these purposes,
ownership of securities of 5% or less of any class of securities of a
public company shall not be considered to be competition with the Company
or any of its Affiliates; or
(ii) employ, solicit for employment or otherwise contract for the
services of any employee of the Company or any of its Affiliates at the
time of this Agreement, or who shall subsequently become an employee of the
Company or any of its Affiliates.
(b) For the purposes of this Section 1, the term "Affiliate" shall
mean, with respect to the Company, any person or entity which, directly or
indirectly, owns or is owned by, or is under common ownership with, the Company.
The term "own" (including, with correlative meanings, "owned by" and "under
common ownership with") shall mean the ownership of 50% or more of the voting
securities (or their equivalent) of a particular entity.
2. Effectiveness; Consideration for Covenant. This Agreement shall
become effective at the Effective Time. In consideration for Employee's entering
into the foregoing covenant, the Company will pay to the Employee $50,000 at the
Effective Time.
3. Severability. It is the desire and intent of the parties to this
Agreement that the provisions of Section 1 shall be enforced to the fullest
extent permissible under the laws and public policies applied in each
jurisdiction in which enforcement is sought. If any particular provision or
portion of Section 1 shall be adjudicated to be invalid or unenforceable,
Section 1 shall be deemed amended to delete therefrom such provision or portion
adjudicated to be invalid or unenforceable, such amendment to apply only with
respect to the operation of Section 1 in the particular jurisdiction in which
such adjudication is made.
4. General.
-2-
<PAGE>
(a) Governing Law; Jurisdiction. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of New York applicable to contracts executed and to be performed
entirely within said State. Any judicial proceeding brought against any of the
parties to this Agreement or any dispute arising out of this Agreement or any
matter related hereto may be brought in the courts of the State of New York or
in the United States District Court for the Southern District of New York, and,
by execution and delivery of this Agreement, each of the parties to this
Agreement accepts the jurisdiction of said courts, and irrevocably agrees to be
bound by any judgment rendered thereby in connection with this Agreement. The
foregoing consent to jurisdiction shall not be deemed to confer rights on any
person other than the respective parties to this Agreement.
(b) Assignability. Notwithstanding anything else in this Agreement to
the contrary, the Company may assign this Agreement to and all rights hereunder
shall inure to the benefit of any person, firm or corporation succeeding to all
or substantially all of the business or assets of the Company by purchase,
merger or consolidation.
(c) Enforcement Costs. In the event that either the Company or the
Employee initiates an action or claim to enforce any provision or term of this
Agreement, the costs and expenses (including attorney's fees) of the prevailing
party shall be paid by the other party, such party to be deemed to have
prevailed if such action or claim is concluded pursuant to a court order or
final judgment which is not subject to appeal, a settlement agreement or
dismissal of the principle claims.
(d) Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the Company and its successors and assigns.
(e) Entire Agreement; Modification. This Agreement constitutes the
entire agreement of the parties hereto with respect to the subject matter hereof
and may not be modified or amended in any way except in writing by the parties
hereto.
(f) Duration. This Agreement shall continue for so long as any
obligations remain under this Agreement.
(g) Survival. The covenants set forth in Section 1 of this Agreement
shall survive and shall continue to be
-3-
<PAGE>
binding upon Employee as set forth in such Section. The existence of any claim
or cause of action by Employee against Company, whether predicated on this
Agreement or otherwise, shall not constitute a defense to the enforcement by
Company of any or all covenants.
(h) Remedies. The parties recognize that the performance of the
obligations under Section 1 of this Agreement by the Employee is special, unique
and extraordinary in character, and that in the event of the breach by the
Employee of the terms and conditions of Section 1 of this Agreement, the Company
or any of its Affiliates shall be entitled to (a) institute and prosecute
proceedings in any court of competent jurisdiction to enforce the specific
performance hereof by the Employee or to enjoin the Employee from engaging in
any activities prohibited hereunder or (b) pursue any other remedy available at
law or in equity.
-4-
<PAGE>
IN WITNESS WHEREOF, the parties hereto, intending to be legally
bound, have hereunto executed this Agreement the day and year first written
above.
PAYCO AMERICAN CORPORATION
By: /s/ Dennis G. Punches
----------------------------
Name: Dennis G. Punches
Title: Chairman
EMPLOYEE
/s/ Susan Mathison
-------------------------------
Susan Mathison
-5-
<PAGE>
Exhibit 10.26
COVENANT NOT-TO-COMPETE AGREEMENT
THIS COVENANT NOT-TO-COMPETE AGREEMENT, dated August 13, 1996, is made
between Payco American Corporation, a Wisconsin corporation, with offices at 180
North Executive Drive, Brookfield, Wisconsin, 53005-6066, (the "Company"), and
David S. Patterson, an individual residing in the State of Wisconsin (the
"Employee").
R E C I T A L S
WHEREAS OSI Holdings Corp., Boxer Acquisition Corp. and the Company
have entered into an Agreement and Plan of Merger, dated as of the date hereof
(the "Merger Agreement"), pursuant to which Boxer Acquisition Corp. will be
merged with and into the Company;
WHEREAS, the Employee has been and is presently in the employ of the
Company;
WHEREAS, the Employee possesses an intimate knowledge of the business
and affairs of the Company and its policies, procedures, methods and personnel;
WHEREAS, the Employee is willing to enter into the Employment
Agreement dated as of the date hereof whereby the Company has secured the
continued services and employment of the Employee on behalf of the Company;
WHEREAS, in order to provide reasonable assurances and to induce the
Company to enter into the Employment Agreement with Employee, the Company and
Employee have agreed to enter into this Agreement for consideration called for
hereby;
NOW, THEREFORE, the parties hereto hereby agrees as follows:
1. Covenant Not-to-Compete. (a) The Employee covenants and agrees that
he will not:
(i) for a period of one (1) year from the Effective Time (as defined
in the Merger Agreement), within any jurisdiction or marketing area in
which the
<PAGE>
Company or any of its Affiliates (as defined below) is doing business or is
qualified to do business, directly or indirectly own, manage, operate,
control, be employed by or participate in the ownership, management,
operation or control of, or be connected in any manner with, any business
of the type and character engaged in and competitive with that currently
conducted by the Company or any of its Affiliates. For these purposes,
ownership of securities of 5% or less of any class of securities of a
public company shall not be considered to be competition with the Company
or any of its Affiliates; or
(ii) employ, solicit for employment or otherwise contract for the
services of any employee of the Company or any of its Affiliates at the
time of this Agreement, or who shall subsequently become an employee of the
Company or any of its Affiliates.
(b) For the purposes of this Section 1, the term "Affiliate" shall
mean, with respect to the Company, any person or entity which, directly or
indirectly, owns or is owned by, or is under common ownership with, the Company.
The term "own" (including, with correlative meanings, "owned by" and "under
common ownership with") shall mean the ownership of 50% or more of the voting
securities (or their equivalent) of a particular entity.
2. Effectiveness; Consideration for Covenant. This Agreement shall
become effective at the Effective Time. In consideration for Employee's entering
into the foregoing covenant, the Company will pay to the Employee $25,000 at the
Effective Time.
3. Severability. It is the desire and intent of the parties to this
Agreement that the provisions of Section 1 shall be enforced to the fullest
extent permissible under the laws and public policies applied in each
jurisdiction in which enforcement is sought. If any particular provision or
portion of Section 1 shall be adjudicated to be invalid or unenforceable,
Section 1 shall be deemed amended to delete therefrom such provision or portion
adjudicated to be invalid or unenforceable, such amendment to apply only with
respect to the operation of Section 1 in the particular jurisdiction in which
such adjudication is made.
4. General.
-2-
<PAGE>
(a) Governing Law; Jurisdiction. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of New York applicable to contracts executed and to be performed
entirely within said State. Any judicial proceeding brought against any of the
parties to this Agreement or any dispute arising out of this Agreement or any
matter related hereto may be brought in the courts of the State of New York or
in the United States District Court for the Southern District of New York, and,
by execution and delivery of this Agreement, each of the parties to this
Agreement accepts the jurisdiction of said courts, and irrevocably agrees to be
bound by any judgment rendered thereby in connection with this Agreement. The
foregoing consent to jurisdiction shall not be deemed to confer rights on any
person other than the respective parties to this Agreement.
(b) Assignability. Notwithstanding anything else in this Agreement to
the contrary, the Company may assign this Agreement to and all rights hereunder
shall inure to the benefit of any person, firm or corporation succeeding to all
or substantially all of the business or assets of the Company by purchase,
merger or consolidation.
(c) Enforcement Costs. In the event that either the Company or the
Employee initiates an action or claim to enforce any provision or term of this
Agreement, the costs and expenses (including attorney's fees) of the prevailing
party shall be paid by the other party, such party to be deemed to have
prevailed if such action or claim is concluded pursuant to a court order or
final judgment which is not subject to appeal, a settlement agreement or
dismissal of the principle claims.
(d) Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the Company and its successors and assigns.
(e) Entire Agreement; Modification. This Agreement constitutes the
entire agreement of the parties hereto with respect to the subject matter hereof
and may not be modified or amended in any way except in writing by the parties
hereto.
(f) Duration. This Agreement shall continue for so long as any
obligations remain under this Agreement.
(g) Survival. The covenants set forth in Section 1 of this Agreement
shall survive and shall continue to be
-3-
<PAGE>
binding upon Employee as set forth in such Section. The existence of any claim
or cause of action by Employee against Company, whether predicated on this
Agreement or otherwise, shall not constitute a defense to the enforcement by
Company of any or all covenants.
(h) Remedies. The parties recognize that the performance of the
obligations under Section 1 of this Agreement by the Employee is special, unique
and extraordinary in character, and that in the event of the breach by the
Employee of the terms and conditions of Section 1 of this Agreement, the Company
or any of its Affiliates shall be entitled to (a) institute and prosecute
proceedings in any court of competent jurisdiction to enforce the specific
performance hereof by the Employee or to enjoin the Employee from engaging in
any activities prohibited hereunder or (b) pursue any other remedy available at
law or in equity.
-4-
<PAGE>
IN WITNESS WHEREOF, the parties hereto, intending to be legally
bound, have hereunto executed this Agreement the day and year first written
above.
PAYCO AMERICAN CORPORATION
By: /s/ Dennis G. Punches
--------------------------------
Name: Dennis G. Punches
Title: Chairman
EMPLOYEE
/s/ David S. Patterson
--------------------------------
David S. Patterson
-5-
<PAGE>
Exhibit 10.27
COVENANT NOT-TO-COMPETE AGREEMENT
THIS COVENANT NOT-TO-COMPETE AGREEMENT, dated August 13, 1996, is
made between Payco American Corporation, a Wisconsin corporation, with offices
at 180 North Executive Drive, Brookfield, Wisconsin, 53005-6066, (the
"Company"), and Neal R. Sparby, an individual residing in the State of Wisconsin
(the "Employee").
R E C I T A L S
WHEREAS OSI Holdings Corp., Boxer Acquisition Corp. and the Company
have entered into an Agreement and Plan of Merger, dated as of the date hereof
(the "Merger Agreement"), pursuant to which Boxer Acquisition Corp. will be
merged with and into the Company;
WHEREAS, the Employee has been and is presently in the employ of the
Company;
WHEREAS, the Employee possesses an intimate knowledge of the
business and affairs of the Company and its policies, procedures, methods and
personnel;
WHEREAS, the Employee is willing to enter into the Employment
Agreement dated as of the date hereof whereby the Company has secured the
continued services and employment of the Employee on behalf of the Company;
WHEREAS, in order to provide reasonable assurances and to induce the
Company to enter into the Employment Agreement with Employee, the Company and
Employee have agreed to enter into this Agreement for consideration called for
hereby;
NOW, THEREFORE, the parties hereto hereby agrees as follows:
1. Covenant Not-to-Compete. (a) The Employee covenants and agrees
that he will not:
(i) for a period of one (1) year from the Effective Time (as defined
in the Merger Agreement), within any jurisdiction or marketing area in
which the
<PAGE>
Company or any of its Affiliates (as defined below) is doing business or
is qualified to do business, directly or indirectly own, manage, operate,
control, be employed by or participate in the ownership, management,
operation or control of, or be connected in any manner with, any business
of the type and character engaged in and competitive with that currently
conducted by the Company or any of its Affiliates. For these purposes,
ownership of securities of 5% or less of any class of securities of a
public company shall not be considered to be competition with the Company
or any of its Affiliates; or
(ii) employ, solicit for employment or otherwise contract for the
services of any employee of the Company or any of its Affiliates at the
time of this Agreement, or who shall subsequently become an employee of
the Company or any of its Affiliates.
(b) For the purposes of this Section 1, the term "Affiliate" shall
mean, with respect to the Company, any person or entity which, directly or
indirectly, owns or is owned by, or is under common ownership with, the Company.
The term "own" (including, with correlative meanings, "owned by" and "under
common ownership with") shall mean the ownership of 50% or more of the voting
securities (or their equivalent) of a particular entity.
2. Effectiveness; Consideration for Covenant. This Agreement shall
become effective at the Effective Time. In consideration for Employee's entering
into the foregoing covenant, the Company will pay to the Employee $100,000 at
the Effective Time.
3. Severability. It is the desire and intent of the parties to this
Agreement that the provisions of Section 1 shall be enforced to the fullest
extent permissible under the laws and public policies applied in each
jurisdiction in which enforcement is sought. If any particular provision or
portion of Section 1 shall be adjudicated to be invalid or unenforceable,
Section 1 shall be deemed amended to delete therefrom such provision or portion
adjudicated to be invalid or unenforceable, such amendment to apply only with
respect to the operation of Section 1 in the particular jurisdiction in which
such adjudication is made.
4. General.
-2-
<PAGE>
(a) Governing Law; Jurisdiction. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of New York applicable to contracts executed and to be performed
entirely within said State. Any judicial proceeding brought against any of the
parties to this Agreement or any dispute arising out of this Agreement or any
matter related hereto may be brought in the courts of the State of New York or
in the United States District Court for the Southern District of New York, and,
by execution and delivery of this Agreement, each of the parties to this
Agreement accepts the jurisdiction of said courts, and irrevocably agrees to be
bound by any judgment rendered thereby in connection with this Agreement. The
foregoing consent to jurisdiction shall not be deemed to confer rights on any
person other than the respective parties to this Agreement.
(b) Assignability. Notwithstanding anything else in this Agreement
to the contrary, the Company may assign this Agreement to and all rights
hereunder shall inure to the benefit of any person, firm or corporation
succeeding to all or substantially all of the business or assets of the Company
by purchase, merger or consolidation.
(c) Enforcement Costs. In the event that either the Company or the
Employee initiates an action or claim to enforce any provision or term of this
Agreement, the costs and expenses (including attorney's fees) of the prevailing
party shall be paid by the other party, such party to be deemed to have
prevailed if such action or claim is concluded pursuant to a court order or
final judgment which is not subject to appeal, a settlement agreement or
dismissal of the principle claims.
(d) Binding Effect. This Agreement shall be binding upon and inure
to the benefit of the Company and its successors and assigns.
(e) Entire Agreement; Modification. This Agreement constitutes the
entire agreement of the parties hereto with respect to the subject matter hereof
and may not be modified or amended in any way except in writing by the parties
hereto.
(f) Duration. This Agreement shall continue for so long as any
obligations remain under this Agreement.
(g) Survival. The covenants set forth in Section 1 of this Agreement
shall survive and shall continue to be
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<PAGE>
binding upon Employee as set forth in such Section. The existence of any claim
or cause of action by Employee against Company, whether predicated on this
Agreement or otherwise, shall not constitute a defense to the enforcement by
Company of any or all covenants.
(h) Remedies. The parties recognize that the performance of the
obligations under Section 1 of this Agreement by the Employee is special, unique
and extraordinary in character, and that in the event of the breach by the
Employee of the terms and conditions of Section 1 of this Agreement, the Company
or any of its Affiliates shall be entitled to (a) institute and prosecute
proceedings in any court of competent jurisdiction to enforce the specific
performance hereof by the Employee or to enjoin the Employee from engaging in
any activities prohibited hereunder or (b) pursue any other remedy available at
law or in equity.
-4-
<PAGE>
IN WITNESS WHEREOF, the parties hereto, intending to be legally
bound, have hereunto executed this Agreement the day and year first written
above.
PAYCO AMERICAN CORPORATION
By: /s/ Dennis G. Punches
-----------------------------
Name: Dennis G. Punches
Title: Chairman
EMPLOYEE
/s/ Neal R. Sparby
-----------------------------
Neal R. Sparby
-5-
<PAGE>
Exhibit 10.28
COVENANT NOT-TO-COMPETE AGREEMENT
THIS COVENANT NOT-TO-COMPETE AGREEMENT, dated August 13, 1996, is
made between Payco American Corporation, a Wisconsin corporation, with offices
at 180 North Executive Drive, Brookfield, Wisconsin, 53005-6066, (the
"Company"), and John P. Stetzenbach, an individual residing in the State of
Wisconsin (the "Employee").
R E C I T A L S
WHEREAS OSI Holdings Corp., Boxer Acquisition Corp. and the Company
have entered into an Agreement and Plan of Merger, dated as of the date hereof
(the "Merger Agreement"), pursuant to which Boxer Acquisition Corp. will be
merged with and into the Company;
WHEREAS, the Employee has been and is presently in the employ of the
Company;
WHEREAS, the Employee possesses an intimate knowledge of the
business and affairs of the Company and its policies, procedures, methods and
personnel;
WHEREAS, the Employee is willing to enter into the Employment
Agreement dated as of the date hereof whereby the Company has secured the
continued services and employment of the Employee on behalf of the Company;
WHEREAS, in order to provide reasonable assurances and to induce the
Company to enter into the Employment Agreement with Employee, the Company and
Employee have agreed to enter into this Agreement for consideration called for
hereby;
NOW, THEREFORE, the parties hereto hereby agrees as follows:
1. Covenant Not-to-Compete. (a) The Employee covenants and agrees
that he will not:
(i) for a period of one (1) year from the Effective Time (as defined
in the Merger Agreement), within any jurisdiction or marketing area in
which the
<PAGE>
Company or any of its Affiliates (as defined below) is doing business or
is qualified to do business, directly or indirectly own, manage, operate,
control, be employed by or participate in the ownership, management,
operation or control of, or be connected in any manner with, any business
of the type and character engaged in and competitive with that currently
conducted by the Company or any of its Affiliates. For these purposes,
ownership of securities of 5% or less of any class of securities of a
public company shall not be considered to be competition with the Company
or any of its Affiliates; or
(ii) employ, solicit for employment or otherwise contract for the
services of any employee of the Company or any of its Affiliates at the
time of this Agreement, or who shall subsequently become an employee of
the Company or any of its Affiliates.
(b) For the purposes of this Section 1, the term "Affiliate" shall
mean, with respect to the Company, any person or entity which, directly or
indirectly, owns or is owned by, or is under common ownership with, the Company.
The term "own" (including, with correlative meanings, "owned by" and "under
common ownership with") shall mean the ownership of 50% or more of the voting
securities (or their equivalent) of a particular entity.
2. Effectiveness; Consideration for Covenant. This Agreement shall
become effective at the Effective Time. In consideration for Employee's entering
into the foregoing covenant, the Company will pay to the Employee a "Special
Bonus" at the Effective Time.
3. Severability. It is the desire and intent of the parties to this
Agreement that the provisions of Section 1 shall be enforced to the fullest
extent permissible under the laws and public policies applied in each
jurisdiction in which enforcement is sought. If any particular provision or
portion of Section 1 shall be adjudicated to be invalid or unenforceable,
Section 1 shall be deemed amended to delete therefrom such provision or portion
adjudicated to be invalid or unenforceable, such amendment to apply only with
respect to the operation of Section 1 in the particular jurisdiction in which
such adjudication is made.
4. General.
-2-
<PAGE>
(a) Governing Law; Jurisdiction. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of New York applicable to contracts executed and to be performed
entirely within said State. Any judicial proceeding brought against any of the
parties to this Agreement or any dispute arising out of this Agreement or any
matter related hereto may be brought in the courts of the State of New York or
in the United States District Court for the Southern District of New York, and,
by execution and delivery of this Agreement, each of the parties to this
Agreement accepts the jurisdiction of said courts, and irrevocably agrees to be
bound by any judgment rendered thereby in connection with this Agreement. The
foregoing consent to jurisdiction shall not be deemed to confer rights on any
person other than the respective parties to this Agreement.
(b) Assignability. Notwithstanding anything else in this Agreement
to the contrary, the Company may assign this Agreement to and all rights
hereunder shall inure to the benefit of any person, firm or corporation
succeeding to all or substantially all of the business or assets of the Company
by purchase, merger or consolidation.
(c) Enforcement Costs. In the event that either the Company or the
Employee initiates an action or claim to enforce any provision or term of this
Agreement, the costs and expenses (including attorney's fees) of the prevailing
party shall be paid by the other party, such party to be deemed to have
prevailed if such action or claim is concluded pursuant to a court order or
final judgment which is not subject to appeal, a settlement agreement or
dismissal of the principle claims.
(d) Binding Effect. This Agreement shall be binding upon and inure
to the benefit of the Company and its successors and assigns.
(e) Entire Agreement; Modification. This Agreement constitutes the
entire agreement of the parties hereto with respect to the subject matter hereof
and may not be modified or amended in any way except in writing by the parties
hereto.
(f) Duration. This Agreement shall continue for so long as any
obligations remain under this Agreement.
(g) Survival. The covenants set forth in Section 1 of this Agreement
shall survive and shall continue to be
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<PAGE>
binding upon Employee as set forth in such Section. The existence of any claim
or cause of action by Employee against Company, whether predicated on this
Agreement or otherwise, shall not constitute a defense to the enforcement by
Company of any or all covenants.
(h) Remedies. The parties recognize that the performance of the
obligations under Section 1 of this Agreement by the Employee is special, unique
and extraordinary in character, and that in the event of the breach by the
Employee of the terms and conditions of Section 1 of this Agreement, the Company
or any of its Affiliates shall be entitled to (a) institute and prosecute
proceedings in any court of competent jurisdiction to enforce the specific
performance hereof by the Employee or to enjoin the Employee from engaging in
any activities prohibited hereunder or (b) pursue any other remedy available at
law or in equity.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto, intending to be legally
bound, have hereunto executed this Agreement the day and year first written
above.
PAYCO AMERICAN CORPORATION
By: /s/ Dennis G. Punches
-----------------------------
Name: Dennis G. Punches
Title: Chairman
EMPLOYEE
/s/ John P. Stetzenbach
-----------------------------
John P. Stetzenbach
-5-
<PAGE>
Exhibit 10.29
COVENANT NOT-TO-COMPETE AGREEMENT
THIS COVENANT NOT-TO-COMPETE AGREEMENT, dated August 13, 1996, is made
between Payco American Corporation, a Wisconsin corporation, with offices at 180
North Executive Drive, Brookfield, Wisconsin, 53005-6066, (the "Company"), and
Joseph T. Treleven, an individual residing in the State of Colorado
("Treleven").
R E C I T A L S
WHEREAS OSI Holdings Corp., Boxer Acquisition Corp. and the Company
have entered into an Agreement and Plan of Merger, dated as of the date hereof
(the "Merger Agreement"), pursuant to which Boxer Acquisition Corp. will be
merged with and into the Company;
WHEREAS, Treleven has been and is presently serving as a employee of
the Company; and
WHEREAS, Treleven possesses knowledge of the business and affairs of
the Company and its policies, procedures, methods and personnel.
NOW, THEREFORE, the parties hereto hereby agrees as follows:
1. Covenant Not-to-Compete. (a) Treleven covenants and agrees that he
will not:
(i) for a period of three (3) years from the Effective Time (as
defined in the Merger Agreement), within any jurisdiction or marketing area
in which the Company or any of its Affiliates (as defined below) is doing
business or is qualified to do business, directly or indirectly own,
manage, operate, control, be employed by or participate in the ownership,
management, operation or control of, or be connected in any manner with,
any business of the type and character engaged in and competitive with that
currently conducted by the Company or any of its Affiliates. For these
purposes, ownership of securities of 5% or less of any class of securities
of a public company shall not be considered
<PAGE>
to be competition with the Company or any of its Affiliates; or
(ii) employ, solicit for employment or otherwise contract for the
services of any employee of the Company or any of its Affiliates at the
time of this Agreement, or who shall subsequently become an employee of the
Company or any of its Affiliates.
(b) For the purposes of this Section 1, the term "Affiliate" shall
mean, with respect to the Company, any person or entity which, directly or
indirectly, owns or is owned by, or is under common ownership with, the Company.
The term "own" (including, with correlative meanings, "owned by" and "under
common ownership with") shall mean the ownership of 50% or more of the voting
securities (or their equivalent) of a particular entity.
2. Effectiveness; Consideration for Covenant. This Agreement shall
become effective at the Effective Time. In consideration for Treleven's entering
into the foregoing covenant, the Company will pay to Treleven $200,000 at the
Effective Time.
3. Severability. It is the desire and intent of the parties to this
Agreement that the provisions of Section 1 shall be enforced to the fullest
extent permissible under the laws and public policies applied in each
jurisdiction in which enforcement is sought. If any particular provision or
portion of Section 1 shall be adjudicated to be invalid or unenforceable,
Section 1 shall be deemed amended to delete therefrom such provision or portion
adjudicated to be invalid or unenforceable, such amendment to apply only with
respect to the operation of Section 1 in the particular jurisdiction in which
such adjudication is made.
4. General.
(a) Governing Law; Jurisdiction. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of New York applicable to contracts executed and to be performed
entirely within said State. Any judicial proceeding brought against any of the
parties to this Agreement or any dispute arising out of this Agreement or any
matter related hereto may be brought in the courts of the State of New York or
in the United States District Court for the Southern District of New York, and,
by execution and delivery of this Agreement, each of the parties to this
Agreement accepts the
-2-
<PAGE>
jurisdiction of said courts, and irrevocably agrees to be bound by any judgment
rendered thereby in connection with this Agreement. The foregoing consent to
jurisdiction shall not be deemed to confer rights on any person other than the
respective parties to this Agreement.
(b) Assignability. Notwithstanding anything else in this Agreement to
the contrary, the Company may assign this Agreement to and all rights hereunder
shall inure to the benefit of any person, firm or corporation succeeding to all
or substantially all of the business or assets of the Company by purchase,
merger or consolidation.
(c) Enforcement Costs. In the event that either the Company or
Treleven initiates an action or claim to enforce any provision or term of this
Agreement, the costs and expenses (including attorney's fees) of the prevailing
party shall be paid by the other party, such party to be deemed to have
prevailed if such action or claim is concluded pursuant to a court order or
final judgment which is not subject to appeal, a settlement agreement or
dismissal of the principle claims.
(d) Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the Company and its successors and assigns.
(e) Entire Agreement; Modification. This Agreement constitutes the
entire agreement of the parties hereto with respect to the subject matter hereof
and may not be modified or amended in any way except in writing by the parties
hereto.
(f) Duration. This Agreement shall continue for so long as any
obligations remain under this Agreement.
(g) Survival. The covenants set forth in Section 1 of this Agreement
shall survive and shall continue to be binding upon Treleven as set forth in
such Section. The existence of any claim or cause of action by Treleven against
Company, whether predicated on this Agreement or otherwise, shall not constitute
a defense to the enforcement by Company of any or all covenants.
(h) Remedies. The parties recognize that the performance of the
obligations under Section 1 of this Agreement by Treleven is special, unique and
extraordinary in character, and that in the event of the breach by Treleven of
the terms and conditions of Section 1 of this Agreement, the
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<PAGE>
Company or any of its Affiliates shall be entitled to (a) institute and
prosecute proceedings in any court of competent jurisdiction to enforce the
specific performance hereof by Treleven or to enjoin Treleven from engaging in
any activities prohibited hereunder or (b) pursue any other remedy available at
law or in equity.
-4-
<PAGE>
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound,
have hereunto executed this Agreement the day and year first written above.
PAYCO AMERICAN CORPORATION
By: /s/ Dennis G. Punches
-----------------------------
Name: Dennis G. Punches
Title: Chairman
/s/ Joseph T. Treleven
--------------------------------
Joseph T. Treleven
<PAGE>
Exhibit 10.30
9% NON-NEGOTIABLE SUBORDINATED NOTE
January 10, 1996 $5,000,000
Outsourcing Solutions Incorporated, a Delaware corporation (the
"Borrower"), hereby promises upon the terms and subject to the provisions hereof
to pay to Alan M. Miller (the "Holder"), the principal amount of Five Million
Dollars ($5,000,000).
This 9% Non-Negotiable Junior Subordinated Note (the "Note") was
issued pursuant to the Stock Purchase Agreement, dated as of December 13, 1995,
between OSI Holdings Corp., the Borrower, A.M. Miller & Associates, Inc. and the
Holder.
1. Definitions. As used herein, the following terms shall have the
following meanings:
"Indebtedness" means (i) all obligations for borrowed money or for the
deferred purchase price of property or services (including, without limitation,
all obligations contingent or otherwise in connection with acceptance, letter of
credit or similar facilities, (ii) all obligations evidenced by bonds, notes,
debentures or other similar instruments or securities, (iii) all indebtedness
created or arising under any sale and leaseback arrangement, conditional sale or
other title retention agreement with respect to property owned or acquired
(whether or not the rights and remedies of the seller or lender under such
agreement in the event of default are limited to repossession or sale of such
property), (iv) all rental obligations under capital leases to the extent not
included in clause (iii) above, (v) all guarantees (direct or indirect), all
contingent reimbursement obligations under undrawn letters of credit and all
other contingent obligations in respect of, or obligations to purchase or
otherwise acquire or to assure payment of, indebtedness of others and (vi)
indebtedness of others secured by any lien upon property, whether or not
assumed, but only to the extent of such property's fair market value.
"Person" means an individual, a partnership, a corporation, an
association, a limited liability company, a joint stock company, a trust, a
joint venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
<PAGE>
"Senior Agent" shall mean Heller Financial, Inc., as Co-Agent,
National Westminster Bank Plc, as Co-Agent, or any agent or representative
designated in writing by the Senior Lenders for purposes of this Agreement.
"Senior Credit Agreement" shall mean the Credit Agreement, dated as of
the date hereof, by and among the Borrower, Heller Financial, Inc. and National
Westminster Bank Plc ("NatWest") as lenders, co-arrangers and coadministrative
agents, NatWest as L/C issuer and such other persons executing the Credit
Agreement as Lenders, as administrative agent, and the institutions named
therein as lenders, as amended, modified or supplemented from time to time
hereafter, together with any credit agreement or similar document from time to
time executed by the Borrower to evidence any Refinancing (as defined in the
definition of Senior Indebtedness) or successive Refinancings.
"Senior Indebtedness" shall mean (i) all Obligations (as defined in
the Senior Credit Agreement) (including Contingent Obligations, as defined in
the Senior Credit Agreement) now or hereafter incurred pursuant to and in
accordance with the terms of the Senior Debt Documents, (ii) any additional
Indebtedness incurred under or pursuant to the Senior Credit Agreement and the
other Senior Debt Documents whether such Obligations or additional Indebtedness
involve principal prepayment charges, interest (including, without limitation,
interest accruing after the filing of a petition initiating any proceeding under
the Bankruptcy Code, whether or not allowed as a claim in such proceeding)
indemnities or reimbursement of fees, expenses or other amounts, and (iii) any
indebtedness incurred for the purpose of refinancing, restructuring, extending
or renewing (collectively, "Refinancing") the obligations of the Borrower under
the Senior Credit Agreement as set forth in clauses (i) and (ii) above.
"Senior Debt Documents" shall mean the Senior Credit Agreement and all
other documents and instruments delivered or filed in connection with the
creation or incurrence of any Senior Indebtedness (including, without
limitation, the guaranty agreements executed and delivered by the Companies (as
defined in the Senior Credit Agreement) in respect of the Obligations of the
Borrower under the Senior Credit Agreement).
"Senior Lenders" shall mean Heller Financial, Inc., National
Westminster Bank Plc and each other Person to which an interest in the Loans is
transferred pursuant to Section
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<PAGE>
8.1 of the Senior Credit Agreement and all other holders of Senior Indebtedness.
2. Payment of Interest. Interest shall accrue on the unpaid principal
amount of this Note from the date hereof at the rate of 9% per annum (the
"Interest Rate"), calculated on the basis of a 365 day year. The Borrower shall
pay interest quarterly in arrears on the fifteenth day of January, April, July
and October in each year (each, an "Interest Payment Date") commencing on April
15, 1996.
3. Payment of Principal.
(a) Scheduled Payment. On July 10, 2001 (the "Maturity Date"), the
Borrower shall pay to the holder of this Note the entire principal amount of
this Note, plus all accrued and unpaid interest hereon which is then unpaid.
(b) Optional Prepayments. Subject to the provisions of Section 4
hereof, the Borrower may, at any time and from time to time, without premium or
penalty, prepay all or a portion of the unpaid principal amount of this Note,
together with unpaid interest accrued since the preceding Interest Payment Date
to which interest has been paid on such portion of the principal amount which it
is prepaying; provided, that no such prepayment shall be made if such prepayment
is then prohibited by the terms of any Senior Indebtedness. A prepayment of less
than all of the unpaid principal amount of this Note shall not relieve the
Borrower of its obligation to make the scheduled payment on this Note on the
Maturity Date. Each partial payment under this Note shall first be credited to
accrued and unpaid interest on the principal being prepaid, and the remainder
shall be credited to principal. Whenever any payment to be made hereunder shall
be due on a date which is not a business day, the payment shall be made on the
next succeeding business day and such extension of time shall be included in the
computation of interest with respect to such payment.
4. Subordination.
(a) Agreement to Subordinate. The Borrower and, by its acceptance
hereof, each Holder agree that the indebtedness of the Borrower evidenced by
this Note, whether for principal, interest on any other amount payable under or
in respect hereof (the "Subordinated Obligations"), shall be junior and
subordinate in right of payment to the prior payment in full of all Senior
Indebtedness, in accordance with the provisions of this Section 4. Each holder
of Senior
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<PAGE>
Indebtedness shall be deemed to have acquired Senior Indebtedness in reliance
upon the agreements of the Borrower and the holder of this Note contained in
this Section 4. The provisions of this Section 4 shall be reinstated if at any
time any payment of any of the Senior Indebtedness is rescinded or must
otherwise be returned by any holder of Senior Indebtedness or any representative
of such holder upon the insolvency, bankruptcy or reorganization of the
Borrower. Any provision of this Note to the contrary notwithstanding, (other
than the provision contained in Section 6) the Borrower shall not make, and no
Holder shall accept, any payment or prepayment of principal, or prepayment of
other amounts due thereunder, of any kind whatsoever with respect to the
Subordinated Obligations at any time when any of the Senior Indebtedness remains
outstanding. Holder may receive interest payments in respect of the Subordinated
Obligations in accordance with the terms of this Note except to the extent and
at the times prohibited or restricted by the provisions of this Section 4. In no
event shall the Holder commence any action or proceeding to contest the
provisions of this Section 4 or the priority of the Liens (as defined in the
Senior Credit Agreement) granted to the holders of the Senior Indebtedness by
the Borrower. No Holder shall take, accept or receive any collateral security
from the Borrower for the payment of the Subordinated Obligations.
(b) Liquidation, Dissolution, Bankruptcy. In the event of any
insolvency, bankruptcy, dissolution, winding up, liquidation, arrangement,
reorganization, marshalling of assets or liabilities, composition, assignment
for the benefit of creditors or other similar proceedings relating to the
Borrower, its debts, its property or its operations, whether voluntary or
involuntary, including, without limitation the filing of any petition or the
taking of any action to commence any of the foregoing (which, in the case of
action by a third party, is not dismissed within 60 days) (a "Bankruptcy
Event"), all Senior Indebtedness shall first be paid in full in cash or other
immediately available funds before Holder shall be entitled to receive or retain
any payment or distribution of assets of the Borrower with respect to any
Subordinated Obligations. In the event of any such Bankruptcy Event, any payment
or distribution of assets to which Holder would be entitled if the Subordinated
Obligations were not subordinated to the Senior Indebtedness in accordance with
this Section 4, whether in cash, property, securities or otherwise, shall be
paid or delivered by the debtor, custodian, trustee or agent or other Person
making such payment or distribution, or by the Holder if received by it,
directly to the Senior Agent on behalf of the holders of
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<PAGE>
the Senior Indebtedness for application to the payment of the Senior
Indebtedness remaining unpaid, to the extent necessary to make payment in full
in cash or other immediately available funds of all Senior Indebtedness
remaining unpaid, after giving effect to any concurrent payment or distribution
to or for the holders of the Senior Indebtedness.
(c) No Payments with Respect to Subordinated Obligations in Certain
Circumstances.
(i) In circumstances in which Section 4(b) is not applicable, no
payment of any nature in respect of the Subordinated Obligations
(including, without limitation, pursuant to any judgment with respect
thereto) shall be made by or on behalf of the Borrower if, at the time of
such payment:
(A) a default in the payment when due (whether at the maturity
thereof, or upon acceleration of maturity or otherwise and without
giving effect to any applicable grace periods) of all or any portion
of the Senior Indebtedness (whether of principal, interest or any
other amount with respect thereto) shall have occurred, and such
default shall not have been cured or waived in accordance with the
terms of the Senior Debt Documents; or
(B) subject to the last sentence of this Section 4(c), (x) the
Borrower and the Holder shall have received notice from the Senior
Agent of the occurrence of one or more Events of Default (as defined
in the Senior Credit Agreement) in respect of the Senior Indebtedness
(other than payment defaults described in Section 4(c)(i)(A) above),
(y) each such Event of Default shall not have been cured or waived in
accordance with the terms of the Senior Debt Documents, and (z) 180
days shall not have elapsed since the date such notice was received.
The Borrower may resume payments (and may make any payments missed
due to the application of Section 4(c)(i) in respect of the Subordinated
Obligations or any judgment with respect thereto:
(A) in the case of a default referred to in clause (A) of this
Section 4(c)(i), upon a cure or
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<PAGE>
waiver thereof in accordance with the terms of the Senior Debt
Documents; or
(B) in the case of an Event of Default or Events of Default
referred to in clause (B) of this Section 4(c)(i), upon the earlier to
occur of (1) the cure or waiver of all such Events of Default in
accordance with the terms of the Senior Debt Documents, or (2) the
expiration of such period of 180 days.
(ii) Following any acceleration of the maturity of any Senior
Indebtedness and as long as such acceleration shall continue unrescinded
and unannulled, such Senior Indebtedness shall first be paid in full in
cash, or provision for such payment shall be made in a manner satisfactory
to the holders of the Senior Indebtedness, before any payment is made on
account of or applied on the Subordinated Obligations.
(iii) The Borrower shall give prompt written notice to the Holder of
(i) any default in respect of Senior Obligations referred to in Section
4(c)(i)(A) and (ii) any notice of the type described in Section 4(c)(i)(B)
from the Senior Agent.
(d) When Distribution Must Be Paid Over. In the event that Holder
shall receive any payment or distribution of assets that Holder is not entitled
to receive or retain under the provisions of this Note, Holder shall hold any
amount so received in trust for the holders of Senior Indebtedness, shall
segregate such assets from other assets held by Holder and shall forthwith turn
over such payment or distribution (without liability for interest thereon) to
the Senior Agent on behalf of the holders of Senior Indebtedness in the form
received (with any necessary endorsement) to be applied to Senior Indebtedness.
(e) Exercise of Remedies. So long as any Senior Indebtedness is
outstanding (including any loans, any commitments to lend or any lender
guarantees), Holder (solely in its capacity as a holder of this Note) shall not
exercise any rights or remedies with respect to an Event of Default under this
Note, including, without limitation, any action (1) to demand or sue for
collection of amounts payable hereunder, (2) to accelerate the principal of this
Note, or (3) to commence or join with any other creditor (other than the holder
of a majority in principal amount of the Senior Indebtedness) in commencing any
proceeding in connection with
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<PAGE>
or premised on the occurrence of a Bankruptcy Event prior to the earlier of:
(A) the payment in full in cash or other immediately available funds
of all Senior Indebtedness;
(B) the initiation of a proceeding (other than a proceeding prohibited
by clause (3) of this Section 4(e)) in connection with or premised upon the
occurrence of a Bankruptcy Event;
(C) the expiration of 270 days immediately following the receipt by
the Senior Agent of notice of the occurrence of such Event of Default from
the Holder; and
(D) the acceleration of the maturity of the Senior Indebtedness;
provided, however, that if, with respect to (B) and (D) above, such proceeding
or acceleration, respectively, is rescinded, or with respect to (C) above,
during such 270-day period such Event of Default has been cured or waived, the
prohibition against taking the actions described in this Section 4(e) shall
automatically be reinstated as of the date of the rescission, cure or waiver, as
applicable. In all events, unless an event described in clause (A), (B) or (D)
above has occurred and not been rescinded, the Holder shall give ten (10) days
prior written notice to the Senior Agent before taking any action described in
this Section 4(e), which notice shall describe with specificity the action that
the Holder in good faith intends to take.
(f) Acceleration of Payment of Note. If this Note is declared due and
payable prior to the Maturity Date, no direct or indirect payment that is due
solely by reason of such declaration shall be made, nor shall application be
made of any distribution of assets of the Borrower (whether by set off or in any
other manner, including, without limitation, from or by way of collateral) to
the payment, purchase or other acquisition or retirement of this Note, unless,
in either case, (i) all amounts due or to become due on or in respect of the
Senior Indebtedness shall have been previously paid in full in cash or other
immediately available funds or in any other manner satisfactory to all holders
of such Senior Indebtedness, (ii) all commitments to lend under Senior
Indebtedness shall have been terminated, (iii) all guarantees constituting
Senior Indebtedness shall have been
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<PAGE>
terminated and (iv) all lender guarantees constituting Senior Indebtedness shall
have been permanently reduced to zero.
(g) Proceedings Against Borrower. So long as any Senior Indebtedness
is outstanding (including any loans, any commitments to lend or open lender
guarantees or any lender guarantees, Holder (solely in its capacity as a holder
of this Note) shall not commence any bankruptcy, insolvency, reorganization or
other similar proceeding against Borrower.
(h) Amending Senior Indebtedness. Any holder of Senior Indebtedness
may, at any time and from time to time, without the consent of or notice to
Holder (i) extend or renew or modify or amend the terms of the Senior
Indebtedness, (ii) sell, exchange, release, fail to perfect a lien on or a
security interest in or otherwise in any manner deal with or apply any property
pledged or mortgaged to secure, or otherwise securing, Senior Indebtedness,
(iii) release any guarantor or any other person liable in any manner for the
Senior Indebtedness, (iv) exercise or refrain from exercising any rights against
Borrower or any other person, (v) apply any sums by whomever paid or however
realized to Senior Indebtedness or (vi) take any other action that might be
deemed to impair in any way the rights of the holder of this Note. Any and all
of such actions may be taken by the holders of Senior Indebtedness without
incurring responsibility to Holder and without impairing or releasing the
obligations of Holder to the holders of Senior Indebtedness.
(i) Certain Rights in Bankruptcy. Holder hereby irrevocably authorizes
and empowers each holder of Senior Indebtedness (and its representative or
representatives) to demand, sue for, collect and receive all payments and
distributions under the terms of this Note, to file and prove all claims
(including claims in bankruptcy) relating to this Note, to exercise any right to
vote arising with respect to this Note and any claims hereunder in any
bankruptcy, insolvency or similar proceeding and take any and all other actions
in the name of Holder (solely in its capacity as a holder of this Note), as such
holder of Senior Indebtedness determines to be necessary or appropriate.
(j) Subrogation. No payment or distribution to any holder of Senior
Indebtedness pursuant to the provisions of this Note shall entitle Holder to
exercise any right of subrogation in respect thereof until (i)(w) all Senior
Indebtedness shall have been paid in full in cash or other immediately available
funds or in any other manner
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<PAGE>
satisfactory to all holders of Senior Indebtedness, (x) all commitments to lend
under Senior Indebtedness shall have been terminated, (y) all guarantees
constituting Senior Indebtedness shall have been terminated and (z) all lender
guarantees constituting Senior Indebtedness shall have been permanently reduced
to zero or (ii) all holders of Senior Indebtedness have consented in writing to
the taking of such action.
(k) Relative Rights. The provisions of this Section 4 are for the
benefit of the holders of Senior Indebtedness (and their successors and assigns)
and shall be enforceable by them directly against Holder. Holder acknowledges
and agrees that any breach of the provisions of this Section 4 will cause
irreparable harm for which the payment of monetary damages may be inadequate.
For this reason, Holder agrees that, in addition to any remedies at law or
equity to which a holder of the Senior Indebtedness may be entitled, a holder of
the Senior Indebtedness will be entitled to an injunction or other equitable
relief to prevent breaches of the provisions of this Section 4 and/or to compel
specific performance of such provisions. The provisions of this Section 4 shall
continue to be effective or be reinstated, as the case may be, if at any time
any payment of Senior Indebtedness is rescinded or must otherwise be returned by
any holder of Senior Indebtedness upon the occurrence of a Bankruptcy Event or
otherwise, all as though such payment had not been made. The provisions of this
Section 4 are not intended to impair and shall not impair as between Borrower
and Holder, the obligation of Borrower, which is absolute and unconditional, to
pay Holder all amounts owing under this Note.
(m) Reliance on Orders and Decrees. Subject to the provisions of
Section 4(d) hereof, upon any payment or distribution of assets of Borrower,
whether in cash, property, securities or otherwise, Holder shall be entitled to
rely upon any order or decree entered by any court of competent jurisdiction in
which any insolvency, bankruptcy, receivership, liquidation, reorganization,
dissolution, winding up or similar case or proceeding is pending, or a
certificate of the trustee in bankruptcy, receiver, liquidating trustee,
custodian, assignee for the benefit of creditors, agent or other Person making
such payment or distribution, delivered to Holder for the purpose of
ascertaining the Persons entitled to participate in such payment or
distribution, the holders of Senior Indebtedness, the amount thereof or payable
thereon, the amount or amounts
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<PAGE>
paid or distributed thereon and all other facts pertinent thereto or to this
Section 4.
5. Events of Default.
(a) Definition. The following shall be an "Event of Default" under
this Note:
(i) the Borrower shall fail to make any payment of interest on this
Note when the same shall become due and payable and such failure shall
continue for a period of 5 days;
(ii) the Borrower shall fail to make any payment of the principal of
this Note when the same shall become due and payable, whether on the
Maturity Date or otherwise;
(iii) (A) the Borrower shall commence any case, proceeding or action
(x) under any existing or future law of any jurisdiction, domestic or
foreign, relating to bankruptcy, insolvency, reorganization or relief of
debtors, seeking to have an order for relief entered with respect to it, or
seeking to adjudicate it a bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to its debts, or (y)
seeking appointment of a receiver, trustee, custodian or other similar
official for it or for all or any substantial part of its assets, (B) the
Borrower shall make a general assignment for the benefit of its creditors,
(C) there shall be commenced against the Borrower any case, proceeding or
other action of a nature referred to in clause (A) above which shall not
have been vacated or discharged within 60 days from the commencement
thereof, or (iv) a court shall enter a decree or order for relief in any
involuntary case under Title 11 of the United States Code, as amended from
time to time, or any applicable bankruptcy or similar law now or hereafter
in effect, which decree or order is not stayed, vacated, discharged, or
bonded pending appeal within 60 days from the entry thereof; or
(iv) the acceleration of the maturity of the Senior Indebtedness.
(b) Remedies. If an Event of Default shall occur and be continuing,
then, subject to the provisions of Section 4, the Holder may, upon written
notice to the Borrower,
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<PAGE>
declare all amounts owing under this Note to be immediately due and payable.
Subject to the immediately preceding paragraph and to Section 4 above,
the Holder shall also have all other rights in respect of this Note following
the occurrence and during the continuance of an Event of Default which are
available pursuant to applicable law or in equity.
6. Pledge Agreement. Anything in this Note to the contrary
notwithstanding, nothing in this Note shall preclude the Holder from timely
exercising such Holder's right pursuant to Section 6 of the Pledge Agreement
(the "Pledge Agreement") dated as of the date hereof, by and between the Holder
and the Borrower to set-off Secured Obligations (as defined in the Pledge
Agreement) against this Note and/or interest payments under this Note.
7. No Presentment. The Borrower, for itself and any guarantors hereof,
and their successors and assigns, waives presentment, demand, protest and notice
thereof or of dishonor, and waives any right to be released by reason of any
extension of time or change in the terms of payment.
8. Amendment. So long as any Senior Indebtedness is outstanding
(including any commitment under the Senior Agent Documents) the terms of this
Note may be amended only with the consent of the Senior Agent. Subject to the
foregoing, without the consent of the Senior Agent hereof, this Note may be
amended by the Borrower and the Holder to cure any ambiguity, defect or
inconsistency.
9. Cancellation. After all unpaid principal and interest owed on this
Note has been paid in full, this Note shall be surrendered to the Borrower for
cancellation and shall not be reissued.
10. Registration of Transfer. In the event of a permitted assignment
or transfer of this Note by Holder, Holder shall surrender this Note to Borrower
at the time of such assignment or transfer and Borrower shall simultaneously
with such surrender, reissue and deliver a new note in the form of this Note in
the name of the assignee or transferee in the same aggregate outstanding
principal amount as the surrendered Note.
11. Payment of Expenses. The Borrower agrees to pay all costs and
expenses (including reasonable attorneys' fees) reasonably incurred by the
Holder after the occurrence
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and during the continuance of an Event of Default in enforcing any obligations
under this Note or in collecting any payments due from Borrower under this Note
(including in connection with a bankruptcy or insolvency proceeding with respect
to the Borrower).
12. Governing Law. The construction, validity and interpretation of
this Note shall be governed by and construed in accordance with the domestic
laws of the State of New York, without giving effect to any choice of law or
conflict of law provision or rule (whether of the State of New York or any other
jurisdiction) that would cause the application of the laws of any jurisdiction
other than the State of New York.
13. Descriptive Headings. The descriptive headings of this Note are
inserted for convenience only, and do not constitute a part of this Note.
IN WITNESS WHEREOF, the Borrower has executed and delivered this Note
on the date first written above.
OUTSOURCING SOLUTIONS INCORPORATED
By: /s/ David E. King
--------------------------
Name: David E. King
Title: Vice President
Agreed:
/s/ Alan M. Miller
- ----------------------------
ALAN M. MILLER
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<PAGE>
Exhibit 10.31
OUTSOURCING SOLUTIONS INC.
1995 STOCK OPTION AND STOCK AWARD PLAN
1. Purpose. The purpose of the Outsourcing Solutions Inc. 1995 Stock
Option and Stock Award Plan (the "Plan") is to maintain the ability of
Outsourcing Solutions Inc. (the "Company") and its subsidiaries to attract and
retain highly qualified and experienced employees and to give such employees a
continued proprietary interest in the success of the Company and its
subsidiaries. Pursuant to the Plan, such employees will be offered the
opportunity to acquire common stock through the grant of options, stock
appreciation rights in tandem with such options, the award of restricted stock
under the Plan, bonuses payable in stock or a combination thereof.
As used herein, the term "subsidiary" shall mean any present or
future corporation which is or would be a "subsidiary corporation" of the
Company as the term is defined in Section 424(f) of the Internal Revenue Code of
1986, as amended from time to time (the "Code").
2. Administration of the Plan. The Plan shall be administered by a
compensation committee (the "Compensation Committee") as appointed from time to
time by the Board of Directors of the Company (the "Board"), which Compensation
Committee shall consist of not less than two (2) members of the Board. No member
of the Board shall be appointed to the Compensation Committee who has been
granted an option or stock appreciation right or awarded restricted stock or
bonuses payable in Common Stock under the Plan within one year prior to
appointment. A majority of the members of the Compensation Committee shall
constitute a quorum. The vote of a majority of a quorum shall constitute action
by the Compensation Committee.
In administering the Plan, the Committee may adopt rules and
regulations for carrying out the Plan. The interpretation and decision with
regard to any question arising under the Plan made by the Committee shall be
final and conclusive on all employees of the Company and its subsidiaries
participating or eligible to participate in the Plan. The
<PAGE>
Committee may consult with counsel, who may be counsel to the Company, and shall
not incur any liability for any action taken in good faith in reliance upon the
advice of counsel. The Committee shall determine the employees to whom, and the
time or times at which, grants or awards shall be made and the number of shares
to be included in the grants or awards. Within the limitations of the Plan, the
number of shares for which options will be granted from time to time and the
periods for which the options will be outstanding will be determined by the
Committee.
Each option or stock or other awards granted pursuant to the Plan
shall be evidenced by an Option Agreement or Award Agreement (the "Agreement").
The Agreement shall not be a precondition to the granting of options or stock or
other awards; however, no person shall have any rights under any option or stock
or other awards granted under the Plan unless and until the optionee to whom
such option or stock or other award shall have been granted shall have executed
and delivered to the Company an Agreement. The Committee shall prescribe the
form of all Agreements. A fully executed original of the Agreement shall be
provided to both the Company and the recipient of the grant.
3. Shares of Stock Subject to the Plan. The total number of shares that
may be optioned or awarded under the Plan is 304,255 shares of the $0.01 par
value common stock of the Company (the "Common Stock") except that said number
of shares shall be adjusted as provided in Paragraph 13. No employee shall
receive, over the term of the Plan, awards of restricted stock for more than
150,000 shares of Common Stock or awards in the form of stock appreciation
rights or options, whether incentive stock options or options other than
incentive stock options, to purchase more than 150,000 shares of Common Stock.
Any shares subject to an option which for any reason expires or is terminated
unexercised and any restricted stock which is forfeited may again be optioned or
awarded under the Plan; provided, however, that forfeited shares shall not be
available for further awards if the employee has realized any benefits of
ownership from such shares. Shares subject to the Plan may be either authorized
and unissued shares or issued shares acquired by the Company or its
subsidiaries.
4. Eligibility. Key salaried employees, including officers, of the Company
and its subsidiaries (but excluding non-employee directors) and consultants are
eligible to be granted options and awarded restricted stock under the Plan
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and to have their bonuses payable in stock. The employees and consultants who
shall receive awards or options under the Plan shall be selected from time to
time by the Committee, in its sole discretion, from among those eligible, which
may be based upon information furnished to the Committee by the Company's
management, and the Committee shall determine, in its sole discretion, the
number of shares to be covered by the award or awards and by the option or
options granted to each such employee selected. Such key salaried employees and
consultants who are selected to participate in the Plan shall be referred to
collectively herein as "Participants."
5. Duration of the Plan. No award or option may be granted under the Plan
after more than ten years from the date the Plan is adopted by the Board or the
date the Plan receives shareholder approval, whichever is earlier, but awards or
options theretofore granted may extend beyond that date.
6. Terms and Conditions of Stock Options. All options granted under this
Plan shall be either incentive stock options, as defined in Section 422 of the
Code, or options other than incentive stock options. Each such option shall be
subject to all the applicable provisions of the Plan, including the following
terms and conditions, and to such other terms and conditions not inconsistent
therewith as the Committee shall determine.
(a) The option price per share shall be determined by the Committee.
However, subject to Paragraph 6(k), the option price of incentive stock
options and other than incentive stock options shall not be less than 100%
of the fair market value of a share of Common Stock at the time the option
is granted. For purposes of the Plan, the fair market value shall be such
value as the Committee, in good faith, shall determine on the relevant
date (without discount for lack of marketability or minority interest);
provided that if the Common Stock is publicly traded on an established
securities market, fair market value shall be either (i) if the Common
Stock is listed on a national securities exchange, the mean between the
highest and lowest prices at which the Common Stock is traded on such
exchange on the relevant date; provided, however, if there is no sale of
the Common Stock on such exchange on such date, the mean between the bid
and asked prices on such exchange at the close of the market on such date
or (ii) if the Common Stock is quoted on the over-the-counter market on
the relevant date as reported by NASDAQ or any
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successor thereto, the mean between the bid and asked prices at which the
Common Stock is quoted on such date; provided, however, if no such
quotations are available on such date, the most recent date upon which
such quotations are available shall be used.
(b) Each option shall be exercisable pursuant to the attainment of
such performance goals and/or during and over such period ending not later
than ten years from the date it was granted, as may be determined by the
Committee and stated in the Agreement. In no event may an option be
exercised more than 10 years from the date the option was granted.
(c) An option shall not be exercisable with respect to a fractional
share of Common Stock or with respect to the lesser of fifty (50) shares
or the full number of shares then subject to the option. No fractional
shares of Common Stock shall be issued upon the exercise of an option. If
a fractional share of Common Stock shall become subject to an option by
reason of a stock dividend or otherwise, the optionee shall not be
entitled to exercise the option with respect to such fractional share.
(d) Each option shall state whether it will or will not be treated
as an incentive stock option.
(e) Each option may be exercised by giving written notice to the
Company specifying the number of shares to be purchased, which shall be
accompanied by payment in full including, if required by applicable law,
applicable taxes, if any. Payment, except as provided in the Agreement,
shall be
(A) in United States dollars by check or bank draft, or
(B) by tendering to the Company Common Stock shares already
owned for at least six months by the person exercising the option,
which may include shares received as the result of a prior exercise
of an option, and having a fair market value, as determined in
accordance with Paragraph 6(a), on the date on which the option is
exercised equal to the cash exercise price applicable to such
option, or
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(C) by a combination of United States dollars and Common Stock
shares as aforesaid.
No optionee shall have any rights to dividends or other rights of a
shareholder with respect to shares of Common Stock subject to his or her
option until he or she has given written notice of exercise of his or her
option and paid in full for such shares.
(f) Notwithstanding the foregoing, the Committee may, in its sole
discretion, grant to a grantee of an option the right (hereinafter
referred to as a "stock appreciation right") to elect, in the manner
described below, in lieu of exercising his or her option for all or a
portion of the shares of Common Stock covered by such option, to
relinquish his or her option with respect to any or all of such shares and
to receive from the Company a payment having a value equal to the amount
by which (a) the fair market value, as determined in accordance with
Paragraph 6(a), of a share of Common Stock on the date of such election,
multiplied by the number of shares as to which the grantee shall have made
such election, exceeds (b) the exercise price for that number of shares of
Common Stock under the terms of such option. A stock appreciation right
shall be exercisable at the time the tandem option is exercisable, and the
"expiration date" for the stock appreciation right shall be the expiration
date for the tandem option. A grantee who makes such an election shall
receive payment in the sole discretion of the Committee (i) in cash equal
to such excess; or (ii) in the nearest whole number of shares of Common
Stock of the Company having an aggregate fair market value, as determined
in accordance with Paragraph 6(a), which is not greater than the cash
amount calculated in (i) above; or (iii) a combination of (i) and (ii)
above. A stock appreciation right may be exercised only when the amount
described in (a) above exceeds the amount described in (b) above. An
election to exercise stock appreciation rights shall be deemed to have
been made on the day written notice of such election, addressed to the
Committee, is received by the Company at Outsourcing Solutions Inc., c/o
McCown De Leeuw & Co., 101 East 52nd Street, New York, New York 10022,
Attention: David King. An option or any portion thereof with respect to
which a grantee has elected to exercise the stock appreciation rights
described above shall be surrendered to the Company and such option shall
thereafter remain exercisable according to its terms only with respect to
the number of shares as to
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which it would otherwise be exercisable, less the number of shares with
respect to which stock appreciation rights have been exercised. The grant
of a stock appreciation right shall be evidenced by such form of agreement
as the Committee may prescribe. The agreement evidencing stock
appreciation rights shall be personal and will provide that the stock
appreciation rights will not be transferable by the grantee otherwise than
by will or the laws of descent and distribution and that they will be
exercisable, during the lifetime of the grantee, only by him or her.
(g) Except as provided in the Agreement, an option may be exercised
only if at all times during the period beginning with the date of the
granting of the option and ending on the date of such exercise, the
grantee was an employee of either the Company or of a subsidiary of the
Company or of another corporation referred to in Section 421(a)(2) of the
Code. The Agreement shall provide whether, and if so, to what extent, an
option may be exercised after termination of continuous employment, but
any such exercise shall in no event be later than the termination date of
the option. If the grantee should die, or become permanently disabled as
determined by the Committee in accordance with the Agreement, at any time
when the option, or any portion thereof, shall be exercisable by him, the
option will be exercisable within a period provided for in the Agreement,
by the optionee or person or persons to whom his or her rights under the
option shall have passed by will or by the laws of descent and
distribution, but in no event at a date later than the termination of the
option. The Committee may require medical evidence of permanent
disability, including medical examinations by physicians selected by it.
(h) The option by its terms shall be personal and shall not be
transferable by the optionee otherwise than by will or by the laws of
descent and distribution as provided in Paragraph 6(g) above. During the
lifetime of an optionee, the option shall be exercisable only by the
optionee. In the event any option is exercised by the executors,
administrators, heirs or distributees of the estate of a deceased optionee
as provided in Paragraph 6(g) above, the Company shall be under no
obligation to issue Common Stock thereunder unless and until the Company
is satisfied that the person or persons exercising the option are the duly
appointed
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<PAGE>
legal representative of the deceased optionee's estate or the proper
legatees or distributees thereof.
(i) Notwithstanding any intent to grant incentive stock options, an
option granted will not be considered an incentive stock option to the
extent that it together with any earlier incentive stock options permits
the exercise for the first time in any calendar year of more than $100,000
in value of Common Stock (determined at the time of grant).
(j) The Committee may, but need not, require such consideration from
an optionee at the time of granting an option as it shall determine,
either in lieu of, or in addition to, the limitations on exercisability
provided in Paragraph 6(e).
(k) No incentive stock option shall be granted to an employee who
owns or would own immediately before the grant of such option, directly or
indirectly, stock possessing more than 10% of the total combined voting
power of all classes of stock of the Company. This restriction does not
apply if, at the time such incentive stock option is granted, the option
price is at least 110% of the fair market value of one share of Common
Stock, as determined in accordance with Paragraph 6(a), on the date of
grant and the incentive stock option by its terms is not exercisable after
the expiration of five years from the date of grant.
(l) An option and any Common Stock received upon the exercise of an
option shall be subject to such other transfer restrictions and/or
legending requirements that are specified in the Agreement.
7. Terms and Conditions of Restricted Stock Awards. All awards of
restricted stock under the Plan shall be subject to all the applicable
provisions of the Plan, including the following terms and conditions, and to
such other terms and conditions not inconsistent therewith, as the Committee
shall determine.
(a) Awards of restricted stock may be in addition to or in lieu of
option grants.
(b) During a period set by, and/or until the attainment of
particular performance goals based upon criteria established by, the
Committee at the time of
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each award of restricted stock (the "restriction period") as specified in
the Agreement, the recipient shall not be permitted to sell, transfer,
pledge, or otherwise encumber the shares of restricted stock; except that
such shares may be used, if the Agreement permits, to pay the option price
of any option granted under the Plan provided an equal number of shares
delivered to the optionee shall carry the same restrictions as the shares
so used.
(c) Shares of restricted stock shall become free of all restrictions
if, during the restriction period, (i) the recipient dies, (ii) the
recipient's employment terminates by reason of permanent disability, as
determined by the Committee, (iii) the recipient retires after attaining
both 59-1/2 years of age and five years of continuous service with the
Company and/or a subsidiary, or (iv) if provided in the Agreement, there
is a "change in control" of the Company (as defined in such Agreement).
The Committee may require medical evidence of permanent disability,
including medical examinations by physicians selected by it. If the
Committee determines that any such recipient is not permanently disabled,
the restricted stock held by such recipient shall be forfeited and revert
to the Company.
(d) Unless and to the extent otherwise provided in the Agreement,
shares of restricted stock shall be forfeited and revert to the Company
upon the recipient's termination of employment during the restriction
period for any reason other than death, permanent disability, as
determined by the Committee, retirement after attaining both 59-1/2 years
of age and five years of continuous service with the Company and/or a
subsidiary, or, to the extent provided in the Agreement, a "change in
control" of the Company (as defined in the Agreement), except to the
extent the Committee, in its sole discretion, finds that such forfeiture
might not be in the best interest of the Company and, therefore, waives
all or part of the application of this provision to the restricted stock
held by such recipient.
(e) Stock certificates for restricted stock shall be registered in
the name of the recipient but shall be appropriately legended and returned
to the Company by the recipient, together with a stock power, endorsed in
blank by the recipient. The recipient shall be entitled to vote shares of
restricted stock and shall be entitled to all dividends paid thereon,
except that dividends
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paid in Common Stock or other property shall also be subject to the same
restrictions.
(f) Restricted stock shall become free of the foregoing restrictions
upon expiration of the applicable restriction period and the Company shall
then deliver Common Stock certificates evidencing such stock.
(g) Restricted Stock and any Common Stock received upon the
expiration of the restriction period shall be subject to such other
transfer restrictions and/or legending requirements that are specified in
the Agreement.
8. Bonuses Payable in Stock. In lieu of cash bonuses otherwise payable
under the Company's or applicable subsidiary's compensation practices to
employees eligible to participate in the Plan, the Committee, in its sole
discretion, may determine that such bonuses shall be payable in Common Stock or
partly in Common Stock and partly in cash. Such bonuses shall be in
consideration of services previously performed and as an incentive toward future
services and shall consist of shares of Common Stock subject to such terms as
the Committee may determine in its sole discretion. The number of shares of
Common Stock payable in lieu of a bonus otherwise payable shall be determined by
dividing such amount by the fair market value of one share of Common Stock on
the date the bonus is payable, with fair market value determined as of such date
in accordance with Paragraph 6(a).
9. Change in Control. (a) In the event of a change in control of the
Company, as defined (if at all) by the Committee in each Agreement, the
Committee may, in its sole discretion, provide that any of the following
applicable actions be taken as a result, or in anticipation, of any such event
to assure fair and equitable treatment of Participants:
(i) accelerate time periods for purposes of vesting in, or realizing
gain from, any outstanding option or stock appreciation right or shares of
restricted stock awarded pursuant to this Plan;
(ii) offer to purchase any outstanding option or stock appreciation
right or shares of restricted stock made pursuant to this Plan from the
holder for its equivalent cash value, as determined by the Committee, as
of the date of the change in control; or
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<PAGE>
(iii) make adjustments or modifications to outstanding options or
stock appreciation rights or with respect to restricted stock as the
Committee deems appropriate to maintain and protect the rights and
interests of the Participants following such change in control.
(b) In no event, however, may any option be exercised after ten (10)
years from the date it was granted.
10. Transfer, Leave of Absence. For the purpose of the Plan: (a) a
transfer of an employee from the Company to a subsidiary or affiliate of the
Company, whether or not incorporated, or vice versa, or from one subsidiary or
affiliate of the Company to another, and (b) a leave of absence, duly authorized
in writing by the Company or a subsidiary or affiliate of the Company, shall not
be deemed a termination of employment.
11. Rights of Employees. (a) No person shall have any rights or claims
under the Plan except in accordance with the provisions of the Plan and the
Agreement.
(b) Nothing contained in the Plan or Agreement shall be deemed to
give any employee the right to be retained in the service of the Company or its
subsidiaries.
12. Tax Withholding Obligations. (a) If required by applicable law, the
payment of taxes, if any, upon the exercise of an option pursuant to Paragraph
6(e) or a stock appreciation right pursuant to Paragraph 6(f), shall be in cash
at the time of exercise or on the applicable tax date under Section 83 of the
Code, if earlier; provided, however, tax withholding obligations may be met by
the withholding of Common Stock otherwise deliverable to the optionee pursuant
to procedures approved by the Committee; provided further, however, the amount
of Common Stock so withheld shall not exceed the minimum required withholding
obligation.
(b) If required by applicable law, recipients of restricted stock,
pursuant to Paragraph 7, shall be required to pay taxes to the Company upon the
expiration of restriction periods or such earlier dates as elected pursuant to
Section 83 of the Code; provided, however, tax withholding obligations may be
met by the withholding of Common Stock otherwise deliverable to the recipient
pursuant to procedures approved by the Committee. If tax withholding is required
by applicable law, in no event shall Common Stock be delivered to any awardee
until he has paid to the Company in cash the
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<PAGE>
amount of such tax required to be withheld by the Company or has elected to have
his withholding obligations met by the withholding of Common Stock in accordance
with the procedures approved by the Committee or otherwise entered into an
agreement satisfactory to the Company providing for payment of withholding tax.
(c) The Company shall withhold from any cash bonus described in
Paragraph 8, an amount of cash sufficient to meet its tax withholding
obligations. If the cash portion of such bonus is not sufficient to satisfy such
withholding obligation, the tax withholding obligations shall be paid in cash by
the recipient or may be met by withholding of Common Stock otherwise deliverable
to the recipient pursuant to procedures approved by the Committee.
13. Changes in Capital. Upon changes in the outstanding Common Stock by
reason of a stock dividend, stock split, reverse split, subdivision,
recapitalization, merger, consolidation (whether or not the Company is a
surviving corporation), an extraordinary dividend payable in cash or property,
combination or exchange of shares, separation, reorganization or liquidation,
the aggregate number and class of shares available under the Plan as to which
stock options and restricted stock may be awarded, the number and class of
shares under (i) each option (and related stock appreciation rights, if any) and
the option price per share and (ii) each award of restricted stock shall, in
each case, be correspondingly adjusted by the Committee, such adjustments to be
made in the case of outstanding options (and related stock appreciation rights,
if any) without change in the total price applicable to such options (and
related stock appreciation rights, if any).
14. Miscellaneous Provisions. (a) The Plan shall be unfunded. The Company
shall not be required to establish any special or separate fund or to make any
other segregation of assets to assure the issuance of shares or the payment of
cash upon exercise of any option or stock appreciation right under the Plan.
Proceeds from the sale of shares of Common Stock pursuant to options granted
under this Plan shall constitute general funds of the Company. The expenses of
the Plan shall be borne by the Company.
(b) It is understood that the Committee may, at any time and from
time to time after the granting of an option or the award of restricted stock or
bonuses payable in Common Stock hereunder, specify such additional terms,
conditions and restrictions with respect to such option or
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stock as may be deemed necessary or appropriate to ensure compliance with any
and all applicable laws, including, but not limited to, terms, restrictions and
conditions for compliance with federal and state securities laws and methods of
withholding or providing for the payment of required taxes.
(c) If at any time the Committee shall determine, in its discretion,
that the listing, registration or qualification of shares of Common Stock upon
any national securities exchange or under any state or federal law, or the
consent or approval of any governmental regulatory body, is necessary or
desirable as a condition of, or in connection with, the sale or purchase of
shares of Common Stock hereunder, no option or stock appreciation right may be
exercised or restricted stock or stock bonus may be transferred in whole or in
part unless and until such listing, registration, qualification, consent or
approval shall have been effected or obtained, or otherwise provided for, free
of any conditions not acceptable to the Committee.
(d) By accepting any benefit under the Plan, each Participant and
each person claiming under or through such Participant shall be conclusively
deemed to have indicated his acceptance and ratification, and consent to, any
action taken under the Plan by the Committee, the Company or the Board.
(e) The Plan shall be governed by and construed in accordance with
the laws of the State of Delaware.
15. Limits of Liability. (a) Any liability of the Company or a subsidiary
of the Company to any Participant with respect to any option or award shall be
based solely upon contractual obligations created by the Plan and the Agreement.
(b) Neither the Company nor a subsidiary of the Company, nor any
member of the Committee or the Board, nor any other person participating in any
determination of any question under the Plan, or in the interpretation,
administration or application of the Plan, shall have any liability to any party
for any action taken or not taken in connection with the Plan, except as may
expressly be provided by statute.
16. Amendments and Termination. The Board may, at any time, amend, alter
or discontinue the Plan; provided, however, no amendment, alteration or
discontinuation shall be
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made which would impair the rights of any holder of an award of restricted stock
or option or stock appreciation rights or stock bonus theretofore granted,
without his or her written consent, or which, without the approval of the
shareholders, would:
(a) except as is provided in Paragraph 13, increase the maximum
number of shares of Common Stock reserved for the purpose of the Plan;
(b) except as is provided in Paragraph 13 of the Plan, decrease the
option price of an option (and related stock appreciation rights, if any)
to less than 100% of the fair market value, as determined in accordance
with Paragraph 6(a), of a share of Common Stock on the date of the
granting of the option (and related stock appreciation rights, if any);
(c) change the class of persons eligible to receive an award of
restricted stock or options or stock appreciation rights under the Plan;
or
(d) extend the duration of the Plan.
The Committee may amend the terms of any award of restricted stock
or option or stock appreciation rights theretofore granted, retroactively or
prospectively, but no such amendment shall impair the rights of any holder
without his or her written consent.
17. Duration. The Plan shall be adopted by the Board as of the date on
which it is approved by a majority of the Company's stockholders, which approval
must occur within the period ending twelve months after the date the Plan is
adopted. The Plan shall terminate upon the earlier of the following dates or
events to occur:
(a) upon the adoption of a resolution of the Board, terminating the
Plan; or
(b) the date all shares of Common Stock subject to the Plan are
purchased according to the Plan's provisions; or
(c) ten years from the date of adoption of the Plan by the Board.
No such termination of the Plan shall affect the rights of any
Participant hereunder and all options or stock
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appreciation rights previously granted and restricted stock and stock bonuses
awarded hereunder shall continue in force and in operation after the termination
of the Plan, except as they may be otherwise terminated in accordance with the
terms of the Plan.
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<PAGE>
Exhibit 10.32
FORM OF
OSI HOLDINGS CORP. NON-QUALIFIED
STOCK OPTION AWARD AGREEMENT [A]
This Agreement (the "Agreement"), dated as of ____________, is made
between OSI Holdings Corp. (the "Company") and _____________________________
(the "Optionee"). All capitalized terms that are not defined herein shall have
the meaning as defined in the OSI Holdings Corp. 1995 Stock Option and Stock
Award Plan (the "Plan"). References to "he," "him," and "his" shall mean the
feminine form of such terms, when applicable.
W I T N E S S E T H :
1. Grant of Option. Pursuant to the provisions of the Plan, the
Company hereby grants to the Optionee, subject to the terms and conditions of
the Plan and subject further to the terms and conditions herein set forth, the
right and option to purchase from the Company, all or any part of an aggregate
of ________ shares of $0.01 par value common stock of the Company (the "Stock")
at a per share purchase price equal to $12.50 (the "Option"), such Option to be
exercisable as hereinafter provided. The Option shall not be treated as an
incentive stock option as defined in Section 422 of the Internal Revenue Code of
1986, as amended.
<PAGE>
2. Terms and Conditions. It is understood and agreed that the Option
evidenced hereby is subject to the following terms and conditions:
(a) Expiration Date. The Option shall expire ten (10) years after the
date indicated above.
(b) Exercise of Option. Subject to the other terms of this Agreement
and the Plan, the Option may be exercised on or after the dates indicated below
as to that percentage of the total shares of Stock covered by this Option set
forth opposite such dates, plus any shares of Stock as to which the Option could
have been exercised, but was not so exercised:
Date Percentage
---- ----------
September 21, 1996 _____%
on the 21st day of _____%
each month thereafter
until September 21, 2000
Notwithstanding the immediately foregoing vesting schedule,
immediately prior to a Change in Control (as defined in Section 3 hereof), the
Option shall become immediately exercisable with respect to the total shares of
Stock subject to the Option.
Any exercise of all or any part of this Option shall be accompanied by
a written notice to the Company specifying the number of shares of Stock as to
which the
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Option is being exercised. Notation of any partial exercise shall be made by the
Company on Schedule I attached hereto.
(c) Consideration. At the time of any exercise of the Option, the
purchase price of the shares of Stock as to which the Option shall be exercised
shall be paid to the Company (i) in cash, (ii) with Stock already owned for at
least six months by the Optionee having a total fair market value, as determined
in accordance with Section 6(a) of the Plan ("Fair Market Value"), equal to the
purchase price of such Stock, or (iii) a combination of cash and Stock (such
Stock having already been owned for at least six months by the Optionee) having
a total Fair Market Value, as so determined, equal to the purchase price of such
Stock.
(d) Exercise Upon Death, Disability or Termination of Employment. (i)
In the event of the death of the Optionee while an employee of the Company or a
subsidiary of the Company, the Option, to the extent such Option would be
exercisable in accordance with the schedule set forth in Section 2(b) hereof as
of the date of his death, may be immediately exercised after his death by the
legal representative of the Optionee's estate or by the legatee of the Optionee
under his last will for a period of two years from the date of his death or
until the expiration of the stated period of the Option, whichever period is the
shorter.
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(ii) If the Optionee's employment with the Company or a subsidiary of
the Company shall terminate by reason of permanent disability (as defined in the
last sentence of this Section 2(d)(ii)), his Option, to the extent exercisable
in accordance with the schedule set forth in Section 2(b) hereof as of the date
of such termination, may be immediately exercised after such termination of
employment but may not be exercised after the expiration of the period of one
year from the date of such termination of employment or of the stated period of
the Option, whichever period is the shorter; provided, however, that if the
Optionee dies within a period of one year from the date of such termination of
employment, any unexercised Option, to the extent exercisable in accordance with
the schedule set forth in Section 2(b) hereof as of the date of such
termination, may be exercised after his death by the legal representative of his
estate or by the legatee of the Optionee under his last will until the
expiration of the period of two years from the date of his death or of the
stated period of the Option, whichever period is the shorter. For purposes of
this Agreement, "permanent disability" shall mean an inability (as determined by
the Committee) to perform duties and services as an employee of the Company or a
subsidiary of the Company by reason of a medically determinable physical or
mental impairment,
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supported by medical evidence, which can be expected to last for a continuous
period of not less than six (6) months.
(iii) If (A) the Company or a subsidiary of the Company terminates the
Optionee's employment with the Company or such subsidiary and such termination
is not "for cause" (as defined in Section 2.5(d) of the Stockholders Agreement,
dated as of September 21, 1995, as amended and restated on January 10, 1996 and
on February 16, 1996 and as may be further amended from time to time, by and
among OSI Holdings Corp., the MDC Entities (as defined therein), APT (as defined
therein), the Management Stockholders (as defined therein) and the
Non-Management Stockholders (as defined therein) (as amended, the "Stockholders
Agreement")) or (B) the Optionee terminates employment with the Company or such
subsidiary for "good reason" (as defined in Section 2.5(c) of the Stockholders
Agreement), the Optionee's Option, to the extent such Option would have been
exercisable in accordance with the schedule set forth in Section 2(b) hereof as
of the date of such termination, may thereafter be immediately exercised but may
not be exercised after the expiration of the period of one year from the date of
such termination of employment or of the stated period of the Option, whichever
period is the shorter; provided, however, that if the Optionee dies within a
period one year from the date of such termination of employment, any unexercised
Option, to the extent such Option
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would have been exercisable in accordance with the schedule set forth in Section
2(b) hereof as of the date of such termination, may thereafter be exercised by
the legal representative of his estate or by the legatee of the Optionee under
his last will until the expiration of the period of two years from the date of
his death or of the stated period of the Option, whichever period is the
shorter.
(iv) If the Optionee's employment with the Company or a subsidiary of
the Company is terminated by reason of the Optionee's retirement after attaining
both five (5) years of continuous service with the Company or a subsidiary of
the Company and 59 1/2 years of age, to the extent exercisable in accordance
with the schedule set forth in Section 2(b) hereof as of the date of such
termination, such Option may thereafter be immediately exercised but may not be
exercised after the expiration of the period of two (2) years from the date of
such termination of employment or of the stated period of the Option, whichever
period is the shorter; provided, however, that if the Optionee dies within a
period of two (2) years from the date of such termination of employment, any
unexercised Option, to the extent exercisable in accordance with the schedule
set forth in Section 2(b) hereof as of the date of such termination, may
thereafter be exercised by the legal representative of his estate or by the
legatee of the Optionee under his last will until the
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expiration of the period of two years from the date of his death or of the
stated period of the Option, whichever period is the shorter.
(v) If the Optionee's employment is terminated by the Company or a
subsidiary of the Company "for cause" (as defined in Section 2.5(d) of the
Stockholders Agreement) or if the Optionee's employment is terminated for any
reason not described in this Section 2(d), the Optionee's Option shall terminate
on the date of such termination.
(e) Nontransferability. This Option shall not be transferable other
than by will or by the laws of descent and distribution.
(f) Withholding Taxes. If required by applicable law, the Optionee
shall be required to pay withholding taxes, if any, to the Company in cash at
the time of receipt of Stock upon the exercise of all or any part of this
Option; provided, however, tax withholding obligations may be met by the
withholding of Stock otherwise deliverable to the Optionee pursuant to
procedures approved by the Committee; provided further, however, the amount of
Stock so withheld shall not exceed the minimum required withholding obligation.
In no event shall Stock be delivered to any Optionee until he has paid to the
Company in cash the amount of tax required to be withheld by the Company under
applicable law, if any, or has elected to have such tax withholding obligations,
if any,
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<PAGE>
met by the withholding of Stock in accordance with procedures
approved by the Committee.
(g) No Rights as Stockholder. The Optionee shall have no dividend
rights or any other rights as a stockholder with respect to any shares of Stock
subject to the Option until he has given written notice of exercise of the
Option and paid in full for such shares.
(h) No Right to Continued Employment. This Option shall not confer
upon the Optionee any right with respect to continuance of employment by the
Company or a subsidiary of the Company, nor shall it interfere in any way with
the right of the Company or such a subsidiary to terminate his employment at any
time.
(i) Inconsistency with Plan. Notwithstanding any provision herein to
the contrary, this Option provides the Optionee with no greater rights or claims
than are specifically provided for under the Plan. If and to the extent that any
provision contained herein is inconsistent with the Plan, the Plan shall govern.
(j) Compliance with Laws, Regulations, Stockholders Agreement, Etc.
This Option and the obligation of the Company to sell and deliver shares of
Stock hereunder, shall be subject to (i) all applicable federal and state laws,
rules and regulations, (ii) any registration, qualification, approvals or other
requirements imposed by any
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<PAGE>
government or regulatory agency or body which the Committee shall, in its sole
discretion, determine to be necessary or applicable and (iii) the terms of the
Stockholders Agreement in all respects. Moreover, this Option may not be
exercised if its exercise, or the receipt of shares of Stock pursuant thereto,
would be contrary to applicable law.
3. Change in Control. For purposes of this Agreement, a "Change in
Control" shall be deemed to have occurred if a "Sale of the Business," as
defined in and contemplated by Section 2.4 of the Stockholders Agreement shall
have occurred.
4. Investment Representation. If at the time of exercise of all or
part of this Option the Stock is not registered under the Securities Act of
1933, as amended (the "Securities Act"), and/or there is no current prospectus
in effect under the Securities Act with respect to the Stock, the Optionee shall
execute, prior to the issuance of any shares of Stock to the Optionee by the
Company, an agreement (in such form as the Committee may specify) in which the
Optionee represents and warrants that the Optionee is purchasing or acquiring
the shares acquired under this Agreement for the Optionee's own account, for
investment only and not with a view to the resale or distribution thereof, and
represents and agrees that any subsequent offer for sale or distribution of any
of such shares shall be made only
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<PAGE>
pursuant to either (i) a registration statement on an appropriate form under the
Securities Act, which registration statement has become effective and is current
with regard to the shares being offered or sold, or (ii) a specific exemption
from the registration requirements of the Securities Act, but in claiming such
exemption the Optionee shall, prior to any offer for sale or sale of such
shares, obtain a prior favorable written opinion, in form and substance
satisfactory to the Committee, from counsel for or approved by the Committee, as
to the applicability of such exemption thereto.
5. Disposition of Stock. Any shares of Stock received by the Optionee
upon exercise of this Option (or any interest or right in such shares) cannot be
sold, assigned, pledged or transferred in any manner except as permitted by the
Stockholders Agreement.
6. Optionee Bound by Plan; Stockholders Agreement. The Optionee hereby
acknowledges receipt of a copy of the Plan and the Stockholders Agreement and
agrees to be bound by all of the terms and provisions thereof, including the
terms and provisions adopted after the granting of this Option but prior to the
complete exercise hereof, subject to the last paragraph of Section 16 of the
Plan as in effect on the date hereof.
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<PAGE>
7. Notices. Any notice hereunder to the Company shall be addressed to
it at c/o McCown De Leeuw & Co., 101 East 52nd Street, 31st Floor, New York, New
York 10022, and any notice hereunder to the Optionee shall be addressed to him
at _______________________________, subject to the right of either party to
designate at any time hereafter in writing some other address.
8. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware.
9. Counterparts. This Agreement has been executed in two counterparts
each of which shall constitute one and the same instrument.
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<PAGE>
IN WITNESS WHEREOF, OSI Holdings Corp. has caused this Agreement to be
executed by an appropriate officer and the Optionee has executed this Agreement,
both on the day and year first above written.
OSI HOLDINGS CORP.
By:
--------------------------
Title:
-----------------------
[Name]
- ------------------------(L.S.)
Optionee
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<PAGE>
Exhibit 10.33
FORM OF
OSI HOLDINGS CORP. NON-QUALIFIED
STOCK OPTION AWARD AGREEMENT [B]
This Agreement (the "Agreement"), dated _____________ is made
between OSI Holdings Corp. (the "Company") and _____________________________
(the "Optionee"). All capitalized terms that are not defined herein shall have
the meaning as defined in the OSI Holdings Corp. 1995 Stock Option and Stock
Award Plan (the "Plan"). References to "he," "him," and "his" shall mean the
feminine form of such terms, when applicable.
W I T N E S S E T H :
1. Grant of Option. Pursuant to the provisions of the Plan, the
Company hereby grants to the Optionee, subject to the terms and conditions of
the Plan and subject further to the terms and conditions herein set forth, the
right and option to purchase from the Company, all or any part of an aggregate
of ________ shares of $0.01 par value common stock of the Company (the "Stock")
at a per share purchase price equal to $12.50 (the "Option"), such Option to be
exercisable as hereinafter provided. The Option shall not be treated as an
incentive stock option as defined in Section 422 of the Internal Revenue Code of
1986, as amended.
<PAGE>
2. Terms and Conditions. It is understood and agreed that the Option
evidenced hereby is subject to the following terms and conditions:
(a) Expiration Date. The Option shall expire ten (10) years after
the date indicated above.
(b) Exercise of Option. Subject to the other terms of this Agreement
and the Plan, the Option may be exercised on or after the date which is eight
years from the date hereof; provided, however, that such Option shall become
exercisable (i) with respect to fifty percent (50%) of the shares of stock
subject to the Option on or after the satisfaction by the Company of such
reasonable performance targets as are established in good faith by the Committee
or the Board in writing on or before December 31 of each year for the next
succeeding year, as set forth in a resolution of the Committee or the Board (as
applicable), as to that percentage of the total shares of Stock covered by this
Option set forth on Schedule I attached hereto and (ii) with respect to the
remaining fifty percent (50%) of the shares of Stock subject to the Option upon
the occurence of a Liquidation Event, as defined on Schedule I attached hereto,
subject to the achievement by the Company of internal rate of return targets as
set forth on such Schedule I, plus any shares of Stock as to which the Option
could have been exercised prior to satisfaction of such conditions in (i)
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and/or (ii) in a particular year (if any) but was not so exercised.
Notwithstanding the foregoing, the Option shall become fully exercisable as to
those shares of Stock referred to in clause (i) above immediately upon the
occurence of a Change in Control (as defined in Section 3 below).
Any exercise of all or any part of this Option shall be accompanied
by a written notice to the Company specifying the number of shares of Stock as
to which the Option is being exercised. Notation of any partial exercise shall
be made by the Company on Schedule II attached hereto.
(c) Consideration. At the time of any exercise of the Option, the
purchase price of the shares of Stock as to which the Option shall be exercised
shall be paid to the Company (i) in cash, (ii) with Stock already owned for at
least eight months by the Optionee having a total fair market value, as
determined in accordance with Section 6(a) of the Plan ("Fair Market Value"),
equal to the purchase price of such Stock, or (iii) a combination of cash and
Stock (such Stock having already been owned for at least eight months by the
Optionee) having a total Fair Market Value, as so determined, equal to the
purchase price of such Stock.
(d) Exercise Upon Death, Disability or Termination of Employment.
(i) In the event of the death of the Optionee while an employee of the Company
or a subsidiary of the Company, the Option, to the extent such Option would be
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exercisable in accordance with Section 2(b) hereof as of the date of his death,
may be immediately exercised after his death by the legal representative of the
Optionee's estate or by the legatee of the Optionee under his last will for a
period of two years from the date of his death or until the expiration of the
stated period of the Option, whichever period is the shorter.
(ii) If the Optionee's employment with the Company or a subsidiary
of the Company shall terminate by reason of permanent disability (as defined in
the last sentence of this Section 2(d)(ii)), his Option, to the extent
exercisable in accordance with Section 2(b) hereof as of the date of such
termination, may be immediately exercised after such termination of employment
but may not be exercised after the expiration of the period of one year from the
date of such termination of employment or of the stated period of the Option,
whichever period is the shorter; provided, however, that if the Optionee dies
within a period of one year from the date of such termination of employment, any
unexercised Option, to the extent exercisable in accordance with Section 2(b)
hereof as of the date of such termination, may be exercised after his death by
the legal representative of his estate or by the legatee of the Optionee under
his last will until the expiration of the period of two years from the date of
his death or of the stated period of the Option, whichever
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period is the shorter. For purposes of this Agreement, "permanent disability"
shall mean an inability (as determined by the Committee) to perform duties and
services as an employee of the Company or a subsidiary of the Company by reason
of a medically determinable physical or mental impairment, supported by medical
evidence, which can be expected to last for a continuous period of not less than
eight (8) months.
(iii) If (A) the Company or a subsidiary of the Company terminates
the Optionee's employment with the Company or such subsidiary and such
termination is not "for cause" (as defined in Section 2.5(d) of the Stockholders
Agreement, dated as of September 21, 1995, as amended and restated on January
10, 1996 and on February 16, 1996 and as may be further amended from time to
time, by and among OSI Holdings Corp., the MDC Entities (as defined therein),
APT (as defined therein), the Management Stockholders (as defined therein) and
the Non-Management Stockholders (as defined therein) (as amended, the
"Stockholders Agreement")) or (B) the Optionee terminates employment with the
Company or such subsidiary for "good reason" (as defined in Section 2.5(c) of
the Stockholders Agreement), the Optionee's Option, to the extent such Option
would have been exercisable in accordance with Section 2(b) hereof as of the
date of such termination, may thereafter be immediately exercised but may not be
exercised
-5-
<PAGE>
after the expiration of the period of one year from the date of such termination
of employment or of the stated period of the Option, whichever period is the
shorter; provided, however, that if the Optionee dies within a period one year
from the date of such termination of employment, any unexercised Option, to the
extent such Option would have been exercisable in accordance with Section 2(b)
hereof as of the date of such termination, may thereafter be exercised by the
legal representative of his estate or by the legatee of the Optionee under his
last will until the expiration of the period of two years from the date of his
death or of the stated period of the Option, whichever period is the shorter.
(iv) If the Optionee's employment with the Company or a subsidiary
of the Company is terminated by reason of the Optionee's retirement after
attaining both five (5) years of continuous service with the Company or a
subsidiary of the Company and 59 1/2 years of age, to the extent exercisable in
accordance with Section 2(b) hereof as of the date of such termination, such
Option may thereafter be immediately exercised but may not be exercised after
the expiration of the period of two (2) years from the date of such termination
of employment or of the stated period of the Option, whichever period is the
shorter; provided, however, that if the Optionee dies within a period of two (2)
years from the date of such termination of employment, any unexercised
-6-
<PAGE>
Option, to the extent exercisable in accordance with Section 2(b) hereof as of
the date of such termination, may thereafter be exercised by the legal
representative of his estate or by the legatee of the Optionee under his last
will until the expiration of the period of two years from the date of his death
or of the stated period of the Option, whichever period is the shorter.
(v) If the Optionee's employment is terminated by the Company or a
subsidiary of the Company "for cause" (as defined in Section 2.5(d) of the
Stockholders Agreement) or if the Optionee's employment is terminated for any
reason not described in this Section 2(d), the Optionee's Option shall terminate
on the date of such termination.
(e) Nontransferability. This Option shall not be transferable other
than by will or by the laws of descent and distribution.
(f) Withholding Taxes. If required by applicable law, the Optionee
shall be required to pay withholding taxes, if any, to the Company in cash at
the time of receipt of Stock upon the exercise of all or any part of this
Option; provided, however, tax withholding obligations may be met by the
withholding of Stock otherwise deliverable to the Optionee pursuant to
procedures approved by the Committee; provided further, however, the amount of
Stock so withheld shall not exceed the minimum required withholding obligation.
-7-
<PAGE>
In no event shall Stock be delivered to any Optionee until he has paid to the
Company in cash the amount of tax required to be withheld by the Company under
applicable law, if any, or has elected to have such tax withholding obligations,
if any, met by the withholding of Stock in accordance with procedures approved
by the Committee.
(g) No Rights as Stockholder. The Optionee shall have no dividend
rights or any other rights as a stockholder with respect to any shares of Stock
subject to the Option until he has given written notice of exercise of the
Option and paid in full for such shares.
(h) No Right to Continued Employment. This Option shall not confer
upon the Optionee any right with respect to continuance of employment by the
Company or a subsidiary of the Company, nor shall it interfere in any way with
the right of the Company or such a subsidiary to terminate his employment at any
time.
(i) Inconsistency with Plan. Notwithstanding any provision herein to
the contrary, this Option provides the Optionee with no greater rights or claims
than are specifically provided for under the Plan. If and to the extent that any
provision contained herein is inconsistent with the Plan, the Plan shall govern.
(j) Compliance with Laws, Regulations, Stockholders Agreement, Etc.
This Option and the obligation
-8-
<PAGE>
of the Company to sell and deliver shares of Stock hereunder, shall be subject
to (i) all applicable federal and state laws, rules and regulations, (ii) any
registration, qualification, approvals or other requirements imposed by any
government or regulatory agency or body which the Committee shall, in its sole
discretion, determine to be necessary or applicable and (iii) the terms of the
Stockholders Agreement in all respects. Moreover, this Option may not be
exercised if its exercise, or the receipt of shares of Stock pursuant thereto,
would be contrary to applicable law.
3. Change in Control. For purposes of this Agreement, a "Change in
Control" shall be deemed to have occurred if a "Sale of the Business," as
defined in and contemplated by Section 2.4 of the Stockholders Agreement shall
have occurred.
4. Investment Representation. If at the time of exercise of all or
part of this Option the Stock is not registered under the Securities Act of
1933, as amended (the "Securities Act"), and/or there is no current prospectus
in effect under the Securities Act with respect to the Stock, the Optionee shall
execute, prior to the issuance of any shares of Stock to the Optionee by the
Company, an agreement (in such form as the Committee may specify) in which the
Optionee represents and warrants that the Optionee is purchasing or acquiring
the shares acquired under this
-9-
<PAGE>
Agreement for the Optionee's own account, for investment only and not with a
view to the resale or distribution thereof, and represents and agrees that any
subsequent offer for sale or distribution of any of such shares shall be made
only pursuant to either (i) a registration statement on an appropriate form
under the Securities Act, which registration statement has become effective and
is current with regard to the shares being offered or sold, or (ii) a specific
exemption from the registration requirements of the Securities Act, but in
claiming such exemption the Optionee shall, prior to any offer for sale or sale
of such shares, obtain a prior favorable written opinion, in form and substance
satisfactory to the Committee, from counsel for or approved by the Committee, as
to the applicability of such exemption thereto.
5. Disposition of Stock. Any shares of Stock received by the
Optionee upon exercise of this Option (or any interest or right in such shares)
cannot be sold, assigned, pledged or transferred in any manner except as
permitted by the Stockholders Agreement.
6. Optionee Bound by Plan; Stockholders Agreement. The Optionee
hereby acknowledges receipt of a copy of the Plan and the Stockholders Agreement
and agrees to be bound by all of the terms and provisions thereof, including the
terms and provisions adopted after the granting of this Option but
-10-
<PAGE>
prior to the complete exercise hereof, subject to the last paragraph of Section
16 of the Plan as in effect on the date hereof.
7. Notices. Any notice hereunder to the Company shall be addressed
to it at c/o McCown De Leeuw & Co., 101 East 52nd Street, 31st Floor, New York,
New York 10022, Attention: David King, and any notice hereunder to the Optionee
shall be addressed to him at ___________________________, subject to the right
of either party to designate at any time hereafter in writing some other
address.
8. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware.
9. Counterparts. This Agreement has been executed in two
counterparts each of which shall constitute one and the same instrument.
-11-
<PAGE>
IN WITNESS WHEREOF, OSI Holdings Corp. has caused this Agreement to
be executed by an appropriate officer and the Optionee has executed this
Agreement, both on the day and year first above written.
OSI HOLDINGS CORP.
By:__________________________
Title:_______________________
OPTIONEE
________________________(L.S.)
[____________]
-12-
<PAGE>
SCHEDULE I
Subject to paragraph (b) of Section 2 of the Agreement, the Option will vest and
become exercisable in accordance with paragraph (1) below with respect to fifty
percent (50%) of the shares of Stock subject to the Option and the Option will
vest and become exercisable in accordance with paragraph (2) below with respect
to the remaining fifty percent (50%) of the shares of Stock subject to the
Option.
(1) With respect to 50% of the shares of Stock subject to the Option:
Subject to the achievement of annual performance targets established by the
Board of Directors of the Company (the "Board") or the Committee (as defined in
the Agreement) in consultation with management, this portion of the Option will
vest evenly on an annual basis over five (5) years beginning on the date of the
Agreement, i.e., with respect to 20% of the total number of shares subject to
this portion of the Option in each year (the "Annual Option Allocation").
50% of the Annual Option Allocation not vested in any year would be subject to
catch-up vesting in the immediately following year, based upon the achievement
of the performance targets applicable to such immediately following year, and to
the extent such Annual Option Allocation does not vest in such immediately
following year, it shall be forfeited and the Option shall never be exercisable
with respect to the shares covered by such unvested portion of such Annual
Option Allocation; provided, however, that, notwithstanding the foregoing, the
Option may become exercisable with respect to such shares to the extent
otherwise provided in paragraph (b) of Section 2 of the Agreement.
(2) With respect to 50% of the shares of Stock subject to the Option: This
portion of the Option will vest upon the occurrence of a "Liquidation Event" (as
defined below), subject to the achievement by the Company of McCown De Leeuw &
Co. ("MDC") internal rate of return ("IRR") targets according to the schedule
set forth below:
-13-
<PAGE>
================================================================================
Year
- --------------------------------------------------------------------------------
1 2 3 4 5
----------------------------------------------------------------------
25.00% 0.00% 0.00% 0.00% 20.00% 40.00%
----------------------------------------------------------------------
30.00% 0.00% 0.00% 20.00% 40.00% 60.00%
----------------------------------------------------------------------
MDC IRR* 35.00% 0.00% 20.00% 40.00% 60.00% 80.00%
----------------------------------------------------------------------
40.00% 20.00% 40.00% 60.00% 80.00% 100.00%
----------------------------------------------------------------------
45.00% 40.00% 60.00% 80.00% 100.00%
----------------------------------------------------------------------
50.00% 60.00% 80.00% 100.00%
----------------------------------------------------------------------
55.00% 60.00% 100.00%
----------------------------------------------------------------------
75.00% 80.00%
----------------------------------------------------------------------
100.00% 100.00%
----------------------------------------------------------------------
*After giving effect to exercise of management options.
================================================================================
For purposes of this Agreement, "Liquidation Event" shall mean a sale by MDC of
any of its shares of common stock of the Company to an unaffiliated third party
(including, without limitation, in a public offering). Upon a Liquidation Event
in which MDC sells less than all of its shares of common stock of the Company,
this portion of the Option will partially vest and become exercisable, in
accordance with the foregoing schedule, on a ratable basis based upon the
proportion of MDC shares sold in the Liquidation Event relative to the total
number of shares owned by MDC immediately prior to the Liquidation Event.
-14-
<PAGE>
Exhibit 10.34
================================================================================
CREDIT AGREEMENT
DATED AS OF NOVEMBER 6, 1996
AMONG
OUTSOURCING SOLUTIONS INC.,
AS BORROWER,
THE LENDERS LISTED HEREIN,
AS LENDERS,
GOLDMAN SACHS CREDIT PARTNERS L.P.
AND
THE CHASE MANHATTAN BANK,
AS CO-ADMINISTRATIVE AGENTS,
GOLDMAN SACHS CREDIT PARTNERS L.P.
AND
CHASE SECURITIES INC.,
AS ARRANGING AGENTS,
AND
SUNTRUST BANK, ATLANTA,
AS COLLATERAL AGENT
================================================================================
<PAGE>
OUTSOURCING SOLUTIONS INC.
CREDIT AGREEMENT
TABLE OF CONTENTS
Page
----
SECTION 1.
DEFINITIONS............................. 2
1.1 Certain Defined Terms................................... 2
1.2 Accounting Terms; Utilization of GAAP for Purposes
of Calculations Under Agreement......................... 31
1.3 Other Definitional Provisions........................... 31
SECTION 2.
AMOUNTS AND TERMS OF COMMITMENTS AND LOANS.............. 32
2.1 Commitments; Loans...................................... 32
2.2 Interest on the Loans................................... 40
2.3 Fees.................................................... 44
2.4 Repayments, Prepayments and Reductions in
Revolving Loan Commitments; General
Provisions Regarding Payments........................... 44
2.5 Use of Proceeds......................................... 53
2.6 Special Provisions Governing Eurodollar Rate Loans...... 54
2.7 Increased Costs; Taxes; Capital Adequacy................ 56
2.8 Obligation of Lenders and Issuing Lenders to Mitigate... 61
SECTION 3.
LETTERS OF CREDIT.......................... 62
3.1 Issuance of Letters of Credit and Lenders'
Purchase of Participations Therein...................... 62
3.2 Letter of Credit Fees................................... 65
3.3 Drawings and Payments and Reimbursement
of Amounts Paid Under Letters of Credit................. 65
3.4 Obligations Absolute.................................... 68
3.5 Indemnification; Nature of Issuing Lender's Duties...... 69
3.6 Increased Costs and Taxes Relating to Letters of Credit. 70
SECTION 4.
CONDITIONS TO LOANS AND LETTERS OF CREDIT.............. 71
4.1 Conditions to Term Loans................................ 71
4.2 Conditions to All Loans................................. 78
4.3 Conditions to Letters of Credit......................... 79
SECTION 5.
(i)
<PAGE>
Page
----
REPRESENTATIONS AND WARRANTIES.................... 80
5.1 Organization, Powers, Qualification, Good
Standing, Business and Subsidiaries..................... 80
5.2 Authorization of Borrowing, etc......................... 81
5.3 Financial Condition; Projections........................ 82
5.4 No Material Adverse Change; No Restricted
Junior Payments......................................... 83
5.5 Title to Properties; Liens.............................. 83
5.6 Litigation; Adverse Facts............................... 83
5.7 Payment of Taxes........................................ 84
5.8 Performance of Agreements; Materially Adverse Agreements 84
5.9 Governmental Regulation................................. 85
5.10 Securities Activities................................... 85
5.11 Employee Benefit Plans.................................. 85
5.12 Certain Fees............................................ 85
5.14 Employee Matters........................................ 87
5.15 Solvency................................................ 87
5.16 Matters Relating to Collateral.......................... 87
5.17 Related Agreements...................................... 88
5.18 Disclosure.............................................. 89
5.19 Subordination of Seller Notes........................... 89
SECTION 6.
AFFIRMATIVE COVENANTS........................ 89
6.1 Financial Statements and Other Reports.................. 90
6.2 Corporate Existence, etc................................ 95
6.3 Payment of Taxes and Claims; Tax Consolidation.......... 95
6.4 Maintenance of Properties; Insurance.................... 95
6.5 Inspection; Lender Meeting.............................. 96
6.6 Compliance with Laws, etc............................... 96
6.7 Environmental Disclosure and Inspection................. 96
6.8 Company's Remedial Action Regarding Hazardous Materials. 98
6.9 of Subsidiary Guaranty and Subsidiary
Security Agreements by Subsidiaries and
Future Subsidiaries..................................... 98
6.10 Interest Rate Protection................................ 99
6.11 Further Assurances...................................... 99
SECTION 7.
NEGATIVE COVENANTS.......................... 100
7.1 Indebtedness............................................ 100
7.2 Liens and Related Matters............................... 101
7.3 Investments; Joint Ventures............................. 102
7.4 Contingent Obligations.................................. 103
7.5 Restricted Junior Payments.............................. 104
(ii)
<PAGE>
Page
----
7.6 Financial Covenants..................................... 105
7.7 Restriction on Fundamental Changes; Asset Sales......... 107
7.8 Sales and Lease-Backs................................... 109
7.9 Transactions with Shareholders and Affiliates........... 109
7.10 Disposal of Subsidiary Stock............................ 109
7.11 Conduct of Business..................................... 110
7.12 Amendments or Waivers of Certain Related
Agreements; Amendments of Documents Relating
to Subordinated Indebtedness; Designation of
"Designated Senior Debt"; Preferred Stock............... 110
7.13 Fiscal Year............................................. 111
SECTION 8.
EVENTS OF DEFAULT.......................... 111
8.1 Failure to Make Payments When Due....................... 111
8.2 Default in Other Agreements............................. 111
8.3 Breach of Certain Covenants............................. 112
8.4 Breach of Warranty...................................... 112
8.5 Other Defaults Under Loan Documents..................... 112
8.6 Involuntary Bankruptcy; Appointment of Receiver, etc.... 112
8.7 Voluntary Bankruptcy; Appointment of Receiver, etc...... 113
8.8 Judgments and Attachments............................... 113
8.9 Dissolution............................................. 114
8.10 Employee Benefit Plans.................................. 114
8.11 Change in Control....................................... 114
8.12 Invalidity of Guaranties................................ 115
8.13 Failure of Security..................................... 115
8.14 Failure to Consummate Acquisition or Merger............. 115
8.15 Default Under Subordination Provisions.................. 115
SECTION 9.
AGENTS................................ 116
9.1 Appointment............................................. 116
9.2 Powers; General Immunity................................ 118
9.3 Representations and Warranties; No Responsibility
For Appraisal of Creditworthiness....................... 119
9.4 Right to Indemnity...................................... 120
9.5 Successor Agents and Swing Line Lender.................. 120
9.6 Collateral Documents.................................... 121
SECTION 10.
MISCELLANEOUS............................ 121
10.1 Assignments and Participations in Loans,
Letters of Credit....................................... 121
10.2 Expenses................................................ 124
(iii)
<PAGE>
Page
----
10.3 Indemnity............................................... 125
10.4 Set-Off; Security Interest in Deposit Accounts.......... 126
10.5 Ratable Sharing......................................... 126
10.6 Amendments and Waivers.................................. 127
10.7 Independence of Covenants............................... 129
10.8 Notices................................................. 129
10.9 Survival of Representations, Warranties and Agreements.. 129
10.10 Failure or Indulgence Not Waiver; Remedies Cumulative... 130
10.11 Marshalling; Payments Set Aside......................... 130
10.12 Severability............................................ 130
10.13 Obligations Several; Independent Nature of
Lenders' Rights......................................... 130
10.14 Headings................................................ 131
10.15 Applicable Law.......................................... 131
10.16 Successors and Assigns.................................. 131
10.17 Consent to Jurisdiction and Service of Process.......... 131
10.18 Waiver of Jury Trial.................................... 132
10.19 Confidentiality......................................... 132
10.20 Counterparts; Effectiveness............................. 133
Signature pages............................................... S-1
(iv)
<PAGE>
EXHIBITS
I FORM OF NOTICE OF BORROWING
II FORM OF NOTICE OF CONVERSION/CONTINUATION
III FORM OF NOTICE OF ISSUANCE OF LETTER OF CREDIT
IV-A FORM OF TRANCHE A TERM NOTE
IV-B FORM OF TRANCHE B TERM NOTE
V FORM OF REVOLVING NOTE
VI FORM OF SWING LINE NOTE
VII FORM OF SUBSIDIARY GUARANTY
VIII FORM OF PLEDGE AGREEMENT
IX-A FORM OF SECURITY AGREEMENT
IX-B FORM OF LIMITED PARTNERSHIP SECURITY AGREEMENT
IX-C FORM OF TRADEMARK SECURITY AGREEMENT
X FORM OF COMPLIANCE CERTIFICATE
XI FORM OF OPINION OF WHITE & CASE
XII FORM OF OPINION OF O'MELVENY & MYERS LLP
XIII FORM OF ASSIGNMENT AGREEMENT
XIV FORM OF PERMITTED SELLER NOTE
XV FORM OF CERTIFICATE RE NON-BANK STATUS
XVI FORM OF COLLATERAL ACCOUNT AGREEMENT
(v)
<PAGE>
SCHEDULES
2.1 LENDERS' COMMITMENTS AND PRO RATA SHARES; LENDING
OFFICES
4.1R CORPORATE AND CAPITAL STRUCTURE; MANAGEMENT
5.1 SUBSIDIARIES OF COMPANY
5.13 CERTAIN ENVIRONMENTAL MATTERS
7.1 CERTAIN EXISTING INDEBTEDNESS
7.2 CERTAIN EXISTING LIENS
7.4 CERTAIN EXISTING CONTINGENT OBLIGATIONS
7.4(iv)(a) CERTAIN EXISTING EARN OUT AGREEMENTS
7.4(iv)(b) CERTAIN EXISTING FORWARD FLOW CONTRACTS
(vi)
<PAGE>
OUTSOURCING SOLUTIONS INC.
CREDIT AGREEMENT
This CREDIT AGREEMENT is dated as of November 6, 1996 and entered into by
and among OUTSOURCING SOLUTIONS INC., a Delaware corporation ("Company"), THE
FINANCIAL INSTITUTIONS LISTED ON THE SIGNATURE PAGES HEREOF (each individually
referred to herein as a "Lender" and collectively as "Lenders"), GOLDMAN SACHS
CREDIT PARTNERS L.P. and THE CHASE MANHATTAN BANK, as co-administrative agents
(each, in such capacity, a "Co-Administrative Agent" and, collectively,
"Co-Administrative Agents"), GOLDMAN SACHS CREDIT PARTNERS L.P. and CHASE
SECURITIES INC., as arranging agents (each, in such capacity, an "Arranging
Agent" and collectively, "Arranging Agents"), and SUNTRUST BANK, ATLANTA, as
collateral agent (in such capacity, "Collateral Agent").
R E C I T A L S
WHEREAS, Company is party to that certain Agreement and Plan of Merger
dated as of August 13, 1996, by and among Company, Boxer Acquisition Corp., a
Delaware corporation and wholly owned subsidiary of Company ("Acquisition Sub"),
and Payco American Corporation, a Wisconsin corporation ("Payco"), pursuant to
which, among other things, Company will acquire all of the capital stock of
Payco;
WHEREAS, Company desires that Lenders extend certain credit facilities to
Company in an aggregate principal amount of $200,000,000 which, together with
the proceeds of the Subordinated Notes (capitalized terms used in these Recitals
without definition shall have the respective meanings assigned in subsection 1.1
hereof) and certain other funds, will be used to fund the acquisition of Payco,
to refinance certain indebtedness of Company, Payco and their respective
Subsidiaries, to pay Transaction Costs and to provide certain working capital
and acquisition facilities to Company;
WHEREAS, certain domestic Subsidiaries of Company desire to guaranty all
of the obligations of Company with respect to the credit facilities provided by
Lenders;
WHEREAS, Company desires to secure all of the Obligations, and each such
Subsidiary of Company desires to secure its respective obligations under the
Subsidiary Guaranty, by granting to Collateral Agent, for the benefit of Agents
and Lenders, (i) a first priority Lien on substantially all of their respective
real and personal property and (ii) a first priority pledge of all of the
capital stock of their respective direct Subsidiaries;
1
<PAGE>
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, Company, Lenders, Co-Administrative
Agents, Arranging Agents and Collateral Agent agree as follows:
SECTION 1.
DEFINITIONS
1.1 Certain Defined Terms.
The following terms used in this Agreement shall have the following
meanings:
"Acquisition" means the transactions contemplated by the Acquisition
Agreement.
"Acquisition Agreement" means that certain Agreement and Plan of Merger
dated as of August 13, 1996, by and among Company, Acquisition Sub and Payco, as
in effect on the Closing Date and as such agreement may be amended, restated,
supplemented or otherwise modified from time to time to the extent permitted
under subsection 7.12A.
"Acquisition Sub" has the meaning assigned to that term in the Recitals to
this Agreement.
"Adjustment Eurodollar Rate" means, for any Interest Rate Determination
Date, the rate per annum obtained by dividing (i) the London Interbank offered
rate for deposits in U.S. Dollars for maturities comparable to the Interest
Period for which such Adjusted Eurodollar Rate will apply as of approximately
11:00 A.M. (London time) on such Interest Rate Determination Date as set forth
on Telerate Page 3750 by (ii) a percentage equal to 100% minus the stated
maximum rate of all reserve requirements (including, without limitation, any
marginal, emergency, supplemental, special or other reserves) applicable on such
Interest Rate Determination Date to any member bank of the Federal Reserve
System in respect of "Eurocurrency liabilities" as defined in Regulation D (or
any successor category of liabilities under Regulation D).
"Affected Lender" has the meaning assigned to that term in subsection
2.6C.
"Affiliate" means, as applied to any Person, any other Person directly or
indirectly controlling, controlled by, or under common control with, that
Person. For the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling", "controlled by" and "under common
control with"), as applied to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of that Person, whether through the ownership of voting securities or
by contract or otherwise; provided, however, that "Affiliate" as applied to
Company or its Subsidiaries shall not include Chase, CSI, GSCP, Goldman, Sachs &
Co. or CS First Boston Corporation and their respective Affiliates, except that
Goldman, Sachs & Co. and GSCP shall be considered Affiliates of Company and its
Subsidiaries for purposes of
2
<PAGE>
subsection 7.9 hereof to the extent such Persons are acting as agents or brokers
for Company or any of its Subsidiaries in connection with any sales of
receivables portfolios.
"Agent" means, individually, each of Collateral Agent, Co-Administrative
Agents and Arranging Agents, and "Agents" means Collateral Agent,
Co-Administrative Agents and Arranging Agents, collectively.
"Agreement" means this Credit Agreement dated as of November 6, 1996, as
it may be amended, restated, supplemented or otherwise modified from time to
time.
"Anniversary" means each of the dates that are anniversaries of the
Closing Date.
"Applicable Base Rate Margin" means, with respect to the applicable Loan
set forth below, the corresponding per annum rate set forth below:
===============================================================
APPLICABLE
LOAN BASE RATE MARGIN
===============================================================
Tranche A Term Loans 1.50%
---------------------------------------------------------------
Tranche B Term Loans 2.00%
---------------------------------------------------------------
Revolving Loans 1.50%
===============================================================
; provided that the Applicable Base Rate Margin set forth above with respect to
Tranche A Term Loans and Revolving Loans shall be reduced by the Pricing
Reduction, if any.
"Applicable Eurodollar Rate Margin" means, with respect to the applicable
Loan set forth below, the corresponding per annum rate set forth below:
===============================================================
APPLICABLE
EURODOLLAR RATE
LOAN MARGIN
===============================================================
Tranche A Term Loans 2.50%
---------------------------------------------------------------
Tranche B Term Loans 3.00%
---------------------------------------------------------------
Revolving Loans 2.50%
===============================================================
; provided that the Applicable Eurodollar Rate Margin set forth above with
respect to Tranche A Term Loans and Revolving Loans shall be reduced by the
Pricing Reduction, if any.
3
<PAGE>
"Arranging Agent" and "Arranging Agents" have the respective meanings
assigned to such terms in the introduction to this Agreement; provided that
after the Closing Date, Arranging Agents shall only mean and include GSCP.
"Articles of Merger" means the Articles of Merger dated as of November 6,
1996 by and between Acquisition Sub and Payco to be filed with the Secretary of
State of Wisconsin, as in effect on the Closing Date and as such articles may be
amended, restated, supplemented or otherwise modified from time to time
thereafter to the extent permitted under subsection 7.12A.
"Asset Sale" means the sale (including in any sale-leaseback transaction)
by Company or any of its Subsidiaries to any Person (other than Company or any
of its Wholly Owned Subsidiaries) of (i) any of the stock of any of Company's
Subsidiaries, (ii) all or substantially all of the assets of any division or
line of business of Company or any of its Subsidiaries, or (iii) any other
assets other than sales of assets in the ordinary course of business and sales
of obsolete equipment, excluding any such other assets to the extent that the
aggregate value of such assets sold in any single transaction or transactions is
equal to $250,000 or less in any one Fiscal Year; provided that in no event
shall a sale of all or any portion of a receivables portfolio be deemed a sale
of assets in the ordinary course of business.
"Assignment Agreement" means an assignment agreement in substantially the
form of Exhibit XIII annexed hereto or in such other form as may be approved by
Co-Administrative Agents.
"Bankruptcy Code" means Title 11 of the United States Code entitled
"Bankruptcy", as now and hereafter in effect, or any successor statute.
"Base Rate" means, at any time, the higher of (x) the Prime Rate or (y)
the rate which is 1/2 of 1% in excess of the Federal Funds Effective Rate.
"Base Rate Loans" means Loans bearing interest at rates determined by
reference to the Base Rate as provided in subsection 2.2A.
"Business Day" means (i) for all purposes other than as covered by clause
(ii) below, any day excluding Saturday, Sunday and any day which is a legal
holiday under the laws of the State of New York or is a day on which banking
institutions located in such state are authorized or required by law or other
governmental action to close, and (ii) with respect to all notices,
determinations, fundings, issuances and payments in connection with the Adjusted
Eurodollar Rate or any Eurodollar Rate Loans, any day that is a Business Day
described in clause (i) above and that is also (a) a day for trading by and
between banks in Dollar deposits in the London interbank market and (b) a day on
which banking institutions are open for business in London.
4
<PAGE>
"Capital Lease" means, as applied to any Person, any lease of any property
(whether real, personal or mixed) by that Person as lessee that, in conformity
with GAAP, is accounted for as a capital lease on the balance sheet of that
Person.
"Cash" means money, currency or a credit balance in a Deposit Account.
"Cash Equivalents" means (i) marketable securities issued or directly and
unconditionally guaranteed by the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year from the date of acquisition thereof; (ii)
marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having the highest rating obtainable
from either Standard & Poor's Rating Service ("S&P") or Moody's Investors
Service, Inc. ("Moody's"); (iii) commercial paper maturing no more than one year
from the date of creation thereof and, at the time of acquisition, having a
rating of at least A-1 from S&P or at least P-1 from Moody's; (iv) certificates
of deposit or bankers' acceptances maturing within one year from the date of
acquisition thereof and, at the time of acquisition, having a rating of at least
A-1 from S&P or at least P-1 from Moody's, issued by any Lender or any
commercial bank organized under the laws of the United States of America or any
state thereof or the District of Columbia having unimpaired capital and surplus
of not less than $250,000,000 (each Lender and each such commercial bank being
herein called a "Cash Equivalent Bank"); and (v) Eurodollar time deposits having
a maturity of less than one year purchased directly from any Cash Equivalent
Bank (provided such deposit is with such Cash Equivalent Bank or any other Cash
Equivalent Bank).
"Cash Proceeds" means, with respect to any Asset Sale, Cash payments
(including any Cash received by way of deferred payment pursuant to, or
monetization of, a note receivable or otherwise, but only as and when so
received) received by Company or any of its Subsidiaries from such Asset Sale.
"Certificate of Merger" means the Certificate of Merger dated as of
November 6, 1996 by and between Acquisition Sub and Payco to be filed with the
Secretary of State of Delaware, as in effect on the Closing Date and as such
certificate may be amended, restated, supplemented or otherwise modified from
time to time thereafter to the extent permitted under subsection 7.12A.
"Certificate re Non-Bank Status" means a certificate substantially in the
form of Exhibit XV annexed hereto delivered by a Lender to Chase
Co-Administrative Agent pursuant to subsection 2.7B(iii).
"Chase" means The Chase Manhattan Bank and its successors, including,
without limitation, its successors by merger.
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"Chase Co-Administrative Agent" means Chase, in its capacity as a
Co-Administrative Agent, and any successor to Chase in such capacity appointed
pursuant to subsection 9.5A.
"Closing Date" means the date on or before November 30, 1996 on which the
initial Loans are made.
"Co-Administrative Agent" and "Co-Administrative Agents" have the
respective meanings assigned to such terms in the introduction to this Agreement
and also mean and include any successor Co-Administrative Agent appointed
pursuant to subsection 9.5A.
"Collateral" means all of the properties and assets (including capital
stock) in which Liens are purported to be granted by the Collateral Documents.
"Collateral Account" has the meaning assigned to that term in the
Collateral Account Agreement.
"Collateral Account Agreement" means the Collateral Account Agreement
executed and delivered by Company and Chase Co-Administrative Agent on the
Closing Date, substantially in the form of Exhibit XVI annexed hereto, pursuant
to which Company may pledge cash to Chase Co-Administrative Agent to secure the
obligations of Company to reimburse Issuing Lenders for payments made under one
or more Letters of Credit as such Collateral Account Agreement may hereafter be
amended, restated, supplemented or otherwise modified from time to time.
"Collateral Agent" means SunTrust, in its capacity as Collateral Agent,
and any successor to SunTrust, in such capacity appointed pursuant to subsection
9.5A.
"Collateral Documents" means the Pledge Agreement, the Security Agreement,
the Limited Partnership Security Agreement, the Trademark Security Agreement,
the Collateral Account Agreement, the Mortgages, the Deeds of Trust, and any
other documents, instruments or agreements delivered by any Loan Party pursuant
to this Agreement or any of the other Loan Documents in order to grant or
perfect liens on any assets of such Loan Party as security for the Obligations.
"Commercial Letter of Credit" means any letter of credit or similar
instrument issued for the purpose of providing the primary payment mechanism in
connection with the purchase of any materials, goods or services by Company or
any of its Subsidiaries in the ordinary course of business of Company or such
Subsidiary.
"Commitments" means the commitments of Lenders to make Loans as set forth
in subsection 2.1A.
"Company Common Stock" means, collectively, Company's (i) Voting Common
Stock, par value $0.01 per share, (ii) Class A Non-Voting Common Stock, par
value $0.01
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per share, (iii) Class B Non-Voting Common Stock, par value $0.01
per share, and (iv) Class C NonVoting Common Stock, par value $0.01 per share.
"Company Preferred Stock" means Company's 8.0% Non-Voting Cumulative
Redeemable Exchangeable Preferred Stock outstanding as of the Closing Date in
the approximate amount of $10,800,000, together with any shares of such
preferred stock issued after the Closing Date as dividends thereon permitted
under subsection 7.5.
"Compliance Certificate" means a certificate substantially in the form of
Exhibit X annexed hereto delivered to Chase Co-Administrative Agent by Company
pursuant to subsection 6.1(iv).
"Condemnation Proceeds" has the meaning assigned to that term in
subsection 2.4B(iii)(d).
"Consolidated Capital Expenditures" means, for any period, the sum of (i)
the aggregate of all expenditures (whether paid in cash or other consideration
or accrued as a liability and including that portion of Capital Leases which is
capitalized on the consolidated balance sheet of Company and its Subsidiaries)
by Company and its Subsidiaries during that period that, in conformity with
GAAP, are included in "purchases of property, plant or equipment" or comparable
items reflected in the consolidated statement of cash flows of Company and its
Subsidiaries plus (ii) to the extent not covered by clause (i) of this
definition, the aggregate of all expenditures by Company and its Subsidiaries
during that period to acquire (by purchase or otherwise) the business, property
(except inventory, other than any receivables portfolios, in the ordinary course
of business) or fixed assets of any Person, or stock or other evidence of
beneficial ownership of any Person that, as a result of the acquisition of such
stock or other evidence, becomes a Subsidiary of Company.
"Consolidated Current Assets" means, as at any date of determination, the
total assets of Company and its Subsidiaries on a consolidated basis which may
properly be classified as current assets in conformity with GAAP, excluding Cash
and Cash Equivalents.
"Consolidated Current Liabilities" means, as at any date of determination,
the total liabilities of Company and its Subsidiaries on a consolidated basis
which may properly be classified as current liabilities in conformity with GAAP.
"Consolidated EBITDA" means, for any period, (i) the sum of the amounts
for such period of (a) Consolidated Net Income, (b) Consolidated Interest
Expense, (c) provisions for taxes based on income, (d) total depreciation
expense, (e) total amortization expense, (f) other non-cash items reducing
Consolidated Net Income, (g) to the extent deducted in determining Consolidated
Net Income, non-recurring charges not exceeding $10,000,000 identified prior to
the first Anniversary (whether or not incurred prior to the first Anniversary)
with respect to the rationalization of the business of Company and its
Subsidiaries following the Acquisition and (h) to the extent deducted in
determining Consolidated Net Income, any non-recurring charges incurred after
the Closing Date in
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connection with the resolution of litigation of Company and its Subsidiaries
disclosed in that certain Offering Circular dated October 31, 1996 prepared in
connection with the offering of the Subordinated Notes, less (ii) the sum of the
amounts for such period of (a) other non-cash items increasing Consolidated Net
Income and (b) to the extent not otherwise deducted in determining Consolidated
Net Income, payments made during such period with respect to Earn Out Agreements
permitted hereunder and Management Fees, all of the foregoing as determined on a
consolidated basis for Company and its Subsidiaries in conformity with GAAP.
"Consolidated Excess Cash Flow" means, for any period, an amount (if
positive) equal to (i) the sum, without duplication, of the amounts for such
period of (a) Consolidated EBITDA and (b) the Consolidated Working Capital
Adjustment minus (ii) the sum, without duplication, of the amounts for such
period of (a) voluntary and scheduled cash repayments of Consolidated Total Debt
(excluding repayments of Revolving Loans except to the extent the Revolving Loan
Commitments are permanently reduced in connection with such repayments), (b)
Consolidated Capital Expenditures (net of any proceeds of any related financings
with respect to such expenditures), (c) Consolidated Interest Expense, and (d)
the provision for current taxes based on income of Company and its Subsidiaries
and payable in cash with respect to such period.
"Consolidated Fixed Charges" means, for any period, an amount equal to the
sum of the amounts for such period of (i) scheduled cash repayments of principal
of all Indebtedness, as reduced by prepayments previously made, (ii)
Consolidated Interest Expense, (iii) Consolidated Maintenance Capital
Expenditures and (iv) the portion of taxes based on income actually paid in
cash.
"Consolidated Interest Expense" means, for any period, total interest
expense (including that portion attributable to Capital Leases in accordance
with GAAP) payable in cash of Company and its Subsidiaries on a consolidated
basis with respect to all outstanding Indebtedness of Company and its
Subsidiaries, including, without limitation, all commissions, discounts and
other fees and charges owed with respect to letters of credit and bankers'
acceptance financing and net costs under Interest Rate Agreements, but
excluding, however, any amounts referred to in subsection 2.3 payable to Agents
and Lenders on or before the Closing Date.
"Consolidated Maintenance Capital Expenditures" means, for any period, all
Consolidated Capital Expenditures for such period other than Consolidated
Capital Expenditures expended to make Permitted Acquisitions or Permitted
Portfolio Acquisitions.
"Consolidated Net Income" means, for any period, the net income (or loss)
of Company and its Subsidiaries on a consolidated basis for such period taken as
a single accounting period determined in conformity with GAAP; provided that
there shall be excluded (i) the income (or loss) of any Person (other than a
Subsidiary of Company) in which any other Person (other than Company or any of
its Subsidiaries) has a joint interest, except to the extent of the amount of
dividends or other distributions actually paid to
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Company or any of its Subsidiaries by such Person during such period, (ii) the
income (or loss) of any Person accrued prior to the date it becomes a Subsidiary
of Company or is merged into or consolidated with Company or any of its
Subsidiaries or that Person's assets are acquired by Company or any of its
Subsidiaries, (iii) the income of any Subsidiary of Company to the extent that
the declaration or payment of dividends or similar distributions by that
Subsidiary of that income is not at the time permitted by operation of the terms
of its charter or any agreement, instrument, judgment, decree, order, statute,
rule or governmental regulation applicable to that Subsidiary, (iv) any
after-tax gains or losses attributable to Asset Sales, and (v) (to the extent
not included in clauses (i) through (iv) above) any net extraordinary gains or
net non-cash extraordinary losses.
"Consolidated Total Debt" means, as at any date of determination, the
aggregate stated balance sheet amount of all outstanding Indebtedness of Company
and its Subsidiaries on a consolidated basis as determined in conformity with
GAAP.
"Consolidated Working Capital" means, as at any date of determination, the
excess of Consolidated Current Assets over Consolidated Current Liabilities.
"Consolidated Working Capital Adjustment" means, for any period on a
consolidated basis, the amount (which may be a negative number) by which
Consolidated Working Capital as of the beginning of such period exceeds (or is
less than) Consolidated Working Capital as of the end of such period.
"Contingent Obligation" means, as applied to any Person, any direct or
indirect liability, contingent or otherwise, of that Person (i) with respect to
any Indebtedness, lease, dividend or other obligation of another if the primary
purpose or intent thereof by the Person incurring the Contingent Obligation is
to provide assurance to the obligee of such obligation of another that such
obligation of another will be paid or discharged, or that any agreements
relating thereto will be complied with, or that the holders of such obligation
will be protected (in whole or in part) against loss in respect thereof, (ii)
with respect to any letter of credit issued for the account of that Person or as
to which that Person is otherwise liable for reimbursement of drawings, or (iii)
under Interest Rate Agreements. Contingent Obligations shall include, without
limitation, (a) the direct or indirect guaranty, endorsement (otherwise than for
collection or deposit in the ordinary course of business), co-making,
discounting with recourse or sale with recourse by such Person of the obligation
of another, (b) the obligation to make take-or-pay or similar payments if
required regardless of non-performance by any other party or parties to an
agreement, and (c) any liability of such Person for the obligation of another
through any agreement (contingent or otherwise) (x) to purchase, repurchase or
otherwise acquire such obligation or any security therefor, or to provide funds
for the payment or discharge of such obligation (whether in the form of loans,
advances, stock purchases, capital contributions or otherwise) or (y) to
maintain the solvency or any balance sheet item, level of income or financial
condition of another if, in the case of any agreement described under subclauses
(x) or (y) of this sentence, the primary purpose or intent thereof is as
described in the preceding sentence. The amount of any Contingent
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Obligation shall be equal to the amount of the obligation so guaranteed or
otherwise supported or, if less, the amount to which such Contingent Obligation
is specifically limited.
"Continuing Director" shall mean, as of any date of determination, any
member of the Board of Directors of Company who (i) was a member of such Board
of Directors on the Closing Date or (ii) was nominated for election or elected
to such Board of Directors with the affirmative vote of the MDC Entities.
"Contractual Obligation" means, as applied to any Person, any provision of
any Security issued by that Person or of any material indenture, mortgage, deed
of trust, contract, undertaking, agreement or other instrument to which that
Person is a party or by which it or any of its properties is bound or to which
it or any of its properties is subject.
"Corporate Loan Party" means any Loan Party which is a corporation.
"CSI" means Chase Securities Inc. and its successors and assigns,
including, without limitation, its successors by merger.
"Debt Collection Laws" means the Fair Debt Collection Practices Act and
any similar state laws relating to the collection of consumer debt.
"Deed of Trust" means any deed of trust granted by Company or any of its
Subsidiaries in any interest in real property to secure the Obligations, as such
deed of trust may be amended, restated, supplemented or otherwise modified from
time to time.
"Defaulting Lender" means any Lender with respect to which a Lender
Default is in effect.
"Deposit Account" means a demand, time, savings, passbook or like account
with a bank, savings and loan association, credit union or like organization,
other than an account evidenced by a negotiable certificate of deposit.
"Dollars" and the sign "$" mean the lawful money of the United States of
America.
"Earn Out Agreement" shall mean (i) the agreements set forth in Schedule
7.4(iv)(a) hereto and (ii) any other agreement entered into after the Closing
Date by Company to pay the seller or sellers of any Person or assets acquired in
accordance with the provisions of subsection 7.7(v) at any time following the
consummation of such acquisition by reference to the financial performance of
Company or the Person or assets acquired.
"Eligible Assignee" means (i) (a) a commercial bank organized under the
laws of the United States or any state thereof; (b) a commercial bank organized
under the laws of any other country or a political subdivision thereof; provided
that (x) such bank is acting through a branch or agency located in the United
States or (y) such bank is organized under the laws of a country that is a
member of the Organization for Economic Cooperation and
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Development or a political subdivision of such country; (c) any other entity
which is an "accredited investor" (as defined in Regulation D under the
Securities Act) which extends credit or buys loans as one of its businesses
including, but not limited to, insurance companies, mutual funds and lease
financing companies; and (d) any other financial institution or fund (whether a
corporation, partnership, trust or other entity) that is engaged in making,
purchasing or otherwise investing in commercial loans in the ordinary course of
its business and has combined capital and surplus or net assets of at least
$100,000,000, in each case (under clauses (a) through (d) above) that is
reasonably acceptable to Co-Administrative Agents; and (ii) any Lender and any
Affiliate of any Lender; provided that no Affiliate of Company shall be an
Eligible Assignee.
"Employee Benefit Plan" means any "employee benefit plan" as defined in
Section 3(3) of ERISA which is subject to ERISA and which is maintained or
contributed to by Company or any of its ERISA Affiliates.
"Employment Agreements" means, collectively, (i) that certain Employment
Agreement and that certain Covenant Not-To-Compete Agreement, in each case dated
as of August 13, 1996 by and between Payco and David S. Patterson, (ii) that
certain Employment Agreement and that certain Covenant Not-To-Compete Agreement,
in each case dated as of August 13, 1996 by and between Payco and James R.
Bohmann, (iii) that certain Employment Agreement and that certain Covenant
Not-To-Compete Agreement, in each case dated as of August 13, 1996 by and
between Payco and William W. Kagel, (iv) that certain Employment Agreement and
that certain Covenant Not-To-Compete Agreement, in each case dated as of August
13, 1996 by and between Payco and Patrick E. Carroll, (v) that certain
Employment Agreement and that certain Covenant Not-To-Compete Agreement, in
each case dated as of August 13, 1996 by and between Payco and Alvin W. Keeley,
(vi) that certain Employment Agreement and that certain Covenant Not-To-Compete
Agreement, in each case dated as of August 13, 1996 by and between Payco and
Susan Mathison, (vii) that certain Employment Agreement and that certain
Covenant Not-To-Compete Agreement, in each case dated as of August 13, 1996 by
and between Payco and John P. Stetzenbach, (viii) that certain Employment
Agreement and that certain Covenant Not-To-Compete Agreement, in each case
dated as of August 13, 1996 by and between Payco and Neal R. Sparby, and (ix)
that certain Consulting Agreement and that certain Covenant Not-To-Compete
Agreement, in each case dated as of August 13, 1996 by and between Payco and
Dennis Punches.
"Environmental Claim" means any written accusation, allegation, notice of
violation, claim, demand, abatement order or other order or direction
(conditional or otherwise) by any governmental authority or any Person for any
damage, including, without limitation, personal injury (including sickness,
disease or death), tangible or intangible property damage, contribution,
indemnity, indirect or consequential damages, damage to the environment,
nuisance, pollution, contamination or other adverse effects on the environment,
or for fines, penalties or restrictions, in each case relating to, resulting
from or in connection with Hazardous Materials and relating to Company, any
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of its Subsidiaries, any of their respective Affiliates that are directly or
indirectly controlled by Company, or any Facility.
"Environmental Laws" means all laws, statutes, ordinances, orders, rules,
regulations, plans, policies or decrees and the like relating to (i)
environmental matters, including, without limitation, those relating to fines,
injunctions, penalties, damages, contribution, cost recovery compensation,
losses or injuries resulting from the Release or threatened Release of Hazardous
Materials, (ii) the generation, use, storage, transportation or disposal of
Hazardous Materials, or (iii) occupational safety and health, public health and
safety, industrial hygiene or protection of wetlands, in any manner applicable
to Company or any of its Subsidiaries or any of their respective properties,
including, without limitation, the Comprehensive Environmental Response,
Compensation, and Liability Act (42 U.S.C. ss. 9601 et seq.), the Hazardous
Materials Transportation Act (49 U.S.C. ss. 1801 et seq.), the Resource
Conservation and Recovery Act (42 U.S.C. ss. 6901 et seq.), the Federal Water
Pollution Control Act ( 33 U.S.C. ss. 1251 et seq.), the Clean Air Act (42
U.S.C. ss. 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. ss. 2601
et seq.), the Federal Insecticide, Fungicide and Rodenticide Act (7 U.S.C.
ss.136 et seq.), the Occupational Safety and Health Act (29 U.S.C. ss. 651 et
seq.) and the Emergency Planning and Community Right-to-Know Act (42 U.S.C. ss.
11001 et seq.), each as amended or supplemented, and any analogous future or
present local, state and federal statutes and regulations promulgated pursuant
thereto, each as in effect as of the date of determination.
"Equity Proceeds" means the cash proceeds (net of underwriting discounts
and commissions and other reasonable costs associated therewith) from the
issuance of any equity Securities of Company after the Closing Date.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute.
"ERISA Affiliate" means, as applied to any Person, (i) any corporation
which is a member of a controlled group of corporations within the meaning of
Section 414(b) of the Internal Revenue Code of which that Person is a member;
(ii) any trade or business (whether or not incorporated) which is a member of a
group of trades or businesses under common control within the meaning of Section
414(c) of the Internal Revenue Code of which that Person is a member; and (iii)
solely for purposes of obligations under Section 412 of the Internal Revenue
Code or under the applicable sections set forth in Section 414(t)(2) of the
Internal Revenue Code, any member of an affiliated service group within the
meaning of Section 414(m) or (o) of the Internal Revenue Code of which that
Person, any corporation described in clause (i) above or any trade or business
described in clause (ii) above is a member.
"ERISA Event" means (i) a "reportable event" within the meaning of Section
4043(c) of ERISA and the regulations issued thereunder with respect to any
Pension Plan (excluding those for which the provision for 30-day notice to the
PBGC has been waived by regulation); (ii) the failure to meet the minimum
funding standard of Section 412 of the Internal
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Revenue Code with respect to any Pension Plan (whether or not waived in
accordance with Section 412(d) of the Internal Revenue Code) or the failure to
make by its due date a required installment under Section 412(m) of the Internal
Revenue Code with respect to any Pension Plan or the failure to make any
required contribution to a Multiemployer Plan; (iii) the provision by the
administrator of any Pension Plan pursuant to Section 4041(a)(2) of ERISA of a
notice of intent to terminate such plan in a distress termination described in
Section 4041(c) of ERISA; (iv) the withdrawal by Company or any of its ERISA
Affiliates from any Pension Plan with two or more contributing sponsors or the
termination of any such Pension Plan resulting, in either case, in liability
pursuant to Section 4063 or 4064 of ERISA, respectively; (v) the institution by
the PBGC of proceedings to terminate any Pension Plan pursuant to Section 4042
of ERISA; (vi) the imposition of liability on Company or any of its ERISA
Affiliates pursuant to Section 4062(e) or 4069 of ERISA or by reason of the
application of Section 4212(c) of ERISA; (vii) the withdrawal by Company or any
of its ERISA Affiliates in a complete or partial withdrawal (within the meaning
of Sections 4203 and 4205 of ERISA) from any Multiemployer Plan resulting in
withdrawal liability pursuant to Section 4201 of ERISA, or the receipt by
Company or any of its ERISA Affiliates of written notice from any Multiemployer
Plan that it is in reorganization or insolvency pursuant to Section 4241 or 4245
of ERISA, or that it intends to terminate or has terminated under Section 4042
of ERISA or under Section 4041A of ERISA if such termination would result in
liability to Company or any of its ERISA Affiliates; (viii) the imposition on
Company or any of its ERISA Affiliates of fines, penalties or taxes under
Chapter 43 of the Internal Revenue Code or under Section 409 or 502(c), (i) or
(l) or 4071 of ERISA in respect of any Employee Benefit Plan; (ix) the failure
of any Pension Plan (or any other Employee Benefit Plan intended to be qualified
under Section 401(a) of the Internal Revenue Code) to qualify under Section
401(a) of the Internal Revenue Code, or the failure of any trust forming part of
any Pension Plan to qualify for exemption from taxation under Section 501(a) of
the Internal Revenue Code; or (x) the imposition of a Lien pursuant to Section
401(a)(29) or 412(n) of the Internal Revenue Code or pursuant to ERISA with
respect to any Pension Plan.
"Eurodollar Rate Loans" means Loans bearing interest at rates determined
by reference to the Adjusted Eurodollar Rate as provided in subsection 2.2A.
"Event of Default" means each of the events set forth in Section 8.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time, and any successor statute.
"Existing API Credit Agreement" means that certain Credit Agreement dated
as of March 21, 1996, by and among Perimeter Credit, L.P., Gulf State Credit,
L.P., and Account Portfolios, L.P., as borrowers, SunTrust Bank, Atlanta, as
lender and administrative agent, and Wachovia Bank of Georgia, N.A., as lender
and collateral agent, as amended, supplemented or otherwise modified to the
Closing Date.
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"Existing OSI Credit Agreement" means that certain Credit Agreement dated
as of January 10, 1996, by and among Outsourcing Solutions Incorporated, Heller
Financial, Inc. and National Westminster Bank Plc ("NatWest"), as lenders,
co-arrangers and co-administrative agents, and NatWest, as L/C issuer, as
amended, supplemented or otherwise modified to the Closing Date.
"Existing Seller Note" means that certain 9% Non-Negotiable Subordinated
Note issued by Outsourcing Solutions Incorporated to Alan Miller in the
principal amount of $5,000,000, due July 10, 2001, as in effect on the Closing
Date and as such note may be amended, restated, supplemented or otherwise
modified from time to time thereafter to the extent permitted under subsection
7.12B.
"Facilities" means any and all real property (including, without
limitation, all buildings, fixtures or other improvements located thereon) now,
hereafter or heretofore owned, leased, operated or used by Company or any of its
Subsidiaries (but only as to portions of buildings actually leased or used) or
any of their respective predecessors or any of their respective Affiliates that
are directly or indirectly controlled by Company.
"Fair Debt Collection Practices Act" means the Federal Fair Debt
Collection Practices Act, as amended from time to time, and any successor
statute.
"Federal Funds Effective Rate" means, for any period, a fluctuating
interest rate equal for each day during such period to the weighted average of
the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day which is a Business Day, the average of the quotations for such day on such
transactions received by Chase Co-Administrative Agent from three Federal funds
brokers of recognized standing selected by Chase Co-Administrative Agent.
"Fiscal Quarter" means a fiscal quarter of a Fiscal Year.
"Fiscal Year" means the fiscal year of Company and its Subsidiaries ending
on December 31 of each calendar year.
"Forward Flow Contract" shall mean (i) the agreement set forth in Schedule
7.4(iv)(b) hereto and (ii) any other agreement entered into after the Closing
Date by Company or any of its Subsidiaries to purchase receivables portfolios
from time to time meeting the criteria enumerated therein.
"Funding and Payment Office" means the office of Chase Co-Administrative
Agent and Swing Line Lender located at 270 Park Avenue, New York, New York 10017
or such offices of Chase Co-Administrative Agent or any successor Chase
Co-Administrative Agent specified by Chase Co-Administrative Agent or such
successor Chase Co-Administrative Agent in a written notice to Loan Parties and
Lenders).
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"Funding Date" means the date of the funding of a Loan.
"GAAP" means, subject to the limitations on the application thereof set
forth in subsection 1.2, generally accepted accounting principles set forth in
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession, in each case as the same are applicable to the circumstances as of
the date of determination and specifically, terms used herein applicable to
Company and its Subsidiaries defined by reference to GAAP shall give effect to
the subtraction of minority interests.
"Governmental Acts" has the meaning assigned to that term in subsection
3.5.
"Governmental Authorization" means any permit, license, authorization,
plan, directive, consent order or consent decree of or from any federal, state
or local governmental authority, agency or court.
"GSCP" means Goldman Sachs Credit Partners L.P., a Bermuda limited
partnership.
"Guaranty" means the Subsidiary Guaranty and any other guaranty of the
Obligations.
"Guarantors" means the Subsidiary Guarantors.
"Hazardous Materials" means (i) any chemical, material or substance
defined as or included in the definition of "hazardous substances", "hazardous
wastes", "hazardous materials", "extremely hazardous waste", "restricted
hazardous waste", "infectious waste", "toxic substances" or any other
formulations intended to define, list or classify substances by reason of
deleterious properties such as ignitability, corrosivity, reactivity,
carcinogenicity, toxicity, reproductive toxicity, "TCLP toxicity" or "EP
toxicity" or words of similar import under any applicable Environmental Laws;
(ii) any oil, petroleum, petroleum fraction or petroleum derived substance;
(iii) any drilling fluids, produced waters and other wastes associated with the
exploration, development or production of crude oil, natural gas or geothermal
resources; (iv) any flammable substances or explosives; (v) any radioactive
materials; (vi) asbestos in any form; (vii) urea formaldehyde foam insulation;
(viii) electrical equipment which contains any oil or dielectric fluid
containing levels of polychlorinated biphenyls in excess of fifty parts per
million; (ix) pesticides; and (x) any other chemical, material or substance,
exposure to which is prohibited, limited or regulated by any governmental
authority.
"HBR Services Agreement" means that certain Master Services Agreement
dated as of October 1, 1992, by and between Account Portfolios, L.P. and HBR
Capital, Ltd., as in effect on the Closing Date and as such agreement may be
amended, restated, supplemented
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<PAGE>
or otherwise modified from time to time thereafter to the extent permitted under
subsection 7.12A.
"Immaterial Subsidiaries" means, with respect to any Person, any
Subsidiary or Subsidiaries of such Person the assets of which constitute,
individually or in the aggregate, less than 5% of the total assets of such
Person and its Subsidiaries.
"Indebtedness" means, as applied to any Person, (i) all indebtedness for
borrowed money, (ii) that portion of obligations with respect to Capital Leases
that is properly classified as a liability on a balance sheet in conformity with
GAAP, (iii) notes payable and drafts accepted representing extensions of credit
whether or not representing obligations for borrowed money (other than accounts
payable incurred in the ordinary course of business and accrued expenses
incurred in the ordinary course of business), (iv) any obligation owed for all
or any part of the deferred purchase price of property or services (excluding
any such obligations incurred under ERISA or under Earn Out Agreements), which
purchase price is (a) due more than six months from the date of incurrence of
the obligation in respect thereof or (b) evidenced by a note or similar written
instrument, and (v) all indebtedness secured by any Lien on any property or
asset owned or held by that Person regardless of whether the indebtedness
secured thereby shall have been assumed by that Person or is nonrecourse to the
credit of that Person. Obligations under Interest Rate Agreements, Currency
Agreements and Earn Out Agreements constitute Contingent Obligations and not
Indebtedness.
"Indemnitee" has the meaning assigned to that term in subsection 10.3.
"Initial Period" means the period commencing on and including the Closing
Date and ending on (but excluding) the earlier of (i) 60 days after the Closing
Date and (ii) the date on which Arranging Agents notify Company that they have
concluded their primary syndication of the Loans and the Commitments.
"Insurance Proceeds" has the meaning assigned to that term in subsection
2.4B(iii)(d).
"Interest Coverage Ratio" means, as of any date of determination, the
ratio of Consolidated EBITDA to Consolidated Interest Expense, in each case
calculated for the 12 consecutive months ending on the last day of the month
preceding such date of determination.
"Interest Payment Date" means (i) with respect to any Base Rate Loan, each
January 15, April 15, July 15 and October 15 of each year, commencing on January
15, 1997 and (ii) with respect to any Eurodollar Rate Loan, the last day of each
Interest Period applicable to such Loan; provided that in the case of each
Interest Period of longer than three months, "Interest Payment Date" shall also
include the date that is three months after the commencement of such Interest
Period.
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"Interest Period" has the meaning assigned to that term in subsection
2.2B.
"Interest Rate Agreement" means any interest rate swap agreement, interest
rate cap agreement, interest rate collar agreement or other similar agreement or
arrangement designed to hedge Company or any of its Subsidiaries against
fluctuations in interest rates.
"Interest Rate Determination Date" means each date for calculating the
Adjusted Eurodollar Rate, for purposes of determining the interest rate in
respect of an Interest Period. The Interest Rate Determination Date in respect
of calculating the Adjusted Eurodollar Rate shall be the second Business Day
prior to the first day of the related Interest Period.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended to the date hereof and from time to time hereafter.
"Investment" means (i) any direct or indirect purchase or other
acquisition by Company or any of its Subsidiaries of, or of a beneficial
interest in, stock or other Securities of any other Person (other than a Person
that, prior to such purchase or acquisition, was a Wholly Owned Subsidiary of
Company), or (ii) any direct or indirect loan, advance (other than advances to
employees for moving, entertainment and travel expenses, drawing accounts and
similar expenditures in the ordinary course of business) or capital contribution
by Company or any of its Subsidiaries to any other Person other than a Wholly
Owned Subsidiary of Company, including all indebtedness and accounts receivable
acquired from that other Person that are not current assets or did not arise
from sales to that other Person in the ordinary course of business; provided,
however, that the term "Investment" shall not include (a) current trade and
customer accounts receivable for goods furnished or services rendered in the
ordinary course of business and payable in accordance with customary trade
terms, (b) advances and prepayments to suppliers for goods and services in the
ordinary course of business, (c) stock or other securities acquired in
connection with the satisfaction or enforcement of Indebtedness or claims due or
owing to Company or any of its Subsidiaries or as security for any such
Indebtedness or claims, (d) Cash held in Deposit Accounts with banks and trust
companies (other than Lenders) not exceeding $2,000,000 in aggregate amount, (e)
Cash held in Deposit Accounts with banks and trust companies (other than
Lenders) in which amounts received from credit card issuers are concentrated and
held to be swept to Company's operating accounts with a Lender on a daily basis,
(f) Cash held in any Deposit Account with a Lender and (g) shares in a mutual
fund that invests solely in Cash Equivalents. The amount of any Investment shall
be the original cost of such Investment plus the cost of all additions thereto,
without any adjustments for increases or decreases in value, or write-ups,
write-downs or write-offs with respect to such Investment.
"Issuing Lender" means, with respect to any Letter of Credit, the Lender
which agrees or is otherwise obligated to issue such Letter of Credit,
determined as provided in subsection 3.1B(ii).
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"Joint Venture" means a joint venture, partnership or other similar
arrangement, whether in corporate, partnership or other legal form; provided
that in no event shall any corporate Subsidiary of any Person be considered to
be a Joint Venture to which such Person is a party.
"Lender" and "Lenders" means the persons identified as "Lenders" and
listed on the signature pages of this Agreement, together with their successors
and permitted assigns pursuant to subsection 10.1, and the term "Lenders" shall
include Swing Line Lender unless the context otherwise requires provided that
the term "Lenders", when used in the context of a particular Commitment, shall
mean Lenders having that Commitment.
"Lender Default" shall mean (i) the refusal (which has not been retracted)
of a Lender to make available its portion of any Loans (including any Revolving
Loans made to pay Refunded Swing Line Loans or to reimburse drawings under
Letters of Credit) in accordance with subsection 2.1A(iv) or its portion of any
unreimbursed drawing or payment under a Letter of Credit in accordance with
subsection 3.3C or (ii) a Lender having notified Company and/or Chase
Co-Administrative Agent in writing that it does not intend to comply with its
obligations under subsection 2.1 or subsections 3.1C, 3.3B or 3.3C, in any such
case as a result of any takeover of such Lender by any regulatory authority or
agency.
"Lending Office" means, as to any Lender, the office or offices of such
Lender specified as the "Lending Office" on Schedule 2.1, or such other office
or offices as such Lender may from time to time notify Company and Chase
Co-Administrative Agent.
"Letter of Credit" or "Letters of Credit" means Commercial Letters of
Credit and Standby Letters of Credit issued or to be issued by Issuing Lenders
for the account of Company pursuant to subsection 3.1.
"Letter of Credit Usage" means, as at any date of determination, the sum
of (i) the maximum aggregate amount which is or at any time thereafter may
become available for drawing under all Letters of Credit then outstanding plus
(ii) the aggregate amount of all drawings under Letters of Credit honored by
Issuing Lenders and not theretofore reimbursed by Company (including any such
reimbursement out of the proceeds of Revolving Loans pursuant to subsection
3.3B).
"Leverage Ratio" means, as of any date of determination, the ratio of
Consolidated Total Debt, as of the date of determination, to Consolidated
EBITDA, for the 12 consecutive months ending on the last day of such month, in
each case, calculated for Company and its Subsidiaries on a consolidated basis
in accordance with GAAP.
"Lien" means any lien, mortgage, pledge, assignment, security interest,
fixed or floating charge or encumbrance of any kind (including any conditional
sale or other title retention agreement, any lease in the nature thereof, and
any agreement to give any security interest) and any option, trust or other
preferential arrangement having the practical effect of any of the foregoing.
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<PAGE>
"Limited Partnership Security Agreement" means the Limited Partnership
Security Agreement entered into by and among Company, certain Subsidiary
Guarantors and Collateral Agent dated as of the date hereof, substantially in
the form of Exhibit IX-B annexed hereto, as such Limited Partnership Security
Agreement may thereafter be amended, restated, supplemented or otherwise
modified from time to time.
"Loan" or "Loans" means, as the context requires, one or more of the
Tranche A Term Loans, Tranche B Term Loans, Revolving Loans and Swing Line Loans
or any combination thereof.
"Loan Documents" means this Agreement, the Notes, the Letters of Credit
(and any applications for, or reimbursement agreements or other documents or
certificates executed by Company in favor of an Issuing Lender relating to, the
Letters of Credit), the Guaranty, and the Collateral Documents.
"Loan Parties" means Company and each Subsidiary Guarantor.
"Management Fees" means the fees payable by Company pursuant to the MDC
Advisory Services Agreement and the HBR Services Agreement.
"Margin Stock" has the meaning assigned to that term in Regulation U of
the Board of Governors of the Federal Reserve System as in effect from time to
time.
"Material Adverse Effect" means (i) a material adverse effect upon the
business, operations, properties, assets, condition (financial or otherwise) or
prospects of Company and its Subsidiaries, taken as a whole, (ii) the material
impairment of the ability of any Loan Party to perform the Obligations and (iii)
a material adverse effect upon the legality, validity, binding effect or
enforceability against a Loan Party of a Loan Document to which it is a party;
provided that Company's consummation of the Acquisition in accordance with the
terms of the Acquisition Agreement shall not be deemed to have a Material
Adverse Effect for purposes of subsection 5.4.
"MDC Advisory Services Agreement" means that certain Advisory Services
Agreement dated as of September 21, 1995, by and between Company and MDC
Management Company III, L.P., as in effect on the Closing Date and as such
agreement may be amended, restated, supplemented or otherwise modified from time
to time thereafter to the extent permitted under subsection 7.12A.
"MDC Entities" means McCown De Leeuw & Co. III, L.P., a California limited
partnership, McCown De Leeuw & Co. Offshore (Europe) III, L.P., a Bermuda
limited partnership, McCown De Leeuw & Co. III (Asia), L.P., a Bermuda limited
partnership and Gamma Fund LLC, a California limited liability company.
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<PAGE>
"Merger" means the merger of Acquisition Sub with and into Payco in
accordance with the terms of the Acquisition Agreement, the Articles of Merger
and the Certificate of Merger, with Payco being the surviving corporation in
such merger.
"Mortgage" means any mortgage or legal charge granted by Company or any of
its Subsidiaries in any interest in real property to secure the Obligations, as
such mortgage may be amended, restated, supplemented or otherwise modified from
time to time.
"Multiemployer Plan" means a "multiemployer plan", as defined in Section
4001(a)(3) of ERISA which is subject to Title IV of ERISA, to which Company or
any of its ERISA Affiliates is contributing or to which Company or any of its
ERISA Affiliates has an obligation to contribute.
"Net Cash Proceeds" means, with respect to any Asset Sale, Cash Proceeds
of such Asset Sale net of bona fide direct costs of sale including, without
limitation, (i) income taxes reasonably estimated to be actually payable as a
result of such Asset Sale within one year of the date of receipt of such Cash
Proceeds, (ii) transfer, sales, use and other taxes payable in connection with
such Asset Sale, (iii) payment of the outstanding principal amount of, premium
or penalty, if any, and interest on any Indebtedness (other than the Loans) that
is secured by a Lien on the stock or assets in question and that is required to
be repaid under the terms thereof as a result of such Asset Sale, and (iv)
broker's commissions and reasonable fees and expenses of counsel in connection
with such Asset Sale.
"Non-Defaulting Lender" means and includes each Lender other than a
Defaulting Lender.
"Notes" means one or more of the Term Notes, Revolving Notes or Swing Line
Note or any combination thereof.
"Notice of Borrowing" means a notice in the form of Exhibit I annexed
hereto delivered by Company to Chase Co-Administrative Agent pursuant to
subsection 2.1B with respect to a proposed borrowing.
"Notice of Conversion/Continuation" means a notice substantially in the
form of Exhibit II annexed hereto delivered by Company to Chase
Co-Administrative Agent pursuant to subsection 2.2D with respect to a proposed
conversion or continuation of the applicable basis for determining the interest
rate with respect to the Loans specified therein.
"Notice of Issuance of Letter of Credit" means a notice in the form of
Exhibit III annexed hereto delivered by Company to Chase Co-Administrative Agent
pursuant to subsection 3.1B(i) with respect to the proposed issuance of a Letter
of Credit.
"Obligations" means all obligations of every nature of each Loan Party
from time to time owed to Agents, Lenders or any of them under the Loan
Documents, whether for principal, interest, reimbursement of amounts drawn under
Letters of Credit or payments
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<PAGE>
for early termination of Interest Rate Agreements, fees, expenses,
indemnification or otherwise.
"Officer's Certificate" means, as applied to any corporation, a
certificate executed on behalf of such corporation by its chairman of the board
(if an officer), its president, its chief financial officer or a vice president;
provided that every Officer's Certificate with respect to the compliance with a
condition precedent to the making of any Loans hereunder shall include (i) a
statement that the officer making or giving such Officer's Certificate has read
such condition and any definitions or other provisions contained in this
Agreement relating thereto, (ii) a statement that, in the opinion of the signer
he or she has made or has caused to be made such examination or investigation as
is necessary to enable him or her to express an informed opinion as to whether
or not such condition has been complied with, and (iii) a statement as to
whether, in the opinion of the signer, such condition has been complied with.
"Operating Lease" means, as applied to any Person, any lease (including,
without limitation, leases that may be terminated by the lessee at any time) of
any property (whether real, personal or mixed) that is not a Capital Lease other
than any such lease under which that Person is the lessor.
"Partnership Loan Party" means any Loan Party which is a limited
partnership.
"Payco" has the meaning assigned to that term in the Recitals to this
Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation established pursuant
to Section 4002 of ERISA (or any successor thereto).
"Pension Plan" means any Employee Benefit Plan, other than a Multiemployer
Plan, which is subject to Title IV of ERISA.
"Permitted Acquisition" means an acquisition of assets or a business
(other than receivables portfolios) effected in accordance with the provisions
of subsection 7.7(v).
"Permitted Encumbrances" means the following types of Liens:
(i) Liens for taxes, assessments or governmental charges or claims
the payment of which is not, at the time, required by subsection 6.3;
(ii) statutory Liens of landlords, statutory Liens of carriers,
warehousemen, mechanics and materialmen and other Liens imposed by law
(other than any such Lien imposed pursuant to Section 401(a)(29) or 412(n)
of the Internal Revenue Code or by ERISA) incurred in the ordinary course
of business for sums not yet delinquent or being contested in good faith,
if such reserve or other appropriate provision, if any, as shall be
required by GAAP shall have been made therefor;
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<PAGE>
(iii) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security, or to secure the performance of
tenders, statutory obligations, surety and appeal bonds, bids, leases,
government contracts, trade contracts, performance and return-of-money
bonds and other similar obligations (exclusive of obligations for the
payment of borrowed money);
(iv) any attachment or judgment Lien not constituting an Event of
Default under subsection 8.8;
(v) leases or subleases granted to others not interfering in any
material respect with the ordinary conduct of the business of Company or
any of its Subsidiaries;
(vi) easements, rights-of-way, restrictions, minor defects,
encroachments or irregularities in title and other similar charges or
encumbrances not interfering in any material respect with the ordinary
conduct of the business of Company or any of its Subsidiaries;
(vii) any (a) interest or title of a lessor or sublessor under any
Capital Lease permitted by subsection 7.1(iii) or any operating lease not
prohibited by this Agreement, (b) restriction or encumbrance that the
interest or title of such lessor or sublessor may be subject to, or (c)
subordination of the interest of the lessee or sublessee under such lease
to any restriction or encumbrance referred to in the preceding clause (b);
(viii) Liens arising from filing UCC financing statements relating
solely to leases permitted by this Agreement;
(ix) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods;
(x) deposits in the ordinary course of business to secure
liabilities to insurance carriers, lessors, utilities and other service
providers; and
(xi) bankers liens and rights of setoff with respect to customary
depository arrangements entered into in the ordinary course of business.
"Permitted Joint Venture" means a Subsidiary engaged in substantially the
same line of business as Company and its Subsidiaries on the date hereof in
which (i) at least 51% of the outstanding equity interests are owned by Company
or a Wholly Owned Subsidiary of Company, (ii) any equity interests (other than
Regulatory Shares) not owned by Company or a Wholly Owned Subsidiary of Company
are beneficially owned by non-Affiliates of
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Company and (iii) Company or a Wholly Owned Subsidiary, as a general partner or
otherwise, controls the management, operations and policies.
"Permitted Portfolio Acquisition" means an acquisition of a receivables
portfolio effected in accordance with the provisions of subsection 7.7(v).
"Permitted Seller Note" means a promissory note substantially in the form
of Exhibit XIV annexed hereto representing any Indebtedness of Company incurred
in connection with any Permitted Acquisition payable to the seller in connection
therewith, as such note may be amended, restated, supplemented or otherwise
modified from time to time to the extent permitted under subsection 7.12B;
provided that no Permitted Seller Note shall (i) be guarantied by any Subsidiary
of Company or secured by any property of Company or any of its Subsidiaries or
(ii) bear cash interest at a rate in excess of 12% per annum; and provided
further, that no Permitted Seller Note issued after the first Anniversary shall
provide for any prepayment or repayment of all or any portion of the principal
thereof prior to the date of the final scheduled installment of principal of any
of the Loans.
"Person" means and includes natural persons, corporations, limited
partnerships, general partnerships, joint stock companies, Joint Ventures,
associations, companies, trusts, banks, trust companies, land trusts, business
trusts or other organizations, whether or not legal entities, and governments
and agencies and political subdivisions thereof.
"Pledge Agreement" means that certain Pledge Agreement by and among
Company, the Subsidiary Guarantors and Collateral Agent dated as of the date
hereof and substantially in the form of Exhibit VIII annexed hereto, as such
Pledge Agreement may be amended, restated, supplemented or otherwise modified
from time to time.
"Portfolio Purchase Business" means assets or operations generating
revenues from collections on acquired or purchased portfolios of loans,
accounts, chattel paper, general intangibles or instruments.
"Potential Event of Default" means a condition or event that, after notice
or after any applicable grace period has lapsed, or both, would constitute an
Event of Default.
"Pricing Reduction" means, at any time after the Closing Date, a pricing
reduction determined by reference to the correlative Leverage Ratio set forth
below:
================================================================================
Leverage Ratio Pricing Reduction
================================================================================
Greater than or equal to 2.25:1.0, but less than 2.75:1.0 .25%
- --------------------------------------------------------------------------------
Less than 2.25:1.0 .50%
================================================================================
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The Pricing Reduction shall be determined by reference to the Leverage Ratio set
forth in the most recent financial statements delivered by Company pursuant to
clause (ii) or (iii) of subsection 6.1 (accompanied by a Compliance Certificate
delivered by Company pursuant to clause (iv) of subsection 6.1) commencing with
the delivery of audited financial statements pursuant to subsection 6.1(iii)
with respect to the Fiscal Year ending December 31, 1996; provided, however,
that for purposes of determining the Leverage Ratio for any four-Fiscal Quarter
period including the Closing Date, Consolidated EBITDA shall be calculated on a
pro forma basis assuming that the Closing Date, the related borrowings by
Company pursuant to this Agreement and the Subordinated Notes, and the
Acquisition occurred on the first day of the applicable four-Fiscal Quarter
period, all such calculations to be in form and substance reasonably
satisfactory to Co-Administrative Agents. The Pricing Reduction shall be
effective on the day following delivery of the relevant Compliance Certificate
to Chase Co-Administrative Agent and shall remain in effect through the next
scheduled date for delivery of a Compliance Certificate. It is understood that
the Pricing Reductions set forth in the table above are not cumulative.
Notwithstanding anything herein to the contrary, at any time an Event of Default
shall have occurred and be continuing the Pricing Reduction shall be zero.
"Prime Rate" means the rate of interest per annum publicly announced from
time to time by Chase as its prime commercial lending rate in effect at its
principal office in New York City. The Prime Rate is a reference rate and does
not necessarily represent the lowest or best rate actually charged to any
customer. Chase or any other Lender may make commercial loans or other loans at
rates of interest at, above or below the Prime Rate.
"Projections" has the meaning assigned thereto in subsection 5.3B.
"Pro Rata Share" means (i) with respect to all payments, computations and
other matters relating to the Tranche A Term Loan Commitment or the Tranche A
Term Loan of any Lender, the percentage obtained by dividing (x) the Tranche A
Term Loan Exposure of that Lender by (y) the aggregate Tranche A Term Loan
Exposure of all Lenders; (ii) with respect to all payments, computations and
other matters relating to the Tranche B Term Loan Commitment or the Tranche B
Term Loan of any Lender, the percentage obtained by dividing (x) the Tranche B
Term Loan Exposure of that Lender by (y) the aggregate Tranche B Term Loan
Exposure of all Lenders; (iii) with respect to all payments, computations and
other matters relating to the Revolving Loan Commitment or the Revolving Loans
of any Lender or any Letters of Credit issued by any Lender or any
participations purchased by any Lender therein or in any Swing Line Loans, the
percentage obtained by dividing (x) the Revolving Loan Exposure of that Lender
by (y) the aggregate Revolving Loan Exposure of all Lenders; and (iv) for all
other purposes with respect to each Lender, the percentage obtained by dividing
(x) the sum of the Tranche A Term Loan Exposure of that Lender plus the Tranche
B Term Loan Exposure of that Lender plus the Revolving Loan Exposure of that
Lender by (y) the sum of the aggregate Tranche A Term Loan Exposure of all
Lenders plus the aggregate Tranche B Term Loan Exposure of all Lenders plus the
aggregate Revolving Loan Exposure of all Lenders; in any such case as the
applicable percentage may be adjusted by assignments permitted pursuant to
subsection 10.1. The
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initial Pro Rata Share of each Lender for purposes of each of clauses (i), (ii),
(iii), and (iv) of the preceding sentence is set forth opposite the name of that
Lender in Schedule 2.1 annexed hereto.
"Qualified Loan Portfolio" means a portfolio of loans, accounts, chattel
paper, general intangibles or instruments acquired or purchased by Company or
one of its Subsidiaries from any Person, where (i) the portfolio is free and
clear of all Liens, except Liens in favor of Collateral Agent for the benefit of
Agents and Lenders under this Agreement; (ii) no participation or other interest
in the portfolio or the collections from the portfolio exists in favor of any
other Person other than a participation or other interest which does not exceed
50% of the portfolio or collections from the portfolio and which is on terms
approved in advance by Co-Administrative Agents and Requisite Lenders; and (iii)
the portfolio consists of loans, accounts, chattel paper, general intangibles or
instruments similar in type, characteristics and quality to those owned or
previously owned by Company and its Subsidiaries. Notwithstanding the foregoing,
a Qualified Loan Portfolio may be subject to participations, interests and/or
Liens granted to Goldman, Sachs & Co. pursuant to arrangements in effect as of
the Closing Date or substantially similar thereto.
"Refunded Swing Line Loans" has the meaning assigned to that term in
subsection 2.1A(iv).
"Register" has the meaning assigned to that term in subsection 2.1D.
"Regulation D" means Regulation D of the Board of Governors of the Federal
Reserve System, as in effect from time to time.
"Regulatory Shares" means, with respect to any Person, shares of such
Person required to be issued as qualifying shares to directors or persons
similarly situated or shares issued to Persons other than Company or a Wholly
Owned Subsidiary of Company in response to regulatory requirements of foreign
jurisdictions pursuant to a resolution of the Board of Directors of such Person,
so long as such shares do not exceed one percent of the total outstanding shares
of equity such Person and any owners of such shares irrevocably covenant with
Company to remit to Company or waive any dividends or distributions paid or
payable in respect of such shares.
"Reimbursement Date" has the meaning assigned to that term in subsection
3.3B.
"Related Agreements" means the Subordinated Notes, the Subordinated Note
Indenture, the other Subordinated Note Documents, the Acquisition Agreement, the
Articles of Merger and the Certificate of Merger.
"Release" means any release, spill, emission, leaking, pumping, pouring,
injection, escaping, deposit, disposal, discharge, dispersal, dumping, leaching
or migration of Hazardous Materials into the indoor or outdoor environment
(including, without limitation, the abandonment or disposal of any barrels,
containers or other closed receptacles
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<PAGE>
containing any Hazardous Materials), or into or out of any Facility, including
the movement of any Hazardous Material through the air, soil, surface water,
groundwater or property.
"Requisite Lenders" means Non-Defaulting Lenders having or holding not
less than 51% of the sum of the aggregate Tranche A Term Loan Exposure of all
Non-Defaulting Lenders plus the aggregate Tranche B Term Loan Exposure of all
Non-Defaulting Lenders plus the aggregate Revolving Loan Exposure of all
Non-Defaulting Lenders.
"Restricted Junior Payment" means (i) any dividend or other distribution,
direct or indirect, on account of any shares of any class of stock of Company
now or hereafter outstanding, except a dividend payable solely in shares of that
class of stock to the holders of that class, (ii) any redemption, retirement,
sinking fund or similar payment, purchase or other acquisition for value, direct
or indirect, of any shares of any class of stock of Company now or hereafter
outstanding, (iii) any payment made to retire, or to obtain the surrender of,
any outstanding warrants, options or other rights to acquire shares of any class
of stock of Company now or hereafter outstanding, and (iv) any payment or
prepayment of principal of, premium, if any, or interest on, or redemption,
purchase, retirement, defeasance (including in-substance or legal defeasance),
sinking fund or similar payment with respect to, any Subordinated Indebtedness.
"Revolving Loan Commitment" means the commitment of a Lender to make
Revolving Loans to Company pursuant to subsection 2.1A(iii) and "Revolving Loan
Commitments" means such commitments of all Lenders in the aggregate.
"Revolving Loan Commitment Termination Date" means October 15, 2001.
"Revolving Loan Exposure" means, with respect to any Lender as of any date
of determination (i) prior to the termination of the Revolving Loan Commitments,
that Lender's Revolving Loan Commitment and (ii) after the termination of the
Revolving Loan Commitments, the sum of (a) the aggregate outstanding principal
amount of the Revolving Loans of that Lender plus (b) in the event that Lender
is an Issuing Lender, the aggregate Letter of Credit Usage in respect of all
Letters of Credit issued by that Lender (net of any participations purchased by
other Lenders in such Letters of Credit) plus (c) the aggregate amount of all
participations purchased by that Lender in any outstanding Letters of Credit or
any unreimbursed drawings under any Letters of Credit plus (d) the aggregate
amount of all participations purchased by that Lender in any outstanding Swing
Line Loans plus (e) in the case of Swing Line Lender, the sum of the aggregate
outstanding principal amount of all Swing Line Loans (in each case net of any
participations therein purchased by other Lenders).
"Revolving Loans" means the Loans made by Lenders to Company pursuant to
subsection 2.1A(iii).
"Revolving Notes" means (i) the promissory notes of Company issued
pursuant to subsection 2.1E(i)(c) on the Closing Date and (ii) any promissory
notes issued by Company
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<PAGE>
pursuant to the last sentence of subsection 10.1B(i) in connection with
assignments of the Revolving Loan Commitment and Revolving Loans of any Lender,
in each case substantially in the form of Exhibit V annexed hereto, as they may
be amended, restated, supplemented or otherwise modified from time to time.
"Securities" means any stock, shares, partnership interests, voting trust
certificates, certificates of interest or participation in any profit-sharing
agreement or arrangement, options, warrants, bonds, debentures, notes, or other
evidences of indebtedness, secured or unsecured, convertible, subordinated or
otherwise, or in general any instruments commonly known as "securities" or any
certificates of interest, shares or participations in temporary or interim
certificates for the purchase or acquisition of, or any right to subscribe to,
purchase or acquire, any of the foregoing.
"Securities Act" means the Securities Act of 1933, as amended from time to
time, and any successor statute.
"Security Agreement" means the Security Agreement entered into by and
among Company, the Subsidiary Guarantors and Collateral Agent dated as of the
date hereof and substantially in the form of Exhibit IX annexed hereto, as such
Security Agreement may be amended, restated, supplemented or otherwise modified
from time to time.
"Solvent" means, with respect to any Person, that as of the date of
determination both (i) (a) the then fair saleable value of the property of such
Person is (y) greater than the total amount of liabilities (including contingent
liabilities) of such Person and (z) not less than the amount that will be
required to pay the probable liabilities on such Person's then existing debts as
they become absolute and matured considering all financing alternatives and
potential asset sales reasonably available to such Person; (b) such Person's
capital is not unreasonably small in relation to its business or any
contemplated or undertaken transaction; and (c) such Person does not intend to
incur, or believe (nor should it reasonably believe) that it will incur, debts
beyond its ability to pay such debts as they become due; and (ii) such Person is
"solvent" within the meaning given that term and similar terms under applicable
laws relating to fraudulent transfers and conveyances. For purposes of this
definition, the amount of any contingent liability at any time shall be computed
as the amount that, in light of all of the facts and circumstances existing at
such time, represents the amount that can reasonably be expected to become an
actual or matured liability.
"Standby Letter of Credit" means any standby letter of credit or similar
instrument issued for the purpose of supporting (i) workers' compensation
liabilities of Company or any of its Subsidiaries, (ii) the obligations of third
party insurers of Company or any of its Subsidiaries arising by virtue of the
laws of any jurisdiction requiring third party insurers, (iii) performance,
payment, deposit or surety obligations of Company or any of its Subsidiaries, in
any case if required by law or governmental rule or regulation or in accordance
with custom and practice in the industry, and (iv) such other obligations of
Company and its Subsidiaries as may be reasonably acceptable to
Co-Administrative Agents;
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provided that Standby Letters of Credit may not be issued for the purpose of
supporting (a) trade payables or (b) Indebtedness constituting "antecedent debt"
(as that term is used in Section 547 of the Bankruptcy Code).
"Stockholders Agreement" means that certain Amended and Restated
Stockholders Agreement dated as of February 16, 1996, by and among Company and
various stockholders of Company, as in effect on the Closing Date and as such
agreement may be amended, restated, supplemented or otherwise modified from time
to time thereafter to the extent permitted under subsection 7.12A.
"Subordinated Indebtedness" means (i) the Indebtedness of Company
evidenced by the Subordinated Notes, (ii) the Indebtedness of Company evidenced
by the Existing Seller Note and any Permitted Seller Notes and (iii) any other
Indebtedness of Company or any of its Subsidiaries subordinated in right of
payment to the Obligations pursuant to documentation containing maturities,
amortization schedules, covenants, defaults, remedies, subordination provisions
and other material terms in form and substance satisfactory to Co-Administrative
Agents and Requisite Lenders.
"Subordinated Note Documents" means the Subordinated Notes, the
Subordinated Note Indenture, the Subordinated Note Guaranty and each other
document executed in connection with the Subordinated Notes, as each such
document may be amended, restated, supplemented or otherwise modified from time
to time to the extent permitted by subsection 7.12B.
"Subordinated Note Guaranty" means the guaranty of the Subordinated Notes
executed by certain Subsidiaries of Company and contained in the Subordinated
Note Indenture, as such guaranty may be amended, restated, supplemented or
otherwise modified from time to time (including by any supplemental indenture
thereto executed by any Subsidiary of Company after the Closing Date) to the
extent permitted under subsection 7.12B.
"Subordinated Note Indenture" means the indenture pursuant to which the
Subordinated Notes are issued, as in effect on the Closing Date and as such
indenture may be amended, restated, supplemented or otherwise modified from time
to time to the extent permitted under subsection 7.12B.
"Subordinated Notes" means the $100,000,000 in aggregate principal amount
of 11% Senior Subordinated Notes due 2006 of Company issued pursuant to the
Subordinated Note Indenture.
"Subsidiary" means, with respect to any Person, any corporation,
partnership, association, joint venture or other business entity of which more
than 50% of the total voting power of shares of stock or other ownership
interests entitled (without regard to the occurrence of any contingency) to vote
in the election of the Person or Persons (whether directors, managers, trustees
or other Persons performing similar functions) having the
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power to direct or cause the direction of the management and policies thereof is
at the time owned or controlled, directly or indirectly, by that Person or one
or more of the other Subsidiaries of that Person or a combination thereof.
"Subsidiary Guarantor" means any Wholly Owned Subsidiary of Company that
becomes party to the Subsidiary Guaranty on the Closing Date or at any time
thereafter pursuant to subsection 6.9.
"Subsidiary Guaranty" means the Subsidiary Guaranty, substantially in the
form of Exhibit VII annexed hereto, delivered by the existing Subsidiary
Guarantors on the Closing Date and any additional Subsidiary Guarantor from time
to time thereafter pursuant to subsection 6.9, as such Subsidiary Guaranty may
be amended, restated, supplemented or otherwise modified from time to time.
"SunTrust" means SunTrust Bank, Atlanta and its successors and assigns,
including, without limitation, its successors by merger.
"Swing Line Lender" means Chase, or any Person serving as a successor
Chase Co-Administrative Agent hereunder, in its capacity as Swing Line Lender
hereunder.
"Swing Line Loan Commitment" means the commitment of Swing Line Lender to
make Swing Line Loans to Company pursuant to subsection 2.1A(iv).
"Swing Line Loans" means the Loans made by Swing Line Lender pursuant to
subsection 2.1A(iv).
"Swing Line Note" means (i) the promissory note of Company issued pursuant
to subsection 2.1E(ii) on the Closing Date and (ii) any promissory note issued
by Company to any successor Chase Co-Administrative Agent and Swing Line Lender
pursuant to the last sentence of subsection 9.5B, in each case substantially in
the form of Exhibit VI annexed hereto, as it may be amended, restated,
supplemented or otherwise modified from time to time.
"Tax" or "Taxes" means any present or future tax, levy, impost, duty,
charge, fee, deduction or withholding of any nature and whatever called, by
whomsoever, on whomsoever and wherever imposed, levied, collected, withheld or
assessed; provided that "Tax on the overall net income" of a Person shall be
construed as a reference to a tax imposed by the jurisdiction in which that
Person's principal office (and/or, in the case of a Lender, its relevant Lending
Office) is located or in which that Person is deemed to be doing business on all
or part of the net income, profits or gains of that Person (whether worldwide,
or only insofar as such income, profits or gains are considered to arise in or
to relate to a particular jurisdiction, or otherwise).
"Term Loans" means, collectively, the Tranche A Term Loans and the Tranche
B Term Loans.
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"Total Utilization of Revolving Loan Commitments" means, as at any date of
determination, the sum of (i) the aggregate principal amount of all outstanding
Revolving Loans (other than Revolving Loans made for the purpose of repaying any
Refunded Swing Line Loans or reimbursing the applicable Issuing Lender for any
amount drawn under any Letter of Credit but not yet so applied) plus (ii) the
aggregate principal amount of all outstanding Swing Line Loans plus (iii) the
Letter of Credit Usage.
"Trademark Security Agreement" means the Trademark Security Agreement
entered into by and among Company, the Subsidiary Guarantors and Collateral
Agent dated as of the date hereof, substantially in the form of Exhibit IX-C
annexed hereto, as such Trademark Security Agreement may thereafter be amended,
restated, supplemented or otherwise modified from time to time.
"Tranche A Term Loan Commitment" means the commitment of a Lender to make
a Tranche A Term Loan to Company pursuant to subsection 2.1A(i), and "Tranche A
Term Loan Commitments" means such commitments of all Lenders in the aggregate.
"Tranche A Term Loan Exposure" means, with respect to any Lender as of any
date of determination (i) prior to the funding of the Tranche A Term Loans, that
Lender's Tranche A Term Loan Commitment and (ii) after the funding of the
Tranche A Term Loans, the outstanding principal amount of the Tranche A Term
Loan of that Lender.
"Tranche A Term Loans" means the Loans made by Lenders to Company pursuant
to subsection 2.1A(i).
"Tranche A Term Notes" means (i) the promissory notes of Company issued
pursuant to subsection 2.1E (i)(a) on the Closing Date and (ii) any promissory
notes issued by Company pursuant to the last sentence of subsection 10.1B(i) in
connection with assignments of the Tranche A Term Loan Commitments or Tranche A
Term Loans of any Lenders, in each case substantially in the form of Exhibit
IV-A annexed hereto, as they may be amended, restated, supplemented or otherwise
modified from time to time.
"Tranche B Term Loan Commitment" means the commitment of a Lender to make
a Tranche B Term Loan to Company pursuant to subsection 2.1A(ii), and "Tranche B
Term Loan Commitments" means such commitments of all Lenders in the aggregate.
"Tranche B Term Loan Exposure" means, with respect to any Lender as of any
date of determination (i) prior to the funding of the Tranche B Term Loans, that
Lender's Tranche B Term Loan Commitment and (ii) after the funding of the
Tranche B Term Loans, the outstanding principal amount of the Tranche B Term
Loan of that Lender.
"Tranche B Term Loans" means the Loans made by Lenders to Company pursuant
to subsection 2.1A(ii).
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"Tranche B Term Notes" means (i) the promissory notes of Company issued
pursuant to subsection 2.1E (i)(b) on the Closing Date and (ii) any promissory
notes issued by Company pursuant to the last sentence of subsection 10.1B(i) in
connection with assignments of the Tranche B Term Loan Commitments or Tranche B
Term Loans of any Lenders, in each case substantially in the form of Exhibit
IV-B annexed hereto, as they may be amended, restated, supplemented or otherwise
modified from time to time.
"Transaction Costs" means the fees, costs and expenses payable by Company
and its Subsidiaries on or before the Closing Date in connection with the
transactions contemplated hereby and by the Related Agreements.
"Unfunded Current Liability" means, with respect to any Pension Plan, the
amount, if any, by which the actuarial present value of the accumulated plan
benefits under such Pension Plan as of the close of its most recent plan year
exceeds the fair market value of the assets allocable thereto, each determined
in accordance with Statement of Financial Accounting Standards No. 35, based
upon the actuarial assumptions used by such Pension Plan's actuary in the most
recent annual valuation of such Pension Plan.
"Wholly Owned Subsidiary" means, with respect to any Person, a Subsidiary
of such Person all of the outstanding capital stock or other ownership interests
of which (other than Regulatory Shares) shall at the time be owned by such
Person or by one or more Wholly Owned Subsidiaries of such Person or by such
Person and one or more Wholly Owned Subsidiaries of such Person.
1.2 Accounting Terms; Utilization of GAAP for Purposes of Calculations Under
Agreement.
Except as otherwise expressly provided in this Agreement, all accounting
terms not otherwise defined herein shall have the meanings assigned to them in
conformity with GAAP. Financial statements and other information required to be
delivered by Company to Lenders pursuant to clauses (i), (ii), (iii) and (xiii)
of subsection 6.1 shall be prepared in accordance with GAAP (except, with
respect to interim financial statements, normal year-end audit adjustments and
the absence of explanatory footnotes) as in effect at the time of such
preparation (and delivered together with the reconciliation statements provided
for in subsection 6.1(v)). Calculations in connection with the definitions,
covenants and other provisions of this Agreement shall utilize accounting
principles and policies in conformity with those used to prepare the financial
statements referred to in subsection 5.3A.
1.3 Other Definitional Provisions.
References to "Sections" and "subsections" shall be to Sections and
subsections, respectively, of this Agreement unless otherwise specifically
provided. Any of the terms defined in subsection 1.1 may, unless the context
otherwise requires, be used in the singular or the plural, depending on the
reference. The words "includes", "including" and similar
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terms used in any Loan Document shall be construed as if followed by the words
"without limitation".
SECTION 2.
AMOUNTS AND TERMS OF COMMITMENTS AND LOANS
2.1 Commitments; Loans.
A. Commitments. Subject to the terms and conditions of this Agreement and
in reliance upon the representations and warranties of Loan Parties set forth
herein and in the other Loan Documents, each Lender hereby severally agrees to
make the Loans described in subsections 2.1A(i), 2.1A(ii) and 2.1A(iii) and
Swing Line Lender hereby agrees to make the Swing Line Loans as described in
subsection 2.1A(iv).
(i) Tranche A Term Loans. Each Lender severally agrees to lend to
Company on the Closing Date an amount not exceeding its Pro Rata Share of
the aggregate amount of the Tranche A Term Loan Commitments to be used for
the purposes identified in subsection 2.5A. The amount of each Lender's
Tranche A Term Loan Commitment is set forth opposite its name on Schedule
2.1 annexed hereto and the aggregate amount of the Tranche A Term Loan
Commitments is $71,000,000; provided that the Tranche A Term Loan
Commitments of Lenders shall be adjusted to give effect to any assignments
of the Tranche A Term Loan Commitments pursuant to subsection 10.1B. Each
Lender's Tranche A Term Loan Commitment shall expire immediately and
without further action on February 15, 1997 if the Tranche A Term Loans
are not made on or before that date. Company may make only one borrowing
under the Tranche A Term Loan Commitments. Amounts borrowed under this
subsection 2.1A(i) and subsequently repaid or prepaid may not be
reborrowed.
(ii) Tranche B Term Loans. Each Lender severally agrees to lend to
Company on the Closing Date an amount not exceeding its Pro Rata Share of
the aggregate amount of the Tranche B Term Loan Commitments to be used for
the purposes identified in subsection 2.5A. The amount of each Lender's
Tranche B Term Loan Commitment is set forth opposite its name on Schedule
2.1 annexed hereto and the aggregate amount of the Tranche B Term Loan
Commitments is $71,000,000; provided that the Tranche B Term Loan
Commitments of Lenders shall be adjusted to give effect to any assignments
of the Tranche B Term Loan Commitments pursuant to subsection 10.1B. Each
Lender's Tranche B Term Loan Commitment shall expire immediately and
without further action on February 15, 1997 if the Tranche B Term Loans
are not made on or before that date. Company may make only one borrowing
under the Tranche B Term Loan Commitments. Amounts borrowed under this
subsection 2.1A(ii) and subsequently repaid or prepaid may not be
reborrowed.
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(iii) Revolving Loans. Each Lender severally agrees, subject to the
limitations set forth below with respect to the maximum amount of
Revolving Loans permitted to be outstanding from time to time, to lend to
Company from time to time during the period from the Closing Date to but
excluding the Revolving Loan Commitment Termination Date an aggregate
amount which shall not exceed its Pro Rata Share of the aggregate amount
of the Revolving Loan Commitments, to be used for the purposes identified
in subsection 2.5B. The original amount of each Lender's Revolving Loan
Commitment is set forth opposite its name on Schedule 2.1 annexed hereto
and the aggregate original amount of the Revolving Loan Commitments is
$58,000,000; provided that the Revolving Loan Commitments of Lenders shall
be adjusted to give effect to any assignments of the Revolving Loan
Commitments pursuant to subsection 10.1B; provided further that the amount
of the Revolving Loan Commitments shall be reduced from time to time by
the amount of any reductions thereto made pursuant to subsections 2.4A or
2.4B. Each Lender's Revolving Loan Commitment shall expire on the
Revolving Loan Commitment Termination Date and all Revolving Loans and all
other amounts owed hereunder with respect to the Revolving Loans and the
Revolving Loan Commitments shall be paid in full no later than that date;
provided that each Lender's Revolving Loan Commitment shall expire
immediately and without further action on February 15, 1997 if the Term
Loans are not made on or before that date. Amounts borrowed under this
subsection 2.1A(iii) may be repaid and reborrowed to but excluding the
Revolving Loan Commitment Termination Date.
Notwithstanding anything contained herein to the contrary, in no
event shall the Total Utilization of Revolving Loan Commitments at any
time exceed the Revolving Loan Commitments then in effect.
(iv) Swing Line Loans. Swing Line Lender hereby agrees, subject to
the limitations set forth below with respect to the maximum aggregate
amount of all Swing Line Loans outstanding from time to time, to make a
portion of the Revolving Loan Commitments available to Company from time
to time during the period from the Closing Date to but excluding the
Revolving Loan Commitment Termination Date by making Base Rate Loans as
Swing Line Loans to Company in an aggregate amount not to exceed the
amount of the Swing Line Loan Commitment, to be used for the purposes
identified in subsection 2.5B, notwithstanding the fact that such Swing
Line Loans, when aggregated with the sum of Swing Line Lender's
outstanding Revolving Loans and Swing Line Lender's Pro Rata Share of the
Letter of Credit Usage then in effect, may exceed Swing Line Lender's
Revolving Loan Commitment. The original amount of the Swing Line Loan
Commitment is $2,000,000; provided that the amounts of the Swing Line Loan
Commitment are subject to reduction as provided in clause (c) of the next
paragraph. The Swing Line Loan Commitment shall expire on the Revolving
Loan Commitment Termination Date and all Swing Line Loans and all other
amounts owed hereunder with respect to the Swing Line Loans shall be paid
in full no later than that date; provided that the Swing Line Loan
Commitment shall expire immediately and without further action on February
15,
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1997 if the Term Loans are not made on or before that date. Amounts
borrowed under this subsection 2.1A(iv) may be repaid and reborrowed to
but excluding the Revolving Loan Commitment Termination Date.
Notwithstanding anything contained herein to the contrary, the Swing
Line Loans, and the Swing Line Loan Commitment shall be subject to the
following limitations in the amounts indicated:
(a) in no event shall the Total Utilization of Revolving Loan
Commitments at any time exceed the Revolving Loan Commitments then
in effect;
(b) any reduction of the Revolving Loan Commitments made
pursuant to subsection 2.4A or 2.4B which reduces the aggregate
Revolving Loan Commitments to an amount less than the then current
sum of the Swing Line Loan Commitment shall result in an automatic
corresponding pro rata reduction of the Swing Line Loan Commitment
such that the sum thereof equals the amount of the Revolving Loan
Commitments, as so reduced, without any further action on the part
of Company, Chase Co-Administrative Agent or Swing Line Lender.
With respect to any Swing Line Loans which have not been voluntarily
prepaid by Company pursuant to subsection 2.4B(i), Swing Line Lender may,
at any time in its sole and absolute discretion, deliver to Chase
Co-Administrative Agent (with a copy to Company), no later than 12:00 Noon
(New York time) at least one Business Day in advance of the proposed
Funding Date, a notice (which shall be deemed to be a Notice of Borrowing
given by Company) requesting Lenders to make Revolving Loans that are Base
Rate Loans to Company on such Funding Date in an amount equal to the
amount of such Swing Line Loans (the "Refunded Swing Line Loans")
outstanding on the date such notice is given which Swing Line Lender
requests Lenders to prepay. Anything contained in this Agreement to the
contrary notwithstanding, (i) the proceeds of such Revolving Loans made by
Lenders other than Swing Line Lender shall be immediately delivered by
Co-Administrative Agents to Swing Line Lender (and not to Company) and
applied to repay a corresponding portion of the Refunded Swing Line Loans
and (ii) on the day such Revolving Loans are made, Swing Line Lender's Pro
Rata Share of the Refunded Swing Line Loans shall be deemed to be paid
with the proceeds of a Revolving Loan made by Swing Line Lender to
Company, and such portion of the Swing Line Loans deemed to be so paid
shall no longer be outstanding as Swing Line Loans and shall no longer be
due under the Swing Line Note of Swing Line Lender but shall instead
constitute part of Swing Line Lender's outstanding Revolving Loans to
Company and shall be due under the Revolving Note issued by Company to
Swing Line Lender. Company hereby authorizes each of Chase
Co-Administrative Agent and Swing Line Lender to charge Company's accounts
with Chase Co-Administrative Agent and Swing Line Lender (up to the amount
available in each such account) in order to immediately
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pay Swing Line Lender the amount of the Refunded Swing Line Loans to the
extent the proceeds of such Revolving Loans made by Lenders, including the
Revolving Loan deemed to be made by Swing Line Lender, are not sufficient
to repay in full the Refunded Swing Line Loans. If any portion of any such
amount paid (or deemed to be paid) to Swing Line Lender should be
recovered by or on behalf of Company from Swing Line Lender in bankruptcy,
by assignment for the benefit of creditors or otherwise, the loss of the
amount so recovered shall be ratably shared among all Lenders in the
manner contemplated by subsection 10.5.
If for any reason Revolving Loans are not made pursuant to this
subsection 2.1A(iv) in an amount sufficient to repay any amounts owed to
Swing Line Lender in respect of any outstanding Swing Line Loans on or
before the third Business Day after demand for payment thereof by Swing
Line Lender, each Lender shall be deemed to, and hereby agrees to, have
purchased a participation in such outstanding Swing Line Loans, and in an
amount equal to its Pro Rata Share of the applicable unpaid amount
together with accrued interest thereon. Upon one Business Day's notice
from Swing Line Lender, each Lender shall deliver to Swing Line Lender an
amount in equal to its respective participation in the applicable unpaid
amount in same day funds at the Funding and Payment Office. In order to
evidence such participation each Lender agrees to enter into a
participation agreement at the request of Swing Line Lender in form and
substance satisfactory to Swing Line Lender. In the event any Lender fails
to make available to Swing Line Lender the amount of such Lender's
participation as provided in this paragraph, Swing Line Lender shall be
entitled to recover such amount on demand from such Lender together with
interest thereon at the rate customarily used by Swing Line Lender for the
correction of errors among banks for three Business Days and thereafter at
the Base Rate, as applicable.
Notwithstanding anything contained herein to the contrary, (i) each
Lender's obligation to make Revolving Loans for the purpose of repaying
any Refunded Swing Line Loans pursuant to the second preceding paragraph
and each Lender's obligation to purchase a participation in any unpaid
Swing Line Loans pursuant to the immediately preceding paragraph shall be
absolute and unconditional and shall not be affected by any circumstance,
including, without limitation, (a) any set-off, counterclaim, recoupment,
defense or other right which such Lender may have against Swing Line
Lender, Company or any other Person for any reason whatsoever; (b) the
occurrence or continuation of an Event of Default or a Potential Event of
Default; (c) any adverse change in the business, operations, properties,
assets, condition (financial or otherwise) or prospects of Company or any
of its Subsidiaries; (d) any breach of this Agreement or any other Loan
Document by any party thereto; or (e) any other circumstance, happening or
event whatsoever, whether or not similar to any of the foregoing; provided
that no Lender shall have any such obligation unless (x) Swing Line Lender
believed in good faith that all conditions under Section 4 to the making
of the applicable Refunded Swing Line Loans or other unpaid Swing Line
Loans, were satisfied at the time such Refunded Swing Line
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Loans or unpaid Swing Line Loans were made, or (y) such Lender had actual
knowledge, by receipt of any notices required to be delivered to Lenders
pursuant to subsection 6.1(ix) or otherwise, that any such condition under
Section 4 had not been satisfied and such Lender failed to notify Swing
Line Lender and Chase Co-Administrative Agent in writing that it had no
obligation to make Revolving Loans until such condition was satisfied (any
such notice to be effective as of the date of receipt thereof by Swing
Line Lender and Chase Co-Administrative Agent), or (z) the satisfaction of
any such condition under Section 4 not satisfied had been waived by
Requisite Lenders prior to or at the time such Refunded Swing Line Loans
or other unpaid Swing Line Loans were made; and (ii) Swing Line Lender
shall not be obligated to make any Swing Line Loans if it has elected not
to do so after the occurrence and during the continuation of a Potential
Event of Default or Event of Default.
B. Borrowing Mechanics. Term Loans or Revolving Loans (including any such
Loans made as Eurodollar Rate Loans with a particular Interest Period) made on
any Funding Date (other than Revolving Loans made pursuant to a request by Swing
Line Lender pursuant to subsection 2.1A(iv) for the purpose of repaying any
Refunded Swing Line Loans Revolving Loans made pursuant to subsection 3.3B for
the purpose of reimbursing any Issuing Lender for the amount of a drawing or
payment under a Letter of Credit issued by it) shall be in an aggregate minimum
amount of $1,000,000 and integral multiples of $100,000 in excess of that
amount. Swing Line Loans made on any Funding Date shall be in an aggregate
minimum amount of $250,000 and integral multiples of $100,000 in excess of that
amount. Whenever Company desires that Lenders make Term Loans or Revolving Loans
it shall deliver to Chase Co-Administrative Agent on behalf of Company a Notice
of Borrowing no later than 12:00 Noon (New York time), at least three Business
Days in advance of the proposed Funding Date in the case of a Eurodollar Rate
Loan, or at least one Business Day in advance of the proposed Funding Date in
the case of a Base Rate Loan. Whenever Company desires that Swing Line Lender
make a Swing Line Loan, it shall deliver to Chase Co-Administrative Agent a
Notice of Borrowing no later than 12:00 Noon (New York time) on the proposed
Funding Date. The Notice of Borrowing shall specify (i) the proposed Funding
Date (which shall be a Business Day), (ii) the amount and type of Loans
requested, (iii) in the case of Swing Line Loans, that such Loans shall be Base
Rate Loans, (iv) in the case of any Loans other than Swing Line Loans, whether
such Loans shall be Base Rate Loans or Eurodollar Rate Loans, and (v) in the
case of any Loans requested to be made as Eurodollar Rate Loans, the initial
Interest Period requested therefor. Term Loans and Revolving Loans may be
continued as or converted into Base Rate Loans and Eurodollar Rate Loans in the
manner provided in subsection 2.2D. In lieu of delivering the above-described
Notice of Borrowing, Company may give Chase Co-Administrative Agent telephonic
notice by the required time of any proposed borrowing under this subsection
2.1B; provided that such notice shall be promptly confirmed in writing by
delivery of a Notice of Borrowing to Chase Co-Administrative Agent on or before
the applicable Funding Date.
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Neither Chase Co-Administrative Agent nor any Lender shall incur any
liability to Company in acting upon any telephonic notice referred to above that
Chase Co-Administrative Agent believes in good faith to have been given by a
duly authorized officer or other person authorized to borrow on behalf of
Company or for otherwise acting in good faith under this subsection 2.1B, and
upon funding of Loans by Lenders in accordance with this Agreement pursuant to
any such telephonic notice Company shall have effected Loans hereunder.
Company shall notify Chase Co-Administrative Agent prior to the funding of
any Loans in the event that any of the matters to which Company is required to
certify in the applicable Notice of Borrowing are no longer true and correct as
of the applicable Funding Date, and the acceptance by Company of the proceeds of
any Loans shall constitute a re-certification by Company, as of the applicable
Funding Date, as to the matters to which Company is required to certify in the
applicable Notice of Borrowing.
Except as otherwise provided in subsections 2.6B, 2.6C and 2.6G, a Notice
of Borrowing for a Eurodollar Rate Loan (or telephonic notice in lieu thereof)
shall be irrevocable on and after the related Interest Rate Determination Date,
and Company shall be bound to make a borrowing in accordance therewith.
C. Disbursement of Funds. All Term Loans and all Revolving Loans under
this Agreement shall be made by Lenders simultaneously and proportionately to
their respective Pro Rata Shares, it being understood that no Lender shall be
responsible for any default by any other Lender in that other Lender's
obligation to make a Loan requested hereunder nor shall the Commitment of any
Lender to make the particular type of Loan requested be increased or decreased
as a result of a default by any other Lender in that other Lender's obligation
to make a Loan requested hereunder. Promptly after receipt by Co-Administrative
Agents of a Notice of Borrowing pursuant to subsection 2.1B (or telephonic
notice in lieu thereof), Chase Co-Administrative Agent shall notify each Lender
or Swing Line Lender, as the case may be, of the proposed borrowing and of the
amount of such Lender's Pro Rata Share of the applicable Loans.
Each Lender shall make the amount of its Loan available to Chase
Co-Administrative Agent not later than 12:00 Noon (New York time) on the
applicable Funding Date, and Swing Line Lender shall make the amount of its
Swing Line Loan available to Chase Co-Administrative Agent not later than 12:00
Noon (New York time) on the applicable Funding Date, in each case in same day
funds, at the Funding and Payment Office. Except as provided in subsection
2.1A(iv) or subsection 3.3B with respect to Revolving Loans used to repay
Refunded Swing Line Loans or to reimburse any Issuing Lender for the amount of
an honored drawing or payment under a Letter of Credit issued by it, upon
satisfaction or waiver of the conditions precedent specified in subsections 4.1
(in the case of Loans made on the Closing Date) and 4.2 (in the case of all
Loans), Chase Co-Administrative Agent shall make the proceeds of such Loans
available to Company on the applicable Funding Date by causing an amount of same
day funds equal to the proceeds of all such Loans
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received by Chase Co-Administrative Agent from Lenders or Swing Line Lender, as
the case may be, to be credited to the account of Company at the Funding and
Payment Office.
Unless Chase Co-Administrative Agent shall have been notified by any
Lender prior to the Funding Date for any Loans that such Lender does not intend
to make available to Chase Co-Administrative Agent the amount of such Lender's
Loan requested on such Funding Date, Chase Co-Administrative Agent may assume
that such Lender has made such amount available to Chase Co-Administrative Agent
on such Funding Date and Chase Co-Administrative Agent may, in its sole
discretion, but shall not be obligated to, make available to Company a
corresponding amount on such Funding Date. If such corresponding amount is not
in fact made available to Chase Co-Administrative Agent by such Lender, Chase
Co-Administrative Agent shall be entitled to recover such corresponding amount
on demand from such Lender together with interest thereon, for each day from
such Funding Date until the date such amount is paid to Chase Co-Administrative
Agent, at the customary rate set by Chase Co-Administrative Agent for the
correction of errors among banks for three Business Days and thereafter at the
Base Rate. If such Lender does not pay such corresponding amount forthwith upon
Chase Co-Administrative Agent's demand therefor, Chase Co-Administrative Agent
shall promptly notify Company and Company shall immediately pay such
corresponding amount in the to Chase Co-Administrative Agent together with
interest thereon, for each day from such Funding Date until the date such amount
is paid to Chase Co-Administrative Agent, at the rate applicable to such Loan.
Nothing in this subsection 2.1C shall be deemed to relieve any Lender from its
obligation to fulfill its Commitments hereunder or to prejudice any rights that
Company may have against any Lender as a result of any default by such Lender
hereunder.
D. The Register.
(i) Chase Co-Administrative Agent shall maintain, at the address
referred to in subsection 10.8, a register for the recordation of the
names and addresses of Lenders and the Commitments and Loans of each
Lender from time to time (the "Register"). The Register shall be available
for inspection by Company or any Lender at any reasonable time and from
time to time upon reasonable prior notice.
(ii) Chase Co-Administrative Agent shall record in the Register the
Commitments and the outstanding Loans from time to time of each Lender and
each repayment or prepayment in respect of the principal amount of the
outstanding Loans of each Lender. Any such recordation shall be conclusive
and binding on Company and each Lender, absent manifest error; provided
that failure to make any such recordation, or any error in such
recordation, shall not affect Company's Obligations in respect of the
applicable Loans.
(iii) Each Lender shall record on its internal records (including,
without limitation, the Notes held by such Lender) the amount of each Loan
made by it and each payment in respect thereof. Any such recordation shall
be prima facie evidence of the amount of such Loans; provided that failure
to make any such recordation, or
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any error in such recordation, shall not affect Company's Obligations in
respect of the applicable Loans; and provided, further that in the event
of any inconsistency between the Register and any Lender's records, the
recordations in the Register shall govern.
(iv) Company, Agents and Lenders shall deem and treat the Persons
listed as Lenders in the Register as the holders and owners of the
corresponding Commitments and Loans listed therein for all purposes
hereof, and no assignment or transfer of any Commitment or Loan shall be
effective, in each case unless an until an Assignment Agreement effecting
the assignment or transfer thereof shall have been accepted by Chase
Co-Administrative Agent and recorded in the Register as provided in
subsection 10.1B(ii). Prior to such recordation, all amounts owed with
respect to the applicable Commitment or Loan shall be owed to the Lender
listed in the Register as the owner thereof, and any request, authority or
consent of any Person who, at the time of making such request or giving
such authority or consent, is listed in the Register as a Lender shall be
conclusive and binding on any subsequent holder, assignee or transferee of
the corresponding Commitments or Loans.
(v) Company hereby designates Chase, and any financial institution
serving as a successor Chase Co-Administrative Agent, to serve as
Company's agent solely for purposes of maintaining the Register as
provided in this subsection 2.1D, and Company hereby agrees that, to the
extent Chase serves in such capacity, Chase and its officers, directors,
employees, agents and affiliates shall constitute Indemnitees for all
purposes under subsection 10.3.
E. Notes. Company shall execute and deliver on the Closing Date (i) to
each Lender (or to Co-Administrative Agents for that Lender) (a) a Tranche A
Term Note substantially in the form of Exhibit IV-A annexed hereto, to evidence
that Lender's Tranche A Term Loans in the principal amount of that Lender's
Tranche A Term Loans and with other appropriate insertions, (b) a Tranche B Term
Note substantially in the form of Exhibit IV-B annexed hereto to evidence that
Lender's Tranche B Term Loans in the principal amount of that Lender's Tranche B
Term Loans and with other appropriate insertions, and (c) a Revolving Note
substantially in the form of Exhibit V annexed hereto to evidence that Lender's
Revolving Loans, in the principal amount of that Lender's Revolving Loan
Commitment and with other appropriate insertions, and (ii) to Swing Line Lender,
a Swing Line Note substantially in the form of Exhibit VI annexed hereto to
evidence Swing Line Lender's Swing Line Loans, in the principal amount of the
Swing Line Loan Commitment and with other appropriate insertions. The Notes and
the Obligations evidenced thereby shall be governed by, subject to and benefit
from all of the terms and conditions of this Agreement and the other Loan
Documents and shall be guarantied and/or secured by the Collateral as provided
in the Loan Documents.
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2.2 Interest on the Loans.
A. Rate of Interest. Subject to the provisions of subsections 2.6 and 2.7,
each Term Loan and each Revolving Loan shall bear interest on the unpaid
principal amount thereof from the date made through maturity (whether by
acceleration or otherwise) at a rate determined by reference to the Base Rate or
the Adjusted Eurodollar Rate, as the case may be. Subject to the provisions of
subsection 2.7, each Swing Line Loan shall bear interest on the unpaid principal
amount thereof from the date made through maturity (whether by acceleration or
otherwise) at a rate determined by reference to the Base Rate. The applicable
basis for determining the rate of interest with respect to any Loan shall be
selected by Company initially at the time a Notice of Borrowing is given with
respect to such Loan pursuant to subsection 2.1B. The basis for determining the
interest rate with respect to any Term Loan or any Revolving Loan may be changed
from time to time pursuant to subsection 2.2D. If on any day any Term Loan or
Revolving Loan is outstanding with respect to which notice has not been
delivered to Co-Administrative Agents in accordance with the terms of this
Agreement specifying the applicable basis for determining the rate of interest,
then for that day that Loan shall bear interest determined by reference to the
Base Rate.
Subject to the provisions of subsections 2.2E and 2.7, the Term Loans and
the Revolving Loans shall bear interest through maturity as follows:
(i) if a Base Rate Loan, then at the sum of the Base Rate plus the
Applicable Base Rate Margin; or
(ii) if a Eurodollar Rate Loan, then at the sum of the Adjusted
Eurodollar Rate plus the Applicable Eurodollar Rate Margin.
Subject to the provisions of subsections 2.2E and 2.7, the Swing Line
Loans shall bear interest through maturity at the sum of the Base Rate plus the
Applicable Base Rate Margin less 0.50% per annum.
B. Interest Periods. In connection with each Eurodollar Rate Loan, Company
may, pursuant to the applicable Notice of Borrowing or Notice of
Conversion/Continuation, as the case may be, select an interest period (each an
"Interest Period") to be applicable to such Loan, which Interest Period shall
be, at Company's option, either a one, three or six month period; provided that:
(i) the initial Interest Period for any Eurodollar Rate Loan shall
commence on the Funding Date in respect of such Loan, in the case of a
Loan initially made as a Eurodollar Rate Loan, or on the date specified in
the applicable Notice of Conversion/Continuation, in the case of a Loan
converted to a Eurodollar Rate Loan;
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(ii) in the case of immediately successive Interest Periods
applicable to a Eurodollar Rate Loan continued as such pursuant to a
Notice of Conversion/Continuation, each successive Interest Period shall
commence on the day on which the next preceding Interest Period expires;
(iii) if an Interest Period would otherwise expire on a day that is
not a Business Day, such Interest Period shall expire on the next
succeeding Business Day; provided that, if any Interest Period would
otherwise expire on a day that is not a Business Day but is a day of the
month after which no further Business Day occurs in such month, such
Interest Period shall expire on the next preceding Business Day;
(iv) any Interest Period that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall, subject to clause (v) of this subsection 2.2B, end on the
last Business Day of a calendar month;
(v) no Interest Period with respect to any portion of the Tranche A
Term Loans shall extend beyond the fifth Anniversary, no Interest Period
with respect to any portion of the Tranche B Term Loans shall extend
beyond the seventh Anniversary and no Interest Period with respect to any
portion of the Revolving Loans shall extend beyond the Revolving Loan
Commitment Termination Date;
(vi) no Interest Period with respect to any portion of the Tranche A
Term Loans or Tranche B Term Loans shall extend beyond a date on which
Company is required to make a scheduled payment of principal of the
Tranche A Term Loans or Tranche B Term Loans, as the case may be, unless
the sum of (a) the aggregate principal amount of Tranche A Term Loans or
Tranche B Term Loans, as the case may be, that are Base Rate Loans plus
(b) the aggregate principal amount of Tranche A Term Loans or Tranche B
Term Loans, as the case may be, that are Eurodollar Rate Loans with
Interest Periods expiring on or before such date equals or exceeds the
principal amount required to be paid on the Tranche A Term Loans or
Tranche B Term Loans, as the case may be, on such date;
(vii) no Interest Period with respect to any portion of the
Revolving Loans shall extend beyond the date on which a permanent
reduction of the Revolving Loan Commitments is scheduled to occur unless
the sum of (a) the aggregate principal amount of Revolving Loans that are
Base Rate Loans plus (b) the aggregate principal amount of Revolving Loans
that are Eurodollar Rate Loans with Interest Periods expiring on or before
such date plus (c) the excess of the Revolving Loan Commitments then in
effect over the aggregate principal amount of Revolving Loans then
outstanding equals or exceeds the permanent reduction of the Revolving
Loan Commitments that is scheduled to occur on such date;
(viii) Company may not select an Interest Period of longer than two
months prior to the end of the Initial Period;
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(ix) there shall be no more than ten (10) Interest Periods
outstanding at any time; and
(x) in the event Company fails to specify an Interest Period for any
Eurodollar Rate Loan in the applicable Notice of Borrowing or Notice of
Conversion/Continuation, Company shall be deemed to have selected an
Interest Period of one month.
C. Interest Payments. Subject to the provisions of subsection 2.2E,
interest on each Loan shall be payable in arrears on and to each Interest
Payment Date applicable to that Loan, upon any prepayment of that Loan (to the
extent accrued on the amount being prepaid) and at maturity (including final
maturity); provided that in the event that any Swing Line Loans, any Revolving
Loans or any Term Loans that are Base Rate Loans are prepaid pursuant to
subsection 2.4B(i), interest accrued on such Swing Line Loans, Revolving Loans
or Term Loans through the date of such prepayment shall be payable on the next
succeeding Interest Payment Date applicable to Base Rate Loans (or, if earlier,
at final maturity).
D. Conversion or Continuation. Subject to the provisions of subsection
2.6, Company shall have the option (i) to convert at any time all or any part of
its outstanding Term Loans or Revolving Loans equal to $1,000,000 and integral
multiples of $100,000 in excess of that amount from Loans bearing interest at a
rate determined by reference to one basis to Loans bearing interest at a rate
determined by reference to an alternative basis or (ii) upon the expiration of
any Interest Period applicable to a Eurodollar Rate Loan, to continue all or any
portion of such Loan equal to $1,000,000 and integral multiples of $100,000 in
excess of that amount as a Eurodollar Rate Loan; provided, however, that a
Eurodollar Rate Loan may only be converted into a Base Rate Loan on the
expiration date of an Interest Period applicable thereto.
Company shall deliver a Notice of Conversion/Continuation to Chase
Co-Administrative Agent no later than 12:00 Noon (New York time) at least one
Business Day in advance of the proposed conversion date (in the case of a
conversion to a Base Rate Loan), and at least three Business Days in advance of
the proposed conversion/continuation date (in the case of a
conversion to, or a continuation of, a Eurodollar Rate Loan). A Notice of
Conversion/Continuation shall specify (i) the proposed conversion/continuation
date (which shall be a Business Day), (ii) the amount and type of the Loan to be
converted/continued, (iii) the nature of the proposed conversion/continuation,
(iv) in the case of a conversion to, or a continuation of, a Eurodollar Rate
Loan, the requested Interest Period, and (v) in the case of a conversion to, or
a continuation of, a Eurodollar Rate Loan, that no Potential Event of Default or
Event of Default has occurred and is continuing. In lieu of delivering the
above-described Notice of Conversion/Continuation, Company may give Chase
Co-Administrative Agent telephonic notice by the required time of any proposed
conversion/continuation under this subsection 2.2D; provided that such notice
shall be promptly confirmed in writing by delivery of a Notice of
Conversion/Continuation to Chase Co-Administrative Agent on or before the
proposed conversion/continuation date.
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Neither Chase Co-Administrative Agent nor any Lender shall incur any
liability to Company in acting upon any telephonic notice referred to above that
Chase Co-Administrative Agent believes in good faith to have been given by a
duly authorized officer or other person authorized to act on behalf of Company
or for otherwise acting in good faith under this subsection 2.2D, and upon
conversion or continuation of the applicable basis for determining the interest
rate with respect to any Loans in accordance with this Agreement pursuant to any
such telephonic notice Company shall have effected a conversion or continuation,
as the case may be, hereunder.
Except as otherwise provided in subsections 2.6B, 2.6C and 2.6G, a Notice
of Conversion/Continuation for conversion to, or continuation of, a Eurodollar
Rate Loan (or telephonic notice in lieu thereof) shall be irrevocable on and
after the related Interest Rate Determination Date, and Company shall be bound
to effect a conversion or continuation in accordance therewith.
E. Post-Default Interest. Upon the occurrence and during the continuation
of any Event of Default, the outstanding principal amount of all Loans and, to
the extent permitted by applicable law, any interest payments thereon not paid
when due and any fees and other amounts then due and payable hereunder, shall
thereafter bear interest (including post-petition interest in any proceeding
under the Bankruptcy Code, or other applicable bankruptcy or insolvency laws)
payable upon demand at a rate that is 2% per annum in excess of the interest
rate otherwise payable under this Agreement with respect to the applicable Loans
(or, in the case of any such fees and other amounts, at a rate which is 2% per
annum in excess of the interest rate otherwise payable under this Agreement for
Revolving Loans bearing interest at a rate determined by reference to the Base
Rate); provided that, in the case of Eurodollar Rate Loans, upon the expiration
of the Interest Period in effect at the time any such increase in interest rate
is effective such Eurodollar Rate Loans shall thereupon become Base Rate Loans
and shall thereafter bear interest payable upon demand at a rate equal to 2% per
annum in excess of the interest rate otherwise payable under this Agreement for
Base Rate Loans that are Tranche A Term Loans, Tranche B Term Loans or Revolving
Loans, as applicable. Payment or acceptance of the increased rates of interest
provided for in this subsection 2.2E is not a permitted alternative to timely
payment and shall not constitute a waiver of any Event of Default or otherwise
prejudice or limit any rights or remedies of any Agent or Lender.
F. Computation of Interest. Interest on Loans shall be computed on the
basis of a 360-day year and for the actual number of days elapsed in the period
during which it accrues. In computing interest on any Loan, the date of the
making of such Loan or the first day of an Interest Period applicable to such
Loan or, with respect to a Base Rate Loan being converted from a Eurodollar Rate
Loan, the date of conversion of such Eurodollar Rate Loan to such Base Rate
Loan, as the case may be, shall be included, and the date of payment of such
Loan or the expiration date of an Interest Period applicable to such Loan or,
with respect to a Base Rate Loan being converted to a Eurodollar Rate Loan, the
date of conversion of such Base Rate Loan to such Eurodollar Rate Loan, as the
case may be,
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shall be excluded; provided that if a Loan is repaid on the same day on which it
is made, one day's interest shall be paid on that Loan.
2.3 Fees.
A. Commitment Fees. Company agrees to pay to Chase Co-Administrative
Agent, for distribution to each Lender in proportion to that Lender's Pro Rata
Share, commitment fees for the period from and including the Closing Date to (i)
and excluding the Revolving Loan Commitment Termination Date equal to the
average of the daily excess of the Revolving Loan Commitments over the sum of
the aggregate principal amount of Revolving Loans outstanding (but not any Swing
Line Loans outstanding) plus the Letter of Credit Usage multiplied by (ii) 1/2
of 1% per annum. All such commitment fees shall be calculated on the basis of a
360-day year and the actual number of days elapsed and shall be payable
quarterly in arrears on January 15, April 15, July 15 and October 15 of each
year, commencing on January 15, 1997.
B. Annual Collateral Agent's Fee. Company agrees to pay to Collateral
Agent an annual Collateral Agent's fee in such amounts as may be agreed between
them from time to time.
C. Other Fees. Company agrees to pay to Agents such other fees in the
amounts and at the times separately agreed upon between Company and the
applicable Agents.
2.4 Repayments, Prepayments and Reductions in Revolving Loan Commitments;
General Provisions Regarding Payments.
A. Scheduled Payments of Term Loans.
(i) Scheduled Payments of Tranche A Term Loans. Company shall make
principal payments on the Tranche A Term Loans in installments on the
dates and in the amounts set forth below:
===============================================================
SCHEDULED REPAYMENT
DATE OF TRANCHE A
TERM LOANS
===============================================================
January 15, 1997 $2,125,000
April 15, 1997 $2,125,000
July 15, 1997 $2,125,000
October 15, 1997 $2,125,000
---------------------------------------------------------------
January 15, 1998 $3,312,500
April 15, 1998 $3,312,500
July 15, 1998 $3,312,500
October 15, 1998 $3,312,500
---------------------------------------------------------------
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===============================================================
SCHEDULED REPAYMENT
DATE OF TRANCHE A
TERM LOANS
===============================================================
January 15, 1999 $3,312,500
April 15, 1999 $3,312,500
July 15, 1999 $3,312,500
October 15, 1999 $3,312,500
---------------------------------------------------------------
January 15, 2000 $4,250,000
April 15, 2000 $4,250,000
July 15, 2000 $4,250,000
October 15, 2000 $4,250,000
---------------------------------------------------------------
January 15, 2001 $4,750,000
April 15, 2001 $4,750,000
July 15, 2001 $4,750,000
October 15, 2001 $4,750,000
===============================================================
; provided that the scheduled installments of principal of the Tranche A
Term Loans set forth above shall be reduced in connection with any
voluntary or mandatory prepayments of the Tranche A Term Loans in
accordance with subsection 2.4C; and provided further, that the Tranche A
Term Loans and all other amounts owed hereunder with respect to the
Tranche A Term Loans shall be paid in full no later than October 15, 2001,
and the final installment payable by Company in respect of the Tranche A
Term Loans on such date shall be in an amount, if such amount is different
from that specified above, sufficient to repay all amounts owing by
Company under this Agreement with respect to the Tranche A Term Loans.
(ii) Scheduled Payments of Tranche B Term Loans. Company shall make
principal payments on the Tranche B Term Loans in installments on the
dates and in the amounts set forth below:
===============================================================
SCHEDULED REPAYMENT
DATE OF TRANCHE B
TERM LOANS
===============================================================
January 15, 1997 $ 250,000
April 15, 1997 $ 250,000
July 15, 1997 $ 250,000
October 15, 1997 $ 250,000
---------------------------------------------------------------
January 15, 1998 $ 250,000
April 15, 1998 $ 250,000
July 15, 1998 $ 250,000
October 15, 1998 $ 250,000
---------------------------------------------------------------
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===============================================================
SCHEDULED REPAYMENT
DATE OF TRANCHE B
TERM LOANS
===============================================================
January 15, 1999 $ 250,000
April 15, 1999 $ 250,000
July 15, 1999 $ 250,000
October 15, 1999 $ 250,000
---------------------------------------------------------------
January 15, 2000 $ 250,000
April 15, 2000 $ 250,000
July 15, 2000 $ 250,000
October 15, 2000 $ 250,000
---------------------------------------------------------------
January 15, 2001 $ 250,000
April 15, 2001 $ 250,000
July 15, 2001 $ 250,000
October 15, 2001 $ 250,000
---------------------------------------------------------------
January 15, 2002 $7,000,000
April 15, 2002 $7,000,000
July 15, 2002 $7,000,000
October 15, 2002 $7,000,000
---------------------------------------------------------------
January 15, 2003 $9,500,000
April 15, 2003 $9,500,000
July 15, 2003 $9,500,000
October 15, 2003 $9,500,000
===============================================================
; provided that the scheduled installments of principal of the Tranche B
Term Loans set forth above shall be reduced in connection with any
voluntary or mandatory prepayments of the Tranche B Term Loans in
accordance with subsection 2.4C; and provided, further that the Tranche B
Term Loans and all other amounts owed hereunder with respect to the
Tranche B Term Loans shall be paid in full no later than October 15, 2003,
and the final installment payable by Company in respect of the Tranche B
Term Loans on such date shall be in an amount, if such amount is different
from that specified above, sufficient to repay all amounts owing by
Company under this Agreement with respect to the Tranche B Term Loans.
B. Prepayments and Unscheduled Reductions in Revolving Loan Commitments.
(i) Voluntary Prepayments. Company may, upon written or telephonic
notice to Chase Co-Administrative Agent on or prior to 12:00 Noon (New
York time) on the date of prepayment, which notice, if telephonic, shall
be promptly confirmed in writing, at any time and from time to time
prepay, without premium or penalty, any Swing Line Loan on any Business
Day in whole or in part in an aggregate minimum amount of $250,000 and
integral multiples of $50,000 in excess
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of that amount. In addition, so long as no Swing Line Loans are then
outstanding, Company may, upon not less than one Business Day's prior
written or telephonic notice, in the case of Base Rate Loans, and three
Business Days' prior written or telephonic notice, in the case of
Eurodollar Rate Loans, in each case confirmed in writing to Chase
Co-Administrative Agent (which notice Chase Co-Administrative Agent will
promptly transmit by telefacsimile or telephone to each Lender), at any
time and from time to time prepay, without premium or penalty, the Loans
other than Swing Line Loans on any Business Day in whole or in part in an
aggregate minimum amount of $1,000,000 and integral multiples of $250,000
in excess of that amount; provided, however, that in the event Company
shall prepay a Eurodollar Rate Loan other than on the expiration of the
Interest Period applicable thereto, Company shall, at the time of such
prepayment, also pay the amount payable under Section 2.6D hereof. Notice
of prepayment having been given as aforesaid, the Loans shall become due
and payable on the prepayment date specified in such notice and in the
aggregate principal amount specified therein. Any voluntary prepayments
pursuant to this subsection 2.4B(i) shall be applied as specified in
subsection 2.4C.
(ii) Voluntary Reductions of Revolving Loan Commitments . Company
may, upon not less than three Business Days' prior written or telephonic
notice confirmed in writing to Chase Co-Administrative Agent (which notice
Chase Co-Administrative Agent will promptly transmit by telefacsimile or
telephone to each Lender), at any time and from time to time terminate in
whole or permanently reduce in part, without premium or penalty, the
Revolving Loan Commitments in an amount up to the amount by which the
Revolving Loan Commitments exceed the Total Utilization of Revolving Loan
Commitments at the time of such proposed termination or reduction;
provided that any such partial reduction of the Revolving Loan Commitments
shall be in an aggregate minimum amount of $1,000,000 and integral
multiples of $250,000 in excess of that amount. Company's notice to Chase
Co-Administrative Agent shall designate the date (which shall be a
Business Day) of such termination or reduction and the amount of any
partial reduction, and such termination or reduction of the Revolving Loan
Commitments shall be effective on the date specified in such notice and
shall reduce the Revolving Loan Commitment of each Lender proportionately
to its Pro Rata Share. Any such voluntary reduction of the Revolving Loan
Commitments shall be applied as specified in subsection 2.4C.
(iii) Mandatory Prepayments and Mandatory Reductions of Revolving
Loan Commitments.
The Loans shall be prepaid and the Revolving Loan Commitments shall
be reduced in the manner provided in subsection 2.4C upon the occurrence
of the following circumstances:
(a) Prepayments and Reductions from Asset Sales. No later than
the first Business Day following the date of receipt by Company or
any of its Subsidiaries of the Cash Proceeds of any Asset Sale
(other than any portion
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of such proceeds that is reinvested (or scheduled for reinvestment)
in a Qualified Loan Portfolio and/or assets of the general type used
in the business of Company and its Subsidiaries within 270 days from
the date of receipt of such proceeds), Company shall prepay the
Loans (and/or the Revolving Loan Commitments shall be reduced) in
the amount of such proceeds not so reinvested (or scheduled for such
reinvestment); provided, that if (1) the Net Cash Proceeds of any
individual Asset Sale of receivables portfolios exceed $5,000,000 or
(2) the Net Cash Proceeds of all such Asset Sales in any Fiscal Year
exceed $10,000,000, then in each case the amount of such excess Net
Cash Proceeds may not be reinvested (or scheduled for reinvestment);
provided further, that if the Net Cash Proceeds of Asset Sales of
businesses in any Fiscal Year exceed 10% of Consolidated EBITDA for
the preceding Fiscal Year, then the amount of such excess Net Cash
Proceeds may not be reinvested (or scheduled for reinvestment); and
provided further, that Company may not reinvest (or schedule for
reinvestment) Net Cash Proceeds upon the occurrence and during the
continuation of an Event of Default. Company shall, no later than
365 days after receipt of any such Net Cash Proceeds that have not
theretofore been applied to the Obligations, make an additional
prepayment of the Loans (and/or the Revolving Loan Commitments shall
be reduced) in the full amount of all such proceeds that have not
therefore been so reinvested. Concurrently with any prepayment of
the Loans and/or reduction of the Commitments pursuant to this
subsection 2.4B(iii)(a), Company shall deliver to Chase
Co-Administrative Agent an Officer's Certificate demonstrating the
derivation of the Net Cash Proceeds of the correlative Asset Sale
from the gross sales price thereof. In the event that Company shall,
at any time after receipt of Cash Proceeds of any Asset Sale
requiring a prepayment or a reduction of the Revolving Loan
Commitments pursuant to this subsection 2.4B(iii)(a), determine that
the prepayments and/or reductions of the Revolving Loan Commitments
previously made in respect of such Asset Sale were in an aggregate
amount less than that required by the terms of this subsection
2.4B(iii)(a), Company shall promptly cause to be made an additional
prepayment of the Loans (and/or reduction in the Revolving Loan
Commitments) in an amount equal to the amount of any such deficit,
and Company shall concurrently therewith deliver to
Co-Administrative Agents an Officer's Certificate demonstrating the
derivation of the additional Net Cash Proceeds resulting in such
deficit.
(b) Prepayments and Reductions Due to Issuance of Debt. On or
prior to the first Business Day after receipt by Company or any of
its Subsidiaries of any proceeds of any Indebtedness (other than the
Loans and any other Indebtedness permitted by this Agreement),
Company shall prepay the Loans (and/or the Revolving Loan
Commitments shall be reduced) in an amount equal to the amount of
such proceeds; provided that payment or acceptance of the amounts
provided for in this subsection 2.4B(iii)(b) shall not constitute a
waiver of any Event of Default resulting from the incurrence of
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such Indebtedness or otherwise prejudice any rights or remedies of
Agents or Lenders.
(c) Prepayments and Reductions Due to Issuance of Equity
Securities. On or prior to the first Business Day after receipt by
Company or any of its Subsidiaries of any Equity Proceeds, Company
shall prepay the Loans (and/or the Revolving Loan Commitments shall
be reduced) in an amount equal to such Equity Proceeds; provided
that such Equity Proceeds shall not be applied to prepay Loans
pursuant to this subsection if (1) such Equity Proceeds were not
derived from a public offering of Securities and (2) such Equity
Proceeds (y) are, upon receipt, designated for reinvestment in the
businesses of Company and its Subsidiaries and (z) are within 30
days of receipt thereof by Company or any of its Subsidiaries,
reinvested in the businesses of Company and its Subsidiaries.
(d) Prepayments and Reductions from Insurance and Condemnation
Proceeds. No later than the second Business Day following the date
of receipt by Company or any of its Subsidiaries of any cash
payments under any of the casualty insurance policies covering
damage to or loss of property maintained pursuant to subsection 6.4
resulting from damage to or loss of all or any portion of the
Collateral or any other tangible asset (net of actual and documented
reasonable costs incurred by Company or any of its Subsidiaries in
connection with adjustment and settlement thereof, "Insurance
Proceeds") or any proceeds resulting from the taking of assets by
the power of eminent domain, condemnation or otherwise (net of
actual and documented reasonable costs incurred by Company or any of
its Subsidiaries in connection with adjustment and settlement
thereof, "Condemnation Proceeds") (other than any portion of any
such proceeds that is reinvested (or scheduled for reinvestment) in
assets of the general type used in the business of Company and its
Subsidiaries within 270 days from the date of receipt of such
proceeds), Company shall prepay the Loans (and/or the Revolving Loan
Commitments shall be reduced) in the amount of such proceeds not so
reinvested (or scheduled for such reinvestment). Company shall, no
later than 270 days after receipt of any such Insurance Proceeds or
Condemnation Proceeds that have not theretofore been applied to the
Obligations, make an additional prepayment of the Loans (and/or the
Revolving Loan Commitments shall be reduced) in the full amount of
all such proceeds that have not therefore been reinvested in such
assets.
(e) Prepayments and Reductions from Consolidated Excess Cash
Flow. In the event that there shall be Consolidated Excess Cash Flow
for any Fiscal Year (commencing with the Fiscal Year ending December
31, 1997), Company shall, no later than 100 days after the end of
such Fiscal Year, prepay the Loans (and/or the Revolving Loan
Commitments shall be reduced) in an aggregate amount equal to (1)
for Fiscal Year 1997, 50% of
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the portion of such Consolidated Excess Cash Flow for such Fiscal
Year in excess of $7,500,000, and (2) for any Fiscal Year
thereafter, 50% of such Consolidated Excess Cash Flow for such
Fiscal Year.
(f) Prepayments Due to Reductions or Restrictions of Revolving
Loan Commitments. Company shall prepay the Swing Line Loans and/or
the Revolving Loans from time to time to the extent necessary so
that (y) the Total Utilization of Revolving Loan Commitments shall
not at any time exceed the Revolving Loan Commitments then in
effect, and (z) the aggregate principal amount of all outstanding
Swing Line Loans shall not at any time exceed the Swing Line Loan
Commitment then in effect. All Swing Line Loans shall be prepaid in
full prior to the prepayment of any Revolving Loans pursuant to this
subsection 2.4B(iii)(f).
C. Application of Prepayments and Reductions of Revolving Loan
Commitments.
(i) Application of Voluntary Prepayments by Type of Loans. Any
voluntary prepayments pursuant to subsection 2.4B(i) shall be applied:
first to repay outstanding Swing Line Loans to the full extent thereof,
second to repay outstanding Revolving Loans to the full extent thereof,
and third, to repay outstanding Term Loans to the full extent thereof.
(ii) Application of Mandatory Prepayments by Type of Loans. Any
amount (the "Applied Amount") required to be applied as a mandatory
prepayment of the Loans and/or a reduction of the Revolving Loan
Commitments pursuant to subsections 2.4B(iii)(a)-(e) shall be applied
first to prepay the Term Loans to the full extent thereof, second, to the
extent of any remaining portion of the Applied Amount, to prepay the Swing
Line Loans to the full extent thereof and to permanently reduce the
Revolving Loan Commitments by the amount of such prepayment, third, to the
extent of any remaining portion of the Applied Amount, to prepay the
Revolving Loans to the full extent thereof and to further permanently
reduce the Revolving Loan Commitments by the amount of such prepayment,
and fourth, to the extent of any remaining portion of the Applied Amount,
to further permanently reduce the Revolving Loan Commitments to the full
extent thereof.
(iii) Application of Prepayments of Term Loans to Tranche A Term
Loans and Tranche B Term Loans and the Scheduled Installments of Principal
Thereof. Any prepayments of the Term Loans pursuant to subsection 2.4B(i)
or 2.4B(iii) shall be applied to prepay the Tranche A Term Loans and the
Tranche B Term Loans on a pro rata basis in accordance with the respective
outstanding principal amounts thereof. Any mandatory prepayments applied
to the Tranche A Term Loans or the Tranche B Term Loans pursuant to this
subsection shall be applied on a pro rata basis (in accordance with the
respective outstanding principal amounts thereof) to each scheduled
installment of principal of the Tranche A Term Loans or the Tranche
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B Term Loans, as the case may be, set forth in subsection 2.4A(i) or
2.4A(ii), respectively, that is unpaid at the time of such prepayment.
(iv) Application of Prepayments to Base Rate Loans and Eurodollar
Rate Loans. Considering Tranche A Term Loans, Tranche B Term Loans and
Revolving Loans being prepaid separately, any prepayment thereof shall be
applied first to Base Rate Loans to the full extent thereof before
application to Eurodollar Rate Loans, in each case in a manner which
minimizes the amount of any payments required to be made by Company
pursuant to subsection 2.6D.
D. Application of Proceeds of Collateral and Payments Under Subsidiary
Guaranty.
(i) Application of Proceeds of Collateral. Except as provided in
subsection 2.4B(iii)(a) with respect to prepayments from Net Asset Sale
Proceeds, all proceeds received by Collateral Agent in respect of any sale
of, collection from, or other realization upon all or any part of the
Collateral under any Collateral Document may, in the discretion of
Collateral Agent, be held by Collateral Agent as Collateral for, and/or
(then or at any time thereafter) applied in full or in part by Collateral
Agent against, the applicable Secured Obligations (as defined in such
Collateral Document) in the following order of priority:
(a) To the payment of all costs and expenses of such sale,
collection or other realization, including without limitation
reasonable compensation to Collateral Agent and its agents and
counsel, and all other reasonable expenses, liabilities and advances
made or incurred by Collateral Agent in connection therewith, and
all amounts for which Collateral Agent is entitled to
indemnification under such Collateral Document and all advances made
by Collateral Agent thereunder for the account of the applicable
Loan Party, and to the payment of all reasonable costs and expenses
paid or incurred by Collateral Agent in connection with the exercise
of any right or remedy under such Collateral Document, all in
accordance with the terms of this Agreement and such Collateral
Document;
(b) thereafter, to the extent of any excess such proceeds, to
the payment of all other such Secured Obligations for the ratable
benefit of the holders thereof; and
(c) thereafter, to the extent of any excess such proceeds, to
the payment to or upon the order of such Loan Party or to whosoever
may be lawfully entitled to receive the same or as a court of
competent jurisdiction may direct.
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(ii) Application of Payments Under Subsidiary Guaranty. All payments
received by Collateral Agent under the Subsidiary Guaranty shall be
applied promptly from time to time by Collateral Agent in the following
order of priority:
(a) To the payment of the reasonable costs and expenses of any
collection or other realization under the Subsidiary Guaranty,
including without limitation reasonable compensation to Collateral
Agent and its agents and counsel, and all expenses, liabilities and
advances made or incurred by Collateral Agent in connection
therewith, all in accordance with the terms of this Agreement and
the Subsidiary Guaranty;
(b) thereafter, to the extent of any excess such payments, to
the payment of all other Guarantied Obligations (as defined in the
Subsidiary Guaranty) for the ratable benefit of the holders thereof;
and
(c) thereafter, to the extent of any excess such payments, to
the payment to the applicable Subsidiary Guarantor or to whosoever
may be lawfully entitled to receive the same or as a court of
competent jurisdiction may direct.
E. General Provisions Regarding Payments.
(i) Manner and Time of Payment. All payments by Company of
principal, interest, fees and other Obligations hereunder and under the
Notes shall be made in same day funds and without defense, setoff or
counterclaim, free of any restriction or condition, and delivered to Chase
Co-Administrative Agent not later than 12:00 Noon (New York time) on the
date due at the Funding and Payment Office for the account of Lenders;
funds received by Chase Co-Administrative Agent after that time on such
due date shall be deemed to have been paid by Company on the next
succeeding Business Day. Company hereby authorizes Chase Co-Administrative
Agent to charge its accounts with such Chase Co-Administrative Agent in
order to cause timely payment to be made to Chase Co-Administrative Agent
of all principal, interest, fees and expenses due hereunder (subject to
sufficient funds being available in its accounts for that purpose).
(ii) Application of Payments to Principal and Interest. Except as
provided in subsection 2.2C, all payments in respect of the principal
amount of any Loan shall include payment of accrued interest on the
principal amount being repaid or prepaid, and all such payments (and in
any event any payments made in respect of any Loan on a date when interest
is due and payable with respect to such Loan) shall be applied to the
payment of interest before application to principal.
(iii) Apportionment of Payments. Aggregate principal and interest
payments shall be apportioned among all outstanding Loans to which such
payments relate, in each case proportionately to Lenders' respective Pro
Rata Shares. Chase
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Co-Administrative Agent shall promptly distribute to each Lender, at its
applicable Lending Office specified on Schedule 2.1 or at such other
address as such Lender may request, its Pro Rata Share of all such
payments received by Chase Co-Administrative Agent and the commitment fees
of such Lender when received by Chase Co-Administrative Agent pursuant to
subsection 2.3. Notwithstanding the foregoing provisions of this
subsection 2.4E(iii) if, pursuant to the provisions of subsection 2.6C,
any Notice of Conversion/Continuation is withdrawn as to any Affected
Lender or if any Affected Lender makes Base Rate Loans in lieu of its Pro
Rata Share of any Eurodollar Rate Loans, Chase Co-Administrative Agent
shall give effect thereto in apportioning payments received thereafter.
(iv) Payments on Business Days. Whenever any payment to be made
hereunder shall be stated to be due on a day that is not a Business Day,
such payment shall be made on the next succeeding Business Day and such
extension of time shall be included in the computation of the payment of
interest hereunder or of the commitment fees hereunder, as the case may
be.
(v) Notation of Payment. Each Lender agrees that before disposing of
any Note held by it, or any part thereof (other than by granting
participations therein), that Lender will make a notation thereon of all
Loans evidenced by that Note and all principal payments previously made
thereon and of the date to which interest thereon has been paid; provided
that the failure to make (or any error in the making of) a notation of any
Loan made under such Note shall not limit or otherwise affect the
obligations of Company hereunder or under such Note with respect to any
Loan or any payments of principal or interest on such Note.
2.5 Use of Proceeds.
A. Term Loans. The proceeds of Term Loans made to Company shall, together
with the proceeds of the Subordinated Notes, be applied to (i) finance the
Acquisition, (ii) refinance certain existing Indebtedness, including
Indebtedness under the Existing API Credit Agreement and the Existing OSI Credit
Agreement, and (iii) pay Transaction Costs.
B. Revolving Loans; Swing Line Loans. Revolving Loans and Swing Line Loans
in an aggregate amount not to exceed $10,000,000 at any time outstanding may be
used to finance the general corporate purposes of Company and its Subsidiaries.
Revolving Loans and Swing Line Loans in an additional amount not to exceed
$48,000,000 at any time outstanding may be used to finance expenditures which
are included in the definition of Consolidated Capital Expenditures; provided
that Revolving Loans and Swing Line Loans in an aggregate amount not to exceed
$58,000,000 at any time outstanding may be used to finance such acquisitions if
at all times such additional amount of Revolving Loans is outstanding the sum of
(i) unrestricted Cash and Cash Equivalents on the balance sheet of Company plus
(ii) the excess of the Revolving Loan Commitments over the Total Utilization of
Revolving Loan Commitments equals or exceeds $7,500,000.
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C. Compliance With Laws. Company hereby undertakes that no portion of the
proceeds of any Loans or other extensions of credit under this Agreement shall
be used by any Loan Party in any manner which would be illegal under, or which
would cause the invalidity or unenforceability (in each case in whole or in
part) of any Loan Document under, any applicable law.
D. Margin Regulations. Without limiting the generality of subsection 2.5C,
no portion of the proceeds of any borrowing under this Agreement shall be used
by Company or any of its Subsidiaries in any manner that might cause the
borrowing or the application of such proceeds to violate Regulation G,
Regulation U, Regulation T or Regulation X of the Board of Governors of the
Federal Reserve System or any other regulation of such Board or to violate the
Exchange Act, in each case as in effect on the date or dates of such borrowing
and such use of proceeds.
2.6 Special Provisions Governing Eurodollar Rate Loans.
Notwithstanding any other provision of this Agreement to the contrary, the
following provisions shall govern with respect to Eurodollar Rate Loans as to
the matters covered:
A. Determination of Applicable Interest Rate. As soon as practicable after
11:00 A.M. (New York time) on each Interest Rate Determination Date, Chase
Co-Administrative Agent shall determine (which determination shall, absent
manifest error, be final, conclusive and binding upon all parties) the interest
rate that shall apply to the Eurodollar Rate Loans for which an interest rate is
then being determined for the applicable Interest Period and shall promptly give
notice thereof (in writing or by telephone confirmed in writing) to Company and
each Lender.
B. Inability to Determine Applicable Interest Rate. In the event that
Chase Co-Administrative Agent shall have reasonably determined (which
determination shall be final and conclusive and binding upon all parties
hereto), on any Interest Rate Determination Date with respect to any Eurodollar
Rate Loans, that by reason of circumstances arising after the date of this
Agreement affecting the London interbank market, adequate and fair means do not
exist for ascertaining the interest rate applicable to such Loans on the basis
provided for in the definition of Adjusted Eurodollar Rate Chase
Co-Administrative Agent shall on such date give notice (by telecopy or by
telephone confirmed in writing) to Company and each Lender of such
determination, whereupon (i) no Loans may be made as, or converted to,
Eurodollar Rate Loans, until such time as Chase Co-Administrative Agent notifies
Company and Lenders that the circumstances giving rise to such notice no longer
exist (such notification not to be unreasonably withheld or delayed) and (ii)
any Notice of Borrowing or Notice of Conversion/Continuation given by Company
with respect to the Loans in respect of which such determination was made shall
be deemed to be rescinded by Company.
C. Illegality or Impracticability of Eurodollar Rate Loans. In the event
that on any date any Lender shall have reasonably determined (which
determination shall be final
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and conclusive and binding upon all parties hereto but shall be made only after
consultation with Company and Chase Co-Administrative Agent) that the making,
maintaining or continuation of its Eurodollar Rate Loans (i) has become unlawful
as a result of compliance by such Lender in good faith with any law, treaty,
governmental rule, regulation, guideline or order (or would conflict with any
such treaty, governmental rule, regulation, guideline or order not having the
force of law even though the failure to comply therewith would not be unlawful)
or (ii) has become impracticable, or would cause such Lender material hardship,
as a result of contingencies occurring after the date of this Agreement which
materially and adversely affect the London interbank market, then, and in any
such event, such Lender shall be an "Affected Lender" and it shall on that day
give notice (by telecopy or by telephone confirmed in writing) to Company and
Chase Co-Administrative Agent of such determination (which notice Chase
Co-Administra- tive Agent shall promptly transmit to each other Lender).
Thereafter (a) the obligation of the Affected Lender to make Loans as, or to
convert Loans to, Eurodollar Rate Loans, shall be suspended until such notice
shall be withdrawn by the Affected Lender, (b) to the extent such determination
by the Affected Lender relates to a Eurodollar Rate Loan then being requested by
Company pursuant to a Notice of Borrowing or a Notice of
Conversion/Continuation, the Affected Lender shall make such Loan as (or convert
such Loan to, as the case may be) a Base Rate Loan, (c) the Affected Lender's
obligation to maintain its outstanding Eurodollar Rate Loans, as the case may be
(the "Affected Loans"), shall be terminated at the earlier to occur of the
expiration of the Interest Period then in effect with respect to the Affected
Loans or when required by law, and (d) the Affected Loans shall automatically
convert into Base Rate Loans on the date of such termination. Notwithstanding
the foregoing, to the extent a determination by an Affected Lender as described
above relates to a Eurodollar Rate Loan then being requested by Company pursuant
to a Notice of Borrowing or a Notice of Conversion/Continuation, Company shall
have the option, subject to the provisions of subsection 2.6D, to rescind such
Notice of Borrowing or Notice of Conversion/Continuation as to all Lenders by
giving notice (by telecopy or by telephone confirmed in writing) to Chase
Co-Administrative Agent of such rescission on the date on which the Affected
Lender gives notice of its determination as described above (which notice of
rescission Chase Co-Administrative Agent shall promptly transmit to each other
Lender). Except as provided in the immediately preceding sentence, nothing in
this subsection 2.6C shall affect the obligation of any Lender other than an
Affected Lender to make or maintain Loans as, or to convert Loans to, Eurodollar
Rate Loans in accordance with the terms of this Agreement.
D. Compensation For Breakage or Non-Commencement of Interest Periods.
Company shall compensate each Lender, upon written request by that Lender (which
request shall set forth the basis for requesting such amounts), for all
reasonable losses, expenses and liabilities (including, without limitation, any
interest paid by that Lender to lenders of funds borrowed by it to make or carry
its Eurodollar Rate Loans and any loss, expense or liability sustained by that
Lender in connection with the liquidation or re-employment of such funds) which
that Lender may sustain: (i) if for any reason (other than a default by that
Lender) a borrowing of any Eurodollar Rate Loan does not occur on a date
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specified therefor in a Notice of Borrowing or a telephonic request for
borrowing, or a conversion to or continuation of any Eurodollar Rate Loan does
not occur on a date specified therefor in a Notice of Conversion/Continuation or
a telephonic request for conversion or continuation, (ii) if any prepayment
(including without limitation any prepayment pursuant to subsection 2.4B(i)) or
conversion of any of its Eurodollar Rate Loans occurs on a date that is not the
last day of an Interest Period applicable to that Loan, (iii) if any prepayment
of any of its Eurodollar Rate Loans is not made on any date specified in a
notice of prepayment given by Company, or (iv) as a consequence of any other
default by Company in the repayment of its Eurodollar Rate Loans when required
by the terms of this Agreement.
E. Booking of Eurodollar Rate Loans. Any Lender may make, carry or
transfer Eurodollar Rate Loans at, to, or for the account of any of its branch
offices or the office of an Affiliate of that Lender.
F. Assumptions Concerning Funding of Eurodollar Rate Loans. Calculation of
all amounts payable to a Lender under this subsection 2.6 and under subsection
2.7A shall be made as though that Lender had actually funded each of its
relevant Eurodollar Rate Loans through the purchase of a Eurodollar deposit
bearing interest at the rate obtained pursuant to clause (i) of the definition
of Adjusted Eurodollar Rate in an amount equal to the amount of such Eurodollar
Rate Loan and having a maturity comparable to the relevant Interest Period and
through the transfer of such Eurodollar deposit from an offshore office of that
Lender to a domestic office of that Lender in the United States of America;
provided, however, that each Lender may fund each of its Eurodollar Rate Loans
in any manner it sees fit and the foregoing assumptions shall be utilized only
for the purposes of calculating amounts payable under this subsection 2.6 and
under subsection 2.7A.
G. Eurodollar Rate Loans After Default. After the occurrence of and during
the continuation of a Potential Event of Default or an Event of Default, (i)
Company may not elect to have a Loan be made or maintained as, or converted to,
a Eurodollar Rate Loan after the expiration of any Interest Period then in
effect for that Loan and (ii) subject to the provisions of subsection 2.6D, any
Notice of Borrowing or Notice of Conversion/Continuation given by Company with
respect to a requested borrowing or conversion/continuation that has not yet
occurred shall be deemed to be rescinded by Company.
2.7 Increased Costs; Taxes; Capital Adequacy.
A. Compensation for Increased Costs and Taxes. Subject to the provisions
of subsection 2.7B (which shall be controlling with respect to the matters
covered thereby), in the event that any law, treaty or governmental rule,
regulation or order, or any change therein or in the interpretation,
administration or application thereof (including the introduction of any new
law, treaty or governmental rule, regulation or order), or any determination of
a court or governmental authority, in each case that becomes effective after the
date hereof, or compliance by such Lender with any guideline, request or
directive issued or made after the date hereof by any central bank or other
governmental or quasi-governmental authority (whether or not having the force of
law):
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(i) results in a change in the basis of taxation of such Lender (or
its applicable lending office) (other than a change with respect to any
Tax on the overall net income of such Lender) with respect to this
Agreement or any of its obligations hereunder or any payments to such
Lender (or its applicable lending office) of principal, interest, fees or
any other amount payable hereunder;
(ii) imposes, modifies or holds applicable any reserve (including,
without limitation, any marginal, emergency, supplemental, special or
other reserve), special deposit, compulsory loan, FDIC insurance or
similar requirement against assets held by, or deposits or other
liabilities in or for the account of, or advances or loans by, or other
credit extended by, or any other acquisition of funds by, any office of
such Lender (other than any such reserve or other requirements with
respect to Eurodollar Rate Loans that are reflected in the definition of
Adjusted Eurodollar Rate; or
(iii) imposes any other condition (other than with respect to a Tax
matter) on or affecting such Lender (or its applicable lending office) or
its obligations hereunder, or the London interbank market;
and the result of any of the foregoing is to increase the cost to such Lender of
agreeing to make, making or maintaining Eurodollar Rate Loans hereunder or to
reduce any amount received or receivable by such Lender (or its applicable
lending office) with respect thereto; then, in any such case, Lender shall
promptly notify Company and Chase Co-Administrative Agent thereof and Company
shall promptly pay to such Lender, upon receipt of the statement referred to in
the next sentence, such additional amount or amounts (in the form of an
increased rate of, or a different method of calculating, interest or otherwise
as such Lender shall reasonably determine) as may be necessary to compensate
such Lender for any such increased cost or reduction in amounts received or
receivable hereunder. Such Lender shall deliver to Company (with a copy to Chase
Co-Administrative Agent) a written statement, setting forth in reasonable detail
the basis for calculating the additional amounts owed to such Lender under this
subsection 2.7A, which statement shall be prima facie evidence of such
additional amounts.
B. Withholding of Taxes.
(i) Payments to Be Free and Clear. All sums payable by Company under
this Agreement and the other Loan Documents shall (except to the extent
required by law) be paid free and clear of, and without any deduction or
withholding on account of, any Tax (other than a Tax on the overall net
income of any Lender) imposed, levied, collected, withheld or assessed by
or within the United States of America or any political subdivision in or
of the United States of America or any other jurisdiction from which a
payment is made by or on behalf of Company.
(ii) Withholding of Taxes. If Company or any other Person is
required by law to make any deduction or withholding on account of any
such Tax from any sum
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paid or payable by Company to Chase Co-Administrative Agent or any Lender
under any of the Loan Documents:
(a) Company shall notify Chase Co-Administrative Agent of any
such requirement or any change in any such requirement as soon as
Company becomes aware of it;
(b) Company shall pay any such Tax before the date on which
penalties attach thereto, such payment to be made (if the liability
to pay is imposed on Company) for its own account or (if that
liability is imposed on Chase Co-Administrative Agent or such
Lender, as the case may be) on behalf of and in the name of Chase
Co-Administrative Agent or such Lender;
(c) the sum payable by Company in respect of which the
relevant deduction, withholding or payment is required shall be
increased to the extent necessary to ensure that, after the making
of that deduction, withholding or payment, Chase Co-Administrative
Agent or such Lender, as the case may be, receives on the due date a
net sum equal to what it would have received had no such deduction,
withholding or payment been required or made; and
(d) within 30 days after paying any sum from which it is
required by law to make any deduction or withholding, and within 30
days after the due date of payment of any Tax which it is required
by clause (b) above to pay, Company shall deliver to Chase
Co-Administrative Agent evidence of such deduction, withholding or
payment and of the remittance thereof to the relevant taxing or
other authority;
provided that no such additional amount shall be required to be paid to any
Lender under clause (c) above except to the extent that any change after the
date hereof (in the case of each Lender listed on the signature pages hereof) or
after the date of the Assignment Agreement pursuant to which such Lender became
a Lender (in the case of each other Lender) in any such requirement for a
deduction, withholding or payment as is mentioned therein shall result in an
increase in the rate of such deduction, withholding or payment from that in
effect at the date of this Agreement or at the date of such Assignment
Agreement, as the case may be, in respect of payments to such Lender.
(iii) Evidence of Exemption from U.S. Withholding Tax.
(a) Each Lender that is organized under the laws of any
jurisdiction other than the United States or any state or other
political subdivision thereof (for purposes of this subsection
2.7B(iii), a "Non-US Lender") shall deliver to Chase
Co-Administrative Agent for transmission to Company, on or prior to
the Closing Date (in the case of each Lender listed on the signature
pages hereof) or on or prior to the date of the Assignment Agreement
pursuant to which it becomes a Lender (in the case of each other
Lender), and at such
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other times as may be necessary in the determination of Company or
Chase Co-Administrative Agent (each in the reasonable exercise of
its discretion), (1) two original copies of Internal Revenue Service
Form 1001 or 4224 (or any successor forms), accurately completed and
duly executed by such Lender, together with any other certificate or
statement of exemption required under the Internal Revenue Code or
the regulations issued thereunder to establish that such Lender is
not subject to deduction or withholding of United States federal
income tax with respect to any payments to such Lender of principal,
interest, fees or other amounts payable under any of the Loan
Documents or (2) if such Lender is not a "bank" or other Person
described in Section 881(c)(3) of the Internal Revenue Code and
cannot deliver either Internal Revenue Service Form 1001 or 4224 (or
any successor forms) pursuant to clause (1) above, a Certificate re
Non-Bank Status together with two original copies of Internal
Revenue Service Form W-8 (or any successor form), properly completed
and duly executed by such Lender, together with any other
certificate or statement of exemption required under the Internal
Revenue Code or the regulations issued thereunder to establish that
such Lender is not subject to deduction or withholding of United
States federal income tax with respect to any payments to such
Lender of interest payable under any of the Loan Documents.
(b) Each Lender required to deliver any forms, certificates or
other evidence with respect to United States federal income tax
withholding matters pursuant to subsection 2.7B(iii)(a) hereby
agrees, from time to time after the initial delivery by such Lender
of such forms, certificates or other evidence, whenever a lapse in
time or change in circumstances renders such forms, certificates or
other evidence obsolete or inaccurate in any material respect, such
Lender shall (1) deliver to Chase Co-Administrative Agent for
transmission to Company two new original copies of Internal Revenue
Service Form 1001 or 4224 (or any successor forms), or a Certificate
re Non-Bank Status and two original copies of Internal Revenue
Service Form W-8 (or any successor form), as the case may be,
accurately completed and duly executed by such Lender,
together with any other certificate or statement of exemption
required in order to confirm or establish that such Lender is not
subject to deduction or withholding of United States federal income
tax with respect to payments to such Lender under the Loan Documents
or (2) immediately notify Chase Co-Administrative Agent and Company
of its inability to deliver any such forms, certificates or other
evidence.
(c) Company shall not be required to pay any additional amount
to any Non-US Lender under clause (c) of subsection 2.7B(ii) in
respect of deductions or withholdings of United States federal
income taxes if such Lender shall have failed to satisfy the
requirements of subsection 2.7B(iii)(a) or 2.7B(iii)(b); provided
that if such Lender shall have satisfied such requirements on the
Closing Date (in the case of each Lender listed on the
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signature pages hereof) or on the date of the Assignment Agreement
pursuant to which it became a Lender (in the case of each other
Lender), nothing in this subsection 2.7B(iii)(c) shall relieve
Company of its obligation to pay any additional amounts pursuant to
clause (c) of subsection 2.7B(ii) in the event that, as a result of
any change in any applicable law, treaty or governmental rule,
regulation or order, or any change in the interpretation,
administration or application thereof, such Lender is no longer
properly entitled to deliver forms, certificates or other evidence
at a subsequent date establishing the fact that such Lender is not
subject to withholding as described in subsection 2.7B(iii)(a) or
2.7B(iii)(b).
C. Capital Adequacy Adjustment. If any Lender shall have determined that
the adoption, effectiveness, phase-in or applicability after the date hereof of
any law, rule or regulation (or any provision thereof) regarding capital
adequacy, or any change therein or in the interpretation or administration
thereof by the National Association of Insurance Commissioners, any governmental
authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by any Lender (or its applicable lending
office) with any guideline, request or directive regarding capital adequacy
(whether or not having the force of law) of the National Association of
Insurance Commissioners, any such governmental authority, central bank or
comparable agency, has or would have the effect of reducing the rate of return
on the capital of such Lender or any corporation controlling such Lender as a
consequence of, or with reference to, such Lender's Loans or Commitments or
Letters of Credit or participations therein or other obligations hereunder with
respect to the Loans or the Letters of Credit to a level below that which such
Lender reasonably determines such Lender or such controlling corporation could
have achieved but for such adoption, effectiveness, phase-in, applicability,
change or compliance (taking into consideration the policies of such Lender or
such controlling corporation with regard to capital adequacy), then from time to
time, within fifteen Business Days after receipt by Company from such Lender of
the statement referred to in the next sentence, Company shall pay to such Lender
such additional amount or amounts as will compensate such Lender or such
controlling corporation on an after-tax basis for such reduction. Such Lender
shall deliver to Company (with a copy to Chase Co-Administrative Agent) a
written statement, setting forth in reasonable detail the basis of the
calculation of such additional amounts, which statement shall be conclusive and
binding upon all parties hereto absent manifest error.
D. Substitute Lenders. In the event Company is required under the
provisions of this subsection 2.7 to make payments in a material amount to any
Lender or in the event any Lender fails to lend to Company in accordance with
this Agreement, Company may, so long as no Event of Default or Potential Event
of Default shall have occurred and be continuing, elect to terminate such Lender
as a party to this Agreement; provided that, concurrently with such termination,
(i) Company shall pay that Lender all principal, interest and fees and other
amounts (including without limitation amounts, if any, owed under this
subsection 2.7) due to be paid to such Lender with respect to all periods
through such date of termination, (ii) another financial institution
satisfactory to Company and Co-Administra-
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tive Agents (or, in the case of a Co-Administrative Agent that is also the
Lender to be terminated, its successor Co-Administrative Agent) shall agree, as
of such date, to become a Lender for all purposes under this Agreement (whether
by assignment or amendment) and to assume all obligations of the Lender to be
terminated as of such date, and (iii) all documents and supporting materials
necessary, in the judgment of Co-Administrative Agents (or, in the case of a
Co-Administrative Agent that is also the Lender to be terminated, its successor
Co-Administrative Agent) to evidence the substitution of such Lender shall have
been received and approved by Co-Administrative Agents as of such date.
2.8 Obligation of Lenders and Issuing Lenders to Mitigate.
Each Lender and Issuing Lender agrees that, as promptly as practicable
after the officer of such Lender or Issuing Lender responsible for administering
the Loans or Letters of Credit of such Lender or Issuing Lender, as the case may
be, becomes aware of the occurrence of an event or the existence of a condition
that would cause such Lender to become an Affected Lender or that would entitle
such Lender or Issuing Lender to receive payments under subsection 2.7 or
subsection 3.6, it will, to the extent not inconsistent with the internal
policies of such Lender or Issuing Lender and any applicable legal or regulatory
restrictions, use reasonable efforts (i) to make, issue, fund or maintain the
Commitments of such Lender or the affected Loans or Letters of Credit of such
Lender or Issuing Lender through another lending or letter of credit office of
such Lender or Issuing Lender, or (ii) take such other measures as such Lender
or Issuing Lender may deem reasonable, if as a result thereof the circumstances
which would cause such Lender to be an Affected Lender would cease to exist or
the additional amounts which would otherwise be required to be paid to such
Lender or Issuing Lender pursuant to subsection 2.7 or subsection 3.6 would be
materially reduced and if, as determined by such Lender or Issuing Lender in its
sole discretion, the making, issuing, funding or maintaining of such Commitments
or Loans or Letters of Credit through such other lending or letter of credit
office or in accordance with such other measures, as the case may be, would not
otherwise materially adversely affect such Commitments or Loans or Letters of
Credit or the interests of such Lender or Issuing Lender; provided that such
Lender or Issuing Lender will not be obligated to utilize such other lending or
letter of credit office pursuant to this subsection 2.8 unless Company agrees to
pay all incremental expenses incurred by such Lender or Issuing Lender as a
result of utilizing such other lending or letter of credit office. A certificate
as to the amount of any such expenses payable by Company pursuant to this
subsection 2.8 (setting forth in reasonable detail the basis for requesting such
amount) submitted by such Lender or Issuing Lender to Company (with a copy to
Chase Co-Administrative Agent) shall be conclusive absent manifest error.
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SECTION 3.
LETTERS OF CREDIT
3.1 Issuance of Letters of Credit and Lenders' Purchase of Participations
Therein.
A. Letters of Credit. In addition to Company requesting that Lenders make
Revolving Loans pursuant to subsection 2.1A(iii), and that Swing Line Lender
make Swing Line Loans pursuant to subsection 2.1A(iv), Company may request, in
accordance with the provisions of this subsection 3.1, from time to time during
the period from the Closing Date to but excluding the Revolving Loan Commitment
Termination Date, that one or more Lenders issue Letters of Credit for the
account of Company for the purposes specified in the definitions of Commercial
Letters of Credit and Standby Letters of Credit. Subject to the terms and
conditions of this Agreement and in reliance upon the representations and
warranties of Company herein set forth, any one or more Lenders may, but (except
as provided in subsection 3.1B(ii)) shall not be obligated to, issue such
Letters of Credit in accordance with the provisions of this subsection 3.1;
provided that Company shall not request that any Lender issue (and no Lender
shall issue):
(i) any Letter of Credit if, after giving effect to such issuance,
the Total Utilization of Revolving Loan Commitments would exceed the
Revolving Loan Commitments then in effect;
(ii) any Letter of Credit if, after giving effect to such issuance,
the Letter of Credit Usage would exceed $5,000,000;
(iii) any Standby Letter of Credit having an expiration date later
than the earlier of (a) the Revolving Loan Commitment Termination Date and
(b) the date which is one year from the date of issuance of such Standby
Letter of Credit; provided that the immediately preceding clause (b) shall
not prevent any Issuing Lender from agreeing that a Standby Letter of
Credit will automatically be extended for one or more successive periods
not to exceed one year each unless such Issuing Lender elects not to
extend for any such additional period; provided further that, unless
Requisite Lenders otherwise consent, such Issuing Lender shall give notice
that it will not extend such Standby Letter of Credit if it has knowledge
that an Event of Default has occurred and is continuing on the last day on
which such Issuing Lender may give notice to the beneficiary that it will
not extend such Standby Letter of Credit;
(iv) any Commercial Letter of Credit (a) having an expiration date
later than the earlier of (X) 30 days prior to the Revolving Loan
Commitment Termination Date and (Y) the date which is 180 days from the
date of issuance of such Commercial Letter of Credit or (b) that is
otherwise unacceptable to the applicable Issuing Lender in its reasonable
discretion;
(v) any Letter of Credit denominated in a currency other than
Dollars; or
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(vi) any Letter of Credit during any period when a Lender Default
exists, unless each Issuing Lender has entered into arrangements
satisfactory to it and Company to eliminate such Issuing Lender's risk
with respect to the Defaulting Lender, including by cash collateralizing
such Defaulting Lender's Pro Rata Share of the Letter of Credit Usage
(after giving effect to the issuance of the proposed Letter of Credit).
B. Mechanics of Issuance.
(i) Notice of Issuance. Whenever Company desires the issuance of a
Letter of Credit, it shall deliver to Chase Co-Administrative Agent, at
the Funding and Payment Office, a Notice of Issuance of Letter of Credit
no later than 12:00 Noon (New York time) at least five Business Days, or
such shorter period as may be agreed to by the Issuing Lender in any
particular instance, in advance of the proposed date of issuance. The
Notice of Issuance of Letter of Credit shall specify (a) the proposed date
of issuance (which shall be a Business Day), (b) the face amount of or
maximum aggregate liability under, as applicable, the Letter of Credit,
(c) the expiration date of the Letter of Credit, (d) the name and address
of the beneficiary, and (e) the verbatim text of the proposed Letter of
Credit or the proposed terms and conditions thereof, including a precise
description of any documents and the verbatim text of any certificates to
be presented by the beneficiary which, if presented by the beneficiary
prior to the expiration date of the Letter of Credit, would require the
Issuing Lender to make payment under the Letter of Credit; provided that
the Issuing Lender, in its reasonable discretion, may require changes in
the text of the proposed Letter of Credit or any such documents or
certificates; provided further that no Letter of Credit shall require
payment against a conforming draft or other request for payment to be made
thereunder on the same business day (under the laws of the jurisdiction in
which the office of the Issuing Lender to which such draft or other
request for payment is required to be presented is located) that such
draft or other request for payment is presented if such presentation is
made after 10:00 A.M. (in the time zone of such office of the Issuing
Lender) on such business day.
Company shall notify the applicable Issuing Lender (and Chase
Co-Administrative Agent, if Chase Co-Administrative Agent is not such
Issuing Lender) prior to the issuance of any Letter of Credit in the event
that any of the matters to which Company is required to certify in the
applicable Notice of Issuance of Letter of Credit is no longer true and
correct as of the proposed date of issuance of such Letter of Credit, and
upon the issuance of any Letter of Credit, Company shall be deemed to have
re-certified, as of the date of such issuance, as to the matters to which
Company is required to certify in the applicable Notice of Issuance of
Letter of Credit.
(ii) Determination of Issuing Lender. Upon receipt by Chase
Co-Administrative Agent of a Notice of Issuance of Letter of Credit
pursuant to
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subsection 3.1B(i) requesting the issuance of a Letter of Credit, in the
event Chase Co-Administrative Agent elects to issue such Letter of Credit,
Chase Co-Administrative Agent shall promptly so notify Company, and such
Chase Co-Administrative Agent shall be the Issuing Lender with respect
thereto. In the event that Chase Co-Administrative Agent, in its sole
discretion, elects not to issue such Letter of Credit, Chase
Co-Administrative Agent shall promptly so notify the Company, whereupon
Company may request any other Lender to issue such Letter of Credit by
delivering to such Lender a copy of the applicable Notice of Issuance of
Letter of Credit. Any Lender so requested to issue such Letter of Credit
shall promptly notify Company and Chase Co-Administrative Agent whether or
not, in its sole discretion, it has elected to issue such Letter of
Credit, and any such Lender which so elects to issue such Letter of Credit
shall be the Issuing Lender with respect thereto. In the event that all
other Lenders shall have declined to issue such Letter of Credit,
notwithstanding the prior election of Chase Co-Administrative Agent not to
issue such Letter of Credit, Chase Co-Administrative Agent shall be
obligated to issue such Letter of Credit and shall be the Issuing Lender
with respect thereto, notwithstanding the fact that the sum of the Letter
of Credit Usage with respect to such Letter of Credit and with respect to
all other Letters of Credit issued by Chase Co-Administrative Agent, when
aggregated with Chase Co-Administrative Agent's outstanding Revolving
Loans and Swing Line Loans, may exceed Chase Co-Administrative Agent's
Revolving Loan Commitment then in effect.
(iii) Issuance of Letter of Credit. Upon satisfaction or waiver (in
accordance with subsection 10.6) of the conditions set forth in subsection
4.3, the Issuing Lender shall issue the requested Letter of Credit in
accordance with the Issuing Lender's standard operating procedures (any
such issuance by Chase Co-Administrative Agent being effected through the
Funding and Payment Office), and upon its issuance of such Letter of
Credit the Issuing Lender shall promptly notify Chase Co-Administrative
Agent and each Lender of such issuance, which notice shall be accompanied
by a copy of such Letter of Credit.
(iv) Reports to Lenders. Within 30 days after the end of each
calendar quarter ending after the Closing Date, so long as any Letter of
Credit shall have been outstanding during such calendar quarter, each
Issuing Lender shall deliver to Chase Co-Administrative Agent and Chase
Co-Administrative Agent shall deliver to each Lender a report setting
forth for such calendar quarter the daily maximum amount available to be
drawn under the Letters of Credit that were outstanding during such
calendar quarter.
C. Lenders' Purchase of Participations in Letters of Credit. Immediately
upon the issuance of each Letter of Credit, each Lender having a Revolving Loan
Commitment shall be deemed to, and hereby agrees to, have irrevocably purchased
from the Issuing Lender a participation in such Letter of Credit and any
drawings honored or payments made thereunder in an amount equal to such Lender's
Pro Rata Share (with respect to the
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Revolving Loan Commitments) of the maximum amount which is or at any time may
become available to be drawn or required to be paid thereunder.
3.2 Letter of Credit Fees.
Company agrees to pay the following amounts to each Issuing Lender with
respect to Letters of Credit issued by it for the account of Company:
(i) with respect to each Letter of Credit, (a) a fronting fee equal
to 1/4 of 1% per annum of the daily maximum amount available to be drawn
under such Letter of Credit and (b) a Letter of Credit fee equal to the
product of (x) the Applicable Eurodollar Rate Margin with respect to
Revolving Loans and (y) the daily maximum amount available to be drawn
under such Letter of Credit, in each case payable in arrears on and to
each January 15, April 15, July 15 and October 15 of each year, commencing
on January 15, 1997, and computed on the basis of a 360-day year for the
actual number of days elapsed; and
(ii) with respect to the issuance, amendment or transfer of each
Letter of Credit and each drawing made thereunder (without duplication of
the fees payable under clause (i) above), documentary and processing
charges in accordance with such Issuing Lender's standard schedule for
such charges in effect at the time of such issuance, amendment, transfer
or drawing, as the case may be.
Promptly upon receipt by such Issuing Lender of any amount described in clause
(i)(b) of this subsection 3.2, such Issuing Lender shall distribute to each
other Lender its Pro Rata Share of such amount.
3.3 Drawings and Payments and Reimbursement of Amounts Paid Under Letters of
Credit.
A. Responsibility of Issuing Lender With Respect to Requests For Drawings
and Payments. In determining whether to honor any drawing or request for payment
under any Letter of Credit by the beneficiary thereof, the Issuing Lender shall
be responsible only to determine that the documents and certificates required to
be delivered under such Letter of Credit have been delivered and that they
comply on their face with the requirements of such Letter of Credit.
B. Reimbursement by Company of Amounts Paid Under Letters of Credit. In
the event an Issuing Lender has determined to honor a drawing or request for
payment under a Letter of Credit issued by it, such Issuing Lender shall
immediately notify Company and Chase Co-Administrative Agent, and Company shall
reimburse such Issuing Lender on or before the Business Day immediately
following the date on which such drawing is honored or such payment is made (the
applicable "Reimbursement Date"), in an amount in same day funds equal to the
amount of such drawing; provided that, anything contained in this Agreement to
the contrary notwithstanding, (i) unless Company shall have notified
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Chase Co-Administrative Agent and such Issuing Lender prior to 12:00 Noon (New
York time) on the date of such drawing or request for payment that Company
intends to reimburse such Issuing Lender for the amount of such honored drawing
or payment with funds other than the proceeds of Revolving Loans, Company shall
be deemed to have given a timely Notice of Borrowing to Chase Co-Administrative
Agent requesting Lenders to make Revolving Loans which are Base Rate Loans, on
the applicable Reimbursement Date in an amount equal to the amount of such
honored drawing or payment and (ii) subject to satisfaction or waiver of the
conditions specified in subsection 4.2B, Lenders shall, on the applicable
Reimbursement Date, make Revolving Loans and in the amount of such honored
drawing or payment, the proceeds of which shall be applied directly by Chase
Co-Administrative Agent to reimburse such Issuing Lender for the amount of such
honored drawing or payment; provided further that if for any reason proceeds of
Revolving Loans are not received by such Issuing Lender on the applicable
Reimbursement Date in an amount equal to the amount of such honored drawing or
payment, Company shall reimburse such Issuing Lender, on demand, in an amount in
Dollars and in same day funds equal to the excess of the amount of such honored
drawing or payment over the aggregate amount of such Revolving Loans, if any,
which are so received. Nothing in this subsection 3.3B shall be deemed to
relieve any Lender from its obligation to make Revolving Loans on the terms and
conditions set forth in this Agreement, and Company shall retain any and all
rights it may have against any Lender resulting from the failure of such Lender
to make such Revolving Loans under this subsection 3.3B.
C. Payment by Lenders of Unreimbursed Payments Under Letters of Credit.
(i) Payment by Lenders. In the event that Company shall fail for any
reason to reimburse any Issuing Lender as provided in subsection 3.3B in
an amount equal to the amount of any honored drawing or payment made by
such Issuing Lender under a Letter of Credit issued by it, such Issuing
Lender shall promptly notify each other Lender of the unreimbursed amount
of such honored drawing or payment and of such other Lender's respective
participation therein based on such Lender's Pro Rata Share of the
Revolving Loan Commitments. Each Lender shall make available to such
Issuing Lender an amount equal to its respective participation, in same
day funds, at the office of such Issuing Lender specified in such notice,
not later than 12:00 Noon (New York time) on the first business day (under
the laws of the jurisdiction in which such office of such Issuing Lender
is located) after the date notified by such Issuing Lender. In the event
that any Lender fails to make available to such Issuing Lender on such
business day the amount of such Lender's participation in such Letter of
Credit as provided in this subsection 3.3C, such Issuing Lender shall be
entitled to recover such amount on demand from such Lender together with
interest thereon at the rate customarily used by such Issuing
Lender for the correction of errors among banks for three Business Days
and thereafter at the Base Rate. Nothing in this subsection 3.3C shall be
deemed to prejudice the right of any Lender to recover from any Issuing
Lender any amounts made available by such Lender to such Issuing Lender
pursuant to this subsection 3.3C in the event that it is determined by the
final judgment of a court of competent jurisdiction that the
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payment with respect to a Letter of Credit by such Issuing Lender in
respect of which payment was made by such Lender constituted gross
negligence or willful misconduct on the part of such Issuing Lender.
(ii) Distribution to Lenders of Reimbursements Received From
Company. In the event any Issuing Lender shall have been reimbursed by
other Lenders pursuant to subsection 3.3C(i) for all or any portion of any
honored drawing or payment made by such Issuing Lender under a Letter of
Credit issued by it, such Issuing Lender shall distribute to each other
Lender which has paid all amounts payable by it under subsection 3.3C(i)
with respect to such honored drawing or payment such other Lender's Pro
Rata Share of all payments subsequently received by such Issuing Lender
from Company in reimbursement of such honored drawing or payment when such
payments are received. Any such distribution shall be made to a Lender at
its primary address set forth below its name on the appropriate signature
page hereof or at such other address as such Lender may request.
D. Interest on Amounts Paid Under Letters of Credit.
(i) Payment of Interest by Company. Company agrees to pay to each
Issuing Lender, with respect to drawings honored or payments made under
any Letters of Credit issued by it, interest on the amount paid by such
Issuing Lender in respect of each such drawing or payment from the date
such drawing is honored or payment is made to but excluding the date such
amount is reimbursed by Company (including any such reimbursement out of
the proceeds of Revolving Loans pursuant to subsection 3.3B) at a rate
equal to (a) for the period from the date such drawing is honored or
payment is made to but excluding the applicable Reimbursement Date, the
Base Rate plus the Applicable Base Rate Margin with respect to Revolving
Loans, and (b) thereafter, a rate which is 2% per annum in excess of the
rate of interest described in the foregoing clause (a). Interest payable
pursuant to this subsection 3.3D(i) shall be computed on the basis of a
360-day year for the actual number of days elapsed in the period during
which it accrues and shall be payable on demand or, if no demand is made,
on the date on which the related drawing or payment under a Letter of
Credit is reimbursed in full.
(ii) Distribution of Interest Payments by Issuing Lender. Promptly
upon receipt by any Issuing Lender of any payment of interest pursuant to
subsection 3.3D(i), (a) such Issuing Lender shall distribute to each other
Lender, out of the interest received by such Issuing Lender in respect of
the period from the date of the applicable honored drawing or payment
under a Letter of Credit issued by such Issuing Lender to but excluding
the date on which such Issuing Lender is reimbursed for the amount of such
drawing or payment (including any such reimbursement out of the proceeds
of Revolving Loans pursuant to subsection 3.3B), the amount that such
other Lender would have been entitled to receive in respect of the Letter
of Credit fee that would have been payable in respect of such Letter of
Credit for such period pursuant to subsection 3.2 if no drawing had been
honored or payment had
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been made under such Letter of Credit, and (b) in the event such Issuing
Lender shall have been reimbursed by other Lenders pursuant to subsection
3.3C(i) for all or any portion of such drawing or payment, such Issuing
Lender shall distribute to each other Lender which has paid all amounts
payable by it under subsection 3.3C(i) with respect to such drawing or
payment such other Lender's Pro Rata Share of any interest received by
such Issuing Lender in respect of that portion of such drawing or payment
so reimbursed by other Lenders for the period from the date on which such
Issuing Lender was so reimbursed by other Lenders to and including the
date on which such portion of such drawing or payment is reimbursed by
Company. Any such distribution shall be made to a Lender at its Lending
Office set forth on Schedule 2.1 or at such other address as such Lender
may request.
3.4 Obligations Absolute.
The obligation of Company to reimburse each Issuing Lender for drawings
honored or payments made under the Letters of Credit issued by it and to repay
any Revolving Loans made by Lenders pursuant to subsection 3.3B and the
obligations of Lenders under subsection 3.3C(i) shall be unconditional and
irrevocable and shall be paid strictly in accordance with the terms of this
Agreement under all circumstances including, without limitation, the following
circumstances:
(i) any lack of validity or enforceability of any Letter of Credit;
(ii) the existence of any claim, set-off, defense or other right
which Company or any Lender may have at any time against a beneficiary or
any transferee of any Letter of Credit (or any Persons for whom any such
transferee may be acting), any Issuing Lender or other Lender or any other
Person or, in the case of a Lender, against Company whether in connection
with this Agreement, the transactions contemplated herein or any unrelated
transaction (including any underlying transaction between Company or one
of its Subsidiaries and the beneficiary for which any Letter of Credit was
procured);
(iii) any draft, demand, certificate or other document presented
under any Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(iv) payment by the applicable Issuing Lender under any Letter of
Credit against presentation of a demand, draft or certificate or other
document which does not substantially comply with the terms of such Letter
of Credit;
(v) any adverse change in the business, operations, properties,
assets, condition (financial or otherwise) or prospects of Company or any
of its Subsidiaries;
(vi) any breach of this Agreement or any other Loan Document by any
party thereto;
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(vii) any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing; or
(viii) the fact that an Event of Default or a Potential Event of
Default shall have occurred and be continuing;
provided, in each case, that payment by the applicable Issuing Lender under the
applicable Letter of Credit shall not have constituted gross negligence or
willful misconduct of such Issuing Lender under the circumstances in question
(as determined by a final judgment of a court of competent jurisdiction).
3.5 Indemnification; Nature of Issuing Lender's Duties.
A. Indemnification. In addition to amounts payable as provided in
subsection 3.6, Company hereby agrees to protect, indemnify, pay and save
harmless each Issuing Lender from and against any and all claims, demands,
liabilities, damages, losses, costs, charges and expenses (including reasonable
fees, expenses and disbursements of counsel and allocated costs of internal
counsel) which such Issuing Lender may incur or be subject to as a consequence,
direct or indirect, of (i) the issuance of any Letter of Credit by such Issuing
Lender, other than as a result of (a) the gross negligence or willful misconduct
of such Issuing Lender as determined by a final judgment of a court of competent
jurisdiction or (b) subject to the following clause (ii), the wrongful dishonor
by such Issuing Lender of a proper demand for payment made under any Letter of
Credit issued by it or (ii) the failure of such Issuing Lender to honor a
drawing or other request for payment under any such Letter of Credit as a result
of any act or omission, whether rightful or wrongful, of any present or future
de jure or de facto government or governmental authority (all such acts or
omissions herein called "Governmental Acts").
B. Nature of Issuing Lenders' Duties. As between Company and any Issuing
Lender, Company assumes all risks of the acts and omissions of, or misuse of the
Letters of Credit issued by such Issuing Lender by, the respective beneficiaries
of such Letters of Credit. In furtherance and not in limitation of the
foregoing, such Issuing Lender shall not be responsible for: (i) the form,
validity, sufficiency, accuracy, genuineness or legal effect of any document
submitted by any party in connection with the application for and issuance of
any such Letter of Credit, even if it should in fact prove to be in any or all
respects invalid, insufficient, inaccurate, fraudulent or forged; (ii) the
validity or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign any such Letter of Credit or the rights or
benefits thereunder or proceeds thereof, in whole or in part, which may prove to
be invalid or ineffective for any reason; (iii) failure of the beneficiary of
any such Letter of Credit to comply fully with any conditions required in order
to draw upon such Letter of Credit; (iv) errors, omissions, interruptions or
delays in transmission or delivery of any messages, by mail, cable, telegraph,
telex or otherwise, whether or not they be in cipher; (v) errors in
interpretation of technical terms; (vi) any loss or delay in the transmission or
otherwise of any document required in order to make a drawing under any such
Letter of Credit or of the proceeds thereof; (vii) the misapplication by the
beneficiary
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of any such Letter of Credit of the proceeds of any drawing or payment under
such Letter of Credit; or (viii) any consequences arising from causes beyond the
control of such Issuing Lender, including, without limitation, any Governmental
Acts, and none of the above shall affect or impair, or prevent the vesting of,
any of such Issuing Lender's rights or powers hereunder.
In furtherance and extension and not in limitation of the specific
provisions set forth in the first paragraph of this subsection 3.5B, any action
taken or omitted by any Issuing Lender under or in connection with the Letters
of Credit issued by it or any documents and certificates delivered thereunder,
if taken or omitted in good faith, shall not put such Issuing Lender under any
resulting liability to Company.
Notwithstanding anything to the contrary contained in this subsection 3.5,
Company shall retain any and all rights it may have against any Issuing Lender
for any liability arising solely out of the gross negligence or willful
misconduct of such Issuing Lender, as determined by a final judgment of a court
of competent jurisdiction.
3.6 Increased Costs and Taxes Relating to Letters of Credit.
In the event that any law, treaty or governmental rule, regulation or
order, or any change therein or in the interpretation, administration or
application thereof (including the introduction of any new law, treaty or
governmental rule, regulation or order), or any determination of a court or
governmental authority, in each case that becomes effective after the date
hereof, or compliance by any Issuing Lender or Lender with any guideline,
request or directive issued or made after the date hereof by any central bank or
other governmental or quasi-governmental authority (whether or not having the
force of law):
(i) results in any change in the basis of taxation of such Issuing
Lender or Lender (or its applicable lending or letter of credit office)
(other than a change with respect to any Tax on the overall net income of
such Issuing Lender or Lender) with respect to the issuing or maintaining
of any Letters of Credit or the purchasing or maintaining of any
participations therein or any other obligations under this Section 3,
whether directly or by such being imposed on or suffered by any particular
Issuing Lender;
(ii) imposes, modifies or holds applicable any reserve (including,
without limitation, any marginal, emergency, supplemental, special or
other reserve), special deposit, compulsory loan, FDIC insurance or
similar requirement in respect of any Letters of Credit issued by any
Issuing Lender or participations therein purchased by any Lender; or
(iii) imposes any other condition on or affecting such Issuing
Lender or Lender (or its applicable lending or letter of credit office)
regarding this Section 3 or any Letter of Credit or any participation
therein;
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and the result of any of the foregoing is to increase the cost to such Issuing
Lender or Lender of agreeing to issue, issuing or maintaining any Letter of
Credit or agreeing to purchase, purchasing or maintaining any participation
therein or to reduce any amount received or receivable by such Issuing Lender or
Lender (or its applicable lending or letter of credit office) with respect
thereto; then, in any case, Company shall promptly pay to such Issuing Lender or
Lender, upon receipt of the statement referred to in the next sentence, such
additional amount or amounts (reasonably determined by such Issuing Lender or
Lender) as may be necessary to compensate such Issuing Lender or Lender for any
such increased cost or reduction in amounts received or receivable hereunder.
Such Issuing Lender or Lender shall deliver to Company a written statement,
setting forth in reasonable detail the basis for calculating the additional
amounts owed to such Issuing Lender or Lender under this subsection 3.6, which
statement shall be prima facie evidence of such additional amounts.
SECTION 4.
CONDITIONS TO LOANS AND LETTERS OF CREDIT
The obligations of Lenders to make Loans and the issuance of Letters of
Credit hereunder are subject to the satisfaction of the following conditions.
4.1 Conditions to Term Loans.
The obligations of Lenders to make the Term Loans are, in addition to the
conditions precedent specified in subsection 4.2, subject to prior or concurrent
satisfaction of the following conditions:
A. Company Documents. On or before the Closing Date, Company shall deliver
or cause to be delivered to Lenders (or to Chase Co-Administrative Agent for
Lenders with sufficient originally executed copies, where appropriate, for each
Lender and its counsel) the following, each, unless otherwise noted, dated the
Closing Date:
(i) Certified copies of its Certificate of Incorporation, together
with a good standing certificate from the Secretary of State of the State
of Delaware and each other state in which it is qualified as a foreign
corporation to do business, each dated a recent date prior to the Closing
Date;
(ii) Copies of its Bylaws, certified as of the Closing Date by its
corporate secretary or an assistant secretary;
(iii) Resolutions of its Board of Directors approving and
authorizing the execution, delivery and performance of this Agreement and
the other Loan Documents and Related Agreements to which it is a party,
certified as of the Closing Date by its corporate secretary or an
assistant secretary as being in full force and effect without modification
or amendment;
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(iv) Signature and incumbency certificates of its officers executing
this Agreement and the other Loan Documents;
(v) Executed originals of this Agreement and the other Loan
Documents to which it is a party; and
(vi) Such other documents as Agents may reasonably request.
B. Subsidiary Documents. On or before the Closing Date, Company shall
deliver or cause to be delivered to Lenders (or to Chase Co-Administrative Agent
for Lenders with sufficient originally executed copies, where appropriate, for
each Lender and its counsel) the following, each, unless otherwise noted, dated
the Closing Date:
(i) Certified copies of the Certificate of Incorporation (or
equivalent organizational document) of each domestic corporate Wholly
Owned Subsidiary of Company, together with a good standing certificate
from the secretary of state of its jurisdiction of incorporation and each
other state in which it is qualified as a foreign corporation to do
business (except any such other state or states in which failure to be so
qualified could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect), each dated a recent date
prior to the Closing Date;
(ii) Copies of the Bylaws of each such domestic corporate Wholly
Owned Subsidiary of Company, certified as of the Closing Date by its
corporate secretary or an assistant secretary;
(iii) Resolutions of the Board of Directors of each such domestic
corporate Wholly Owned Subsidiary of Company approving and authorizing the
execution, delivery and performance of the Subsidiary Guaranty, the
Security Agreement, the Pledge Agreement, the Trademark Security
Agreement, the Limited Partnership Security Agreement (as applicable) and
the other Loan Documents and Related Agreements to which such Subsidiary
is party, certified as of the Closing Date by its corporate secretary or
an assistant secretary as being in full force and effect without
modification or amendment;
(iv) Conformed copies of the partnership agreement of each domestic
Subsidiary of Company that is a partnership, certified by each general
partner of such partnership as of the Closing Date as being in full force
and effect without modification or amendment;
(v) Certificates of limited partnership or statements of
partnership, as applicable, of each such Subsidiary of Company that is a
partnership, certified by the Secretary of State (or similar official) of
its jurisdiction of formation and a certificate of existence or good
standing, as the case may be, from the Secretary of State (or similar
official) of such jurisdiction, together with a certificate or other
evidence of good standing from the secretary of state of each other state
in which it is authorized
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as a foreign limited partnership to do business (except any such other
state or states in which failure to be so qualified could not,
individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect), each dated as of a recent date prior to the
Closing Date;
(vi) All documents executed by the appropriate partners approving or
authorizing, the execution, delivery and performance of the Subsidiary
Guaranty, the Security Agreement, the Pledge Agreement, the Trademark
Security Agreement, the Limited Partnership Security Agreement (as
applicable) and the other Loan Documents and Related Agreements to which
such Subsidiary is a party, each certified as of the Closing Date by the
general partner of such partnership Subsidiary or other Loan Party;
(vii) Signature and incumbency certificates of its officers,
partners or other Persons executing the Subsidiary Guaranty, the Security
Agreement, the Pledge Agreement, the Trademark Security Agreement, the
Limited Partnership Security Agreement (as applicable) and the other Loan
Documents to which such Subsidiary is party;
(viii) Executed originals of the Subsidiary Guaranty, the Security
Agreement, the Pledge Agreement and the other Loan Documents to which any
corporate or partnership Subsidiary of Company is a party; and
(ix) Such other documents as Agents may reasonably request.
C. Acquisition Agreement. On the Closing Date (i) Agents shall have
received executed or conformed copies of the Acquisition Agreement and any
amendments thereto and documents executed in connection therewith, (ii) such
Acquisition Agreement shall be in full force and effect and, no term or
condition thereof shall have been amended, modified or waived after the
execution thereof except with the prior written consent of Arranging Agents,
(iii) the parties thereto shall not have failed in any material respect to
perform any material obligation or covenant required by any such Acquisition
Agreement to be performed or complied with by any of them on or before the
Closing Date, and (iv) Agents shall have received an Officer's Certificate from
Company to the effect set forth in clauses (ii) and (iii).
D. Issuance of Subordinated Debt. On or before the Closing Date, Company
shall have issued and sold the Subordinated Notes in an aggregate principal
amount of not less than $100,000,000 and Company shall have delivered to
Arranging Agents complete, correct and conformed copies of the Subordinated
Notes and the Subordinated Note Documents, all in form and substance
satisfactory to Arranging Agents. In addition, all opinions by counsel to
Company or any of its Subsidiaries (and, if requested by Co-Administrative
Agents, any certificates and letters) delivered in connection with the
Subordinated Notes, Subordinated Note Documents and the Acquisition shall be
addressed to Agents and Lenders or accompanied by a written authorization from
each Person
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delivering such an opinion stating that Agents and Lenders may rely on such
opinion as though it were addressed to them.
E. Related Agreements. Co-Administrative Agents shall have received (i) a
fully executed or conformed copy of each Related Agreement and all principal
documents executed in connection therewith, and each Related Agreement shall be
in full force and effect and no provision thereof shall have been modified or
waived in any respect determined by Agents to be material, in each case without
consent of Agents and (ii) an Officer's Certificate from Company to the effect
set forth in clause (i), and each such Related Agreement shall be satisfactory
in form and substance to Agents.
F. Consummation of Acquisition and Merger.
(i) All conditions to the Acquisition and the Merger set forth in
the Acquisition Agreement shall have been satisfied or the fulfillment of
any such conditions shall have been waived with the consent of Arranging
Agents;
(ii) Agents shall have received evidence in form and substance
satisfactory to Agents that (a) the Acquisition shall become effective in
accordance with the terms of the Acquisition Agreement immediately upon
the making of the initial Loans and (b) the Merger shall become effective
in accordance with the terms of the Articles of Merger and the Certificate
of Merger and the laws of the States of Delaware and Wisconsin immediately
upon the making of the initial Loans;
(iii) the aggregate cash consideration paid to the holders of equity
interests in respect of such equity interests in connection with the
Acquisition shall not exceed $150,235,000;
(iv) Transaction Costs shall not exceed $20,000,000, and Arranging
Agents shall have received evidence satisfactory in form and substance to
Arranging Agents to such effect: and
(v) Agents shall have received an Officer's Certificate of Company
to the effect set forth in clauses (i)-(iv) above and stating that Company
will proceed to consummate the Acquisition and the Merger immediately upon
the making of the initial Loans.
G. Repayment of Existing Debt. All Indebtedness of Company and its
Subsidiaries (other than existing Indebtedness identified in Schedule 7.1
annexed hereto, the terms and conditions of which Indebtedness shall be in form
and in substance satisfactory to Arranging Agents), including Indebtedness under
the Existing OSI Credit Agreement and the Existing API Credit Agreement, shall
have been paid in full, redeemed or defeased, any commitments to lend thereunder
shall have been terminated, all security interests created to secure the
obligations arising in connection therewith shall have been terminated or
effectively assigned to Collateral Agent for the benefit of Agents and Lenders,
and Company
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shall have delivered to Chase Co-Administrative Agent UCC-3 termination
statements or assignments (or comparable forms) and any and all other
instruments of release, satisfaction, assignment and/or reconveyance (or
evidence of the filing thereof) as may be necessary or advisable to terminate or
assign to Agents and Lenders all such security interests and all other security
interests in the Collateral. Arranging Agents shall have received evidence
satisfactory to Arranging Agents and their counsel that Indebtedness under the
Existing OSI Credit Agreement was paid in full with the proceeds of Term Loans.
H. Necessary Consents. Company shall have obtained all consents necessary
or advisable in connection with the Acquisition and the Merger, the transactions
contemplated by the Loan Documents and Related Agreements and the continued
operation of the business conducted by Company and its Subsidiaries, and each of
the foregoing shall be in full force and effect and in form and substance
satisfactory to Arranging Agents (except as disclosed to and approved by
Arranging Agents). All applicable waiting periods shall have expired without any
action being taken or threatened by any competent authority which would
restrain, prevent or otherwise impose adverse conditions on the Acquisition or
the Merger or the financing thereof, and no action, request for stay, petition
for review or rehearing, reconsideration or appeal shall be pending and any time
for agency action to set aside its consent on its own motion shall have expired.
I. No Utilization of Revolving Loan Commitments On the Closing Date, after
giving effect to the Acquisition and the Merger, the Total Utilization of
Revolving Loan Commitments shall equal zero.
J. Perfection of Security Interests in Personal Property and Mixed
Collateral. Company shall have taken or caused to be taken such actions in such
a manner so that Collateral Agent has, for the benefit of Agents and Lenders, a
valid and perfected first priority security interest in the entire personal
property and mixed Collateral (subject to Liens permitted by this Agreement).
Such actions shall include, without limitation: (i) the delivery pursuant to the
applicable Collateral Documents of (a) certificates (which certificates shall be
properly endorsed in blank for transfer or accompanied by irrevocable undated
stock powers duly endorsed in blank, all in form and substance satisfactory to
Chase Co-Administrative Agent) representing all of the shares of capital stock
and all of the limited partnership interests required to be pledged pursuant to
the Collateral Documents, together with an acknowledgment from each partnership
Subsidiary that the pledge to Collateral Agent of all limited and general
partnership interests constituting Collateral is recorded on the books of such
partnership Subsidiary, and (b) all promissory notes or other instruments (duly
endorsed, where appropriate, in a manner satisfactory to Chase Co-Administrative
Agent) evidencing any Collateral; (ii) delivery to Agents of (a) the results of
a recent search, by a Person satisfactory to Agents, of all effective UCC
financing statements and fixture filings and all judgment and tax lien filings
which may have been made with respect to any personal or mixed property of any
Loan Party, together with copies of all such filings disclosed by such search;
(iii) the delivery to Chase Co-Administrative Agent of Uniform Commercial Code
financing statements executed by the applicable Loan Parties as to all such
Collateral granted by such Loan Parties for all jurisdictions as
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may be necessary or desirable to perfect Collateral Agent's security interest in
such Collateral; and (iv) the delivery to Chase Co-Administrative Agent of
evidence reasonably satisfactory to Chase Co-Administrative Agent that all other
filings (including, without limitation, Uniform Commercial Code termination
statements and filings with the United States Patent and Trademark Office of
trademark assignments for all trademarks used by Company and its Subsidiaries
registered in the United States), recordings and other actions that either Chase
Co-Administrative Agent or Collateral Agent deems necessary or advisable to
establish, preserve and perfect the first priority Liens (subject to Liens
consented to in writing by Co-Administrative Agents and Requisite Lenders or
permitted by subsection 7.2 with respect to such Collateral) granted to
Collateral Agent in personal and mixed property shall have been made.
K. Solvency Appraisal; Financial Condition Certificate. Company shall have
delivered to Co-Administrative Agents and Lenders a certificate from the chief
financial officer of Company dated the Closing Date, in form, scope and
substance satisfactory to Arranging Agents, with appropriate attachments
demonstrating that, after giving effect to the consummation of the Acquisition
and the Merger and the financing transactions contemplated hereby, Company and
its Subsidiaries are Solvent.
L. Transaction Costs. Not less than three days prior to the Closing Date,
Company shall have delivered to Co-Administrative Agents and Lenders a schedule,
in a form satisfactory to Co-Administrative Agents, setting forth Company's
reasonable best estimate of the Transaction Costs (other than amounts payable to
Agents and Lenders).
M. Opinions of Loan Parties' Counsel. Lenders and their respective counsel
shall have received (i) originally executed copies of one or more favorable
written opinions of White & Case, counsel for the Loan Parties, in form and
substance reasonably satisfactory to Arranging Agents and their counsel, dated
as of the Closing Date and setting forth substantially the matters in the
opinions designated in Exhibit XI annexed hereto and as to such other matters as
Arranging Agents acting on behalf of Lenders may reasonably request, and (ii)
evidence satisfactory to Arranging Agents that Loan Parties have instructed such
counsel to deliver such opinions to Lenders.
N. Opinions of Agents' Counsel. Lenders shall have received originally
executed copies of one or more favorable written opinions of O'Melveny & Myers
LLP, counsel to Arranging Agents and Co-Administrative Agents, dated as of the
Closing Date, substantially in the form of Exhibit XII annexed hereto and as to
such other matters as Agents acting on behalf of Lenders may reasonably request.
O. Fees. Company shall have paid to Agents, for distribution (as
appropriate) to Agents and Lenders, the fees payable on the Closing Date
referred to in subsection 2.3.
P. Financial Statements; Pro Forma Balance Sheet. On or before the Closing
Date, Lenders shall have received from Company (i) audited financial statements
of each of Company (or, with respect to years prior to 1995, Account Portfolios,
L.P., as predecessor
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of Company) and Payco and their respective Subsidiaries for the fiscal years
ending December 31 of 1993, 1994 and 1995, consisting of balance sheets and the
related consolidated statements of income, stockholders' equity and cash flows
for such fiscal years, (ii) unaudited financial statements of each of Company
and Payco and their respective Subsidiaries as at June 30, 1996, consisting of a
balance sheet and the related consolidated statements of income, stockholders'
equity and cash flows for the six-month period ending on such date, all in
reasonable detail and certified by the chief financial officer of Company that
they fairly present the financial condition of each of Company and Payco and
their respective Subsidiaries, as the case may be, as at the dates indicated and
the results of their operations and their cash flows for the periods indicated,
subject to changes resulting from audit and normal year-end adjustments, and
(iii) pro forma consolidated and consolidating balance sheets of Company and its
Subsidiaries as at June 30, 1996 prepared in accordance with GAAP and reflecting
the consummation of the Acquisition and the Merger, the related financings and
the other transactions contemplated by the Loan Documents and the Related
Agreements, which pro forma balance sheets shall be in form and substance
satisfactory to Lenders.
Q. Insurance Appraisal; Evidence of Insurance. Chase Co-Administrative
Agent shall have received (i) a copy of the insurance report prepared by Aon
Corp. with respect to Company and its Subsidiaries and such report shall be in
form and substance satisfactory to Arranging Agents, and (ii) satisfactory
certificates of insurance with respect to each of the insurance policies
required pursuant to subsection 6.4, and Arranging Agents shall be satisfied
with the nature and scope of these insurance policies.
R. Corporate Structure; Management.
(i) Corporate Structure. The corporate organizational structure,
capital structure and ownership of Company and its Subsidiaries, after
giving effect to the Acquisition and the Merger, shall be as set forth on
Schedule 4.1R annexed hereto.
(ii) Management. The management structure of Company after giving
effect to the Acquisition and the Merger shall be as set forth on Schedule
4.1R annexed hereto. Arranging Agents shall have received duly executed
copies of, and shall be satisfied with the form and substance of, the
Employment Agreements, certified by the corporate secretary of Company as
being in full force and effect as of the Closing Date without
modification, waiver or amendment.
S. Representations and Warranties; Performance of Agreements. Company
shall have delivered to Chase Co-Administrative Agent an Officer's Certificate,
in form and substance satisfactory to Chase Co-Administrative Agent, to the
effect that the representations and warranties in Section 5 hereof are true and
correct in all material respects on and as of the Closing Date to the same
extent as though made on and as of that date and that Company shall have
performed in all material respects all agreements and satisfied all conditions
which this Agreement provides shall be performed or satisfied by them on or
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before the Closing Date, except as otherwise disclosed to and agreed to in
writing by Chase Co-Administrative Agent.
T. Completion of Proceedings. All corporate and other proceedings taken or
to be taken in connection with the transactions contemplated hereby and all
documents incidental thereto not previously found acceptable by Arranging
Agents, acting on behalf of Lenders, and its counsel shall be satisfactory in
form and substance to Arranging Agents and such counsel, and Arranging Agents
and such counsel shall have received all such counterpart originals or certified
copies of such documents as Arranging Agents may reasonably request.
4.2 Conditions to All Loans.
The obligations of Lenders to make Loans on each Funding Date are subject
to the following further conditions precedent:
A. Chase Co-Administrative Agent shall have received on or before that
Funding Date, in accordance with the provisions of subsection 2.1B, an
originally executed Notice of Borrowing, signed by the chief executive officer,
the chief financial officer or the controller of Company or by any executive
officer of Company designated by any of the above-described officers on behalf
of Company in a writing delivered to Chase Co-Administrative Agent.
B. As of that Funding Date:
(i) The representations and warranties contained herein and in the
other Loan Documents shall be true and correct in all material respects on
and as of that Funding Date to the same extent as though made on and as of
that date, except to the extent such representations and warranties
specifically relate to an earlier date, in which case such representations
and warranties shall have been true and correct in all material respects
on and as of such earlier date;
(ii) No event shall have occurred and be continuing or would result
from the consummation of the borrowing contemplated by such Notice of
Borrowing that would constitute an Event of Default or a Potential Event
of Default;
(iii) Each Loan Party shall have performed in all material respects
all agreements and satisfied all conditions which this Agreement and the
other Loan Documents provide shall be performed or satisfied by it on or
before that Funding Date;
(iv) No order, judgment or decree of any court, arbitrator or
governmental authority shall purport to enjoin or restrain any Lender from
making the Loans to be made by it, on that Funding Date;
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(v) The making of the Loans requested on such Funding Date shall not
violate any law including, without limitation, Regulation G, Regulation T,
Regulation U or Regulation X of the Board of Governors of the Federal
Reserve System; and
(vi) There shall not be pending or, to the knowledge of Company,
threatened, any action, suit, proceeding, governmental investigation or
arbitration against or affecting Company or any of its Subsidiaries or any
property of Company or any of its Subsidiaries that has not been disclosed
by Company in writing and that is required to be so disclosed pursuant to
subsection 5.6 or 6.1(x) prior to the making of the last preceding Loans
(or, in the case of the initial Loans, prior to the execution of this
Agreement), and there shall have occurred no development not so disclosed
in any such action, suit, proceeding, governmental investigation or
arbitration so disclosed that, in either event, in the opinion of Chase
Co-Administrative Agent or of Requisite Lenders, would be expected to have
a Material Adverse Effect; and no injunction or other restraining order
shall have been issued and no hearing to cause an injunction or other
restraining order to be issued shall be pending or noticed with respect to
any action, suit or proceeding seeking to enjoin or otherwise prevent the
consummation of, or to recover any damages or obtain relief as a result
of, the transactions contemplated by this Agreement or the making of Loans
hereunder.
4.3 Conditions to Letters of Credit.
The issuance of any Letter of Credit hereunder (whether or not the
applicable Issuing Lender is obligated to issue such Letter of Credit) is
subject to the following conditions precedent:
A. On or before the date of issuance of the initial Letter of Credit
pursuant to this Agreement, the initial Loans shall have been made.
B. On or before the date of issuance of such Letter of Credit, Chase
Co-Administrative Agent shall have received, in accordance with the provisions
of subsection 3.1B(i), an originally executed Notice of Issuance of Letter of
Credit, signed by the chief executive officer, the chief financial officer or
the controller of Company or by any executive officer of Company designated by
any of the above-described officers on behalf of Company in a writing delivered
to Chase Co-Administrative Agent, together with all other information specified
in subsection 3.1B(i) and such other documents or information as the applicable
Issuing Lender may reasonably require in connection with the issuance of such
Letter of Credit.
C. On the date of issuance of such Letter of Credit, all conditions
precedent described in subsection 4.2B shall be satisfied to the same extent as
if the issuance of such Letter of Credit were the making of a Loan and the date
of issuance of such Letter of Credit were a Funding Date.
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SECTION 5.
REPRESENTATIONS AND WARRANTIES
In order to induce Lenders to enter into this Agreement and to make the
Loans, to induce Issuing Lender to issue Letters of Credit and to induce other
Lenders to purchase participations therein, Company represents and warrants to
each Lender, on the date of this Agreement, on each Funding Date, and on the
date of issuance of each Letter of Credit, that the following statements are
true and correct:
5.1 Organization, Powers, Qualification, Good Standing, Business and
Subsidiaries.
A. Organization and Powers. Each Corporate Loan Party is a corporation
duly organized, validly existing and in good standing under the laws of its
state of incorporation. Each Partnership Loan Party is a duly organized and
validly existing limited partnership under the laws of its jurisdiction of
formation and is in good standing in such jurisdiction. Each Loan Party has all
requisite corporate or partnership (as applicable) power and authority to own
and operate its properties, to carry on its business as now conducted and as
proposed to be conducted, to enter into the Loan Documents and to carry out the
transactions contemplated thereby. Company has all requisite corporate power and
authority to issue and pay the Notes.
B. Qualification and Good Standing. Each Corporate Loan Party is qualified
to do business and in good standing, and each Partnership Loan Party is
authorized as a foreign limited partnership to do business, in every
jurisdiction where its assets are located and wherever necessary to carry out
its business and operations, except in jurisdictions where the failure to be so
qualified, authorized or in good standing has not had and will not have a
Material Adverse Effect.
C. Conduct of Business. Company and its Subsidiaries are engaged only in
the businesses permitted to be engaged in pursuant to subsection 7.11.
D. Company and Subsidiaries. All of the Subsidiaries of Company as of the
Closing Date after giving effect to the Acquisition and the Merger are
identified in Schedule 5.1 annexed hereto. The capital stock of each of the
domestic Subsidiaries of Company identified in Schedule 5.1 annexed hereto which
are corporations is duly authorized, validly issued, fully paid and
nonassessable and none of such capital stock constitutes Margin Stock. The
limited and general partnership interests of each of the subsidiaries of Company
identified in Schedule 5.1 annexed hereto which are limited partnerships are
duly and validly issued. Company and each of the domestic Subsidiaries of
Company identified in Schedule 5.1 annexed hereto are duly organized, validly
existing and in good standing under the laws of their respective jurisdictions
of incorporation or formation set forth therein, have full corporate or
partnership (as applicable) power and authority to own their assets and
properties and to operate their business as presently owned and conducted and as
proposed to be conducted, and are qualified to do business and in good standing
in every jurisdiction where their assets are located and wherever necessary
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to carry out their business and operations, in each case except where failure to
be so qualified or in good standing or a lack of such corporate power and
authority has not had and will not have a Material Adverse Effect. Schedule 5.1
annexed hereto correctly sets forth the ownership interest of Company in each of
its Subsidiaries identified therein.
5.2 Authorization of Borrowing, etc.
A. Authorization of Borrowing. The execution, delivery and performance of
the Loan Documents and the Related Agreements and the issuance, delivery and
payment of the Notes have been duly authorized by all necessary corporate and/or
partnership (as applicable) action on the part of each of the Loan Parties
thereto.
B. No Conflict. After giving effect to the consummation of the
transactions contemplated hereby to occur on the Closing Date, the execution,
delivery and performance by each of the Loan Parties of the Loan Document and
the Related Agreements to which they are parties, the issuance, delivery and
payment of the Notes and the consummation of the transactions contemplated by
the Loan Documents do not and will not (i) violate any provision of any law or
any governmental rule or regulation applicable to Company or any of its
Subsidiaries, the Certificate or Articles of Incorporation or Bylaws (or other
analogous organizational document) of Company or any of its Subsidiaries or any
order, judgment or decree of any court or other agency of government binding on
Company or any of its Subsidiaries, (ii) conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under any
Contractual Obligation of Company or any of its Subsidiaries, (iii) result in or
require the creation or imposition of any Lien upon any of the properties or
assets of Company or any of its Subsidiaries (other than any Liens created under
any of the Loan Documents in favor of Chase Co-Administrative Agent on behalf of
Lenders), or (iv) require any approval of stockholders or partners or any
approval or consent of any Person under any Contractual Obligation of Company or
any of its Subsidiaries, except for such approvals or consents which will be
obtained on or before the Closing Date.
C. Governmental Consents. The execution, delivery and performance by the
Loan Parties of the Loan Documents and Related Agreements to which they are
party, the issuance, delivery and payment of the Notes and the consummation of
the transactions contemplated by the Loan Documents do not and will not require
any registration with, consent or approval of, or notice to, or other action to,
with or by, any federal, state or other governmental authority or regulatory
body except for such registrations, consents, approvals, notices or other
actions which will be made, obtained or taken on or before the Closing Date.
D. Binding Obligation. Each of the Loan Documents and the Related
Agreements has been duly executed and delivered by each of the Loan Parties
party thereto and is the legally valid and binding obligation of each such Loan
Party, enforceable against such Loan Party in accordance with its respective
terms, except as may be limited by
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bankruptcy, insolvency, reorganization, moratorium or similar laws relating to
or limiting creditors' rights generally or by equitable principles relating to
enforceability.
E. Valid Issuance of Subordinated Notes. Company has the corporate power
and authority to issue the Subordinated Notes. The Subordinated Notes, when
issued and paid for, will be the legally valid and binding obligations of
Company, enforceable against Company in accordance with their respective terms,
except as may be limited by bankruptcy, insolvency, reorganization, moratorium
or similar laws relating to or limiting creditors' rights generally or by
equitable principles relating to enforceability. The subordination provisions of
the Subordinated Notes will be enforceable against the holders thereof and the
Loans and all other monetary Obligations hereunder are and will be within the
definition of "Senior Debt" included in such provisions. The Subordinated Notes,
when issued and sold, will either (a) have been registered or qualified under
applicable federal and state securities laws or (b) be exempt therefrom.
5.3 Financial Condition; Projections.
A. Financial Statements. Company has heretofore delivered to Lenders, at
Lenders' request, the following financial statements and information: (i) the
audited consolidated balance sheets of Company and its Subsidiaries (or, with
respect to years prior to 1995, Account Portfolios, L.P. (as predecessor of
Company) and its Subsidiaries) as at December 31 of 1993, 1994 and 1995, and the
related audited consolidated statements of operations, stockholders' equity and
cash flows of Company and its Subsidiaries for the periods then ended, together
with the report on such consolidated financial statements of Deloitte & Touche
LLP setting forth in each case in comparative form the corresponding figures for
the previous Fiscal Year (other than the Fiscal Year ending December 31, 1992),
(ii) the unaudited consolidated balance sheet of Company and its Subsidiaries as
at June 30, 1996 and the related unaudited consolidated statements of
operations, stockholders' equity and cash flows of Company and its Subsidiaries
for the six months then ended, together with the corresponding figures for the
corresponding periods of the previous Fiscal Year (other than the Fiscal Year
ending December 31, 1992), and (iii) the audited consolidated balance sheet of
Payco and its subsidiaries as at December 31 of 1993, 1994 and 1995, and the
audited consolidated statement of operations, stockholders' equity, and cash
flows of Payco and its Subsidiaries for the fiscal year then ended, together
with the report on such consolidated financial statements of Arthur Andersen &
Co setting forth in comparative form the corresponding figures for the previous
fiscal year (other than the fiscal year ending December 31, 1992) and (iv) the
unaudited consolidated balance sheet of Payco and its Subsidiaries as at June
30, 1996 and the related unaudited consolidated statements of operations,
stockholders' equity and cash flows of Payco and its Subsidiaries for the six
months then ended, together with the corresponding figures for the corresponding
period of the previous fiscal year (other than the fiscal year ending December
31, 1992). All such statements were prepared in conformity with GAAP and fairly
present, in all material respects, the financial position (on a consolidated
basis) of the entities described in such financial statements as at the
respective dates thereof and the results of operations and cash flows (on a
consolidated basis) of the entities described therein for each of the periods
then
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ended, subject, in the case of any such unaudited financial statements, to
changes resulting from audit and normal year-end adjustments and the absence of
footnote disclosure required in accordance with GAAP. Neither Company nor Payco
has (and will not immediately following the funding of the initial Loans) have
any Contingent Obligation, contingent liability or liability for taxes,
long-term lease or unusual forward or long-term commitment that is not reflected
in the most recent financial statements delivered pursuant to subsection 6.1,
the notes thereto and which in any such case is material in relation to the
business, operations, properties, assets, condition (financial or otherwise) or
prospects of Company and its Subsidiaries taken as a whole.
B. Projections. On and as of the Closing Date, the financial projections
of Company and its Subsidiaries for the period from December 31, 1996 through
December 31, 2003 (giving effect to the Acquisition) previously delivered to
Lenders (the "Projections") are based on good faith estimates and assumptions
made by the management of Company, it being recognized, however, that
projections as to future events are not to be viewed as facts and that the
actual results during the period or periods covered by the Projections may
differ from the projected results and that the differences may be material.
Notwithstanding the foregoing, as of the Closing Date, management of Company and
Payco believed that the Projections were reasonable and attainable.
5.4 No Material Adverse Change; No Restricted Junior Payments.
Since December 31, 1995, no event or change has occurred that has caused
or evidences, either in any case or in the aggregate, a Material Adverse Effect.
Neither Company nor any of its Subsidiaries has directly or indirectly declared,
ordered, paid or made, or set apart any sum or property for, any Restricted
Junior Payment or agreed to do so except as permitted by subsection 7.5.
5.5 Title to Properties; Liens.
After giving effect to the transactions contemplated by this Agreement to
occur on the Closing Date, Company and its Subsidiaries have good, sufficient
and legal title to all of their respective properties and assets reflected in
the financial statements referred to in subsection 5.3 or in the most recent
financial statements delivered pursuant to subsection 6.1, except for assets
disposed of since the date of such financial statements in the ordinary course
of business or as otherwise permitted under subsection 7.7. Except as permitted
by this Agreement, all such properties and assets are free and clear of Liens.
5.6 Litigation; Adverse Facts.
There is no action, suit, proceeding, arbitration or governmental
investigation (whether or not purportedly on behalf of Company or any of its
Subsidiaries) at law or in equity or before or by any federal, state, municipal
or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, pending or, to the knowledge of
Company, threatened against or affecting Company or any of its
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Subsidiaries or any property of Company or any of its Subsidiaries that, either
individually or in the aggregate together with all other such actions,
proceedings and investigations, has had, or could reasonably be expected to
result in, a Material Adverse Effect, it being understood, solely for purposes
of this sentence, that any money judgments or settlements the occurrence of
which do not give rise to an Event of Default under subsection 8.8 shall not be
deemed to have a Material Adverse Effect. Neither Company nor any of its
Subsidiaries is or has been (i) in violation of any applicable law (including
any Debt Collection Laws) that has had, or could reasonably be expected to
result in, a Material Adverse Effect, it being understood for purposes of this
clause (i) that any such violation which results in money judgments or
settlements the occurrence of which do not give rise to an Event of Default
under subsection 8.8 shall not be deemed to have a Material Adverse Effect, or
(ii) subject to or in default with respect to any final judgment, writ,
injunction, decree, rule or regulation of any court or any federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, that has had, or could reasonably be
expected to result in, a Material Adverse Effect.
5.7 Payment of Taxes.
Except to the extent permitted by subsection 6.3, all material tax returns
and reports of Company and its Subsidiaries required to be filed by any of them
have been timely filed, and all material taxes, assessments, fees and other
governmental charges upon Company and its Subsidiaries and upon their respective
properties, assets, income, businesses and franchises which are due and payable
have been paid when due and payable. Company does not know of any proposed tax
assessment against Company or any of its Subsidiaries other than those which are
being actively contested by Company or such Subsidiary in good faith and by
appropriate proceedings and for which reserves or other appropriate provisions,
if any, as may be required in conformity with GAAP shall have been made or
provided therefor.
5.8 Performance of Agreements; Materially Adverse Agreements.
A. Neither Company nor any of its Subsidiaries is in default in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in any of its Contractual Obligations, and no condition
exists that, with the giving of notice or the lapse of time or both, would
constitute such a default, except where the consequences, direct or indirect, of
such default or defaults, if any, would not have a Material Adverse Effect.
B. Neither Company nor any of its Subsidiaries is a party to or is
otherwise subject to any agreement or instrument or any charter or other
internal restriction which has had, or could reasonably be expected (based upon
assumptions that are reasonable at the time made) to result in, individually or
in the aggregate, a Material Adverse Effect.
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5.9 Governmental Regulation.
Neither Company nor any of its Subsidiaries is subject to regulation under
the Public Utility Holding Company Act of 1935, the Federal Power Act, the
Interstate Commerce Act or the Investment Company Act of 1940 or under any other
federal or state statute or regulation which may limit its ability to incur
Indebtedness or which may otherwise render all or any portion of the Obligations
unenforceable.
5.10 Securities Activities.
Neither Company nor any of its Subsidiaries is engaged principally, or as
one of its important activities, in the business of extending credit for the
purpose of purchasing or carrying any Margin Stock.
5.11 Employee Benefit Plans.
A. Company and each of its ERISA Affiliates are in substantial compliance
with all applicable provisions and requirements of ERISA with respect to each
Employee Benefit Plan, and have substantially performed all their obligations
under each Employee Benefit Plan, except to the extent that any non-compliance
with ERISA or any such failure to perform would not result in material liability
of Company or any of its ERISA Affiliates.
B. No ERISA Event has occurred which has resulted or is reasonably likely
to result in any material liability to the PBGC or to any other Person.
C. Except to the extent required under Section 4980B of the Internal
Revenue Code and/or Section 601 of ERISA, neither Company nor any of its
Subsidiaries maintains or contributes to any employee welfare benefit plan (as
defined in Section 3(1) of ERISA) that provides health or welfare benefits
(through the purchase of insurance or otherwise) for any retired or former
employees of Company or any of its Subsidiaries, except to the extent that the
provision of such benefits would not have a Material Adverse Effect.
D. No Pension Plan has an Unfunded Current Liability in an amount that
would have a Material Adverse Effect.
5.12 Certain Fees.
No broker's or finder's fee or commission will be payable with respect to
this Agreement or any of the loan transactions contemplated hereby, and Company
hereby indemnifies Lenders against, and agrees that it will hold Lenders
harmless from, any claim, demand or liability for any such broker's or finder's
fees alleged to have been incurred in connection herewith or therewith and any
expenses (including reasonable fees, expenses and disbursements of counsel)
arising in connection with any such claim, demand or liability.
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5.13 Environmental Protection.
Except as set forth on Schedule 5.13 annexed hereto:
(i) the operations of Company and each of its Subsidiaries
(including, without limitation, all operations and conditions at or in the
Facilities) comply in all material respects with all Environmental Laws;
(ii) Company and each of its Subsidiaries have obtained all material
Governmental Authorizations under Environmental Laws necessary to their
respective operations, and all such Governmental Authorizations are in
good standing, and Company and each of its Subsidiaries are in compliance
with all material terms and conditions of such Governmental
Authorizations;
(iii) neither Company nor any of its Subsidiaries has received (a)
any notice or claim to the effect that it is or may be liable to any
Person as a result of or in connection with any Hazardous Materials or (b)
any letter or request for information under Section 104 of the
Comprehensive Environmental Response, Compensation, and Liability Act (42
U.S.C. ss. 9604) or comparable state laws, and, to the best knowledge of
Company, none of the operations of Company or any of its Subsidiaries is
the subject of any federal or state investigation relating to or in
connection with any Hazardous Materials at any Facility or at any other
location;
(iv) none of the operations of Company or any of its Subsidiaries is
subject to any judicial or administrative proceeding alleging the
violation of or liability under any Environmental Laws which could
reasonably be expected to have a Material Adverse Effect;
(v) to the knowledge of Company, neither Company nor any of its
Subsidiaries nor any of their respective Facilities or operations are
subject to any outstanding written order or agreement with any
governmental authority or private party relating to (a) any Environmental
Laws or (b) any Environmental Claims that could reasonably be expected to
have a Material Adverse Effect;
(vi) neither Company nor any of its Subsidiaries has any material
contingent liability in connection with any Release of any Hazardous
Materials by Company or any of its Subsidiaries;
(vii) neither Company nor any of its Subsidiaries nor, to the
knowledge of Company, any predecessor of Company or any of its
Subsidiaries has filed any notice under any Environmental Law indicating
past or present treatment or Release of Hazardous Materials at any
Facility, and none of Company's or any of its Subsidiaries' operations
involves the generation, transportation, treatment, storage or disposal of
hazardous waste, as defined under 40 C.F.R. Parts 260-270 or any state
equivalent;
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(viii) to the knowledge of Company, no Hazardous Materials exist on
or under any Facility in a manner that has a reasonable possibility of
giving rise to an Environmental Claim having a Material Adverse Effect,
and neither Company nor any of its Subsidiaries has filed any notice or
report of a Release of any Hazardous Materials that has a reasonable
possibility of giving rise to an Environmental Claim having a Material
Adverse Effect;
(ix) neither Company nor any of its Subsidiaries nor, to the
knowledge of Company, any of their respective predecessors has disposed of
any Hazardous Materials in a manner that has a reasonable possibility of
giving rise to an Environmental Claim having a Material Adverse Effect;
(x) to the knowledge of Company, no underground storage tanks or
surface impoundments are on or at any Facility; and
(xi) to the knowledge of Company, no Lien in favor of any Person
relating to or in connection with any Environmental Claim has been filed
or has been attached to any Facility.
5.14 Employee Matters.
There is no strike or work stoppage in existence or threatened involving
Company or any of its Subsidiaries that could reasonably be expected to have a
Material Adverse Effect.
5.15 Solvency.
Each Loan Party is, and Company and its Subsidiaries, taken as a whole,
are, and, upon the incurrence of any Obligations by any Loan Party on any date
on which this representation is made, will be, Solvent.
5.16 Matters Relating to Collateral.
A. Creation, Perfection and Priority of Liens. The execution and delivery
of the Collateral Documents by Loan Parties, together with (i) the actions taken
on or prior to the date hereof pursuant to subsections 4.1J and 6.9 and (ii) the
delivery to Collateral Agent of any Pledged Collateral not delivered to
Collateral Agent at the time of execution and delivery of the applicable
Collateral Document (all of which Pledged Collateral has been so delivered) are
effective to create in favor of Collateral Agent for the benefit of Agents and
Lenders, as security for the respective Secured Obligations (as defined in the
applicable Collateral Document in respect of any Collateral), a valid and
perfected first priority Lien on all of the Collateral, and all filings and
other actions necessary or desirable to perfect and maintain the perfection and
first priority status of such Liens have been duly made or taken and remain in
full force and effect, other than the filing of any UCC financing statements
delivered to Collateral Agent for filing (but not yet filed) and the periodic
filing
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of UCC continuation statements in respect of UCC financing statements filed by
or on behalf of Collateral Agent.
B. Governmental Authorizations. No authorization, approval or other action
by, and no notice to or filing with, any governmental authority or regulatory
body is required for either (i) the pledge or grant by any Loan Party of the
Liens purported to be created in favor of Chase Co-Administrative Agent pursuant
to any of the Collateral Documents or (ii) the exercise by Chase
Co-Administrative Agent of any rights or remedies in respect of any Collateral
(whether specifically granted or created pursuant to any of the Collateral
Documents or created or provided for by applicable law), except for filings or
recordings contemplated by subsection 5.16A and except as may be required, in
connection with the disposition of any Pledged Collateral, by laws generally
affecting the offering and sale of securities.
C. Absence of Third-Party Filings. Except such as may have been filed in
favor of Chase Co-Administrative Agent as contemplated by subsection 5.16A, (i)
no effective UCC financing statement, fixture filing or other instrument similar
in effect covering all or any part of the Collateral is on file in any filing or
recording office and (ii) no effective filing covering all or any part of the
intellectual property Collateral is on file in the United States Patent and
Trademark Office.
D. Margin Regulations. The pledge of the Pledged Collateral pursuant to
the Collateral Documents does not violate Regulation G, Regulation T, Regulation
U or Regulation X of the Board of Governors of the Federal Reserve System.
E. Information Regarding Collateral. All information supplied to any Agent
by or on behalf of any Loan Party with respect to any of the Collateral (in each
case taken as a whole with respect to any particular Collateral) is accurate and
complete in all material respects.
5.17 Related Agreements.
A. Delivery of Related Agreements. Company has delivered to Agents
complete and correct copies of each Related Agreement and of all exhibits and
schedules thereto.
B. Payco's Warranties. Except to the extent otherwise set forth herein or
in the schedules hereto, each of the representations and warranties given by
Payco to Company in the Acquisition Agreement is true and correct in all
material respects as of the date hereof (or as of any earlier date to which such
representation and warranty specifically relates) and will be true and correct
in all material respects as of the Closing Date (or as of such earlier date, as
the case may be), in each case subject to the qualifications set forth in the
schedules to the Acquisition Agreement.
C. Warranties of Company. Subject to the qualifications and the schedules
set forth therein, each of the representations and warranties given by Company
to Payco in the
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Acquisition Agreement is true and correct in all material respects as of the
date hereof and will be true and correct in all material respects as of the
Closing Date.
D. Survival. Notwithstanding anything in the Acquisition Agreement to the
contrary, the representations and warranties of Company set forth in subsections
5.17B and 5.17C shall, solely for purposes of this Agreement, survive the
Closing Date for the benefit of Agents and Lenders.
5.18 Disclosure.
The representations of Company and its Subsidiaries contained in the Loan
Documents, Related Documents and in any other document, certificate or written
statement furnished to Lenders by or on behalf of Company or any of its
Subsidiaries for use in connection with the transactions contemplated by this
Agreement, when taken as a whole, do not contain any untrue statement of a
material fact or omit to state a material fact (known to Company or the
applicable Subsidiary, in the case of any document not furnished by Company or
such Subsidiary) necessary in order to make the statements contained herein or
therein not misleading in light of the circumstances in which the same were
made. Any projections and pro forma financial information contained in such
materials are based upon good faith estimates and assumptions believed by
Company to be reasonable at the time made, it being recognized by Lenders that
such projections as to future events are not to be viewed as facts and that
actual results during the period or periods covered by any such projections may
differ from the projected results. There is no fact known (or which should upon
the reasonable exercise of diligence be known) to Company (other than matters of
a general economic nature) that has had, or could reasonably be expected to
result in, a Material Adverse Effect and that has not been disclosed herein or
in such other documents, certificates and statements furnished to Lenders for
use in connection with the transactions contemplated hereby.
5.19 Subordination of Seller Notes.
The subordination provisions of the Existing Seller Note and any Permitted
Seller Notes are enforceable against the holders thereof, and the Loans and
other monetary Obligations hereunder are and will be within the definition of
"Senior Indebtedness" included in such provisions.
SECTION 6.
AFFIRMATIVE COVENANTS
Company covenants and agrees that, so long as any of the Commitments
hereunder shall remain in effect and until payment in full of all of the Loans
and other Obligations and the cancellation or expiration of all Letters of
Credit, unless Requisite Lenders shall otherwise give prior written consent,
Company shall perform, and shall cause each of its Subsidiaries to perform, all
covenants in this Section 6.
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6.1 Financial Statements and Other Reports.
Company will maintain, and cause each of its Subsidiaries to maintain, a
system of accounting established and administered in accordance with sound
business practices to permit preparation of financial statements in conformity
with GAAP. Company will deliver to Chase Co-Administrative Agent (and Chase
Co-Administrative Agent will, after receipt thereof, deliver to each Lender):
(i) Monthly Financials: as soon as available and in any event within
30 days after the calendar month-end for the months of January 1997
through and including June 1997 and within 20 days after each calendar
month-end thereafter, (a) the consolidated balance sheets of Company and
its Subsidiaries as at the end of each fiscal month ending after the
Closing Date and the related consolidated statements of income,
stockholders' equity and cash flows of Company and its Subsidiaries for
such month and for the period from the beginning of the then current
Fiscal Year to the end of such month, setting forth in each case in
comparative form the corresponding figures for the corresponding periods
of the previous fiscal year and the corresponding figures from the
consolidated plan and financial forecast for the current Fiscal Year
delivered pursuant to subsection 6.1(xiii), all in reasonable detail and
certified by the chief financial officer of Company that they fairly
present, in all material respects, the financial condition of Company and
its Subsidiaries as at the dates indicated and the results of their
operations and their cash flows for the periods indicated, subject to
changes resulting from audit and normal year-end adjustments; and (b) a
narrative report describing the operations of Company and its Subsidiaries
in the form prepared for presentation to senior management for such month
and for the period from the beginning of the then current Fiscal Year to
the end of such month;
(ii) Quarterly Financials: as soon as available and in any event
within 45 days after the end of each Fiscal Quarter, (a) the consolidated
balance sheets of Company and its Subsidiaries as at the end of such
Fiscal Quarter and the related consolidated statements of income,
stockholders' equity and cash flows of Company and its Subsidiaries for
such Fiscal Quarter and for the period from the beginning of the then
current Fiscal Year to the end of such Fiscal Quarter, setting forth in
each case in comparative form the corresponding figures for the
corresponding periods of the previous fiscal year and the corresponding
figures from the consolidated plan and financial forecast for the current
Fiscal Year delivered pursuant to subsection 6.1(xiii), all in reasonable
detail and certified by the chief financial officer of Company that they
fairly present, in all material respects, the financial condition of
Company and its Subsidiaries as at the dates indicated and the results of
their operations and their cash flows for the periods indicated, subject
to changes resulting from audit and normal year-end adjustments, and (b) a
narrative report describing the operations of Company and its Subsidiaries
in the form prepared for presentation to senior management for such Fiscal
Quarter and for the period from the beginning of the then current Fiscal
Year to the end of such Fiscal Quarter;
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(iii) Year-End Financials: as soon as available and in any event
within 90 days after the end of each Fiscal Year, (a) the consolidated and
consolidating balance sheets of Company and its Subsidiaries as at the end
of such Fiscal Year and the related consolidated and consolidating
statements of income, stockholders' equity and cash flows of Company and
its Subsidiaries for such Fiscal Year, setting forth in each case in
comparative form the corresponding figures for the previous fiscal year
and the corresponding figures from the consolidated plan and financial
forecast delivered pursuant to subsection 6.1(xiii) for the Fiscal Year
covered by such financial statements, all in reasonable detail and
certified by the chief financial officer of Company that they fairly
present, in all material respects, the financial condition of Company and
its Subsidiaries as at the dates indicated and the results of their
operations and their cash flows for the periods indicated, (b) a narrative
report describing the operations of Company and its Subsidiaries in the
form prepared for presentation to senior management for such Fiscal Year,
and (c) in the case of such consolidated financial statements, a report
thereon of independent certified public accountants of recognized national
standing selected by Company and reasonably satisfactory to Chase
Co-Administrative Agent, which report shall be unqualified as to the
ability of Company and its Subsidiaries to continue as a going concern and
as to scope of audit, and shall state that such consolidated financial
statements fairly present, in all material respects, the consolidated
financial position of Company and its Subsidiaries as at the dates
indicated and the results of their operations and their cash flows for the
periods indicated in conformity with GAAP applied on a basis consistent
with prior years (except as otherwise disclosed in such financial
statements) and that the examination by such accountants in connection
with such consolidated financial statements has been made in accordance
with generally accepted auditing standards;
(iv) Officer's and Compliance Certificates: together with each
delivery of financial statements of Company and its Subsidiaries pursuant
to subdivisions (ii) and (iii) above, (a) an Officer's Certificate of
Company stating that the signer has reviewed the terms of this Agreement
and have made, or caused to be made under their supervision, a review in
reasonable detail of the transactions and condition of Company and its
Subsidiaries during the accounting period covered by such financial
statements and that such review has not disclosed the existence during or
at the end of such accounting period, and that the signer does not have
knowledge of the existence as at the date of such Officer's Certificate,
of any condition or event that constitutes an Event of Default or
Potential Event of Default, or, if any such condition or event existed or
exists, specifying the nature and period of existence thereof and what
action Company has taken, is taking and proposes to take with respect
thereto; and (b) a Compliance Certificate demonstrating in reasonable
detail compliance during and at the end of the applicable accounting
periods with the restrictions contained in Section 7;
(v) Reconciliation Statements: if, as a result of any change in
accounting principles and policies from those used in the preparation of
the audited financial
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statements referred to in subsection 5.3, the consolidated financial
statements of Company and its Subsidiaries delivered pursuant to
subdivisions (i), (ii), (iii) or (xiii) of this subsection 6.1 will differ
in any material respect from the consolidated financial statements that
would have been delivered pursuant to such subdivisions had no such change
in accounting principles and policies been made, then (a) together with
the first delivery of financial statements pursuant to subdivision (i),
(ii), (iii) or (xiii) of this subsection 6.1 following such change,
consolidated financial statements of Company and its Subsidiaries for (y)
the current Fiscal Year to the effective date of such change and (z) the
two full Fiscal Years immediately preceding the Fiscal Year in which such
change is made, in each case prepared on a pro forma basis as if such
change had been in effect during such periods, and (b) together with each
delivery of financial statements pursuant to subdivision (i), (ii), (iii)
or (xiii) of this subsection 6.1 following such change, a written
statement of the chief accounting officer or chief financial officer of
Company setting forth the differences which would have resulted if such
financial statements had been prepared without giving effect to such
change;
(vi) Accountants' Certification: together with each delivery of
consolidated financial statements of Company and its Subsidiaries pursuant
to subdivision (iii) above, a written statement by the independent
certified public accountants giving the report thereon (a) stating that
their audit examination has included a reading of the terms of this
Agreement and the other Loan Documents as they relate to accounting
matters, and (b) stating whether, in connection with their audit
examination, any condition or event, insofar as such condition or event
relates to the covenants set forth in subsection 7.6 or to accounting
matters, that constitutes an Event of Default or Potential Event of
Default has come to their attention and, if such a condition or event has
come to their attention, specifying the nature and period of existence
thereof; provided that such accountants shall not be liable by reason of
any failure to obtain knowledge of any such Event of Default or Potential
Event of Default that would not be disclosed in the course of their audit
examination;
(vii) Accountants' Reports: promptly upon receipt thereof (unless
restricted by applicable professional standards), copies of all reports
submitted to Company by independent certified public accountants in
connection with each annual, interim or special audit of the financial
statements of Company and its respective Subsidiaries made by such
accountants, including, without limitation, any comment letter submitted
by such accountants to management in connection with their annual audit;
(viii) SEC Filings and Press Releases: promptly upon their becoming
available, copies of (a) all financial statements, reports, notices and
proxy statements sent or made available generally by Company to its
security holders, (b) all regular and periodic reports and all
registration statements (other than on Form S-8 or a similar form) and
prospectuses, if any, filed by Company or any of its Subsidiaries with any
securities exchange or with the Securities and Exchange Commission or any
governmental or private regulatory authority, and (c) all press releases
and other
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statements made available generally by Company or any of its Subsidiaries
to the public concerning material developments in the business of Company
or any of its Subsidiaries;
(ix) Events of Default, etc.: promptly upon any officer of Company
obtaining knowledge (a) of any condition or event that constitutes an
Event of Default or Potential Event of Default, or becoming aware that any
Lender has given any notice (other than to Chase Co-Administrative Agent)
or taken any other action with respect to a claimed Event of Default or
Potential Event of Default, (b) that any Person has given any notice to
Company or any of its Subsidiaries or taken any other action with respect
to a claimed default or event or condition of the type referred to in
subsection 8.2, (c) of any condition or event that would be required to be
disclosed in a current report filed by Company with the Securities and
Exchange Commission on Form 8-K (Items 1, 2, 4, 5 and 6 of such Form as in
effect on the date hereof) if Company were required to file such reports
under the Exchange Act, or (d) of the occurrence of any event or change
that has caused or evidences, either in any case or in the aggregate, a
Material Adverse Effect, an Officer's Certificate specifying the nature
and period of existence of such condition, event or change, or specifying
the notice given or action taken by any such Person and the nature of such
claimed Event of Default, Potential Event of Default, default, event or
condition, and what action Company has taken, is taking and proposes to
take with respect thereto;
(x) Litigation or Other Proceedings: (a) promptly upon any officer
of Company obtaining knowledge of the institution of, or non-frivolous
threat of, any action, suit, proceeding (whether administrative, judicial
or otherwise), governmental investigation or arbitration against or
affecting Company or any of its Subsidiaries or any property of Company or
any of its Subsidiaries (collectively, "Proceedings") not previously
disclosed in writing by Company to Lenders or Chase Co-Administrative
Agent any material development in any Proceeding that, in any case:
(1) if adversely determined, has a reasonable possibility of
giving rise to a Material Adverse Effect; or
(2) seeks to enjoin or otherwise prevent the consummation of,
or to recover any damages or obtain relief as a result of, the
transactions contemplated hereby;
written notice thereof together with such other information as may be
reasonably available to Company to enable Lenders and their counsel to
evaluate such matters; and (b) within 45 days after the end of each Fiscal
Quarter, a schedule of all Proceedings involving an alleged liability of,
or claims against or affecting, Company or any of its Subsidiaries equal
to or greater than $250,000 and promptly after request by either Co-
Administrative Agent such other information as may be reasonably requested
by such Co-Administrative Agent to enable such Co-Administrative Agent
and its counsel to evaluate any of such Proceedings;
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(xi) ERISA Events: promptly upon becoming aware of the occurrence of
any ERISA Event, a written notice specifying the nature thereof, what
action Company or any of its ERISA Affiliates has taken, is taking or
proposes to take with respect thereto and, when known, any action taken or
threatened by the Internal Revenue Service, the Department of Labor or the
PBGC with respect thereto;
(xii) ERISA Notices: with reasonable promptness, copies of (a) all
written notices received by Company or any of its ERISA Affiliates from a
Multiemployer Plan sponsor concerning an ERISA Event; and (b) such other
documents or governmental reports or filings relating to any Employee
Benefit Plan as either Co-Chase Co-Administrative Agent shall reasonably
request;
(xiii) Financial Plans: as soon as practicable and in any event no
later than the beginning of each Fiscal Year, a monthly consolidated and
consolidating plan and financial forecast for the next succeeding Fiscal
Year, including, without limitation, (a) forecasted consolidated and
consolidating balance sheets and forecasted consolidated and consolidating
statements of income and cash flows of Company and its Subsidiaries for
such Fiscal Year, together with a pro forma Compliance Certificate for
such Fiscal Year and an explanation of the assumptions on which such
forecasts are based, and (b) such other information and projections as
either Co-Administrative Agent may reasonably request;
(xiv) Insurance: as soon as practicable and in any event by the last
day of each Fiscal Year, a report in form and substance satisfactory to
Co-Administrative Agents outlining all material insurance coverage
maintained as of the date of such report by Company and its Subsidiaries
and all material insurance coverage planned to be maintained by Company
and its Subsidiaries in the immediately succeeding Fiscal Year;
(xv) Environmental Audits and Reports: as soon as practicable
following receipt thereof, copies of all environmental audits and reports,
whether prepared by personnel of Company or any of its Subsidiaries or by
independent consultants, with respect to significant environmental matters
at any Facility or which relate to an Environmental Claim which could
result in a Material Adverse Effect;
(xvi) Board of Directors: with reasonable promptness, written notice
of any change in the Board of Directors of Company;
(xvii) New Subsidiaries: promptly upon any Person becoming a
Subsidiary of Company, a written notice setting forth with respect to such
Person (a) the date on which such Person became a Subsidiary of Company
and (b) all of the data required to be set forth in Schedule 5.1 annexed
hereto with respect to all Subsidiaries of Company (it being understood
that such written notice shall be deemed to supplement Schedule 5.1
annexed hereto for all purposes of this Agreement); and
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(xviii) Other Information: with reasonable promptness, such other
information and data with respect to Company or any of its Subsidiaries as
from time to time may be reasonably requested by either Co-Administrative
Agent.
For purposes of subsection 4.1P(iii) and this subsection 6.1,
"consolidating" balance sheets and "consolidating" statements of income,
stockholders equity and cash flows refer to financial statements consolidating
the financial position, results of operations and cash flows of the major
operating groups of Company's Subsidiaries, which operating groups as of the
Closing Date consist of (1) A.M. Miller & Associates, Inc. and its Subsidiaries,
(2) Account Portfolios, Inc. and its Subsidiaries, (3) Continental Credit
Services, Inc., Alaska Financial Services, Inc., Southwest Credit Services, Inc.
and their respective Subsidiaries, and (4) Payco and its Subsidiaries.
6.2 Corporate Existence, etc.
Except as permitted under subsection 7.7, Company will, and will cause
each of its Subsidiaries to, at all times preserve and keep in full force and
effect its corporate existence and all rights and franchises material to the
business of Company and its Subsidiaries (on a consolidated basis). Without
limiting the foregoing, Company shall, and shall cause each of its Subsidiaries
to, file and diligently process to completion applications for all material
permits, licenses and other governmental approvals necessary for the operation
of its debt collection business.
6.3 Payment of Taxes and Claims; Tax Consolidation.
A. Company will, and will cause each of its Subsidiaries to, pay all
material taxes and all assessments and other governmental charges imposed upon
it or any of its properties or assets or in respect of any of its income,
businesses or franchises before any penalty accrues thereon, and all claims
(including, without limitation, claims for labor, services, materials and
supplies) for sums that have become due and payable and that by law have or may
become a Lien upon any of its properties or assets, prior to the time when any
penalty or fine shall be incurred with respect thereto; provided that no such
charge or claim need be paid if it is being contested in good faith by
appropriate proceedings timely instituted and diligently conducted and if such
reserve or other appropriate provision, if any, as shall be required in
conformity with GAAP shall have been made therefor.
B. Company will not, nor will it permit any of its Subsidiaries to, file
or consent to the filing of any consolidated income tax return with any Person
(other than Company and its Subsidiaries).
6.4 Maintenance of Properties; Insurance.
Company will, and will cause each of its Subsidiaries to, maintain or
cause to be maintained in good repair, working order and condition, ordinary
wear and tear excepted, all material properties used or useful in the business
of Company and its Subsidiaries and
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from time to time will make or cause to be made all appropriate repairs,
renewals and replacements thereof. Company will maintain or cause to be
maintained, with financially sound and reputable insurers, insurance with
respect to its properties and business and the properties and businesses of its
Subsidiaries against loss or damage of the kinds customarily carried or
maintained under similar circumstances by corporations of established reputation
engaged in similar businesses. Each such policy of casualty insurance covering
damage to or loss of property shall name Chase Co-Administrative Agent for the
benefit of Agent and Lenders as the loss payee thereunder for all losses,
subject to application of proceeds as required by subsection 2.4B(iii)(d), and
shall provide for at least 30 days' prior written notice to Chase
Co-Administrative Agent of any modification or cancellation of such policy.
6.5 Inspection; Lender Meeting.
Company shall, and shall cause each of its Subsidiaries to, permit any
authorized representatives designated by any Agent or Lender to visit and
inspect any of the properties of Company or any of its Subsidiaries, including
its and their financial and accounting records, and to make copies and take
extracts therefrom, and to discuss its and their affairs, finances and accounts
with its and their officers and independent public accountants, all upon
reasonable advance notice and at such reasonable times during normal business
hours and as often as may be reasonably requested. Without in any way limiting
the foregoing, Company will, upon the request of Chase Co-Administrative Agent,
participate in a meeting of Agents and Lenders once during each Fiscal Year to
be held at Company's corporate offices (or such other location as may be agreed
to by Company and Chase Co-Administrative Agent) at such time as may be agreed
to by Company and Chase Co-Administrative Agent.
6.6 Compliance with Laws, etc.
Company shall, and shall cause each of its Subsidiaries to, comply with
the requirements of all applicable laws, rules, regulations and orders of any
governmental authority (including all Debt Collection Laws), noncompliance with
which could reasonably be expected to cause a Material Adverse Effect.
6.7 Environmental Disclosure and Inspection.
A. Company shall, and shall cause each of its Subsidiaries to, exercise
all due diligence in order to comply and cause (i) all tenants under any leases
or occupancy agreements affecting any portion of the Facilities and (ii) all
other Persons on or occupying such property, to comply with all Environmental
Laws.
B. Company agrees that Chase Co-Administrative Agent may, from time to
time and in its reasonable discretion, retain, at Company's expense, an
independent professional consultant to review any report relating to Hazardous
Materials prepared by or for Company and to conduct its own investigation of any
Facility currently owned, leased, operated or used by Company or any of its
Subsidiaries, and Company agrees to use all reasonable
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efforts to obtain permission for Chase Co-Administrative Agent's professional
consultant to conduct its own investigation of any such Facility previously
owned, leased, operated or used by Company or any of its Subsidiaries. Company
shall use its reasonable efforts to obtain for Chase Co-Administrative Agent
and its agents, employees, consultants and contractors the right, upon
reasonable notice to Company, to enter into or on to the Facilities currently
owned, leased, operated or used by Company or any of its Subsidiaries to perform
such tests on such property as are reasonably necessary to conduct such a review
and/or investigation. Any such investigation of any Facility shall be conducted,
unless otherwise agreed to by Company and Chase Co-Administrative Agent, during
normal business hours and, to the extent reasonably practicable, shall be
conducted so as not to interfere with the ongoing operations at any such
Facility or to cause any damage or loss to any property at such Facility.
Company and Chase Co-Administrative Agent hereby acknowledge and agree that any
report of any investigation conducted at the request of Chase Co-Administrative
Agent pursuant to this subsection 6.7B will be obtained and shall be used by
Chase Co-Administrative Agent and Lenders for the purposes of Lenders' internal
credit decisions, to monitor and police the Loans and to protect Lenders'
security interests, if any, created by the Loan Documents. Chase
Co-Administrative Agent agrees to deliver a copy of any such report to Company
with the understanding that Company acknowledges and agrees that (i) it will
indemnify and hold harmless each Agent and Lender from any costs, losses or
liabilities relating to any Loan Party's use of or reliance on such report, (ii)
no Agent nor any Lender makes any representation or warranty with respect to
such report, and (iii) by delivering such report to Company, no Agent nor any
Lender is requiring or recommending the implementation of any suggestions or
recommendations contained in such report.
C. Company shall promptly advise Chase Co-Administrative Agent in writing
and in reasonable detail of (i) any Release of any Hazardous Materials required
to be reported to any federal, state, local or foreign governmental or
regulatory agency under any applicable Environmental Laws, (ii) any and all
written communications with respect to any Environmental Claims that have a
reasonable possibility of giving rise to a Material Adverse Effect or with
respect to any Release of Hazardous Materials required to be reported to any
federal, state or local governmental or regulatory agency, (iii) any remedial
action taken by Company or any other Person in response to (x) any Hazardous
Materials on, under or about any Facility, the existence of which has a
reasonable possibility of resulting in an Environmental Claim having a Material
Adverse Effect, or (y) any Environmental Claim that could have a Material
Adverse Effect, (iv) Company's discovery of any occurrence or condition on any
real property adjoining or in the vicinity of any Facility that could cause such
Facility or any part thereof to be subject to any restrictions on the ownership,
occupancy, transferability or use thereof under any Environmental Laws, and (v)
any request for information from any governmental agency that suggests such
agency is investigating whether Company or any of its Subsidiaries may be
potentially responsible for a Release of Hazardous Materials.
D. Company shall promptly notify Chase Co-Administrative Agent of (i) any
proposed acquisition of stock, assets, or property by Company or any of its
Subsidiaries that could reasonably be expected to expose Company or any of its
Subsidiaries to, or result in,
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Environmental Claims that could have a Material Adverse Effect or that could
reasonably be expected to have a material adverse effect on any Governmental
Authorization then held by Company or any of its Subsidiaries and (ii) any
proposed action to be taken by Company or any of its Subsidiaries to commence
manufacturing, industrial or other similar operations that could reasonably be
expected to subject Company or any of its Subsidiaries to additional laws, rules
or regulations, including, without limitation, laws, rules and regulations
requiring additional environmental permits or licenses.
E. Company shall, at its own expense, provide copies of such documents or
information as either Co-Administrative Agent may reasonably request in relation
to any matters disclosed pursuant to this subsection 6.7.
6.8 Company's Remedial Action Regarding Hazardous Materials.
Company shall promptly take, and shall cause each of its Subsidiaries
promptly to take, any and all necessary remedial action in connection with the
presence, storage, use, disposal, transportation or Release of any Hazardous
Materials on or under any Facility in order to comply with all applicable
Environmental Laws and Governmental Authorizations unless the failure to so
comply could not reasonably be expected to have a Material Adverse Effect. In
the event Company or any of its Subsidiaries takes any remedial action with
respect to any Hazardous Materials on or under any Facility, Company or such
Subsidiary shall conduct and complete such remedial action in material
compliance with all applicable Environmental Laws, and in accordance with the
policies, orders and directives of all federal, state and local governmental
authorities except when, and only to the extent that, Company's or such
Subsidiary's liability for such presence, storage, use, disposal, transportation
or Release of any Hazardous Materials is being contested in good faith by
Company or such Subsidiary.
6.9 of Subsidiary Guaranty and Subsidiary Security Agreements by Subsidiar-
ies and Future Subsidiaries.
In the event that any Person becomes a domestic Subsidiary after the date
hereof, Company will promptly notify Chase Co-Administrative Agent of that fact
and cause such Subsidiary to execute and deliver to Chase Co-Administrative
Agent and Collateral Agent a counterpart of the Subsidiary Guaranty and the
Pledge Agreement, the Security Agreement, the Limited Partnership Security
Agreement and the Trademark Security Agreement (collectively, the "Subsidiary
Security Agreements"), and to take all such further actions and execute all such
further documents and instruments as may be required to grant and perfect in
favor of Collateral Agent, for the benefit of Lenders, a first-priority security
interest in all of the personal property assets of such Subsidiary described in
the Subsidiary Security Agreements. Company shall deliver to Chase
Co-Administrative Agent and Collateral Agent, together with such Loan Documents,
(i) certified copies of such Subsidiary's Articles or Certificate of
Incorporation (or comparable constituent documents), together, if applicable,
with a good standing certificate from the Secretary of State of the jurisdiction
of its incorporation, each to be dated a recent date prior
to their delivery to
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Chase Co-Administrative Agent, (ii) a copy, if applicable, of such Subsidiary's
Bylaws, certified by its corporate secretary or an assistant corporate secretary
as of a recent date prior to their delivery to Chase Co-Administrative Agent and
Collateral Agent, (iii) a certificate executed by the secretary or an assistant
secretary of such Subsidiary as to (a) the incumbency and signatures of the
officers of such Subsidiary executing the Subsidiary Guaranty and to which such
Subsidiary is a party and (b) the fact that the attached resolutions of the
Board of Directors of such Subsidiary authorizing the execution, delivery and
performance of the Subsidiary Guaranty and the Subsidiary Security Agreements to
which such Subsidiary is a party are in full force and effect and have not been
modified or rescinded, and (iv) a favorable opinion of counsel to such
Subsidiary, in form and substance satisfactory to Chase Co-Administrative Agent
and its counsel, as to (a) the due organization and good standing of such
Subsidiary, (b) the due authorization, execution and delivery by such Subsidiary
of the Subsidiary Guaranty and the Subsidiary Security Agreements to which such
Subsidiary is a party, (c) the enforceability of the Subsidiary Guaranty and the
Subsidiary Security Agreements to which such Subsidiary is a party against such
Subsidiary, and (d) such other matters as Chase Co-Administrative Agent and
Collateral Agent may reasonably request, all of the foregoing to be reasonably
satisfactory in form and substance to Chase Co-Administrative Agent and its
counsel and Collateral Agent.
6.10 Interest Rate Protection.
At all times after the date which is 180 days after the Closing Date,
Company shall maintain in effect one or more Interest Rate Agreements with
respect to the Loans, in an aggregate notional principal amount of not less than
$50,000,000, which Interest Rate Agreements shall have the effect of
establishing a maximum interest rate of not more than 10% per annum with respect
to such notional principal amount, each such Interest Rate Agreement to be in
form and substance satisfactory to Co-Administrative Agents and with a term of
not less than three years.
6.11 Further Assurances.
At any time or from time to time upon the request of either
Co-Administrative Agent, Company will, at its expense, promptly execute,
acknowledge and deliver such further documents and do such other acts and things
as such Co-Administrative Agent may reasonably request in order to effect fully
the purposes of the Loan Documents and to provide for payment of the Obligations
in accordance with the terms of this Agreement, the Notes and the other Loan
Documents. In furtherance and not in limitation of the foregoing, Company shall
take, and cause each of its Subsidiaries to take, such actions as either
Co-Administrative Agent may reasonably request from time to time (including,
without limitation, the execution and delivery of guaranties, security
agreements, pledge agreements, mortgages, deeds of trust, stock powers,
financing statements and other documents, the filing or recording of any of the
foregoing, title insurance with respect to any of the foregoing that relates to
an interest in real property, and the delivery of stock certificates and other
collateral with respect to which perfection is obtained by possession) to ensure
that the Obligations are guarantied by Subsidiary Guarantors and are secured by
substantially all of
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the assets of Company and its domestic Subsidiaries. In the event that Company
or any of its Subsidiaries creates a new domestic Subsidiary, all of the capital
stock or partnership interests of such new domestic Subsidiary shall be duly and
validly pledged to Collateral Agent for the benefit of Agents and Lenders
pursuant to the Collateral Documents, subject to no other Liens.
SECTION 7.
NEGATIVE COVENANTS
Company covenants and agrees that, so long as any of the Commitments
hereunder shall remain in effect and until payment in full of all of the Loans
and other Obligations and the cancellation or expiration of all Letters of
Credit, unless Requisite Lenders shall otherwise give prior written consent,
Company shall perform, and shall cause each of its Subsidiaries to perform, all
covenants in this Section 7.
7.1 Indebtedness.
Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create, incur, assume or guaranty, or otherwise become
or remain directly or indirectly liable with respect to, any Indebtedness,
except:
(i) Company may become and remain liable with respect to the
Obligations;
(ii) Company and its Subsidiaries may become and remain liable with
respect to Contingent Obligations permitted by subsection 7.4 and, upon
any matured obligations actually arising pursuant thereto, the
Indebtedness corresponding to the Contingent Obligations so extinguished;
(iii) Company and its Subsidiaries, as applicable, may remain liable
with respect to Indebtedness described in Schedule 7.1 annexed hereto;
(iv) Indebtedness of Company and its Subsidiaries (a) under Capital
Leases capitalized on the consolidated balance sheet of Company as
liabilities or (b) secured by Liens permitted under subsection 7.2A(iii),
in an aggregate amount not exceeding $15,000,000 at any time outstanding;
(v) Company may become and remain liable with respect to
Indebtedness to any of its domestic Wholly Owned Subsidiaries, and any
domestic Wholly Owned Subsidiary of Company may become and remain liable
with respect to Indebtedness to Company or any other domestic Wholly Owned
Subsidiary of Company provided that (a) all such intercompany Indebtedness
shall be evidenced by promissory notes, (b) all such intercompany
Indebtedness owed by Company to any of its respective Subsidiaries shall
be subordinated in right of payment to the payment in full of the
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Obligations pursuant to the terms of the applicable promissory notes or an
intercompany subordination agreement, in each case in form and substance
satisfactory to Co-Administrative Agents, and (c) any payment by Company
or by any Subsidiary of Company under any guaranty of the Obligations
shall result in a pro tanto reduction of the amount of any intercompany
Indebtedness owed by Company or by such Subsidiary to Company or to any of
its Subsidiaries for whose benefit such payment is made;
(vi) Company may become and remain liable with respect to the
Subordinated Notes;
(vii) Company may become and remain liable with respect to Permitted
Seller Notes, provided that the aggregate principal amount of such notes
issued shall not exceed $5,000,000 prior to the first Anniversary and
$25,000,000 thereafter; and
(viii) Company and its Subsidiaries may become and remain liable
with respect to other Indebtedness in an aggregate principal amount not to
exceed at any time outstanding $5,000,000.
7.2 Liens and Related Matters.
A. Prohibition on Liens. Company shall not, and shall not permit any of
its Subsidiaries to, directly or indirectly, create, incur, assume or permit to
exist any Lien on or with respect to any property or asset of any kind
(including any document or instrument in respect of goods or accounts
receivable) of Company or any of its Subsidiaries, whether now owned or
hereafter acquired, or any income or profits therefrom, or file or permit the
filing of, or permit to remain in effect, any financing statement, or other
similar notice of any Lien with respect to any such property, asset, income or
profits under the Uniform Commercial Code of any state or under any similar
recording or notice statute, except:
(i) Permitted Encumbrances;
(ii) Liens described in Schedule 7.2 annexed hereto;
(iii) Purchase money security interests (including mortgages,
conditional sales, Capital Leases and any other title retention or
deferred purchase devices) in tangible personal property of Company or any
of its Subsidiaries existing or created at the time of acquisition thereof
or within 30 days thereafter, and the renewal, extension and refunding of
any such security interest in an amount not exceeding the amount thereof
remaining unpaid immediately prior to such renewal, extension or
refunding; provided, however, that such Indebtedness is permitted by
subsection 7.1(iv) hereof;
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(iv) Other Liens on assets of Company and its Subsidiaries securing
Indebtedness in an aggregate amount not to exceed $2,000,000 at any time
outstanding; and
(v) Liens granted pursuant to the Collateral Documents.
B. Equitable Lien in Favor of Lenders. If Company or any of its
Subsidiaries shall create or assume any consensual Lien upon any of its
properties or assets, whether now owned or hereafter acquired, other than Liens
excepted by the provisions of subsection 7.2A, it shall make or cause to be made
effective provision whereby the Obligations will be secured by such Lien equally
and ratably with any and all other Indebtedness secured thereby as long as any
such Indebtedness shall be so secured; provided that, notwithstanding the
foregoing, this covenant shall not be construed as a consent by Requisite
Lenders to the creation or assumption of any such Lien not permitted by the
provisions of subsection 7.2A.
C. No Further Negative Pledges. Except with respect to specific property
encumbered to secure payment of particular Indebtedness or to be sold pursuant
to an executed agreement with respect to an Asset Sale, neither Company nor any
of its Subsidiaries shall enter into any agreement prohibiting the creation or
assumption of any Lien upon any of its properties or assets, whether now owned
or hereafter acquired.
D. No Restrictions on Subsidiary Distributions to Company or Other
Subsidiaries. Except as provided herein Company will not, and will not permit
any of its Subsidiaries to, create or otherwise cause or suffer to exist or
become effective any consensual encumbrance or restriction of any kind on the
ability of any such Subsidiary to (i) pay dividends or make any other
distributions on any of such Subsidiary's capital stock owned by Company or any
other Subsidiary of Company, (ii) repay or prepay any Indebtedness owed by such
Subsidiary to Company or any other Subsidiary of Company, (iii) make loans or
advances to Company or any other Subsidiary of Company, or (iv) transfer any of
its property or assets to Company or any other Subsidiary of Company.
7.3 Investments; Joint Ventures.
Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, make or own any Investment in any Person, including any
Joint Venture, except:
(i) Company and its Subsidiaries may make and own Investments in
Cash Equivalents;
(ii) Company and its Subsidiaries may continue to own the
Investments owned by them as of the Closing Date (after giving effect to
the Acquisition and the Merger) in any Subsidiaries of Company;
(iii) Company and its Subsidiaries may make intercompany loans to
the extent permitted under subsection 7.1(v);
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(iv) Payco may continue to own the Joint Ventures owned by it as of
the Closing Date (after giving effect to the Acquisition and the Merger);
(v) Company and its Subsidiaries may make and own Investments in
Permitted Joint Ventures; provided that (a) at the time of such
Investment, and after giving effect thereto, no Potential Event of Default
or Event of Default shall have occurred and be continuing, (b) the
aggregate amount of all such Investments made after the Closing Date shall
not exceed $5,000,000, and (c) Company and its Subsidiaries shall pledge
all of their respective equity interests in any Permitted Joint Venture to
Collateral Agent to secure the Obligations under the Loan Documents
(except to the extent, and only to the extent, such pledge of the equity
interests in a Permitted Joint Venture organized under the laws of a
foreign country would result in Company incurring additional liabilities
for taxes);
(vi) Company may make and own Investments consisting of notes
received in connection with any Asset Sale limited to 20% of the total
sale price of the assets sold in such Asset Sale; provided that the
aggregate principal amount of such notes at any time outstanding shall not
exceed $2,000,000;
(vii) Company and its Subsidiaries may make and own Investments in
connection with a Permitted Acquisition or a Permitted Portfolio
Acquisition;
(viii) Company and its Subsidiaries may make Consolidated
Maintenance Capital Expenditures permitted by subsection 7.8; and
(ix) Company and its Subsidiaries may make and own other Investments
in an aggregate amount not to exceed at any time $2,500,000.
7.4 Contingent Obligations.
Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create or become or remain liable with respect to any
Contingent Obligation, except:
(i) Company may become and remain liable with respect to Contingent
Obligations in respect of Letters of Credit, as applicable, and
Subsidiaries of Company may become and remain liable with respect to
Contingent Obligations arising under the Subsidiary Guaranty;
(ii) Company and its Subsidiaries may become and remain liable with
respect to Contingent Obligations under Interest Rate Agreements required
under subsection 6.10;
(iii) Company and its Subsidiaries may become and remain liable with
respect to Contingent Obligations in respect of customary indemnification
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and purchase price adjustment obligations incurred in the ordinary course
of business in connection with Asset Sales or other sales of assets;
(iv) Company and its Subsidiaries may become and remain liable with
respect to Contingent Obligations under guarantees in the ordinary course
of business of the obligations of suppliers, landlords, customers,
franchisees and licensees of Company and its Subsidiaries in an aggregate
amount not to exceed at any time $1,000,000;
(v) Company and its Subsidiaries may become and remain liable with
respect to Contingent Obligations under guarantees in the ordinary course
of business with respect to the performance by Company or any of its
Subsidiaries of obligations under collection contracts;
(vi) Company may become and remain liable with respect to Contingent
Obligations in respect of Earn Out Agreements in connection with Permitted
Acquisitions and Company and its Subsidiaries may become and remain liable
with respect to Contingent Obligations in respect of Forward Flow
Contracts; provided that to the extent that purchases of receivables
portfolios from a single seller (together with all Affiliates of such
seller) party to a Forward Flow Contract with Company or any of its
Subsidiaries exceed $750,000 in any 12-month period, any receivables
portfolio purchased during such 12-month period under a Forward Flow
Contract with such seller shall be a Qualified Loan Portfolio;
(vii) Company and its Subsidiaries, as applicable, may remain liable
with respect to Contingent Obligations described in Schedule 7.4 annexed
hereto;
(viii) Subsidiaries of Company may become and remain liable with
respect to the Subordinated Note Guaranty; and
(ix) Company and its Subsidiaries may become and remain liable with
respect to other Contingent Obligations; provided that the maximum
aggregate liability, contingent or otherwise, of Company and its
Subsidiaries in respect of all such Contingent Obligations shall at no
time exceed $1,000,000.
7.5 Restricted Junior Payments.
Company shall not, and shall not permit any of its respective Subsidiaries
to, directly or indirectly, declare, order, pay, make or set apart any sum for
any Restricted Junior Payment; provided that (i) Company may make scheduled
interest payments in respect of the Subordinated Notes in accordance with the
terms of the Subordinated Note Indenture; (ii) Company may make scheduled
interest and principal payments in respect of the Existing Seller Note and any
Permitted Seller Notes permitted by subsection 7.1(viii) in accordance with the
terms of the Existing Seller Note and such Permitted Seller Notes; (iii) so long
as no Event of Default or Potential Event of Default shall have occurred and be
continuing
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or shall be caused thereby, Company may make payments in an aggregate amount not
to exceed $1,000,000 in any Fiscal Year to the extent necessary to repurchase
shares of Company Common Stock from officers, directors or employees of Company
or any of its Subsidiaries following termination of employment of any such
officer, director or employee by reason of death, disability, retirement or
resignation or following other events customarily requiring or permitting such
repurchase, in each case in accordance with the terms of customary terms of
management and/or employee stock plans, stock subscription agreements or
shareholder agreements entered into with officers, directors or employees of
Company or any of its Subsidiaries; (iv) so long as no Event of Default or
Potential Event of Default shall have occurred and be continuing or shall be
caused thereby, Company may repurchase Company Preferred Stock and make payments
of accrued and unpaid dividends to the holders of Company Preferred Stock,
provided that in no event may Company pay any dividend on or repurchase Company
Preferred Stock unless both (x) the Leverage Ratio for the most recently ended
four-Fiscal Quarter period does not exceed 2.0:1.0 and (y) at least 50% of the
initial aggregate principal amount of the Term Loans has been repaid.
7.6 Financial Covenants.
A. Minimum Interest Coverage Ratio. The ratio of (i) Consolidated EBITDA
to (ii) Consolidated Interest Expense for any four-Fiscal Quarter period (or for
any of the one, two or three consecutive Fiscal Quarter periods, as the case may
be, ending after the Closing Date and on or prior to June 30, 1997) (each
applicable one-, two-, three-or four-Fiscal Quarter period being a "Calculation
Period") ending during any of the periods set forth below shall not be less than
the correlative ratio indicated:
===============================================================
PERIOD DURING MINIMUM
WHICH CALCULATION INTEREST COVERAGE
PERIOD ENDS RATIO
===============================================================
Closing Date - 12/31/97 2.25:1.00
---------------------------------------------------------------
01/01/98 - 12/31/98 2.50:1.00
---------------------------------------------------------------
01/01/99 - 12/31/99 2.75:1.00
---------------------------------------------------------------
Thereafter 3.00:1.00
===============================================================
B. Maximum Leverage Ratio. The ratio of (i) Consolidated Total Debt as of
the last day (any such day being a "Calculation Date") of any Fiscal Quarter
ending during any of the periods set forth below to (ii) Consolidated EBITDA for
the Calculation Period ending on such Calculation Date shall not exceed the
correlative ratio indicated:
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===============================================================
PERIOD DURING MAXIMUM
WHICH CALCULATION LEVERAGE
DATE OCCURS RATIO
===============================================================
Closing Date - 12/31/97 4.00:1.00
---------------------------------------------------------------
01/01/98 - 12/31/98 3.75:1.00
---------------------------------------------------------------
01/01/99 - 12/31/99 3.50:1.00
---------------------------------------------------------------
01/01/00 - 12/31/00 3.25:1.00
---------------------------------------------------------------
01/01/01 - 12/31/01 3.00:1.00
---------------------------------------------------------------
Thereafter 2.75:1.00
===============================================================
C. Minimum Fixed Charge Coverage Ratio. The ratio of (i) Consolidated
EBITDA to (ii) Consolidated Fixed Charges for any Calculation Period ending
after the Closing Date shall not be less than 1.05:1.00.
D. Consolidated Maintenance Capital Expenditures. Company shall not, and
shall not permit its Subsidiaries to, make or incur Consolidated Maintenance
Capital Expenditures, in any Fiscal Year (or specified portion thereof)
indicated below, in an aggregate amount in excess of the corresponding amount
(the "Maximum Consolidated Maintenance Capital Expenditures Amount") set forth
below opposite such Fiscal Year (or such portion thereof); provided that the
Maximum Consolidated Maintenance Capital Expenditures Amount for any Fiscal Year
shall be increased by an amount equal to the excess, if any (but in no event
more than 25% of the Maximum Consolidated Maintenance Capital Expenditures
Amount for the previous Fiscal Year (or, in the event such previous Fiscal Year
is 1996, for the specified portion of such previous Fiscal Year)), of the
Maximum Consolidated Maintenance Capital Expenditures Amount for the previous
Fiscal Year (or such portion of Fiscal Year 1996, if applicable) over the actual
amount of Consolidated Maintenance Capital Expenditures for such previous Fiscal
Year (or such portion of Fiscal Year 1996, if applicable); and provided further,
that the Maximum Consolidated Maintenance Capital Expenditures Amount for any
Fiscal Year (or, in the case of Fiscal Year 1996, the specified portion thereof)
and for each Fiscal Year thereafter shall be increased, immediately following
any acquisition permitted under subsection 7.7(v), by an amount (in each such
Fiscal Year (or portion thereof, if applicable)) equal to the product of (i) the
Maximum Consolidated Maintenance Capital Expenditures Amount in effect
immediately prior to such acquisition multiplied by (ii) the ratio of (a)
Consolidated EBITDA attributable to the business or assets so acquired but not
attributable to any Portfolio Purchase Business so acquired to (b) Consolidated
EBITDA not attributable to the Portfolio Purchase Business of Company and its
Subsidiaries without giving effect to such acquisition, determined in the case
of clauses (a) and (b) for the four-Fiscal Quarter period most recently ended
prior to such acquisition.
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===============================================================
MAXIMUM CONSOLIDAT-
FISCAL YEAR ED MAINTENANCE
(OR PORTION THEREOF) CAPITAL EXPENDITURES
===============================================================
Closing Date - 12/31/96 $3,000,000
---------------------------------------------------------------
1997 $8,000,000
---------------------------------------------------------------
Thereafter $8,000,000
===============================================================
E. Certain Calculations. With respect to any period during which new
Subsidiaries, assets or businesses are acquired pursuant to subsection 7.7(v),
for purposes of determining compliance with the financial covenants set forth in
this subsection 7.6, Consolidated EBITDA and Consolidated Interest Expense shall
be calculated with respect to such periods and such Subsidiaries, assets or
businesses on a pro forma basis (including any pro forma expense and cost
reductions calculated on a basis consistent with Regulation S-X promulgated
under the Securities Act) using the historical financial statements of all
entities or assets so acquired or to be acquired and the consolidated financial
statements of Company and its Subsidiaries which shall be reformulated (i) as if
such acquisition, and any acquisitions which have been consummated during such
period, and any Indebtedness or other liabilities incurred in connection with
any such acquisition had been consummated or incurred at the beginning of such
period (and assuming that such Indebtedness bears interest during any portion of
the applicable measurement period prior to the relevant acquisition at the
weighted average of the interest rates applicable to outstanding Loans during
such period), and (ii) otherwise in conformity with certain procedures to be
agreed upon between Co-Administrative Agents and Company, all such calculations
to be in form and substance satisfactory to Co-Administrative Agents.
7.7 Restriction on Fundamental Changes; Asset Sales.
Company shall not, and shall not permit any of its Subsidiaries to, alter
the corporate, capital or legal structure of Company or any of its Subsidiaries,
create any new Subsidiaries or enter into any transaction of merger or
consolidation, or liquidate, wind-up or dissolve itself (or suffer any
liquidation or dissolution), or convey, sell, lease, sub-lease, transfer or
otherwise dispose of, in one transaction or a series of transactions, all or any
substantial part of its business, property or fixed assets, whether now owned or
hereafter acquired, or acquire by purchase or otherwise any part of the
business, property or fixed assets of, or stock or other evidence of beneficial
ownership of, any Person, except:
(i) any Subsidiary of Company may be merged with or into Company or
any domestic Wholly Owned Subsidiary of Company, or be liquidated, wound
up or dissolved, or all or any substantial part of its business, property
or assets may be conveyed, sold, leased, transferred or otherwise disposed
of, in one transaction or a series of transactions, to Company or any
domestic Wholly Owned Subsidiary of
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Company; provided that, in the case of such a merger, Company or such
Wholly Owned Subsidiary shall be the continuing or surviving corporation;
(ii) Company and its Subsidiaries may acquire inventory (other than
receivables portfolios), equipment and other assets in the ordinary course
of business;
(iii) Company and its Subsidiaries may sell or otherwise dispose of
assets in transactions that do not constitute Asset Sales; provided that
the consideration received for such assets shall be in an amount at least
equal to the fair market value thereof (determined in good faith by the
board of directors of Company);
(iv) Company and its Subsidiaries may make any Asset Sale of assets
that have, in the aggregate, a fair market value (determined in good faith
by the board of directors of Company) not in excess of 20% of Consolidated
EBITDA for the four-Fiscal Quarter period most recently ended prior to
such Asset Sale; provided that (x) the consideration received for such
assets shall be in an amount at least equal to the fair market value
thereof (determined in good faith by the board of directors of Company);
(y) not less than 80% of the consideration received therefor shall be
cash; and (z) the proceeds of such Asset Sales shall be applied as
required by subsection 2.4B(iii)(a); and
(v) Company may make acquisitions of receivables portfolios and
other assets and businesses (including acquisitions of the capital stock
of another Person), provided that:
(a) in the event that the aggregate amount of all such
acquisitions in any Fiscal Year would exceed $5,000,000 after giving
effect to any such proposed acquisition, (y) the Interest Coverage
Ratio (calculated on a pro forma basis giving effect to the proposed
acquisition) shall not be less than the ratio set forth in
subsection 7.6A applicable at the time of such acquisition plus 0.25
and (z) the Leverage Ratio (calculated on a pro forma basis giving
effect to the proposed acquisition) shall not be greater than the
ratio set forth in subsection 7.6B applicable at the time of such
acquisition minus 0.25.
(b) any receivables portfolio acquired shall be a Qualified
Loan Portfolio;
(c) the aggregate amount expended for such acquisitions during
any successive twelve-month period following the Closing Date shall
not exceed $30,000,000; provided that such amount shall, in any such
twelve-month period, be increased by an amount equal to the excess,
if any (but in no event more than $10,000,000), of $30,000,000 over
the actual amount expended for acquisitions under this clause (v)
for the twelve-month period immediately preceding such twelve-month
period;
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(d) that portion of Consolidated EBITDA attributable to any
assets so acquired, as projected by Company for the twelve-month
period immediately following the date of such acquisition, shall not
exceed 20% of Consolidated EBITDA for the four-Fiscal Quarter period
most recently ended prior to the date of such acquisition, and
Company shall have delivered an Officer's Certificate to
Co-Administrative Agents (together with supporting information
therefor) to the foregoing effect; and
(e) no Event of Default or Potential Event of Default shall
have occurred and be continuing at the time of such acquisition or
shall be caused thereby.
7.8 Sales and Lease-Backs.
Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, become or remain liable as lessee or as a guarantor or
other surety with respect to any lease, whether an Operating Lease or a Capital
Lease, of any property (whether real, personal or mixed), whether now owned or
hereafter acquired, (i) which Company or any of its Subsidiaries has sold or
transferred or is to sell or transfer to any other Person (other than Company or
any of its Subsidiaries) or (ii) which Company or any of its Subsidiaries
intends to use for substantially the same purpose as any other property which
has been or is to be sold or transferred by Company or any of its Subsidiaries
to any Person (other than Company or any of its Subsidiaries) in connection with
such lease.
7.9 Transactions with Shareholders and Affiliates.
Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, enter into or permit to exist any transaction
(including, without limitation, the purchase, sale, lease or exchange of any
property or the rendering of any service) with any holder of 5% or more of any
class of equity Securities of Company or with any Affiliate of Company or of any
such holder, on terms that are less favorable to Company or that Subsidiary, as
the case may be, than those that might be obtained at the time from Persons who
are not such a holder or Affiliate; provided that the foregoing restriction
shall not apply to (i) any transaction between Company and any of its Wholly
Owned Subsidiaries or between any of its Wholly Owned Subsidiaries, (ii)
reasonable and customary fees paid to members of the boards of directors of
Company and its Subsidiaries, (iii) fees, expenses and other amounts payable to
the MDC Entities on the Closing Date, and (iv) the Management Fees.
7.10 Disposal of Subsidiary Stock.
Company shall not:
(i) directly or indirectly sell, assign, pledge or otherwise
encumber or dispose of any shares of capital stock or other equity
Securities of any of its
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Subsidiaries, except as permitted under this Agreement or the Collateral
Documents or to qualify directors if required by applicable law; or
(ii) permit any of its Subsidiaries directly or indirectly to sell,
assign, pledge or otherwise encumber or dispose of any shares of capital
stock or other equity Securities of any of its Subsidiaries (including
such Subsidiary), except as permitted under this Agreement or the
Collateral Documents or to Company, another wholly-owned Subsidiary of
Company, or to qualify directors if required by applicable law.
7.11 Conduct of Business.
Company shall not, and shall not permit any of its Subsidiaries to, engage
in any business other than (i) the businesses engaged in by Company and its
Subsidiaries on the Closing Date (after giving effect to the Acquisition and the
Merger) and similar or related businesses and (ii) such other lines of business
as may be consented to by Co-Administrative Agents and Requisite Lenders.
7.12 Amendments or Waivers of Certain Related Agreements; Amendments of
Documents Relating to Subordinated Indebtedness; Designation of
"Designated Senior Debt"; Preferred Stock.
A. Amendments or Waivers of Certain Related Agreements. Neither Company
nor any of its Subsidiaries will agree to any material amendment to, or waive
any of its material rights under, any Related Agreement (other than any Related
Agreement evidencing or governing any Subordinated Indebtedness), the MDC
Advisory Services Agreement, the HBR Services Agreement or the Stockholders
Agreement after the Closing Date if such amendment or waiver would be adverse to
Lenders without in each case obtaining the prior written consent of Requisite
Lenders to such amendment or waiver; provided, however, that if certain
performance criteria determined by the Board of Directors of Company are met
from time to time, Company may amend the MDC Advisory Services Agreement without
the consent of Lenders to provide for an increase or increases in the annual
Management Fee payable thereunder, provided that such Management Fee shall not
exceed $750,000 annually.
B. Amendments of Documents Relating to Subordinated Indebtedness. Company
shall not, and shall not permit any of its Subsidiaries to, amend or otherwise
change the terms of any Subordinated Indebtedness or Subordinated Note Document,
or make any payment consistent with an amendment thereof or change thereto, if
the effect of such amendment or change is to increase the interest rate on such
Subordinated Indebtedness, change (to earlier dates) any dates upon which
payments of principal or interest are due thereon, change any event of default
or condition to an event of default with respect thereto (other than to
eliminate any such event of default or increase any grace period related
thereto), change the redemption, prepayment or defeasance provisions thereof,
change the subordination provisions thereof (or of any guaranty thereof), or
change any collateral therefor (other than to release such collateral), or if
the effect of such amendment or
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change, together with all other amendments or changes made, is to increase
materially the obligations of the obligor thereunder or to confer any additional
rights on the holders of such Subordinated Indebtedness (or trustee or other
representative on their behalf) which would be adverse to Company or Lenders.
C. Designation of "Designated Senior Debt". Company shall not designate
any Indebtedness as "Designated Senior Debt" (as defined in the Subordinated
Note Indenture) for purposes of the Subordinated Note Indenture without the
prior written consent of Requisite Lenders.
D. Preferred Stock. Without the prior written approval of Requisite
Lenders, Company shall not amend, restate, supplement or otherwise modify its
Articles of Incorporation if the effect of such amendment, restatement,
supplement or modification is to (i) increase the dividend rate payable on, or
change the redemption provisions of, the Company Preferred Stock, (ii) together
with all other amendments or changes made, increase materially the obligations
of Company to the holders of the Company Preferred Stock, (iii) confer any
additional rights on the holders of the Company Preferred Stock which would be
adverse to Company or Lenders, or (iv) provide for the issuance of any preferred
stock of Company in addition to the Company Preferred Stock or the filing or
amendment of any certificate of designation with respect thereto.
7.13 Fiscal Year.
Company shall not change its Fiscal Year-end from December 31.
SECTION 8.
EVENTS OF DEFAULT
IF any of the following conditions or events ("Events of Default") shall
occur:
8.1 Failure to Make Payments When Due.
Failure by Company to pay any installment of principal of any Loan when
due, whether at stated maturity, by acceleration, by notice of prepayment or
otherwise; failure by Company to pay when due any amount payable to an Issuing
Lender in reimbursement of any drawing honored or payment made under a Letter of
Credit; or failure by Company to pay any interest on any Loan or any fee or any
other amount due under this Agreement within five days after the date due; or
8.2 Default in Other Agreements.
(i) Failure of Company or any of its Subsidiaries to pay when due (a) any
principal of or interest on any Indebtedness (other than Indebtedness referred
to in subsection 8.1)
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in an individual principal amount of $2,500,000 or more or any items of
Indebtedness with an aggregate principal amount of $5,000,000 or more or (b) any
Contingent Obligation in an individual principal amount of $2,500,000 or more or
any Contingent Obligations with an aggregate principal amount of $5,000,000 or
more, in each case beyond the end of any grace period provided therefor; or (ii)
breach or default by Company or any of its Subsidiaries with respect to any
other material term of (a) any evidence of any Indebtedness in an individual
principal amount of $2,500,000 or more or any items of Indebtedness with an
aggregate principal amount of $5,000,000 or more or any Contingent Obligation in
an individual principal amount of $2,500,000 or more or any Contingent
Obligations with an aggregate principal amount of $5,000,000 or more or (b) any
loan agreement, mortgage, indenture or other agreement relating to such
Indebtedness or Contingent Obligation(s), if in any case under this clause (ii)
the effect of such breach or default is to cause, or to permit the holder or
holders of that Indebtedness or Contingent Obligation(s) (or a trustee on behalf
of such holder or holders) to cause, that Indebtedness or Contingent
Obligation(s) to become or be declared due and payable prior to its stated
maturity or the stated maturity of any underlying obligation, as the case may be
(upon the giving or receiving of notice, lapse of time, both, or otherwise); or
8.3 Breach of Certain Covenants.
Failure of Company to perform or comply with any term or condition
contained in subsection 2.4, 2.5 or 6.2 or Section 7 of this Agreement; or
8.4 Breach of Warranty.
Any material representation, warranty, certification or other statement
made by Company or any of its Subsidiaries in any Loan Document or in any
statement or certificate at any time given by Company or any of its Subsidiaries
in writing pursuant hereto or thereto or in connection herewith or therewith
shall be false in any material respect on the date as of which made; or
8.5 Other Defaults Under Loan Documents.
Any Loan Party shall default in the performance of or compliance with any
term contained in this Agreement or any of the other Loan Documents, other than
any such term referred to in any other subsection of this Section 8, and such
default shall not have been remedied or waived within 30 days after the earlier
of (i) an officer of Company becoming aware of such default or (ii) receipt by
Company of notice from any Agent or Lender of such default; or
8.6 Involuntary Bankruptcy; Appointment of Receiver, etc.
(i) A court having jurisdiction in the premises shall enter a decree or
order for relief in respect of Company or any of its Subsidiaries (other than
Immaterial Subsidiaries) in an involuntary case under the Bankruptcy Code or
under any other applicable bankruptcy,
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insolvency or similar law now or hereafter in effect, which decree or order is
not stayed; or any other similar relief shall be granted under any applicable
federal or state law; or (ii) an involuntary case shall be commenced against
Company or any of its Subsidiaries (other than Immaterial Subsidiaries) under
the Bankruptcy Code or under any other applicable bankruptcy, insolvency or
similar law now or hereafter in effect; or a decree or order of a court having
jurisdiction in the premises for the appointment of a receiver, liquidator,
sequestrator, trustee, custodian or other officer having similar powers over
Company or any of its Subsidiaries (other than Immaterial Subsidiaries), or over
all or a substantial part of its property, shall have been entered; or there
shall have occurred the involuntary appointment of an interim receiver, trustee
or other custodian of Company or any of its Subsidiaries (other than Immaterial
Subsidiaries) for all or a substantial part of its property; or a warrant of
attachment, execution or similar process shall have been issued against any
substantial part of the property of Company or any of its Subsidiaries (other
than Immaterial Subsidiaries), and any such event described in this clause (ii)
shall continue for 60 days unless dismissed, bonded or discharged; or
8.7 Voluntary Bankruptcy; Appointment of Receiver, etc.
(i) Company or any of its Subsidiaries (other than Immaterial
Subsidiaries) shall have an order for relief entered with respect to it or
commence a voluntary case under the Bankruptcy Code or under any other
applicable bankruptcy, insolvency or similar law now or hereafter in effect, or
shall consent to the entry of an order for relief in an involuntary case, or to
the conversion of an involuntary case to a voluntary case, under any such law,
or shall consent to the appointment of or taking possession by a receiver,
trustee or other custodian for all or a substantial part of its property; or
Company or any of its Subsidiaries (other than Immaterial Subsidiaries) shall
make any assignment for the benefit of creditors; or (ii) Company or any of its
Subsidiaries (other than Immaterial Subsidiaries) shall be unable, or shall fail
generally, or shall admit in writing its inability, to pay its debts as such
debts become due; or the Board of Directors of Company or any of its
Subsidiaries (other than Immaterial Subsidiaries) (or any committee thereof)
shall adopt any resolution or otherwise authorize any action to approve any of
the actions referred to in clause (i) above or this clause (ii); or
8.8 Judgments and Attachments.
(i) Any money judgment, writ or warrant of attachment or similar process
involving (a) in any individual case an amount in excess of $2,500,000 or (b) in
the aggregate at any time an amount in excess of $5,000,000 (in either case not
adequately covered by insurance as to which a solvent and unaffiliated insurance
company has acknowledged coverage) shall be entered or filed against Company or
any of its Subsidiaries or any of their respective assets and shall remain
undischarged, unvacated, unbonded or unstayed for a period of 60 days (or in any
event later than five days prior to the date of any proposed sale thereunder);
or (ii) any money judgment shall be rendered against Company or any of its
Subsidiaries or any of their respective assets, or any settlement shall require
payment by, Company or any of its Subsidiaries in any individual case in an
amount in excess of $12,000,000; (iii) any of
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the following shall occur twice or both of the following shall occur: (a) a
money judgment in excess of $5,000,000 in an individual case shall be rendered
against Company or any of its Subsidiaries or any of their respective assets, or
(b) a settlement shall require payment by Company or any of its Subsidiaries in
excess of $5,000,000 in an individual case; provided, however, that the amount
of any money judgment or required settlement under the preceding clauses (ii)
and (iii) shall not include for the purposes of such clauses any portion thereof
which has been paid for by insurance or which is adequately covered by insurance
as to which a solvent and unaffiliated insurance company has acknowledged
coverage; or
8.9 Dissolution.
Any order, judgment or decree shall be entered against Company or any of
its Subsidiaries decreeing the dissolution or split up of Company or that
Subsidiary and such order shall remain undischarged or unstayed for a period in
excess of 30 days; or
8.10 Employee Benefit Plans.
There shall occur one or more ERISA Events which individually or in the
aggregate results in a Material Adverse Effect; or there shall exist an Unfunded
Current Liability, individually or in the aggregate for all Pension Plans
(excluding for purposes of such computation any Pension Plans with respect to
which there is no Unfunded Current Liability), which would have a Material
Adverse Effect; or
8.11 Change in Control.
(i) Prior to the consummation of any initial public offering of Company
Common Stock, (a) the MDC Entities shall at any time not own, in the aggregate,
at least 51% of the combined voting power of Company voting Securities; or (b)
any Person (other than the MDC Entities), including a "group" (within the
meaning of Sections 13(d) and 14(d)(2) of the Exchange Act) which includes such
Person, shall purchase or otherwise acquire, directly or indirectly, beneficial
ownership of Securities of Company and, as a result of such purchase or
acquisition, any Person (together with its associates and Affiliates), shall
directly or indirectly beneficially own in the aggregate Securities representing
more than 35% of the combined voting power of Company voting Securities; or (ii)
at any time thereafter, (a) the MDC Entities together shall own, directly or
indirectly, in the aggregate, a lesser percentage of the combined voting power
of Company voting Securities than any other holder, including a "group" (within
the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act) which includes
such holder, of such voting Securities; (b) a majority of the members of the
Board of Directors of Company shall not be Continuing Directors; or (c) any
Person (other than the MDC Entities), including a "group" (within the meaning of
Sections 13(d) and 14(d)(2) of the Exchange Act) which includes such Person,
shall purchase or otherwise acquire, directly or indirectly, beneficial
ownership of Securities of Company and, as a result of such purchase or
acquisition, any Person (together with its associates and Affiliates), shall
directly or indirectly beneficially own in the aggregate Securities representing
more than 25% of the combined voting power of Company voting Securities; or
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8.12 Invalidity of Guaranties.
At any time after the execution and delivery thereof, any Guaranty of the
Obligations of Company, for any reason other than the satisfaction in full of
all Obligations, ceases to be in full force and effect or is declared to be null
and void (except with respect to the obligations thereunder of Immaterial
Subsidiaries of Company) or any Loan Party (other than Immaterial Subsidiaries
of Company) denies in writing that it has any further liability, including,
without limitation, with respect to future advances by Lenders, under any Loan
Document to which it is a party; or
8.13 Failure of Security.
Any Collateral Document shall, at any time, cease to be in full force and
effect (other than by reason of a release of Collateral thereunder in accordance
with the terms hereof or thereof, the satisfaction in full of the Obligations or
any other termination of such Collateral Document in accordance with the terms
hereof or thereof) or shall be declared null and void; or the validity or
enforceability thereof shall be contested in writing by any Loan Party; or Agent
shall not have or shall cease to have a valid security interest in any
Collateral purported to be covered thereby, perfected and with the priority
required by the relevant Collateral Document, for any reason other than the
failure of Agents or any Lender to take any action within its control, subject
only to Liens permitted under the applicable Collateral Documents; or
8.14 Failure to Consummate Acquisition or Merger.
The Acquisition or the Merger shall not be consummated in accordance with
this Agreement and the applicable Related Agreements concurrently with the
making of the initial Loans, or the Acquisition or the Merger shall be unwound,
reversed or otherwise rescinded in whole or in part for any reason; or
8.15 Default Under Subordination Provisions.
Company or any guarantor of Subordinated Indebtedness shall fail to comply
with the subordination provisions contained in the Subordinated Note Indenture
or any other instrument, indenture or agreement pursuant to which such
Subordinated Indebtedness is issued;
THEN (i) upon the occurrence of any Event of Default described in subsection 8.6
or 8.7, each of (a) the unpaid principal amount of and accrued interest on the
Loans, (b) an amount equal to the maximum amount that may at any time be drawn
under all Letters of Credit then outstanding (whether or not any beneficiary
under any such Letter of Credit shall have presented, or shall be entitled at
such time to present, the drafts or other documents or certificates required to
draw under such Letter of Credit) and (c) all other Obligations shall
automatically become immediately due and payable, without presentment, demand,
protest or other requirements of any kind, all of which are hereby expressly
waived
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by Company, and the obligation of each Lender to make any Loan, the obligation
of Chase Co-Administrative Agent to issue any Letter of Credit and the right of
any Lender to issue any Letter of Credit hereunder shall thereupon terminate,
and (ii) upon the occurrence and during the continuation of any other Event of
Default, Chase Co-Administrative Agent shall, upon the written request of
Requisite Lenders, by written notice to Company, declare all or any portion of
the amounts described in clauses (a) through (c) above to be, and the same shall
forthwith become, immediately due and payable, and the obligation of each Lender
to make any Loan, the obligation of Chase Co-Administrative Agent to issue any
Letter of Credit and the right of any Lender to issue any Letter of Credit
hereunder shall thereupon terminate; provided that the foregoing shall not
affect in any way the obligations of Lenders under subsection 3.3C(i) or the
obligations of Lenders to purchase participations in any unpaid Swing Line Loans
as provided in subsection 2.1A(iv).
Any amounts described in clause (b) above, when received by Chase
Co-Administrative Agent, shall be held by Chase Co-Administrative Agent pursuant
to the terms of the Collateral Account Agreement and shall be applied as therein
provided.
Notwithstanding anything contained in the second preceding paragraph, if
at any time within 60 days after an acceleration of the Loans pursuant to such
paragraph Company shall pay all arrears of interest and all payments on account
of principal which shall have become due otherwise than as a result of such
acceleration (with interest on principal and, to the extent permitted by law, on
overdue interest, at the rates specified in this Agreement) and all Events of
Default and Potential Events of Default (other than non-payment of the principal
of and accrued interest on the Loans, in each case which is due and payable
solely by virtue of acceleration) shall be remedied or waived pursuant to
subsection 10.6, then Requisite Lenders, by written notice to Company, may at
their option rescind and annul such acceleration and its consequences; but such
action shall not affect any subsequent Event of Default or Potential Event of
Default or impair any right consequent thereon. The provisions of this paragraph
are intended merely to bind Lenders to a decision which may be made at the
election of Requisite Lenders and are not intended to benefit Company and do not
grant Company the right to require Lenders to rescind or annul any acceleration
hereunder or preclude Agents or Lenders from exercising any of the rights or
remedies available to them under any of the Loan Documents, even if the
conditions set forth in this paragraph are met.
SECTION 9.
AGENTS
9.1 Appointment.
A. Each of GSCP and Chase is hereby appointed a Co-Administrative Agent
hereunder and under the other Loan Documents and each Lender hereby authorizes
each Co-Administrative Agent to act as its agent in accordance with the terms
of this Agreement and the other Loan Documents. Each of GSCP and CSI is hereby
appointed an Arranging
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Agent hereunder and under the other Loan Documents and each Lender hereby
authorizes each Arranging Agent to act as its agent in accordance with the terms
of this Agreement and the other Loan Documents. SunTrust is hereby appointed
Collateral Agent hereunder and under the other Loan Documents and each Lender
hereby authorizes Collateral Agent to act as its agent in accordance with the
terms of this Agreement and the other Loan Documents. Each Agent agrees to act
upon the express conditions contained in this Agreement and the other Loan
Documents, as applicable. The provisions of this Section 9 are solely for the
benefit of Agents and Lenders and Company shall have no rights as a third party
beneficiary of any of the provisions thereof. In performing its functions and
duties under this Agreement, each Agent shall act solely as an agent of Lenders
and does not assume and shall not be deemed to have assumed any obligation
towards or relationship of agency or trust with or for Company or any of its
Subsidiaries. Upon the conclusion of the Initial Period, all obligations of
Arranging Agents hereunder shall terminate.
B. Appointment of Supplemental Collateral Agents. It is the purpose of
this Agreement and the other Loan Documents that there shall be no violation of
any law of any jurisdiction denying or restricting the right of banking
corporations or associations to transact business as agent or trustee in such
jurisdiction. It is recognized that in case of litigation under this Agreement
or any of the other Loan Documents, and in particular in case of the enforcement
of any of the Loan Documents, or in case Chase Co-Administrative Agent deems
that by reason of any present or future law of any jurisdiction Collateral Agent
may not exercise any of the rights, powers or remedies granted herein or in any
of the other Loan Documents or take any other action which may be desirable or
necessary in connection therewith, it may be necessary that Chase
Co-Administrative Agent appoint an additional individual or institution as a
separate trustee, co-trustee, collateral agent or collateral co-agent (any such
additional individual or institution being referred to herein individually as a
"Supplemental Collateral Agent" and collectively as "Supplemental Collateral
Agents").
In the event that Chase Co-Administrative Agent appoints a Supplemental
Collateral Agent with respect to any Collateral, (i) each and every right,
power, privilege or duty expressed or intended by this Agreement or any of the
other Loan Documents to be exercised by or vested in or conveyed to Chase
Co-Administrative Agent with respect to such Collateral shall be exercisable by
and vest in such Supplemental Collateral Agent to the extent, and only to the
extent, necessary to enable such Supplemental Collateral Agent to exercise such
rights, powers and privileges with respect to such Collateral and to perform
such duties with respect to such Collateral, and every covenant and obligation
contained in the Loan Documents and necessary to the exercise or performance
thereof by such Supplemental Collateral Agent shall run to and be enforceable by
either Agent or such Supplemental Collateral Agent, and (ii) the provisions of
this Section 9 and of subsections 10.2 and 10.3 that refer to Collateral Agent
shall inure to the benefit of such Supplemental Collateral Agent and all
references therein to Collateral Agent shall be deemed to be references to
Collateral Agent and/or such Supplemental Collateral Agent, as the context may
require.
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Should any instrument in writing from Company or any other Loan Party be
required by any Supplemental Collateral Agent so appointed by Chase
Co-Administrative Agent for more fully and certainly vesting in and confirming
to him or it such rights, powers, privileges and duties, Company shall, or shall
cause such Loan Party to, execute, acknowledge and deliver any and all such
instruments promptly upon request by Chase Co-Administrative Agent. In case any
Supplemental Collateral Agent, or a successor thereto, shall die, become
incapable of acting, resign or be removed, all the rights, powers, privileges
and duties of such Supplemental Collateral Agent, to the extent permitted by
law, shall vest in and be exercised by Collateral Agent until the appointment of
a new Supplemental Collateral Agent.
9.2 Powers; General Immunity.
A. Duties Specified. Each Lender irrevocably authorizes each Agent to take
such action on such Lender's behalf and to exercise such powers hereunder and
under the other Loan Documents as are specifically delegated to such Agent by
the terms hereof and thereof, together with such powers as are reasonably
incidental thereto. Each Agent shall have only those duties and responsibilities
that are expressly specified in this Agreement and the other Loan Documents, and
it may perform such duties by or through its agents or employees. No Agent shall
have, by reason of this Agreement or any of the other Loan Documents, a
fiduciary relationship in respect of any Lender; and nothing in this Agreement
or any of the other Loan Documents, expressed or implied, is intended to or
shall be so construed as to impose upon any Agent any obligations in respect of
this Agreement or any of the other Loan Documents except as expressly set forth
herein or therein.
B. No Responsibility for Certain Matters. No Agent shall be responsible to
any Lender for the execution, effectiveness, genuineness, validity,
enforceability, collectibility or sufficiency of this Agreement or any other
Loan Document or for any representations, warranties, recitals or statements
made herein or therein or made in any written or oral statement or in any
financial or other statements, instruments, reports or certificates or any other
documents furnished by any Agent to Lenders or by or on behalf of Company and/or
its Subsidiaries to any Agent or any Lender in connection with the Loan
Documents and the transactions contemplated thereby or for the financial
condition or business affairs of Company or any other Person liable for the
payment of any Obligations, nor shall any Agent be required to ascertain or
inquire as to the performance or observance of any of the terms, conditions,
provisions, covenants or agreements contained in any of the Loan Documents or as
to the use of the proceeds of the Loans or the use of the Letters of Credit or
as to the existence or possible existence of any Event of Default or Potential
Event of Default. Anything contained in this Agreement to the contrary
notwithstanding, neither Co-Administrative Agent shall have any liability
arising from confirmations of the amount of outstanding Loans or the Total
Utilization of Revolving Loan Commitments or the component amounts thereof.
C. Exculpatory Provisions. Neither any Agent nor any of such Agent's
respective officers, directors, employees or agents shall be liable to Lenders
for any action taken or
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omitted by such Agent under or in connection with any of the Loan Documents
except to the extent caused by such Agent's gross negligence or willful
misconduct. If any Agent shall request instructions from Lenders with respect to
any act or action (including the failure to take an action) in connection with
this Agreement or any of the other Loan Documents, such Agent shall be entitled
to refrain from such act or taking such action unless and until such Agent shall
have received instructions from Requisite Lenders (or such other Lenders as may
be required to give such instructions under subsection 10.6). Without prejudice
to the generality of the foregoing, (i) such Agent shall be entitled to rely,
and shall be fully protected in relying, upon any communication, instrument or
document believed by it to be genuine and correct and to have been signed or
sent by the proper person or persons, and shall be entitled to rely and shall be
protected in relying on opinions and judgments of attorneys (who may be
attorneys for Company and its Subsidiaries), accountants, experts and other
professional advisors selected by it; and (ii) no Lender shall have any right of
action whatsoever against such Agent as a result of such Agent acting or (where
so instructed) refraining from acting under this Agreement or any of the other
Loan Documents in accordance with the instructions of Requisite Lenders (or such
other Lenders as may be required to give such instructions under subsection
10.6). Such Agent shall be entitled to refrain from exercising any power,
discretion or authority vested in it under this Agreement or any of the other
Loan Documents unless and until it has obtained the instructions of Requisite
Lenders (or such other Lenders as may be required to give such instructions
under subsection 10.6).
D. Agents Entitled to Act as Lender. The agency hereby created shall in no
way impair or affect any of the rights and powers of, or impose any duties or
obligations upon, any Agent in its individual capacity as a Lender hereunder.
With respect to its participation in the Loans and the Letters of Credit, each
Agent shall have the same rights and powers hereunder as any other Lender and
may exercise the same as though it were not performing the duties and functions
delegated to it hereunder, and the term "Lender" or "Lenders" or any similar
term shall, unless the context clearly otherwise indicates, include such Agent
in its individual capacity. Each Agent and its Affiliates may accept deposits
from, lend money to and generally engage in any kind of banking, trust,
financial advisory or other business with Company or any of its Affiliates as if
it were not performing the duties specified herein, and may accept fees and
other consideration from Company and/or its Subsidiaries for services in
connection with this Agreement and otherwise without having to account for the
same to Lenders.
9.3 Representations and Warranties; No Responsibility For Appraisal of
Creditworthiness.
Each Lender represents and warrants that it has made its own independent
investigation of the financial condition and affairs of Company and its
Subsidiaries in connection with the making of the Loans and the issuance of
Letters of Credit hereunder and that it has made and shall continue to make its
own appraisal of the creditworthiness of Company and its Subsidiaries. No Agent
shall have any duty or responsibility, either initially or on a continuing
basis, to make any such investigation or any such appraisal on
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behalf of Lenders or to provide any Lender with any credit or other information
with respect thereto, whether coming into its possession before the making of
the Loans or at any time or times thereafter, and no Agent shall have any
responsibility with respect to the accuracy of or the completeness of any
information provided to Lenders.
9.4 Right to Indemnity.
Each Lender, in proportion to its Pro Rata Share, severally agrees to
indemnify each Agent, to the extent that such Agent shall not have been
reimbursed by Company, for and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses
(including, without limitation, counsel fees and disbursements) or disbursements
of any kind or nature whatsoever which may be imposed on, incurred by or
asserted against such Agent in performing its duties hereunder or under the
other Loan Documents or otherwise in its capacity as such Agent in any way
relating to or arising out of this Agreement or the other Loan Documents;
provided that no Lender shall be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from such Agent's gross negligence or
willful misconduct.
9.5 Successor Agents and Swing Line Lender.
A. Successor Agents. Any Agent may resign at any time by giving 30 days'
prior written notice thereof to the other Agents, Lenders and Company, and any
Agent may be removed at any time with or without cause by an instrument or
concurrent instruments in writing delivered to Company and Co-Administrative
Agents and signed by Requisite Lenders. Upon any such notice of resignation or
any such removal, Requisite Lenders shall have the right, upon five Business
Days' notice to Company, to appoint a successor Agent. Upon the acceptance of
any appointment as Agent hereunder by a successor Agent, that successor Agent
shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring or removed Agent and the retiring or
removed Agent shall be discharged from its duties and obligations under this
Agreement. After any retiring or removed Agent's resignation or removal
hereunder as Agent, the provisions of this Section 9 shall inure to its benefit
as to any actions taken or omitted to be taken by it while it was Agent under
this Agreement.
B. Successor Swing Line Lender. Any resignation or removal of Chase Co-
Administrative Agent pursuant to subsection 9.5A shall also constitute the
resignation or removal of Chase or its successor as Swing Line Lender, and any
successor Chase Co-Administrative Agent appointed pursuant to subsection 9.5A
shall, upon its acceptance of such appointment, become the successor Swing Line
Lender for all purposes hereunder. In such event (i) Company shall prepay any
outstanding Swing Line Loans made by the retiring or removed Chase Co-
Administrative Agent in its capacity as Swing Line Lender, (ii) upon such
prepayment, the retiring or removed Chase Co-Administrative Agent and Swing Line
Lender shall surrender the Swing Line Note held by it to Company for
cancellation, and (iii) Company shall issue a new Swing Line Note to the
successor Chase Co-Administrative
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Agent and Swing Line Lender substantially in the form of Exhibit VI annexed
hereto, in the principal amount of the Swing Line Loan Commitment then in effect
and with other appropriate insertions.
9.6 Collateral Documents.
Each Lender and Agent hereby further authorizes Collateral Agent to enter
into each Collateral Document as secured party on behalf of and for the benefit
of Agents and Lenders and agrees to be bound by the terms of each Collateral
Document; provided that Collateral Agent shall not enter into or consent to any
amendment, modification, termination or waiver of any provision contained in any
Collateral Document without the prior consent of Requisite Lenders (or, if
required pursuant to subsection 10.6, all Lenders); provided further, however,
that, without further written consent or authorization from Requisite Lenders,
Collateral Agent may execute any documents or instruments necessary to effect
the release of any asset constituting Collateral from the Lien of the applicable
Collateral Document in the event that such asset is sold or otherwise disposed
of in a transaction effected in accordance with subsection 7.7. Anything
contained in any of the Loan Documents to the contrary notwithstanding, each
Lender agrees that no Lender shall have any right individually to realize upon
any of the Collateral under any Collateral Document (including, without
limitation, through the exercise of a right of set-off against call deposits of
such Lender in which any funds on deposit in the Collateral Account may from
time to time be invested), it being understood and agreed that all rights and
remedies under the Collateral Documents may be exercised solely by Collateral
Agent for the benefit of Lenders in accordance with the terms thereof.
SECTION 10.
MISCELLANEOUS
10.1 Assignments and Participations in Loans, Letters of Credit.
A. General. Subject to subsection 10.1B, each Lender shall have the right
at any time to (i) sell, assign, transfer or negotiate to any Eligible Assignee,
or (ii) sell participations to any Person in, all or any part of its Commitments
(together with its Letters of Credit or participations therein made or arising
pursuant to its Revolving Loan Commitment) or any Loan or Loans made by it or
any other interest herein or in any other Obligations owed to it; provided that
no such sale,
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assignment, transfer or participation shall, without the consent of Company,
require Company to file a registration statement with the Securities and
Exchange Commission or apply to qualify such sale, assignment, transfer or
participation under the securities laws of any state; provided further, that no
such sale, assignment or transfer described in clause (i) above shall be
effective unless and until an Assignment Agreement effecting such sale,
assignment or transfer shall have been accepted by Chase Co-Administrative Agent
and recorded in the Register as provided in subsection 10.1B(ii); provided,
further that no such sale, assignment, transfer or participation of any Letter
of Credit or any participation therein may be made separately from a sale,
assignment, transfer or participation of a corresponding interest in the
Revolving Loan Commitment and the Revolving Loans of the Lender effecting such
sale, assignment, transfer or participation; and provided further that, anything
contained herein to the contrary notwithstanding, the Swing Line Loan Commitment
and the Swing Line Loans of Swing Line Lender may not be sold, assigned or
transferred as described in clause (i) above to any Person other than a
successor Chase Co-Administrative Agent and Swing Line Lender to the extent
contemplated by subsection 9.5. Except as otherwise provided in this subsection
10.1, no Lender shall, as between Company and such Lender, be relieved of any of
its obligations hereunder as a result of any sale, assignment, transfer or
negotiation of, or any granting of participations in, all or any part of its
Commitments or the Loans, the Letters of Credit or participations therein or the
other Obligations owed to such Lender.
B. Assignments.
(i) Amounts and Terms of Assignments. Each Commitment, Loan, Letter
of Credit, or participation therein or other Obligation may (a) be
assigned in any amount to another Lender who is a Non-Defaulting Lender,
or to an Affiliate of the assigning Lender or another Lender who, in
either such case, is a Non-Defaulting Lender, with the consent of
Co-Administrative Agents (which consent shall not be unreasonably
withheld) and the giving of notice to Company; provided that, after giving
effect to a proposed assignment to another Lender, the assigning Lender
shall have an aggregate Commitment of at least $5,000,000 unless the
proposed assignment constitutes the aggregate amount of the Commitments,
Loans, Letters of Credit, and participations therein and other Obligations
of the assigning Lender, or (b) be assigned in an aggregate amount of not
less than $5,000,000 (or such lesser amount as shall constitute the
aggregate amount of the Commitments, Loans, Letters of Credit, and
participations therein and other Obligations of the assigning Lender) to
any other Eligible Assignee with the consent of Co-Administrative Agents
(which consent shall not be unreasonably withheld) and the giving of
notice to Company. To the extent of any such assignment in accordance with
either clause (a) or (b) above, the assigning Lender shall be relieved of
its obligations with respect to its Commitments, Loans, Letters of Credit,
or participations therein or other Obligations or the portion thereof so
assigned. The parties to each such assignment shall execute and deliver to
Chase Co-Administrative Agent, for its acceptance and recording in the
Register, an Assignment Agreement, together with a processing fee of
$3,000 payable by the assigning Lender and such certificates, documents or
other evidence, if any, with respect to United States federal income tax
withholding matters as the assignee under such Assignment Agreement may be
required to deliver to Chase Co-Administrative Agent pursuant to
subsection 2.7B(iii) (a). Upon such execution, delivery, acceptance and
recordation, from and after the effective date specified in such
Assignment Agreement, (y) the assignee thereunder shall be a party hereto
and, to the extent that rights and obligations hereunder have been
assigned to it pursuant to such Assignment Agreement, shall have the
rights and obligations of a Lender hereunder and (z) the assigning Lender
thereunder shall, to the extent that rights and obligations hereunder have
been assigned by it pursuant to such Assignment
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Agreement, relinquish its rights (other than any rights which survive the
termination of this Agreement under subsection 10.9B) and be released from
its obligations under this Agreement (and, in the case of an Assignment
Agreement covering all or the remaining portion of an assigning Lender's
rights and obligations under this Agreement, such Lender shall cease to be
a party hereto; provided that, anything contained in any of the Loan
Documents to the contrary notwithstanding, if such Lender is the Issuing
Lender with respect to any outstanding Letters of Credit such Lender shall
continue to have all rights and obligations of an Issuing Lender with
respect to such Letters of Credit until the cancellation or expiration of
such Letters of Credit and the reimbursement of any amounts drawn
thereunder). The Commitments hereunder shall be modified to reflect the
Commitments of such assignee and any remaining Commitments of such
assigning Lender and, if any such assignment occurs after the issuance of
the Notes hereunder, the assigning Lender shall surrender its applicable
Notes and, upon such surrender, new Notes shall be issued to the assignee
and, if applicable, to the assigning Lender, substantially in the form of
Exhibit IV, Exhibit V or Exhibit VI annexed hereto, as the case may be,
with appropriate insertions, to reflect the new Commitments and/or
outstanding Term Loans of the assignee and the assigning Lender.
(ii) Acceptance by Chase Co-Administrative Agent; Recordation in
Register. Upon its receipt of an Assignment Agreement executed by an
assigning Lender and an assignee representing that it is an Eligible
Assignee, together with the processing fee referred to in subsection
10.1B(i) and any certificates, documents or other evidence with respect to
United States federal income tax withholding matters that such assignee
may be required to deliver to Chase Co-Administrative Agent pursuant to
subsection 2.7B(iii) (a), Chase Co-Administrative Agent shall, if such
Assignment Agreement has been completed and is in substantially the form
of Exhibit XIII hereto and if Co-Administrative Agents have consented to
the assignment evidenced thereby (to the extent such consent is required
pursuant to subsection 10.1B(i)), (a) accept such Assignment Agreement by
executing a counterpart thereof as provided therein (which acceptance
shall evidence any required consent of Chase Co-Administrative Agent to
such assignment), (b) record the information contained therein in the
Register, and (c) give prompt notice thereof to Company. Chase
Co-Administrative Agent shall maintain a copy of each Assignment Agreement
delivered to and accepted by it as provided in this subsection 10.1B(ii).
C. Participations. The holder of any participation, other than an
Affiliate of the Lender granting such participation, shall not be entitled to
require such Lender to take or omit to take any action hereunder except action
(i) effecting the extension of the final maturity of the Loan allocated to such
participation, (ii) effecting a reduction of the principal amount of or
affecting the rate of interest payable on any Loan allocated to such
participation, (iii) releasing all or substantially all of the Collateral, or
(iv) releasing all of the Guarantors from their obligations under the
Guaranties, and all amounts payable by Company hereunder (including, without
limitation, amounts payable to such Lender
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pursuant to subsections 2.6D, 2.7 and 3.6) shall be determined as if such Lender
had not sold such participation. Company and each Lender hereby acknowledge and
agree that, solely for purposes of subsections 10.4 and 10.5, (a) any
participation will give rise to a direct obligation of Company to the
participant and (b) the participant shall be considered to be a "Lender".
D. Assignments to Federal Reserve Banks. In addition to the assignments
and participations permitted under the foregoing provisions of this subsection
10.1, any Lender may assign and pledge all or any portion of its Loans, the
other Obligations owed to such Lender and its Notes to any Federal Reserve Bank
as collateral security pursuant to Regulation A of the Board of Governors of the
Federal Reserve System and any operating circular issued by such Federal Reserve
Bank; provided that (i) no Lender shall, as between Company and such Lender, be
relieved of any of its obligations hereunder as a result of any such assignment
and pledge and (ii) in no event shall such Federal Reserve Bank be considered to
be a "Lender" or be entitled to require the assigning Lender to take or omit to
take any action hereunder.
E. Information. Each Lender may furnish any information concerning Company
and its Subsidiaries in the possession of that Lender from time to time to
assignees and participants (including prospective assignees and participants),
subject to subsection 10.20.
F. Limitation. No assignee, participant or other transferee or any
Lender's rights shall be entitled to receive any greater payment under
subsection 2.7 than such Lender would have been entitled to receive with respect
to the rights transferred, unless such transfer is made with Company's prior
written consent or at a time when the circumstances giving rise to such greater
payment did not exist.
G. Representations of Lenders. Each Lender listed on the signature pages
hereof hereby represents and warrants (i) that it is an Eligible Assignee
described in clause (i) of the definition thereof; (ii) that it has experience
and expertise in the making of loans such as the Loans; and (iii) that it will
make its Loans for its own account in the ordinary course of its business and
without a view to distribution of such Loans within the meaning of the
Securities Act or the Exchange Act or other federal securities laws (it being
understood that, subject to the provisions of this subsection 10.1, the
disposition of such Loans or any interests therein shall at all times remain
within its exclusive control). Each Lender that becomes a party hereto pursuant
to an Assignment Agreement shall be deemed to agree that the representations and
warranties of such Lender contained in Section 2(c) of such Assignment Agreement
are incorporated herein by this reference.
10.2 Expenses.
Whether or not the transactions contemplated hereby shall be consummated,
Company agrees to pay promptly (i) all the actual and reasonable costs and out
of pocket expenses of Co-Administrative Agents in connection with the
preparation of the Loan Documents; (ii) all the actual and reasonable costs of
furnishing all opinions by counsel for
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Company (including, without limitation, any opinions requested by Lenders as to
any legal matters arising hereunder) and of Company's performance of and
compliance with all agreements and conditions on its part to be performed or
complied with under this Agreement and the other Loan Documents including,
without limitation, with respect to confirming compliance with environmental and
insurance requirements; (iii) the reasonable fees, expenses and disbursements of
counsel to Agents (including allocated costs of internal counsel) in connection
with the negotiation, preparation, execution and administration of the Loan
Documents and the Loans and any consents, amendments, waivers or other
modifications hereto or thereto and any other documents or matters requested by
Company; (iv) all other actual and reasonable costs and expenses incurred by
Agents in connection with the negotiation, preparation and execution of the Loan
Documents and the transactions contemplated hereby and thereby; and (v) after
the occurrence of an Event of Default, all costs and expenses, including
reasonable attorneys' fees (including allocated costs of internal counsel) and
costs of settlement, incurred by Agents and Lenders in enforcing any Obligations
of or in collecting any payments due from Company hereunder or under the other
Loan Documents by reason of such Event of Default or in connection with any
refinancing or restructuring of the credit arrangements provided under this
Agreement in the nature of a "work-out" or pursuant to any insolvency or
bankruptcy proceedings.
10.3 Indemnity.
In addition to the payment of expenses pursuant to subsection 10.2,
whether or not the transactions contemplated hereby shall be consummated,
Company agrees to defend, indemnify, pay and hold harmless Agents and Lenders,
and the officers, directors, trustees, partners, employees, agents, attorneys
and affiliates of any of Agents and Lenders (collectively called the
"Indemnitees") from and against any and all other liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, claims, costs, expenses
and disbursements of any kind or nature whatsoever (including, without
limitation, the reasonable fees and disbursements of counsel for such
Indemnitees in connection with any investigative, administrative or judicial
proceeding commenced or threatened by any Person, whether or not any such
Indemnitee shall be designated as a party or a potential party thereto), whether
direct, indirect or consequential and whether based on any federal, state or
foreign laws, statutes, rules or regulations (including, without limitation,
securities and commercial laws, statutes, rules or regulations and Environmental
Laws), on common law or equitable cause or on contract or otherwise, that may be
imposed on, incurred by, or asserted against any such Indemnitee, in any manner
relating to or arising out of this Agreement or the other Loan Documents or the
transactions contemplated hereby or thereby (including, without limitation,
Lenders' agreement to make the Loans hereunder or the use or intended use of the
proceeds of any of the Loans or the issuance of Letters of Credit hereunder or
the use or intended use of any of the Letters of Credit) (collectively called
the "Indemnified Liabilities"); provided that Company shall not have any
obligation to any Indemnitee hereunder with respect to any Indemnified
Liabilities to the extent, and only to the extent, of any particular liability,
obligation, loss, damage, penalty, claim, cost, expense or disbursement that
arose from the gross negligence or willful misconduct of that Indemnitee as
determined by a final judgment of a court of competent jurisdiction. To the
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extent that the undertaking to defend, indemnify, pay and hold harmless set
forth in the preceding sentence may be unenforceable because it is violative of
any law or public policy, Company shall contribute the maximum portion that it
is permitted to pay and satisfy under applicable law to the payment and
satisfaction of all Indemnified Liabilities incurred by the Indemnitees or any
of them.
10.4 Set-Off; Security Interest in Deposit Accounts.
In addition to any rights now or hereafter granted under applicable law
and not by way of limitation of any such rights, upon the occurrence and during
the continuance of any Event of Default each Lender is hereby authorized by
Company at any time or from time to time, without notice to Company or to any
other Person, any such notice being hereby expressly waived, to set off and to
appropriate and to apply any and all deposits (general or special, including,
but not limited to, Indebtedness evidenced by certificates of deposit, whether
matured or unmatured, but not including trust accounts) and any other
Indebtedness at any time held or owing by that Lender (at any office of that
Lender wherever located) to or for the credit or the account of Company against
and on account of the obligations and liabilities of Company to that Lender
under this Agreement, the Notes, the Letters of Credit and participations
therein, including, but not limited to, all claims of any nature or description
arising out of or connected with this Agreement, the Notes, the Letters of
Credit and participations therein or any other Loan Document, irrespective of
whether or not (i) that Lender shall have made any demand hereunder or (ii) the
principal of or the interest on the Loans or any amounts in respect of the
Letters of Credit or any other amounts due hereunder shall have become due and
payable pursuant to Section 8 and although said obligations and liabilities, or
any of them, may be contingent or unmatured. Company hereby further grants to
each Agent and Lender a security interest in all deposits and accounts
maintained with such Agent or Lender as security for the Obligations.
10.5 Ratable Sharing.
Lenders hereby agree among themselves that if any of them shall, whether
by voluntary payment (other than a voluntary prepayment of Loans made and
applied in accordance with the terms of this Agreement), by realization upon
security, through the exercise of any right of set-off or banker's lien, by
counterclaim or cross action or by the enforcement of any right under the Loan
Documents or otherwise, or as adequate protection of a deposit treated as cash
collateral under the Bankruptcy Code, receive payment or reduction of a
proportion of the aggregate amount of principal, interest, amounts payable in
respect of Letters of Credit, fees and other amounts then due and owing to that
Lender hereunder or under the other Loan Documents (collectively, the "Aggregate
Amounts Due" to such Lender) which is greater than the proportion received by
any other Lender in respect of the Aggregate Amounts Due to such other Lender,
then the Lender receiving such proportionately greater payment shall (i) notify
Chase Co-Administrative Agent and each other Lender of the receipt of such
payment and (ii) apply a portion of such payment to purchase participations
(which it shall be deemed to have purchased from each seller of a participation
simultaneously upon the receipt by such seller of its portion of such payment)
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in the Aggregate Amounts Due to the other Lenders so that all such recoveries of
Aggregate Amounts Due shall be shared by all Lenders in proportion to the
Aggregate Amounts Due to them; provided that if all or part of such
proportionately greater payment received by such purchasing Lender is thereafter
recovered from such Lender upon the bankruptcy, reorganization or insolvency
proceeding of Company or otherwise, those purchases shall be rescinded and the
purchase prices paid for such participations shall be returned to such
purchasing Lender ratably to the extent of such recovery, but without interest.
Company expressly consents to the foregoing arrangement and agrees that any
holder of a participation so purchased may exercise any and all rights of
banker's lien, set-off or counterclaim with respect to any and all monies owing
by Company to that holder with respect thereto as fully as if that holder were
owed the amount of the participation held by that holder.
10.6 Amendments and Waivers.
A. No amendment, modification, termination or waiver of any provision of
this Agreement or of the Notes, or consent to any departure by Company or any
other Loan Party therefrom, shall in any event be effective without the written
concurrence of Requisite Lenders; provided that any such amendment,
modification, termination, waiver or consent which: reduces the principal amount
of any of the Loans; changes in any manner the definition of "Requisite Lenders"
or "Pro Rata Share"; changes in any manner any provision of this Agreement
which, by its terms, expressly requires the approval or concurrence of all
Lenders; postpones the scheduled final maturity date of any of the Loans;
postpones the date or reduces the amount of any scheduled payment (but not
prepayment) of principal of any of the Loans; postpones the date on which any
interest or any fees are payable; decreases the interest rate borne by any of
the Loans (other than any waiver of any increase in the interest rate applicable
to any of the Loans pursuant to subsection 2.2E) or the amount of any fees
payable hereunder; increases the maximum duration of Interest Periods permitted
hereunder; releases all or substantially all of the Collateral; releases all of
the Guarantors from their obligations under the Guaranties; reduces the amount
or postpones the due date of any amount payable in respect of, or extends the
required expiration date of, any Letter of Credit; changes the obligations of
Lenders relating to the purchase of participations in Letters of Credit in any
manner that could be adverse to any Issuing Lender; or changes in any manner the
provisions contained in subsection 8.1 or this subsection 10.6; shall be
effective only if evidenced by a writing signed by or on behalf of all Lenders
to whom are owed Obligations being directly affected by such amendment,
modification, termination, waiver or consent. In addition, (i) any amendment,
modification, termination or waiver of any of the provisions contained in
Section 4 shall be effective only if evidenced by a writing signed by or on
behalf of Co-Administrative Agents and Requisite Lenders, (ii) no amendment,
modification, termination or waiver of any provision of any Note shall be
effective without the written concurrence of the Lender which is the holder of
that Note, (iii) no amendment, modification, termination or waiver of any
provision of this Agreement which disproportionately and adversely affects the
obligation of any Loan Party to make payments (including without limitation
mandatory prepayments) to the holders of the Tranche A Term Loans, the holders
of the Tranche B Term Loans or the
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holders of the Revolving Loans and Revolving Loan Commitments, shall be
effective without the written concurrence of the holders of 51% in principal
amount of the class (i.e., Tranche A Term Loans, Tranche B Term Loans or
Revolving Loans and Revolving Loan Commitments each being a "class" of Loans) of
Loans so disproportionately and adversely affected; (iv) no increase in the
Commitments of any Lender over the amount thereof then in effect shall be
effective without the written concurrence of that Lender, it being understood
and agreed that in no event shall waivers or modifications of conditions
precedent, covenants, Events of Default, Potential Events of Default or of a
mandatory prepayment or a reduction of any or all of the Commitments be deemed
to constitute an increase of the Commitment of any Lender and that an increase
in the available portion of any Commitment of any Lender shall not be deemed to
constitute an increase in the Commitment of such Lender, (v) no amendment,
modification, termination or waiver of any provision of subsection 2.1A(iii) or
any other provision of this Agreement relating to the Swing Line Loan Commitment
or the Swing Line Loans shall be effective without the written concurrence of
Swing Line Lender, (vi) no amendment, modification, termination or waiver of any
provision of Section 3 relating to the rights or obligations of any or all
Issuing Lenders shall be effective without the written concurrence of Chase
Co-Administrative Agent and each Lender who is an Issuing Lender with respect to
any Letter of Credit then outstanding, and (vii) no amendment, modification,
termination or waiver of any provision of Section 9 or of any other provision of
this Agreement which, by its terms, expressly requires the approval or
concurrence of Chase Co-Administrative Agent or Co-Administrative Agent shall be
effective without the written concurrence of Chase Co-Administrative Agent or
Co-Administrative Agent, as the case may be, Chase Co-Administrative Agent may,
but shall have no obligation to, with the concurrence of any Lender, execute
amendments, modifications, waivers or consents on behalf of that Lender. Any
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which it was given. No notice to or demand on Company in
any case shall entitle Company to any other or further notice or demand in
similar or other circumstances. Any amendment, modification, termination, waiver
or consent effected in accordance with this subsection 10.6 shall be binding
upon each Lender at the time outstanding, each future Lender and, if signed by
Company, on Company.
B. If, in connection with any proposed change, waiver, discharge or
termination to any of the provision of this Agreement as contemplated by the
proviso in the first sentence of this subsection 10.6, the consent of Requisite
Lenders is obtained but consent of one or more of such other Lenders whose
consent is required is not obtained, then Company may, so long as all
non-consenting Lenders are so treated, elect to terminate such Lender as a party
to this Agreement; provided that, concurrently with such termination, (i)
Company shall pay that Lender all principal, interest and fees and other amounts
due to be paid to such Lender with respect to all periods through such date of
termination, (ii) another financial institution satisfactory to Company and
Co-Administrative Agents (or if either Co-Administrative Agent is also a Lender
to be terminated, the successor Co-Administrative Agent and the Co-
Administrative Agent not so terminated) shall agree, as of such date, to become
a Lender for all purposes under this Agreement (whether by assignment or
amendment) and to assume all obligations of the Lender to be terminated
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as of such date, and (iii) all documents and supporting materials necessary, in
the judgment of Co-Administrative Agents (or if either Co-Administrative Agent
is also a Lender to be terminated, the successor Co-Administrative Agent and the
Co-Administrative Agent not so terminated) to evidence the substitution of such
Lender shall have been received and approved by Co-Administrative Agents as of
such date.
10.7 Independence of Covenants.
All covenants hereunder shall be given independent effect so that if a
particular action or condition is not permitted by any of such covenants, the
fact that it would be permitted by an exception to, or would otherwise be within
the limitations of, another covenant shall not avoid the occurrence of an Event
of Default or Potential Event of Default if such action is taken or condition
exists.
10.8 Notices.
Unless otherwise specifically provided herein, any notice or other
communication herein required or permitted to be given shall be in writing and
may be personally served, telecopied, telexed or sent by United States mail or
courier service and shall be deemed to have been given when delivered in person
or by courier service, upon receipt of telecopy or telex, or four Business Days
after depositing it in the United States mail, registered or certified, with
postage prepaid and properly addressed; provided that notices to Chase
Co-Administrative Agent shall not be effective until received. For the purposes
hereof, the address of each party hereto shall be as set forth under such
party's name on the signature pages hereof or (i) as to Company and Chase
Co-Administrative Agent, such other address as shall be designated by such
Person in a written notice delivered to the other parties hereto and (ii) as to
each other party, such other address as shall be designated by such party in a
written notice delivered to Chase Co-Administrative Agent.
10.9 Survival of Representations, Warranties and Agreements.
A. All representations, warranties and agreements made herein shall
survive the execution and delivery of this Agreement and the making of the Loans
and the issuance of the Letters of Credit hereunder.
B. Notwithstanding anything in this Agreement or implied by law to the
contrary, the agreements of Company set forth in subsections 2.6D, 2.7, 3.5A,
3.6, 10.2, 10.3 and 10.4 and the agreements of Lenders set forth in subsections
9.2C, 9.4, 10.4, 10.5 and 10.20 shall survive the payment of the Loans, the
cancellation or expiration of the Letters of Credit and the reimbursement of any
amounts drawn or paid thereunder, and the termination of this Agreement.
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10.10 Failure or Indulgence Not Waiver; Remedies Cumulative.
No failure or delay on the part of Chase Co-Administrative Agent,
Collateral Agent or any Lender in the exercise of any power, right or privilege
hereunder or under any other Loan Document shall impair such power, right or
privilege or be construed to be a waiver of any default or acquiescence therein,
nor shall any single or partial exercise of any such power, right or privilege
preclude other or further exercise thereof or of any other power, right or
privilege. All rights and remedies existing under this Agreement and the other
Loan Documents are cumulative to, and not exclusive of, any rights or remedies
otherwise available.
10.11 Marshalling; Payments Set Aside.
Neither Chase Co-Administrative Agent nor any Lender shall be under any
obligation to marshal any assets in favor of Company or any other party or
against or in payment of any or all of the Obligations. To the extent that
Company makes a payment or payments to Chase Co-Administrative Agent,
Collateral Agent or Lenders (or to Chase Co-Administrative Agent or Collateral
Agent for the benefit of Lenders), or Chase Co-Administrative Agent, Collateral
Agent or Lenders enforce any security interests or exercise their rights of
setoff, and such payment or payments or the proceeds of such enforcement or
setoff or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside and/or required to be repaid to a trustee,
receiver or any other party under any bankruptcy law, any other state or federal
law, common law or any equitable cause, then, to the extent of such recovery,
the obligation or part thereof originally intended to be satisfied, and all
Liens, rights and remedies therefor or related thereto, shall be revived and
continued in full force and effect as if such payment or payments had not been
made or such enforcement or setoff had not occurred.
10.12 Severability.
In case any provision in or obligation under this Agreement or the Notes
shall be invalid, illegal or unenforceable in any jurisdiction, the validity,
legality and enforceability of the remaining provisions or obligations, or of
such provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
10.13 Obligations Several; Independent Nature of Lenders' Rights.
The obligations of Lenders hereunder are several and no Lender shall be
responsible for the obligations or Commitments of any other Lender hereunder.
Nothing contained herein or in any other Loan Document, and no action taken by
Lenders pursuant hereto or thereto, shall be deemed to constitute Lenders as a
partnership, an association, a joint venture or any other kind of entity. The
amounts payable at any time hereunder to each Lender shall be a separate and
independent debt, and each Lender shall be entitled to protect and enforce its
rights arising out of this Agreement and it shall not be necessary for any other
Lender to be joined as an additional party in any proceeding for such purpose.
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10.14 Headings.
Section and subsection headings in this Agreement are included herein for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose or be given any substantive effect.
10.15 Applicable Law.
THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER
SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT LIMITATION SECTION
5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD
TO CONFLICTS OF LAWS PRINCIPLES.
10.16 Successors and Assigns.
This Agreement shall be binding upon the parties hereto and their
respective successors and assigns and shall inure to the benefit of the parties
hereto and the successors and assigns of Lenders (it being understood that
Lenders' rights of assignment are subject to subsection 10.1). Company's rights
or obligations hereunder nor any interest therein may not be assigned or
delegated by Company without the prior written consent of all Lenders.
10.17 Consent to Jurisdiction and Service of Process.
ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST COMPANY ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY OBLIGATIONS
THEREUNDER, MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT
JURISDICTION IN THE STATE, COUNTY AND CITY OF NEW YORK. BY EXECUTING AND
DELIVERING THIS AGREEMENT, COMPANY, FOR ITSELF AND IN CONNECTION WITH ITS
PROPERTIES, IRREVOCABLY
(I) ACCEPTS GENERALLY AND UNCONDITIONALLY THE NONEX- CLUSIVE
JURISDICTION AND VENUE OF SUCH COURTS;
(II) WAIVES ANY DEFENSE OF FORUM NON CONVENIENS;
(III) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN
ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT
REQUESTED, TO COMPANY AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH
SUBSECTION 10.8;
(IV) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (III) ABOVE IS
SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER COMPANY IN
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ANY SUCH PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE
AND BINDING SERVICE IN EVERY RESPECT;
(V) AGREES THAT LENDERS RETAIN THE RIGHT TO SERVE PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST COMPANY IN
THE COURTS OF ANY OTHER JURISDICTION; AND
(VI) AGREES THAT THE PROVISIONS OF THIS SUBSECTION 10.17 RELATING TO
JURISDICTION AND VENUE SHALL BE BINDING AND ENFORCEABLE TO THE FULLEST
EXTENT PERMISSIBLE UNDER NEW YORK GENERAL OBLIGATIONS LAW SECTION 5-1402
OR OTHERWISE.
10.18 Waiver of Jury Trial.
EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES TO WAIVE ITS
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR ANY DEALINGS
BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION OR THE
LENDER/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED. The scope of this waiver
is intended to be all-encompassing of any and all disputes that may be filed in
any court and that relate to the subject matter of this transaction, including,
without limitation, contract claims, tort claims, breach of duty claims and all
other common law and statutory claims. Each party hereto acknowledges that this
waiver is a material inducement to enter into a business relationship, that each
has already relied on this waiver in entering into this Agreement, and that each
will continue to rely on this waiver in their related future dealings. Each
party hereto further warrants and represents that it has reviewed this waiver
with its legal counsel and that it knowingly and voluntarily waives its jury
trial rights following consultation with legal counsel. THIS WAIVER IS
IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING
(OTHER THAN BY A MUTUAL WRITTEN WAIVER SPECIFICALLY REFERRING TO THIS SUBSECTION
10.18 AND EXECUTED BY EACH OF THE PARTIES HERETO), AND THIS WAIVER SHALL APPLY
TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY OTHER DOCUMENTS OR
AGREEMENTS RELATING TO THE LOANS MADE HEREUNDER. In the event of litigation,
this Agreement may be filed as a written consent to a trial by the court.
10.19 Confidentiality.
Each Lender shall hold all non-public information obtained pursuant to the
requirements of this Agreement which has been identified as confidential by
Company in accordance with such Lender's customary procedures for handling
confidential information of this nature, it being understood and agreed by
Company that in any event a Lender may
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make disclosures reasonably required by any bona fide assignee, transferee or
participant in connection with the contemplated assignment or transfer by such
Lender of any Loans or any participation therein or as required or requested by
any governmental agency or representative thereof or pursuant to legal process
or by the National Association of Insurance Commissioners or in connection with
the exercise of any remedy under the Loan Documents; provided that, unless
specifically prohibited by applicable law or court order, each Lender shall
notify Company of any request by any governmental agency or representative
thereof (other than any such request in connection with any examination of the
financial condition of such Lender by such governmental agency) for disclosure
of any such non-public information prior to disclosure of such information; and
provided, further that in no event shall any Lender be obligated or required to
return any materials furnished by Company or any of its Subsidiaries.
10.20 Counterparts; Effectiveness.
This Agreement and any amendments, waivers, consents or supplements hereto
or in connection herewith may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument; signature pages may
be detached from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached to the same
document. This Agreement shall become effective upon the execution of a
counterpart hereof by each of the parties hereto and receipt by Company and
Chase Co-Administrative Agent of written or telephonic notification of such
execution and authorization of delivery thereof.
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
COMPANY: OUTSOURCING SOLUTIONS INC.
By: /s/ Tyler T. Zachem
-------------------------------------
Tyler T. Zachem
Vice President
Notice Address:
300 Galleria Parkway
Suite 690
Atlanta, Georgia 30339
Attention: Chief Financial Officer
Facsimile: (770) 988-2910
with a copy to:
McCown De Leeuw & Co.
101 East 52nd Street
31st Floor
New York, New York 10022
Attention: Tyler T. Zachem
Facsimile: (212) 355-6283
(212) 355-6945
and a copy to:
White & Case
1155 Avenue of the Americas
New York, New York 10036
Attention: Frank L. Schiff, Esq.
Facsimile: (212) 819-7817
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AGENTS AND LENDERS: GOLDMAN SACHS CREDIT PARTNERS L.P.,
individually, as a Co-Administrative Agent
and as an Arranging Agent
By: /s/ Edward Forst
-------------------------------------
Authorized Signatory
Notice Address:
Goldman Sachs Credit Partners L.P.
c/o Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Attention: Justin Vorwerk
Telephone: (212) 902-1608
Facsimile: (212) 902-2417
with a copy to:
Goldman Sachs Credit Partners L.P.
c/o Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Attention: Kathy King
Jennifer Perry
Telephone: (212) 902-4425
Facsimile: (212) 902-3757
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THE CHASE MANHATTAN BANK,
individually and as a
Co-Administrative Agent
By: /s/ William J. Caggiano
-------------------------------------
William J. Caggiano
Managing Director
Notice Address:
270 Park Avenue, 9th Floor
New York, New York 10017
Attention: William J. Caggiano
Telephone: (212) 270-1338
Facsimile: (212) 972-0009
with a copy to:
29th Floor
140 East 45th Street
New York, New York 10017
Attention: Sandra Miklave
Loan Servicing Group
Telephone: (212) 622-0005
Facsimile: (212) 622-0002
S-3
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SUNTRUST BANK, ATLANTA,
individually and as Collateral Agent
By: /s/ Dennis H. James, Jr.
-------------------------------------
Dennis H. James, Jr.
Assistant Vice President
By: /s/ John G. Taylor
-------------------------------------
Name: John G. Taylor
Title: Vice President
Notice Address:
Suntrust Bank, Atlanta
25 Park Place, 23rd Floor
Atlanta, Georgia 30303
Attention: Dennis H. James, Jr.
Telephone: (404) 588-7963
Facsimile: (404) 588-8833
With a copy to:
Suntrust Bank, Atlanta
25 Park Place, 23rd Floor
Atlanta, Georgia 30303
Attention: Devyonne Aabeel
Telephone: (404) 588-7077
Facsimile: (404) 588-8833
S-4
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FLEET NATIONAL BANK
By: /s/ John E. Duncan
-------------------------------------
Name: John E. Duncan
Title: Managing Director
Notice Address:
Fleet National Bank
One Federal Street, MAOFD03C
Boston, Massachusetts 02211
Attention: James Silva
Telephone: (617) 346-4399
Facsimile: (617) 346-4806
With a copy to:
Fleet National Bank
One Federal Street, MAOFD03C
Boston, Massachusetts 02211
Attention: Paul Tarantino
Telephone: (617) 346-4401
Facsimile: (617) 346-4806
S-5
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NBD BANK
By: /s/ Larry E. Schuster
-------------------------------------
Name: Larry E. Schuster
Title: Authorized Agent
Notice Address:
NBD Bank
611 Woodward Avenue
Detroit, Michigan 48226
Attention: John DeFrancesco
Telephone: (313) 225-1403
Facsimile: (313) 225-2649
With a copy to:
NBD Bank
611 Woodward Avenue
Detroit, Michigan 48226
Attention: Phyllis Bonzani
Telephone: (313) 225-2273
Facsimile: (313) 225-2649
S-6
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BANK OF SCOTLAND
By: /s/ Catherine M. Oniffrey
-------------------------------------
Name: Catherine M. Oniffrey
Title: Vice President
Notice Address:
Bank of Scotland
565 Fifth Avenue, 5th Floor
New York, New York 10017
Attention: John Kelly
Telephone: (212) 450-0830
Facsimile: (212) 682-5720
With a copy to:
Bank of Scotland
565 Fifth Avenue, 5th Floor
New York, New York 10017
Attention: Janet Taffe
Assistant Vice President
Telephone: (212) 450-0872
Facsimile: (212) 557-9460
S-7
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MERRILL LYNCH SENIOR FLOATING
RATE FUND, INC.
By: Merrill Lynch Asset Management, L.P.,
as Investment Advisor
By: /s/ Anthony R. Clemente
----------------------------------
Name: Anthony R. Clemente
Title: Authorized Signatory
Notice Address:
Merrill Lynch Asset Management
800 Scudders Mill Road - Area 2C
Plainsboro, New Jersey 08536
Attention: Douglas Henderson
Telephone: (609) 282-2059
Facsimile: (609) 282-2756
S-8
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LASALLE NATIONAL BANK
By: /s/ Marc Pressler
-------------------------------------
Name: Marc Pressler
Title: Vice President
Notice Address:
LaSalle National Bank
135 South LaSalle Street, Suite 301
Chicago, Illinois 60603
Attention: Marc A. Pressler
Telephone: (312) 904-8284
Facsimile: (312) 904-6242
With a copy to:
LaSalle National Bank
135 South LaSalle Street, Suite 301
Chicago, Illinois 60603
Attention: Kelly Whitney
Telephone: (312) 904-7049
Facsimile: (312) 904-6242
S-9
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CREDITANSTALT - BANKVEREIN
By: /s/ Robert M. Biringer
-------------------------------------
Robert M. Biringer
Executive Vice President
By: /s/ Carl G. Drake
-------------------------------------
Carl G. Drake
Senior Associate
Notice Address:
Creditanstalt
Two Ravina Drive, Suite 1680
Atlanta, Georgia 30346
Attention: Robert M. Biringer
Telephone: (770) 390-1850
Facsimile: (770) 390-1851
S-10
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THE FIRST NATIONAL BANK OF BOSTON
By: /s/ Gregory R.D. Clark
-------------------------------------
Name: Gregory R.D. Clark
Title: Director
Notice Address:
Bank of Boston
Diversified Finance
100 Federal Street, MS 01-08-05
Boston, Massachusetts 02110
Attention: Clifford A. Gaysunas
Assistant Vice President
Telephone: (617) 434-3051
Facsimile: (617) 434-4929
With a copy to:
Bank of Boston
Commercial Loan Services
100 Federal Street, MS 01-08-04
Boston, Massachusetts 02110
Attention: Joan Broderick
Administrative Officer
Telephone: (617) 434-2456
Facsimile: (617) 434-9820
S-11
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HELLER FINANCIAL, INC.
By: /s/ Steven Laux
-------------------------------------
Name: Steve Laux
Title: Vice President
Notice Address:
Heller Financial
500 West Monroe Street
Chicago, Illinois 60661
Attention: Christina M. Rashid
Telephone: (312) 441-7571
Facsimile: (312) 441-7357
S-12
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GIROCREDIT BANK AKTIENGESELLSCHA-
FT DER SPARKASSEN
By: /s/ Timothy Daileader
-------------------------------------
Name: Timothy Daileader
Title: Assistant Vice President
Notice Address:
GiroCredit Bank A.G. Sparkassen, NY Branch
Park Avenue Tower
65 East 55th Street, 29th Floor
New York, New York 10022
Attention: Timothy Daileader
Assistant Vice President
Telephone: (212) 644-0660
Facsimile: (212) 644-0644
With a copy to:
GiroCredit Bank A.G. Sparkassen, NY Branch
Park Avenue Tower
65 East 55th Street, 29th Floor
New York, New York 10022
Attention: JoMarie Rivera
Telephone: (212) 909-0747
Facsimile: (212) 223-0283
S-13
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PNC BANK, NATIONAL ASSOCIATION
By: /s/ Thomas R. Colwell
-------------------------------------
Name: Thomas R. Colwell
Title: Vice President
Notice Address:
PNC Bank
345 Park Avenue, 29th Floor
New York, New York 10154
Attention: Mark Williams
Telephone: (212) 409-3724
Facsimile: (212) 409-3737
With a copy to:
PNC Bank
345 Park Avenue, 29th Floor
New York, New York 10154
Attention: Anna Di Rocco
Telephone: (212) 409-3717
Facsimile: (212) 409-3737
S-14
<PAGE>
SOUTHERN PACIFIC THRIFT & LOAN
ASSOCIATION
By: /s/ Charles D. Martorano
-------------------------------------
Name: Charles D. Martorano
Title: Senior Vice President
Notice Address:
Southern Pacific Thrift & Loan Association
12300 Wilshire Blvd., Suite 200
Los Angeles, California 90025
Attention: Chris Kelleher
Charles T. Martorano
Telephone: (310) 442-3351/3315
Facsimile: (310) 207-4067
With a copy to:
Southern Pacific Thrift & Loan Association
12300 Wilshire Blvd., Suite 200
Los Angeles, California 90025
Attention: Charles Williams
Telephone: (310) 442-3312
Facsimile: (310) 207-4067
S-15
<PAGE>
VAN KAMPEN AMERICAN CAPITAL
PRIME RATE INCOME TRUST
By: /s/ Jeffrey W. Maillet
-------------------------------------
Name: Jeffrey W. Maillet
Title: Senior Vice President & Director
Notice Address:
Van Kampen American Capital
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
Attention: Jeffrey Maillet
Telephone: (630) 684-6438
Facsimile: (630) 684-6740
S-16
<PAGE>
EXHIBIT I
[FORM OF NOTICE OF BORROWING]
NOTICE OF BORROWING
Pursuant to that certain Credit Agreement dated as of November 6, 1996, as
amended, restated, supplemented or otherwise modified to the date hereof (said
Credit Agreement, as so amended, restated, supplemented or otherwise modified,
being the "Credit Agreement", the terms defined therein and not otherwise
defined herein being used herein as therein defined), by and among Outsourcing
Solutions Inc., a Delaware corporation ("Company"), the financial institutions
listed therein as Lenders, Goldman Sachs Credit Partners L.P. and The Chase
Manhattan Bank ("Chase"), as Co-Administrative Agents (Chase, in such capacity,
"Chase Co-Administrative Agent"), SunTrust Bank, Atlanta, as Collateral Agent,
and Goldman Sachs Credit Partners L.P. and Chase Securities Inc., as Arranging
Agents, this represents Company's request to borrow as follows:
1. Date of borrowing: ___________________, [199_] [200_]
2. Amount of borrowing: $___________________
3. Lender(s): |_| a. Lenders, in accordance with their
applicable Pro Rata Shares
|_| b. Swing Line Lender
4. Type of Loans: |_| a. Tranche A Term Loans
|_| b. Tranche B Term Loans
|_| c. Revolving Loans
|_| d. Swing Line Loan
5. Interest rate option:(1) |_| a. Base Rate Loan(s)
|_| b. Eurodollar Rate Loans with an
initial Interest Period of
____________ month(s)
The proceeds of such Loans are to be deposited in Company's account at Chase
Co-Administrative Agent.
- --------
(1) Term Loans and Revolving Loans may be Base Rate Loans or Eurodollar
Rate Loans. Swing Line Loans shall be Base Rate Loans.
<PAGE>
The undersigned officer, to the best of his or her knowledge, and Company
certify that:
(i) The representations and warranties contained in the Credit
Agreement and the other Loan Documents are true and correct in all material
respects on and as of the date hereof to the same extent as though made on
and as of the date hereof, except to the extent such representations and
warranties specifically relate to an earlier date, in which case such
representations and warranties were true and correct in all material
respects on and as of such earlier date;
(ii) No event has occurred and is continuing or would result from the
consummation of the borrowing contemplated hereby that would constitute an
Event of Default or a Potential Event of Default; [and]
(iii) Company has performed in all material respects all agreements
and satisfied all conditions which the Credit Agreement provides shall be
performed or satisfied by it on or before the date hereof[; and][.]
[(iv) FOR REVOLVING LOANS: The amount of the proposed borrowing will
not cause the Total Utilization of Revolving Loan Commitments to exceed the
Revolving Loan Commitments.]
DATED: ____________________ OUTSOURCING SOLUTIONS INC.
By:__________________________________
Name:
Title:
<PAGE>
EXHIBIT II
[FORM OF NOTICE OF CONVERSION/CONTINUATION]
NOTICE OF CONVERSION/CONTINUATION
Pursuant to that certain Credit Agreement dated as of November 6, 1996, as
amended, restated, supplemented or otherwise modified to the date hereof (said
Credit Agreement, as so amended, restated, supplemented or otherwise modified,
being the "Credit Agreement", the terms defined therein and not otherwise
defined herein being used herein as therein defined), by and among Outsourcing
Solutions Inc., a Delaware corporation ("Company"), the financial institutions
listed therein as Lenders, Goldman Sachs Credit Partners L.P. and The Chase
Manhattan Bank, as Co-Administrative Agents, SunTrust Bank, Atlanta, as
Collateral Agent, and Goldman Sachs Credit Partners L.P. and Chase Securities
Inc., as Arranging Agents, this represents Company's request to convert or
continue Loans as follows:
1. Date of conversion/continuation: __________________, [199_] [200_]
2. Amount of Loans being converted/continued: $___________________
3. Type of Loans being converted/continued:
|_| a. Tranche A Term Loans
|_| b. Tranche B Term Loans
|_| c. Revolving Loans
4. Nature of conversion/continuation:
|_| a. Conversion of Base Rate Loans to Eurodollar Rate Loans
|_| b. Conversion of Eurodollar Rate Loans to Base Rate Loans
|_| c. Continuation of Eurodollar Rate Loans as such
5. If Loans are being continued as or converted to Eurodollar Rate Loans,
the duration of the new Interest Period that commences on the
conversion/ continuation date: _______________ month(s)
II-1
<PAGE>
In the case of a conversion to or continuation of Eurodollar Rate Loans,
the undersigned officer, to the best of his or her knowledge, and Company
certify that no Event of Default or Potential Event of Default has occurred and
is continuing under the Credit Agreement.
DATED: _____________________ OUTSOURCING SOLUTIONS INC.
By:______________________________________
Name:
Title:
II-2
<PAGE>
EXHIBIT III
[FORM OF NOTICE OF ISSUANCE OF LETTER OF CREDIT]
NOTICE OF ISSUANCE OF LETTER OF CREDIT
Pursuant to that certain Credit Agreement dated as of November 6, 1996, as
amended, restated, supplemented or otherwise modified to the date hereof (said
Credit Agreement, as so amended, restated, supplemented or otherwise modified,
being the "Credit Agreement", the terms defined therein and not otherwise
defined herein being used herein as therein defined), by and among Outsourcing
Solutions Inc., a Delaware corporation ("Company"), the financial institutions
listed therein as Lenders, Goldman Sachs Credit Partners L.P. and The Chase
Manhattan Bank, as Co-Administrative Agents, SunTrust Bank, Atlanta, as
Collateral Agent, and Goldman Sachs Credit Partners L.P. and Chase Securities
Inc., as Arranging Agents, this represents Company's request for the issuance of
a Letter of Credit by Chase Co-Administrative Agent as follows:
1. Date of issuance of Letter of Credit: ________________, [199_] [200_]
2. Type of Letter of Credit:
|_| a. Commercial Letter of Credit
|_| b. Standby Letter of Credit
3. Face amount of Letter of Credit: $________________________
4. Expiration date of Letter of Credit: ________________, [199_] [200_]
5. Name and address of beneficiary:
______________________________________________
______________________________________________
______________________________________________
______________________________________________
6. Attached hereto is:
|_| a. the verbatim text of such proposed Letter of Credit
|_| b. a description of the proposed terms and conditions of such
Letter of Credit, including a precise description of any
documents to be presented by the beneficiary which, if
presented by the beneficiary prior to the expiration date of
such Letter of Credit, would require the Issuing Lender to
make payment under such Letter of Credit.
III-1
<PAGE>
The undersigned officer, to the best of his or her knowledge, and Company
certify that:
(i) The representations and warranties contained in the Credit
Agreement and the other Loan Documents are true and correct in all material
respects on and as of the date hereof to the same extent as though made on
and as of the date hereof, except to the extent such representations and
warranties specifically relate to an earlier date, in which case such
representations and warranties were true and correct in all material
respects on and as of such earlier date;
(ii) No event has occurred and is continuing or would result from the
issuance of the Letter of Credit contemplated hereby that would constitute
an Event of Default or a Potential Event of Default;
(iii) Company has performed in all material respects all agreements
and satisfied all conditions which the Credit Agreement provides shall be
performed or satisfied by it on or before the date hereof; and
(iv) The issuance of the proposed Letter of Credit will not cause (a)
the Letter of Credit Usage to exceed $5,000,000 or (b) the Total
Utilization of Revolving Loan Commitments to exceed the Revolving Loan
Commitments.
DATED: ____________________ OUTSOURCING SOLUTIONS INC.
By:____________________________________
Name:
Title:
III-2
<PAGE>
EXHIBIT IV-A
[FORM OF TRANCHE A TERM NOTE]
OUTSOURCING SOLUTIONS INC.
PROMISSORY NOTE DUE OCTOBER 15, 2001
$[1] New York, New York
[Closing Date]
FOR VALUE RECEIVED, OUTSOURCING SOLUTIONS INC., a Delaware corporation
("Company"), promises to pay to [2] ("Payee") or its registered assigns the
principal amount of [3] ($[1]) in the installments referred to below.
Company also promises to pay interest on the unpaid principal amount
hereof, from the date hereof until paid in full, at the rates and at the times
which shall be determined in accordance with the provisions of that certain
Credit Agreement dated as of November 6, 1996, by and among Company, the
financial institutions listed therein as Lenders, Goldman Sachs Credit Partners
L.P. and The Chase Manhattan Bank ("Chase"), as Co-Administrative Agents (Chase,
in such capacity, "Chase Co-Administrative Agent"), SunTrust Bank, Atlanta, as
Collateral Agent, and Goldman Sachs Credit Partners L.P. and Chase Securities
Inc., as Arranging Agents (said Credit Agreement, as it may be amended,
restated, supplemented or otherwise modified from time to time, being the
"Credit Agreement", the terms defined therein and not otherwise defined herein
being used herein as therein defined).
Company shall make principal payments on this Note in consecutive quarterly
installments as set forth in the Credit Agreement, commencing on January 15,
1997 and ending on October 15, 2001. Each such installment shall be due on the
date specified in the Credit Agreement and in an amount determined in accordance
with the provisions thereof; provided that the last such installment shall be in
an amount sufficient to repay the entire unpaid principal balance of this Note,
together with all accrued and unpaid interest thereon.
- --------
[1] Insert amount of Lender's Tranche A Term Loan in numbers.
[2] Insert Lender's name in capital letters.
[3] Insert amount of Lender's Tranche A Term Loan in words.
IV-A-1
<PAGE>
This Note is one of Company's "Tranche A Term Notes" in the aggregate
principal amount of $71,000,000 and is issued pursuant to and entitled to the
benefits of the Credit Agreement, to which reference is hereby made for a more
complete statement of the terms and conditions under which the Tranche A Term
Loan evidenced hereby was made and is to be repaid.
All payments of principal and interest in respect of this Note shall be
made in lawful money of the United States of America in same day funds at the
Funding and Payment Office or at such other place as shall be designated in
writing for such purpose in accordance with the terms of the Credit Agreement.
Unless and until an Assignment Agreement effecting the assignment or transfer of
this Note shall have been accepted by Chase Co-Administrative Agent and recorded
in the Register as provided in subsection 10.1B(ii) of the Credit Agreement,
Company and Chase Co-Administrative Agent shall be entitled to deem and treat
Payee as the owner and holder of this Note and the Loan evidenced hereby. Payee
hereby agrees, by its acceptance hereof, that before disposing of this Note or
any part hereof it will make a notation hereon of all principal payments
previously made hereunder and of the date to which interest hereon has been
paid; provided, however, that the failure to make a notation of any payment made
on this Note shall not limit or otherwise affect the obligations of Company
hereunder with respect to payments of principal of or interest on this Note.
Whenever any payment on this Note shall be stated to be due on a day which
is not a Business Day, such payment shall be made on the next succeeding
Business Day and such extension of time shall be included in the computation of
the payment of interest on this Note.
This Note is subject to mandatory prepayment as provided in subsection
2.4B(iii) of the Credit Agreement and to prepayment at the option of Company as
provided in subsection 2.4B(i) of the Credit Agreement.
THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF COMPANY AND PAYEE HEREUNDER
SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT LIMITATION SECTION
5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD
TO CONFLICTS OF LAWS PRINCIPLES.
Upon the occurrence of an Event of Default, the unpaid balance of the
principal amount of this Note, together with all accrued and unpaid interest
thereon, may become, or may be declared to be, due and payable in the manner,
upon the conditions and with the effect provided in the Credit Agreement.
This Note is entitled to the benefits of the Guaranty and is secured
pursuant to the Collateral Documents.
The terms of this Note are subject to amendment only in the manner provided
in the Credit Agreement.
IV-A-2
<PAGE>
This Note is subject to restrictions on transfer or assignment as provided
in subsections 10.1 and 10.16 of the Credit Agreement.
No reference herein to the Credit Agreement and no provision of this Note
or the Credit Agreement shall alter or impair the obligations of Company, which
are absolute and unconditional, to pay the principal of and interest on this
Note at the place, at the respective times, and in the currency herein
prescribed.
Company promises to pay all costs and expenses, including reasonable
attorneys' fees, all as provided in subsection 10.2 of the Credit Agreement,
incurred in the collection and enforcement of this Note. Company and any
endorsers of this Note hereby consent to renewals and extensions of time at or
after the maturity hereof, without notice, and hereby waive diligence,
presentment, protest, demand and notice of every kind and, to the full extent
permitted by law, the right to plead any statute of limitations as a defense to
any demand hereunder.
IN WITNESS WHEREOF, Company has caused this Note to be duly executed and
delivered by its officer thereunto duly authorized as of the date and at the
place first written above.
OUTSOURCING SOLUTIONS INC.
By:_____________________________________
Name:
Title:
IV-A-3
<PAGE>
EXHIBIT IV-B
[FORM OF TRANCHE B TERM NOTE]
OUTSOURCING SOLUTIONS INC.
PROMISSORY NOTE DUE OCTOBER 15, 2003
$[1] New York, New York
[Closing Date]
FOR VALUE RECEIVED, OUTSOURCING SOLUTIONS INC., a Delaware corporation
("Company"), promises to pay to [2] ("Payee") or its registered assigns the
principal amount of [3] ($[1]) in the installments referred to below.
Company also promises to pay interest on the unpaid principal amount
hereof, from the date hereof until paid in full, at the rates and at the times
which shall be determined in accordance with the provisions of that certain
Credit Agreement dated as of November 6, 1996, by and among Company, the
financial institutions listed therein as Lenders, Goldman Sachs Credit Partners
L.P. and The Chase Manhattan Bank ("Chase"), as Co-Administrative Agents (Chase,
in such capacity, "Chase Co-Administrative Agent"), SunTrust Bank, Atlanta, as
Collateral Agent, and Goldman Sachs Credit Partners L.P. and Chase Securities
Inc., as Arranging Agents (said Credit Agreement, as it may be amended,
restated, supplemented or otherwise modified from time to time, being the
"Credit Agreement", the terms defined therein and not otherwise defined herein
being used herein as therein defined).
Company shall make principal payments on this Note in consecutive quarterly
installments as set forth in the Credit Agreement, commencing on January 15,
1997 and ending on October 15, 2003. Each such installment shall be due on the
date specified in the Credit Agreement and in an amount determined in accordance
with the provisions thereof; provided that the last such installment shall be in
an amount sufficient to repay the entire unpaid principal balance of this Note,
together with all accrued and unpaid interest thereon.
- --------
[1] Insert amount of Lender's Tranche B Term Loan in numbers.
[2] Insert Lender's name in capital letters.
[3] Insert amount of Lender's Tranche B Term Loan in words.
IV-B-1
<PAGE>
This Note is one of Company's "Tranche B Term Notes" in the aggregate
principal amount of $71,000,000 and is issued pursuant to and entitled to the
benefits of the Credit Agreement, to which reference is hereby made for a more
complete statement of the terms and conditions under which the Tranche B Term
Loan evidenced hereby was made and is to be repaid.
All payments of principal and interest in respect of this Note shall be
made in lawful money of the United States of America in same day funds at the
Funding and Payment Office or at such other place as shall be designated in
writing for such purpose in accordance with the terms of the Credit Agreement.
Unless and until an Assignment Agreement effecting the assignment or transfer of
this Note shall have been accepted by Chase Co-Administrative Agent and recorded
in the Register as provided in subsection 10.1B(ii) of the Credit Agreement,
Company and Chase Co-Administrative Agent shall be entitled to deem and treat
Payee as the owner and holder of this Note and the Loan evidenced hereby. Payee
hereby agrees, by its acceptance hereof, that before disposing of this Note or
any part hereof it will make a notation hereon of all principal payments
previously made hereunder and of the date to which interest hereon has been
paid; provided, however, that the failure to make a notation of any payment made
on this Note shall not limit or otherwise affect the obligations of Company
hereunder with respect to payments of principal of or interest on this Note.
Whenever any payment on this Note shall be stated to be due on a day which
is not a Business Day, such payment shall be made on the next succeeding
Business Day and such extension of time shall be included in the computation of
the payment of interest on this Note.
This Note is subject to mandatory prepayment as provided in subsection
2.4B(iii) of the Credit Agreement and to prepayment at the option of Company as
provided in subsection 2.4B(i) of the Credit Agreement.
THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF COMPANY AND PAYEE HEREUNDER
SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT LIMITATION SECTION
5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD
TO CONFLICTS OF LAWS PRINCIPLES.
Upon the occurrence of an Event of Default, the unpaid balance of the
principal amount of this Note, together with all accrued and unpaid interest
thereon, may become, or may be declared to be, due and payable in the manner,
upon the conditions and with the effect provided in the Credit Agreement.
This Note is entitled to the benefits of the Guaranty and is secured
pursuant to the Collateral Documents.
The terms of this Note are subject to amendment only in the manner provided
in the Credit Agreement.
IV-B-2
<PAGE>
This Note is subject to restrictions on transfer or assignment as provided
in subsections 10.1 and 10.16 of the Credit Agreement.
No reference herein to the Credit Agreement and no provision of this Note
or the Credit Agreement shall alter or impair the obligations of Company, which
are absolute and unconditional, to pay the principal of and interest on this
Note at the place, at the respective times, and in the currency herein
prescribed.
Company promises to pay all costs and expenses, including reasonable
attorneys' fees, all as provided in subsection 10.2 of the Credit Agreement,
incurred in the collection and enforcement of this Note. Company and any
endorsers of this Note hereby consent to renewals and extensions of time at or
after the maturity hereof, without notice, and hereby waive diligence,
presentment, protest, demand and notice of every kind and, to the full extent
permitted by law, the right to plead any statute of limitations as a defense to
any demand hereunder.
IN WITNESS WHEREOF, Company has caused this Note to be duly executed and
delivered by its officer thereunto duly authorized as of the date and at the
place first written above.
OUTSOURCING SOLUTIONS INC.
By:____________________________________
Name:
Title:
IV-B-3
<PAGE>
EXHIBIT V
[FORM OF REVOLVING NOTE]
OUTSOURCING SOLUTIONS INC.
PROMISSORY NOTE DUE OCTOBER 15, 2001
$[1] New York, New York
[Closing Date]
FOR VALUE RECEIVED, OUTSOURCING SOLUTIONS INC., a Delaware corporation
("Company"), promises to pay to the order of [2] ("Payee") or its registered
assigns, on or before October 15, 2001, the lesser of (x) [3] ($[1]) and (y) the
unpaid principal amount of all advances made by Payee to Company as Revolving
Loans under the Credit Agreement referred to below.
Company also promises to pay interest on the unpaid principal amount
hereof, from the date hereof until paid in full, at the rates and at the times
which shall be determined in accordance with the provisions of that certain
Credit Agreement dated as of November 6, 1996, by and among Company, the
financial institutions listed therein as Lenders, Goldman Sachs Credit Partners
L.P. and The Chase Manhattan Bank ("Chase"), as Co-Administrative Agents (Chase,
in such capacity, "Chase Co-Administrative Agent"), SunTrust Bank, Atlanta, as
Collateral Agent, and Goldman Sachs Credit Partners L.P. and Chase Securities
Inc., as Arranging Agents (said Credit Agreement, as it may be amended,
restated, supplemented or otherwise modified from time to time, being the
"Credit Agreement", the terms defined therein and not otherwise defined herein
being used herein as therein defined).
This Note is one of Company's "Revolving Notes" in the aggregate principal
amount of $58,000,000 and is issued pursuant to and entitled to the benefits of
the Credit Agreement, to which reference is hereby made for a more complete
statement of the terms and conditions under which the Revolving Loans evidenced
hereby were made and are to be repaid.
All payments of principal and interest in respect of this Note shall be
made in lawful money of the United States of America in same day funds at the
Funding and Payment Office
- --------
[1] Insert amount of Lender's Revolving Loan Commitment in numbers.
[2] Insert Lender's name in capital letters.
[3] Insert amount of Lender's Revolving Loan Commitment in words.
V-1
<PAGE>
or at such other place as shall be designated in writing for such purpose in
accordance with the terms of the Credit Agreement. Unless and until an
Assignment Agreement effecting the assignment or transfer of this Note shall
have been accepted by Chase Co-Administrative Agent and recorded in the Register
as provided in subsection 10.1B(ii) of the Credit Agreement, Company and Chase
Co-Administrative Agent shall be entitled to deem and treat Payee as the owner
and holder of this Note and the Loans evidenced hereby. Payee hereby agrees, by
its acceptance hereof, that before disposing of this Note or any part hereof it
will make a notation hereon of all principal payments previously made hereunder
and of the date to which interest hereon has been paid; provided, however, that
the failure to make a notation of any payment made on this Note shall not limit
or otherwise affect the obligations of Company hereunder with respect to
payments of principal of or interest on this Note.
Whenever any payment on this Note shall be stated to be due on a day which
is not a Business Day, such payment shall be made on the next succeeding
Business Day and such extension of time shall be included in the computation of
the payment of interest on this Note.
This Note is subject to mandatory prepayment as provided in subsection
2.4B(iii) of the Credit Agreement and to prepayment at the option of Company as
provided in subsection 2.4B(i) of the Credit Agreement.
THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF COMPANY AND PAYEE HEREUNDER
SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT LIMITATION SECTION
5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD
TO CONFLICTS OF LAWS PRINCIPLES.
Upon the occurrence of an Event of Default, the unpaid balance of the
principal amount of this Note, together with all accrued and unpaid interest
thereon, may become, or may be declared to be, due and payable in the manner,
upon the conditions and with the effect provided in the Credit Agreement.
This Note is entitled to the benefits of the Guaranty and is secured
pursuant to the Collateral Documents.
The terms of this Note are subject to amendment only in the manner provided
in the Credit Agreement.
This Note is subject to restrictions on transfer or assignment as provided
in subsections 10.1 and 10.16 of the Credit Agreement.
No reference herein to the Credit Agreement and no provision of this Note
or the Credit Agreement shall alter or impair the obligations of Company, which
are absolute and unconditional, to pay the principal of and interest on this
Note at the place, at the respective times, and in the currency herein
prescribed.
V-2
<PAGE>
Company promises to pay all costs and expenses, including reasonable
attorneys' fees, all as provided in subsection 10.2 of the Credit Agreement,
incurred in the collection and enforcement of this Note. Company and any
endorsers of this Note hereby consent to renewals and extensions of time at or
after the maturity hereof, without notice, and hereby waive diligence,
presentment, protest, demand and notice of every kind and, to the full extent
permitted by law, the right to plead any statute of limitations as a defense to
any demand hereunder.
IN WITNESS WHEREOF, Company has caused this Note to be duly executed and
delivered by its officer thereunto duly authorized as of the date and at the
place first written above.
OUTSOURCING SOLUTIONS INC.
By:___________________________________
Name:
Title:
V-3
<PAGE>
TRANSACTIONS
ON
REVOLVING NOTE
Outstanding
Type of Amount of Amount of Principal
Loan Made Loan Made Principal Paid Balance Notation
Date This Date This Date This Date This Date Made By
- ---- --------- --------- --------- --------- -------
V-4
<PAGE>
EXHIBIT VI
[FORM OF SWING LINE NOTE]
OUTSOURCING SOLUTIONS INC.
PROMISSORY NOTE DUE OCTOBER 15, 2001
$2,000,000.00 New York, New York
[Closing Date]
FOR VALUE RECEIVED, OUTSOURCING SOLUTIONS INC., a Delaware corporation
("Company"), promises to pay to THE CHASE MANHATTAN BANK ("Payee") or its
registered assigns, on or before October 15, 2001, the lesser of (x) Two Million
and no/100 Dollars ($2,000,000.00) and (y) the unpaid principal amount of all
advances made by Payee to Company as Swing Line Loans under the Credit Agreement
referred to below.
Company also promises to pay interest on the unpaid principal amount
hereof, from the date hereof until paid in full, at the rates and at the times
which shall be determined in accordance with the provisions of that certain
Credit Agreement dated as of November 6, 1996, by and among Company, the
financial institutions listed therein as Lenders, Goldman Sachs Credit Partners
L.P. and The Chase Manhattan Bank ("Chase"), as Co-Administrative Agents (Chase,
in such capacity, "Chase Co-Administrative Agent"), SunTrust Bank, Atlanta, as
Collateral Agent, and Goldman Sachs Credit Partners L.P. and Chase Securities
Inc., as Arranging Agents (said Credit Agreement, as it may be amended,
restated, supplemented or otherwise modified from time to time, being the
"Credit Agreement", the terms defined therein and not otherwise defined herein
being used herein as therein defined).
This Note is Company's "Swing Line Note" and is issued pursuant to and
entitled to the benefits of the Credit Agreement, to which reference is hereby
made for a more complete statement of the terms and conditions under which the
Swing Line Loans evidenced hereby were made and are to be repaid.
All payments of principal and interest in respect of this Note shall be
made in lawful money of the United States of America in same day funds at the
Funding and Payment Office or at such other place as shall be designated in
writing for such purpose in accordance with the terms of the Credit Agreement.
Whenever any payment on this Note shall be stated to be due on a day which
is not a Business Day, such payment shall be made on the next succeeding
Business Day and such extension of time shall be included in the computation of
the payment of interest on this Note.
VI-1
<PAGE>
This Note is subject to mandatory prepayment as provided in subsection
2.4B(iii) of the Credit Agreement and to prepayment at the option of Company as
provided in subsection 2.4B(i) of the Credit Agreement.
THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF COMPANY AND PAYEE HEREUNDER
SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT LIMITATION SECTION
5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD
TO CONFLICTS OF LAWS PRINCIPLES.
Upon the occurrence of an Event of Default, the unpaid balance of the
principal amount of this Note, together with all accrued and unpaid interest
thereon, may become, or may be declared to be, due and payable in the manner,
upon the conditions and with the effect provided in the Credit Agreement.
This Note is entitled to the benefits of the Guaranty and is secured
pursuant to the Collateral Documents.
The terms of this Note are subject to amendment only in the manner provided
in the Credit Agreement.
This Note is subject to restrictions on transfer or assignment as provided
in subsections 10.1 and 10.16 of the Credit Agreement.
No reference herein to the Credit Agreement and no provision of this Note
or the Credit Agreement shall alter or impair the obligations of Company, which
are absolute and unconditional, to pay the principal of and interest on this
Note at the place, at the respective times, and in the currency herein
prescribed.
Company promises to pay all costs and expenses, including reasonable
attorneys' fees, all as provided in subsection 10.2 of the Credit Agreement,
incurred in the collection and enforcement of this Note. Company and any
endorsers of this Note hereby consent to renewals and extensions of time at or
after the maturity hereof, without notice, and hereby waive diligence,
presentment, protest, demand and notice of every kind and, to the full extent
permitted by law, the right to plead any statute of limitations as a defense to
any demand hereunder.
[Remainder of page intentionally left blank]
VI-2
<PAGE>
IN WITNESS WHEREOF, Company has caused this Note to be duly executed and
delivered by its officer thereunto duly authorized as of the date and at the
place first written above.
OUTSOURCING SOLUTIONS INC.
By:__________________________________
Name:
Title:
VI-3
<PAGE>
TRANSACTIONS
ON
SWING LINE NOTE
Outstanding
Amount of Amount of Principal
Loan Made Principal Paid Balance Notation
Date This Date This Date This Date Made By
---- --------- --------- --------- -------
VI-4
<PAGE>
EXHIBIT VII
[FORM OF SUBSIDIARY GUARANTY]
SUBSIDIARY GUARANTY
This SUBSIDIARY GUARANTY is entered into as of November 6, 1996 by THE
UNDERSIGNED DIRECT AND INDIRECT DOMESTIC SUBSIDIARIES of Outsourcing Solutions
Inc., a Delaware corporation ("Company") (each such undersigned Subsidiary a
"Guarantor" and collectively, "Guarantors"; provided that after the Closing
Date, Guarantors shall be deemed to include any Additional Guarantors (as
hereinafter defined)), in favor of and for the benefit of SUNTRUST BANK,
ATLANTA, as agent for and representative of (in such capacity herein called
"Guarantied Party") the financial institutions ("Lenders") party to the Credit
Agreement referred to below and any Interest Rate Exchangers (as hereinafter
defined).
RECITALS
A. Company has entered into that certain Credit Agreement dated as of
November 6, 1996 (said Credit Agreement, as it may hereafter be amended,
restated, supplemented or otherwise modified from time to time, being the
"Credit Agreement"; capitalized terms defined therein and not otherwise defined
herein being used herein as therein defined) with Lenders, Goldman Sachs Credit
Partners L.P. and The Chase Manhattan Bank, as Co-Administrative Agents,
Guarantied Party, as Collateral Agent, and Goldman Sachs Credit Partners L.P.
and Chase Securities Inc., as Arranging Agents.
B. Company may from time to time enter, or may from time to time have
entered, into one or more Interest Rate Agreements (collectively, the "Lender
Interest Rate Agreements") with or one or more Lenders or their Affiliates (in
such capacity, collectively, "Interest Rate Exchangers") in accordance with the
terms of the Credit Agreement, and it is desired that the obligations of Company
under the Lender Interest Rate Agreements, including without limitation the
obligation of Company to make payments thereunder in the event of early
termination thereof (all such obligations being the "Interest Rate
Obligations"), together with all obligations of Company under the Credit
Agreement and the other Loan Documents, be guarantied hereunder.
C. A portion of the proceeds of the Loans may be advanced to Guarantors and
thus the Guarantied Obligations (as hereinafter defined) are being incurred for
and will inure to the benefit of Guarantors (which benefits are hereby
acknowledged).
D. It is a condition precedent to the making of the initial Loans under the
Credit Agreement that Company's obligations thereunder be guarantied by
Guarantors.
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E. Guarantors are willing irrevocably and unconditionally to guaranty such
obligations of Company.
NOW, THEREFORE, based upon the foregoing and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
in order to induce Lenders and Guarantied Party to enter into the Credit
Agreement and to make Loans and other extensions of credit thereunder and to
induce Interest Rate Exchangers to enter into the Lender Interest Rate
Agreements, Guarantors hereby agree as follows:
SECTION 1.
DEFINITIONS
1.1 Certain Defined Terms.
As used in this Guaranty, the following terms shall have the following
meanings unless the context otherwise requires:
"Beneficiaries" means Guarantied Party, Lenders and any Interest Rate
Exchangers.
"Guarantied Obligations" has the meaning assigned to that term in
subsection 2.1.
"Guaranty" means this Subsidiary Guaranty dated as of November 6,
1996, as it may be amended, restated, supplemented or otherwise modified
from time to time.
"payment in full", "paid in full" or any similar term means payment in
full of the Guarantied Obligations, including without limitation all
principal, interest, costs, fees and expenses (including without limitation
legal fees and expenses) of Beneficiaries as required under the Loan
Documents and the Lender Interest Rate Agreements.
1.2 Interpretation.
(a) References to "Sections" and "subsections" shall be to Sections and
subsections, respectively, of this Guaranty unless otherwise specifically
provided.
(b) In the event of any conflict or inconsistency between the terms,
conditions and provisions of this Guaranty and the terms, conditions and
provisions of the Credit Agreement, the terms, conditions and provisions of this
Guaranty shall prevail.
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SECTION 2.
THE GUARANTY
2.1 Guaranty of the Guarantied Obligations.
Subject to the provisions of subsection 2.2(a), Guarantors jointly and
severally hereby irrevocably and unconditionally guaranty the due and punctual
payment in full of all Guarantied Obligations when the same shall become due,
whether at stated maturity, by required prepayment, declaration, acceleration,
demand or otherwise (including amounts that would become due but for the
operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11
U.S.C. ss. 362(a)). The term "Guarantied Obligations" is used herein in its most
comprehensive sense and includes:
(a) any and all Obligations of Company and any and all Interest Rate
Obligations, in each case now or hereafter made, incurred or created,
whether absolute or contingent, liquidated or unliquidated, whether due or
not due, and however arising under or in connection with the Credit
Agreement and the other Loan Documents and the Lender Interest Rate
Agreements, including those arising under successive borrowing transactions
under the Credit Agreement which shall either continue the Obligations of
Company or from time to time renew them after they have been satisfied and
including interest which, but for the filing of a petition in bankruptcy
with respect to Company, would have accrued on any Guarantied Obligations,
whether or not a claim is allowed against Company for such interest in the
related bankruptcy proceeding; and
(b) those expenses set forth in subsection 2.8 hereof.
2.2 Limitation on Amount Guarantied; Contribution by Guarantors.
(a) Anything contained in this Guaranty to the contrary notwithstanding, if
any Fraudulent Transfer Law (as hereinafter defined) is determined by a court of
competent jurisdiction to be applicable to the obligations of any Guarantor
under this Guaranty, the obligations of such Guarantor hereunder shall be
limited to a maximum aggregate amount equal to the largest amount that would not
render its obligations hereunder subject to avoidance as a fraudulent transfer
or conveyance under Section 548 of Title 11 of the United States Code or any
applicable provisions of comparable state law (collectively, the "Fraudulent
Transfer Laws"), in each case after giving effect to all other liabilities of
such Guarantor, contingent or otherwise, that are relevant under the Fraudulent
Transfer Laws (specifically excluding, however, any liabilities of such
Guarantor (i) in respect of intercompany indebtedness to Company or other
affiliates of Company to the extent that such indebtedness would be discharged
in an amount equal to the amount paid by such Guarantor hereunder and (ii) under
any guaranty of Subordinated Indebtedness which guaranty contains a limitation
as to maximum amount similar to that set forth in this subsection 2.2(a),
pursuant to which the liability of such Guarantor hereunder is included in the
liabilities taken into account in determining such maximum amount) and after
giving effect as assets to the value (as determined under the applicable
provisions of the Fraudulent Transfer Laws) of any rights to subrogation,
reimbursement, indemnification or
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contribution of such Guarantor pursuant to applicable law or pursuant to the
terms of any agreement (including without limitation any such right of
contribution under subsection 2.2(b)).
(b) Guarantors under this Guaranty together desire to allocate among
themselves (collectively, the "Contributing Guarantors"), in a fair and
equitable manner, their obligations arising under this Guaranty. Accordingly, in
the event any payment or distribution is made on any date by any Guarantor under
this Guaranty (a "Funding Guarantor") that exceeds its Fair Share (as defined
below) as of such date, that Funding Guarantor shall be entitled to a
contribution from each of the other Contributing Guarantors in the amount of
such other Contributing Guarantor's Fair Share Shortfall (as defined below) as
of such date, with the result that all such contributions will cause each
Contributing Guarantor's Aggregate Payments (as defined below) to equal its Fair
Share as of such date. "Fair Share" means, with respect to a Contributing
Guarantor as of any date of determination, an amount equal to (i) the ratio of
(x) the Adjusted Maximum Amount (as defined below) with respect to such
Contributing Guarantor to (y) the aggregate of the Adjusted Maximum Amounts with
respect to all Contributing Guarantors multiplied by (ii) the aggregate amount
paid or distributed on or before such date by all Funding Guarantors under this
Guaranty in respect of the obligations guarantied. "Fair Share Shortfall" means,
with respect to a Contributing Guarantor as of any date of determination, the
excess, if any, of the Fair Share of such Contributing Guarantor over the
Aggregate Payments of such Contributing Guarantor. "Adjusted Maximum Amount"
means, with respect to a Contributing Guarantor as of any date of determination,
the maximum aggregate amount of the obligations of such Contributing Guarantor
under this Guaranty determined as of such date, in the case of any Guarantor, in
accordance with subsection 2.2(a); provided that, solely for purposes of
calculating the "Adjusted Maximum Amount" with respect to any Contributing
Guarantor for purposes of this subsection 2.2(b), any assets or liabilities of
such Contributing Guarantor arising by virtue of any rights to subrogation,
reimbursement or indemnification or any rights to or obligations of contribution
hereunder shall not be considered as assets or liabilities of such Contributing
Guarantor. "Aggregate Payments" means, with respect to a Contributing Guarantor
as of any date of determination, an amount equal to (i) the aggregate amount of
all payments and distributions made on or before such date by such Contributing
Guarantor in respect of this Guaranty (including in respect of this subsection
2.2(b)) minus (ii) the aggregate amount of all payments received on or before
such date by such Contributing Guarantor from the other Contributing Guarantors
as contributions under this subsection 2.2(b). The amounts payable as
contributions hereunder shall be determined as of the date on which the related
payment or distribution is made by the applicable Funding Guarantor. The
allocation among Contributing Guarantors of their obligations as set forth in
this subsection 2.2(b) shall not be construed in any way to limit the liability
of any Contributing Guarantor hereunder.
2.3 Payment by Guarantors; Application of Payments.
Subject to the provisions of subsection 2.2(a), Guarantors hereby jointly
and severally agree, in furtherance of the foregoing and not in limitation of
any other right which any Beneficiary may have at law or in equity against any
Guarantor by virtue hereof, that upon the failure of Company to pay any of the
Guarantied Obligations when and as the same shall become due, whether at stated
maturity, by required prepayment, declaration, acceleration, demand or
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otherwise (including amounts that would become due but for the operation of the
automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. ss.
362(a)), Guarantors will upon demand pay, or cause to be paid, in cash, to
Guarantied Party for the ratable benefit of Beneficiaries, an amount equal to
the sum of the unpaid principal amount of all Guarantied Obligations then due as
aforesaid, accrued and unpaid interest on such Guarantied Obligations (including
without limitation interest which, but for the filing of a petition in
bankruptcy with respect to Company, would have accrued on such Guarantied
Obligations, whether or not a claim is allowed against Company for such interest
in the related bankruptcy proceeding) and all other Guarantied Obligations then
owed to Beneficiaries as aforesaid. All such payments shall be applied promptly
from time to time by Guarantied Party as provided in subsection 2.4D of the
Credit Agreement.
2.4 Liability of Guarantors Absolute.
Each Guarantor agrees that its obligations hereunder are irrevocable,
absolute, independent and unconditional and shall not be affected by any
circumstance which constitutes a legal or equitable discharge of a guarantor or
surety other than payment in full of the Guarantied Obligations. In furtherance
of the foregoing and without limiting the generality thereof, each Guarantor
agrees as follows:
(a) This Guaranty is a guaranty of payment when due and not of
collectibility.
(b) Guarantied Party may enforce this Guaranty upon the occurrence of
an Event of Default under the Credit Agreement or the occurrence of an
Early Termination Date (as defined in a Master Agreement or an Interest
Rate Swap Agreement or Interest Rate and Currency Exchange Agreement in the
form prepared by the International Swap and Derivatives Association Inc. or
a similar event under any similar swap agreement) under any Lender Interest
Rate Agreement (either such occurrence being an "Event of Default" for
purposes of this Guaranty) notwithstanding the existence of any dispute
between Company and any Beneficiary with respect to the existence of such
Event of Default.
(c) The obligations of each Guarantor hereunder are independent of the
obligations of Company under the Loan Documents or the Lender Interest Rate
Agreements and the obligations of any other guarantor (including any other
Guarantor) of the obligations of Company under the Loan Documents or the
Lender Interest Rate Agreements, and a separate action or actions may be
brought and prosecuted against such Guarantor whether or not any action is
brought against Company or any of such other guarantors and whether or not
Company is joined in any such action or actions.
(d) Payment by any Guarantor of a portion, but not all, of the
Guarantied Obligations shall in no way limit, affect, modify or abridge any
Guarantor's liability for any portion of the Guarantied Obligations which
has not been paid. Without limiting the generality of the foregoing, if
Guarantied Party is awarded a judgment in any suit brought to enforce any
Guarantor's covenant to pay a portion of the Guarantied
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<PAGE>
Obligations, such judgment shall not be deemed to release such Guarantor
from its covenant to pay the portion of the Guarantied Obligations that is
not the subject of such suit, and such judgment shall not, except to the
extent satisfied by such Guarantor, limit, affect, modify or abridge any
other Guarantor's liability hereunder in respect of the Guarantied
Obligations.
(e) Any Beneficiary, upon such terms as it deems appropriate, without
notice or demand and without affecting the validity or enforceability of
this Guaranty or giving rise to any reduction, limitation, impairment,
discharge or termination of any Guarantor's liability hereunder, from time
to time may (i) renew, extend, accelerate, increase the rate of interest
on, or otherwise change the time, place, manner or terms of payment of the
Guarantied Obligations, (ii) settle, compromise, release or discharge, or
accept or refuse any offer of performance with respect to, or substitutions
for, the Guarantied Obligations or any agreement relating thereto and/or
subordinate the payment of the same to the payment of any other
obligations; (iii) request and accept other guaranties of the Guarantied
Obligations and take and hold security for the payment of this Guaranty or
the Guarantied Obligations; (iv) release, surrender, exchange, substitute,
compromise, settle, rescind, waive, alter, subordinate or modify, with or
without consideration, any security for payment of the Guarantied
Obligations, any other guaranties of the Guarantied Obligations, or any
other obligation of any Person (including any other Guarantor) with respect
to the Guarantied Obligations; (v) enforce and apply any security now or
hereafter held by or for the benefit of such Beneficiary in respect of this
Guaranty or the Guarantied Obligations and direct the order or manner of
sale thereof, or exercise any other right or remedy that such Beneficiary
may have against any such security, in each case as such Beneficiary in its
discretion may determine consistent with the Credit Agreement or the
applicable Lender Interest Rate Agreement and any applicable security
agreement, including foreclosure on any such security pursuant to one or
more judicial or nonjudicial sales, whether or not every aspect of any such
sale is commercially reasonable, and even though such action operates to
impair or extinguish any right of reimbursement or subrogation or other
right or remedy of any Guarantor against Company or any security for the
Guarantied Obligations; and (vi) exercise any other rights available to it
under the Loan Documents or the Lender Interest Rate Agreements.
(f) This Guaranty and the obligations of Guarantors hereunder shall be
valid and enforceable and shall not be subject to any reduction,
limitation, impairment, discharge or termination for any reason (other than
payment in full of the Guarantied Obligations), including without
limitation the occurrence of any of the following, whether or not any
Guarantor shall have had notice or knowledge of any of them: (i) any
failure or omission to assert or enforce or agreement or election not to
assert or enforce, or the stay or enjoining, by order of court, by
operation of law or otherwise, of the exercise or enforcement of, any claim
or demand or any right, power or remedy (whether arising under the Loan
Documents the Lender Interest Rate Agreements, at law, in equity or
otherwise) with respect to the Guarantied Obligations or any agreement
relating thereto, or with respect to any other guaranty of or security for
the payment of the Guarantied
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<PAGE>
Obligations; (ii) any rescission, waiver, amendment or modification of, or
any consent to departure from, any of the terms or provisions (including
without limitation provisions relating to events of default) of the Credit
Agreement, any of the other Loan Documents, any of the Lender Interest Rate
Agreements or any agreement or instrument executed pursuant thereto, or of
any other guaranty or security for the Guarantied Obligations, in each case
whether or not in accordance with the terms of the Credit Agreement or such
Loan Document, such Lender Interest Rate Agreement or any agreement
relating to such other guaranty or security; (iii) the Guarantied
Obligations, or any agreement relating thereto, at any time being found to
be illegal, invalid or unenforceable in any respect; (iv) the application
of payments received from any source (other than payments received pursuant
to the other Loan Documents or any of the Lender Interest Rate Agreements
or from the proceeds of any security for the Guarantied Obligations, except
to the extent such security also serves as collateral for indebtedness
other than the Guarantied Obligations) to the payment of indebtedness other
than the Guarantied Obligations, even though any Beneficiary might have
elected to apply such payment to any part or all of the Guarantied
Obligations; (v) any Beneficiary's consent to the change, reorganization or
termination of the corporate structure or existence of Company or any of
its Subsidiaries and to any corresponding restructuring of the Guarantied
Obligations; (vi) any failure to perfect or continue perfection of a
security interest in any collateral which secures any of the Guarantied
Obligations; (vii) any defenses, set-offs or counterclaims which Company
may allege or assert against any Beneficiary in respect of the Guarantied
Obligations, including, but not limited to, failure of consideration,
breach of warranty, payment, statute of frauds, statute of limitations,
accord and satisfaction and usury; and (viii) any other act or thing or
omission, or delay to do any other act or thing, which may or might in any
manner or to any extent vary the risk of any Guarantor as an obligor in
respect of the Guarantied Obligations.
2.5 Waivers by Guarantors.
Each Guarantor hereby waives, for the benefit of Beneficiaries:
(a) any right to require any Beneficiary, as a condition of payment or
performance by such Guarantor, to (i) proceed against Company, any other
guarantor (including any other Guarantor) of the Guarantied Obligations or
any other Person, (ii) proceed against or exhaust any security held from
Company, any such other guarantor or any other Person, (iii) proceed
against or have resort to any balance of any deposit account or credit on
the books of any Beneficiary in favor of Company or any other Person, or
(iv) pursue any other remedy in the power of any Beneficiary whatsoever;
(b) any defense arising by reason of the incapacity, lack of authority
or any disability or other defense of Company including without limitation
any defense based on or arising out of the lack of validity or the
unenforceability of the Guarantied Obligations or any agreement or
instrument relating thereto or by reason of the cessation
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of the liability of Company from any cause other than payment in full of
the Guarantied Obligations;
(c) any defense based upon any statute or rule of law which provides
that the obligation of a surety must be neither larger in amount nor in
other respects more burdensome than that of the principal;
(d) any defense based upon any Beneficiary's errors or omissions in
the administration of the Guarantied Obligations, except behavior which
amounts to bad faith;
(e) (i) any principles or provisions of law, statutory or otherwise,
which are or might be in conflict with the terms of this Guaranty and any
legal or equitable discharge of such Guarantor's obligations hereunder,
(ii) the benefit of any statute of limitations affecting such Guarantor's
liability hereunder or the enforcement hereof, (iii) any rights to
set-offs, recoupments and counterclaims, and (iv) promptness, diligence and
any requirement that any Beneficiary protect, secure, perfect or insure any
security interest or lien or any property subject thereto;
(f) notices, demands, presentments, protests, notices of protest,
notices of dishonor and notices of any action or inaction, including
acceptance of this Guaranty, notices of default under the Credit Agreement,
the Lender Interest Rate Agreements or any agreement or instrument related
thereto, notices of any renewal, extension or modification of the
Guarantied Obligations or any agreement related thereto, notices of any
extension of credit to Company and notices of any of the matters referred
to in subsection 2.4 and any right to consent to any thereof; and
(g) any defenses or benefits that may be derived from or afforded by
law which limit the liability of or exonerate guarantors or sureties, or
which may conflict with the terms of this Guaranty.
2.6 Guarantors' Rights of Subrogation, Contribution, Etc.
Until the Guarantied Obligations have been paid in full and the Commitments
terminated, each Guarantor hereby waives any claim, right or remedy, direct or
indirect, that such Guarantor now has or may hereafter have against Company or
any of its assets in connection with this Guaranty or the performance by such
Guarantor of its obligations hereunder, in each case whether such claim, right
or remedy arises in equity, under contract, by statute, under common law or
otherwise and including, without limitation, (a) any right of subrogation,
reimbursement or indemnification that such Guarantor now has or may hereafter
have against Company, (b) any right to enforce, or to participate in, any claim,
right or remedy that any Beneficiary now has or may hereafter have against
Company, and (c) any benefit of, and any right to participate in, any collateral
or security now or hereafter held by any Beneficiary. In addition, until the
Guarantied Obligations shall have been paid in full and the Commitments shall
have terminated and all Letters of Credit shall have expired or been cancelled,
each Guarantor shall withhold
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exercise of any right of contribution such Guarantor may have against any other
guarantor (including any other Guarantor) of the Guarantied Obligations
(including without limitation any such right of contribution under subsection
2.2(b)). Each Guarantor further agrees that, to the extent the waiver or
agreement to withhold the exercise of its rights of subrogation, reimbursement,
indemnification and contribution as set forth herein is found by a court of
competent jurisdiction to be void or voidable for any reason, any rights of
subrogation, reimbursement or indemnification such Guarantor may have against
Company or against any collateral or security, and any rights of contribution
such Guarantor may have against any such other guarantor, shall be junior and
subordinate to any rights any Beneficiary may have against Company, to all
right, title and interest any Beneficiary may have in any such collateral or
security, and to any right any Beneficiary may have against such other
guarantor. If any amount shall be paid to any Guarantor on account of any such
subrogation, reimbursement, indemnification or contribution rights at any time
when all Guarantied Obligations shall not have been paid in full, such amount
shall be held in trust for Guarantied Party on behalf of Beneficiaries and shall
forthwith be paid over to Guarantied Party for the benefit of Beneficiaries to
be credited and applied against the Guarantied Obligations, whether matured or
unmatured, in accordance with the terms hereof.
2.7 Subordination of Other Obligations.
Any indebtedness of Company or any Guarantor now or hereafter held by any
Guarantor (the "Obligee Guarantor") is hereby subordinated in right of payment
to the Guarantied Obligations, and any such indebtedness collected or received
by the Obligee Guarantor after an Event of Default has occurred and is
continuing shall be held in trust for Guarantied Party on behalf of
Beneficiaries and shall forthwith be paid over to Guarantied Party for the
benefit of Beneficiaries to be credited and applied against the Guarantied
Obligations but without affecting, impairing or limiting in any manner the
liability of the Obligee Guarantor under any other provision of this Guaranty.
2.8 Expenses.
Guarantors jointly and severally agree to pay, or cause to be paid, on
demand, and to save Beneficiaries harmless against liability for, any and all
costs and expenses (including fees and disbursements of counsel and allocated
costs of internal counsel) incurred or expended by any Beneficiary in connection
with the enforcement of or preservation of any rights under this Guaranty.
2.9 Continuing Guaranty.
This Guaranty is a continuing guaranty and shall remain in effect until all
of the Guarantied Obligations shall have been paid in full and the Commitments
shall have terminated and all Letters of Credit shall have expired or been
cancelled. Each Guarantor hereby irrevocably waives any right to revoke this
Guaranty as to future transactions giving rise to any Guarantied Obligations.
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2.10 Authority of Guarantors or Company.
It is not necessary for any Beneficiary to inquire into the capacity or
powers of any Guarantor or Company or the officers, directors or any agents
acting or purporting to act on behalf of any of them.
2.11 Financial Condition of Company.
Any Loans may be granted to Company or continued from time to time, and any
Lender Interest Rate Agreement may be entered into from time to time, in each
case without notice to or authorization from any Guarantor regardless of the
financial or other condition of Company at the time of any such grant or
continuation or at the time such Lender Interest Rate Agreement is entered into,
as the case may be. No Beneficiary shall have any obligation to disclose or
discuss with any Guarantor its assessment, or any Guarantor's assessment, of the
financial condition of Company. Each Guarantor has adequate means to obtain
information from Company on a continuing basis concerning the financial
condition of Company and its ability to perform its obligations under the Loan
Documents and the Lender Interest Rate Agreements, and each Guarantor assumes
the responsibility for being and keeping informed of the financial condition of
Company and of all circumstances bearing upon the risk of nonpayment of the
Guarantied Obligations. Each Guarantor hereby waives and relinquishes any duty
on the part of any Beneficiary to disclose any matter, fact or thing relating to
the business, operations or conditions of Company now known or hereafter known
by any Beneficiary.
2.12 Rights Cumulative.
The rights, powers and remedies given to Beneficiaries by this Guaranty are
cumulative and shall be in addition to and independent of all rights, powers and
remedies given to Beneficiaries by virtue of any statute or rule of law or in
any of the other Loan Documents, any of the Lender Interest Rate Agreements or
any agreement between any Guarantor and any Beneficiary or Beneficiaries or
between Company and any Beneficiary or Beneficiaries. Any forbearance or failure
to exercise, and any delay by any Beneficiary in exercising, any right, power or
remedy hereunder shall not impair any such right, power or remedy or be
construed to be a waiver thereof, nor shall it preclude the further exercise of
any such right, power or remedy.
2.13 Bankruptcy; Post-Petition Interest; Reinstatement of Guaranty.
(a) So long as any Guarantied Obligations remain outstanding, no Guarantor
shall, without the prior written consent of Guarantied Party acting pursuant to
the instructions of Requisite Obligees (as defined in subsection 3.14), commence
or join with any other Person in commencing any bankruptcy, reorganization or
insolvency proceedings of or against Company. The obligations of Guarantors
under this Guaranty shall not be reduced, limited, impaired, discharged,
deferred, suspended or terminated by any proceeding, voluntary or involuntary,
involving the bankruptcy, insolvency, receivership, reorganization, liquidation
or arrangement
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of Company or by any defense which Company may have by reason of the order,
decree or decision of any court or administrative body resulting from any such
proceeding.
(b) Each Guarantor acknowledges and agrees that any interest on any portion
of the Guarantied Obligations which accrues after the commencement of any
proceeding referred to in clause (a) above (or, if interest on any portion of
the Guarantied Obligations ceases to accrue by operation of law by reason of the
commencement of said proceeding, such interest as would have accrued on such
portion of the Guarantied Obligations if said proceedings had not been
commenced) shall be included in the Guarantied Obligations because it is the
intention of Guarantors and Beneficiaries that the Guarantied Obligations which
are guarantied by Guarantors pursuant to this Guaranty should be determined
without regard to any rule of law or order which may relieve Company of any
portion of such Guarantied Obligations. Guarantors will permit any trustee in
bankruptcy, receiver, debtor in possession, assignee for the benefit of
creditors or similar person to pay Guarantied Party, or allow the claim of
Guarantied Party in respect of, any such interest accruing after the date on
which such proceeding is commenced.
(c) In the event that all or any portion of the Guarantied Obligations are
paid by Company, the obligations of Guarantors hereunder shall continue and
remain in full force and effect or be reinstated, as the case may be, in the
event that all or any part of such payment(s) are rescinded or recovered
directly or indirectly from any Beneficiary as a preference, fraudulent transfer
or otherwise, and any such payments which are so rescinded or recovered shall
constitute Guarantied Obligations for all purposes under this Guaranty.
2.14 Notice of Events.
As soon as any Guarantor obtains knowledge thereof, such Guarantor shall
give Guarantied Party written notice of any condition or event which has
resulted in a breach of or noncompliance with any term, condition or covenant
contained herein.
2.15 Set Off.
In addition to any other rights any Beneficiary may have under law or in
equity, if any amount shall at any time be due and owing by any Guarantor to any
Beneficiary under this Guaranty, such Beneficiary is authorized at any time or
from time to time upon the occurrence and during the continuation of any Event
of Default, without notice (any such notice being hereby expressly waived), to
set off and to appropriate and to apply any and all deposits (general or
special, including, but not limited to, indebtedness evidenced by certificates
of deposit, whether matured or unmatured) and any other indebtedness of such
Beneficiary owing to such Guarantor and any other property of such Guarantor
held by any Beneficiary to or for the credit or the account of such Guarantor
against and on account of the Guarantied Obligations and liabilities of such
Guarantor to any Beneficiary under this Guaranty.
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2.16 Discharge of Guaranty Upon Sale of Guarantor.
If all of the stock of any Guarantor or any of its successors in interest
under this Guaranty shall be sold or otherwise disposed of (including by merger
or consolidation) in an Asset Sale not prohibited by subsection 7.7 of the
Credit Agreement or otherwise consented to by Requisite Lenders, the Guaranty of
such Guarantor or such successor in interest, as the case may be, hereunder
shall automatically be discharged and released without any further action by any
Beneficiary or any other Person effective as of the time of such Asset Sale;
provided that, as a condition precedent to such discharge and release,
Guarantied Party shall have received evidence satisfactory to it that
arrangements satisfactory to it have been made for delivery to Guarantied Party
of the applicable Net Cash Proceeds.
SECTION 3.
MISCELLANEOUS
3.1 Survival of Warranties.
All agreements, representations and warranties made herein shall survive
the and delivery of this Guaranty and the other Loan Documents and the Lender
Interest Rate Agreements and any increase in the Commitments under the Credit
Agreement.
3.2 Notices.
Any notice or other communication herein required or permitted to be given
shall be in writing and may be personally served, telexed or sent by
telefacsimile or United States mail or courier and shall be deemed to have been
given when delivered in person or by courier service, or upon receipt of
telefacsimile or telex (with received answerback) or three Business Days after
depositing it in the United States mail with postage pre-paid and properly
addressed; provided, notices to Guarantied Party shall not be effective until
received. For purposes hereof, the address of each party hereto shall be as set
forth under such party's name on the signature pages hereof or, as to any party,
such other address as shall be designated by such party in a written notice
delivered to the other parties hereto.
3.3 Severability.
In case any provision in or obligation under this Guaranty shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
3.4 Amendments and Waivers.
No amendment, modification, termination or waiver of any provision of this
Guaranty, and no consent to any departure by any Guarantor therefrom, shall in
any event be effective
VII-12
<PAGE>
without the written concurrence of Guarantied Party and, in the case of any such
amendment or modification, each Guarantor against whom enforcement of such
amendment or modification is sought. Any such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
it was given.
3.5 Headings.
Section and subsection headings in this Guaranty are included herein for
convenience of reference only and shall not constitute a part of this Guaranty
for any other purpose or be given any substantive effect.
3.6 Applicable Law; Rules of Construction.
THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS OF GUARANTORS AND
BENEFICIARIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK
(INCLUDING WITHOUT LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF
THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. The
rules of construction set forth in subsection 1.3 of the Credit Agreement shall
be applicable to this Guaranty mutatis mutandis.
3.7 Successors and Assigns.
This Guaranty is a continuing guaranty and shall be binding upon each
Guarantor and its respective successors and assigns. This Guaranty shall inure
to the benefit of Beneficiaries and their respective successors and assigns. No
Guarantor shall assign this Guaranty or any of the rights or obligations of such
Guarantor hereunder without the prior written consent of all Lenders. Any
Beneficiary may, without notice or consent, assign its interest in this Guaranty
in whole or in part. The terms and provisions of this Guaranty shall inure to
the benefit of any transferee or assignee of any Loan, and in the event of such
transfer or assignment the rights and privileges herein conferred upon such
Beneficiary shall automatically extend to and be vested in such transferee or
assignee, all subject to the terms and conditions hereof.
3.8 Consent to Jurisdiction and Service of Process.
ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY GUARANTOR ARISING OUT OF OR
RELATING TO THIS GUARANTY, OR ANY OBLIGATIONS HEREUNDER, MAY BE BROUGHT IN ANY
STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE, COUNTY AND CITY
OF NEW YORK. BY EXECUTING AND DELIVERING THIS GUARANTY, EACH GUARANTOR, FOR
ITSELF AND IN CONNECTION WITH ITS PROPERTIES, IRREVOCABLY (I) ACCEPTS GENERALLY
AND UNCONDITIONALLY THE NONEXCLUSIVE JURISDICTION AND VENUE OF SUCH COURTS; (II)
WAIVES ANY DEFENSE OF FORUM NON CONVENIENS; (III) AGREES THAT SERVICE OF ALL
PROCESS IN
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<PAGE>
ANY SUCH PROCEEDING IN ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED
MAIL, RETURN RECEIPT REQUESTED, TO SUCH GUARANTOR AT ITS ADDRESS PROVIDED IN
ACCORDANCE WITH SUBSECTION 3.2; (IV) AGREES THAT SERVICE AS PROVIDED IN CLAUSE
(III) ABOVE IS SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER SUCH GUARANTOR IN
ANY SUCH PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND
BINDING SERVICE IN EVERY RESPECT; (V) AGREES THAT BENEFICIARIES RETAIN THE RIGHT
TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS
AGAINST SUCH GUARANTOR IN THE COURTS OF ANY OTHER JURISDICTION; AND (VI) AGREES
THAT THE PROVISIONS OF THIS SUBSECTION 3.8 RELATING TO JURISDICTION AND VENUE
SHALL BE BINDING AND ENFORCEABLE TO THE FULLEST EXTENT PERMISSIBLE UNDER NEW
YORK GENERAL OBLIGATIONS LAW SECTION 5-1402 OR OTHERWISE.
3.9 Waiver of Trial by Jury.
EACH GUARANTOR AND, BY ITS ACCEPTANCE OF THE BENEFITS HEREOF, EACH
BENEFICIARY HEREBY AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY
CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS GUARANTY. The scope
of this waiver is intended to be all encompassing of any and all disputes that
may be filed in any court and that relate to the subject matter of this
transaction, including without limitation contract claims, tort claims, breach
of duty claims and all other common law and statutory claims. Each Guarantor
and, by its acceptance of the benefits hereof, each Beneficiary (i) acknowledges
that this waiver is a material inducement for such Guarantor and Beneficiaries
to enter into a business relationship, that such Guarantor and Beneficiaries
have already relied on this waiver in entering into this Guaranty or accepting
the benefits thereof, as the case may be, and that each will continue to rely on
this waiver in their related future dealings and (ii) further warrants and
represents that each has reviewed this waiver with its legal counsel, and that
each knowingly and voluntarily waives its jury trial rights following
consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY
NOT BE MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WRITTEN
WAIVER SPECIFICALLY REFERRING TO THIS SUBSECTION 3.9 AND EXECUTED BY GUARANTIED
PARTY AND EACH GUARANTOR), AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS GUARANTY. In the
event of litigation, this Guaranty may be filed as a written consent to a trial
by the court.
3.10 No Other Writing.
This writing is intended by Guarantors and Beneficiaries as the final
expression of this Guaranty and is also intended as a complete and exclusive
statement of the terms of their agreement with respect to the matters covered
hereby. No course of dealing, course of performance or trade usage, and no parol
evidence of any nature, shall be used to supplement
VII-14
<PAGE>
or modify any terms of this Guaranty. There are no conditions to the full
effectiveness of this Guaranty.
3.11 Further Assurances.
At any time or from time to time, upon the request of Guarantied Party,
Guarantors shall execute and deliver such further documents and do such other
acts and things as Guarantied Party may reasonably request in order to effect
fully the purposes of this Guaranty.
3.12 Additional Guarantors.
The initial Guarantors hereunder shall be such of the Subsidiaries of
Company as are signatories hereto on the date hereof. From time to time
subsequent to the date hereof, additional Subsidiaries of Company may become
parties hereto, as additional Guarantors (each an "Additional Guarantor"), by
executing a counterpart of this Guaranty. Upon delivery of any such counterpart
to Chase Co-Administrative Agent, notice of which is hereby waived by
Guarantors, each such Additional Guarantor shall be a Guarantor and shall be as
fully a party hereto as if such Additional Guarantor were an original signatory
hereof. Each Guarantor expressly agrees that its obligations arising hereunder
shall not be affected or diminished by the addition or release of any other
Guarantor hereunder, nor by any election of Chase Co-Administrative Agent not
to cause any Subsidiary of Company to become an Additional Guarantor hereunder.
This Guaranty shall be fully effective as to any Guarantor that is or becomes a
party hereto regardless of whether any other Person becomes or fails to become
or ceases to be a Guarantor hereunder.
3.13 Counterparts; Effectiveness.
This Guaranty may be executed in any number of counterparts and by the
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed to be an original for all purposes; but
all such counterparts together shall constitute but one and the same instrument.
This Guaranty shall become effective as to each Guarantor upon the of a
counterpart hereof by such Guarantor (whether or not a counterpart hereof shall
have been executed by any other Guarantor) and receipt by Guarantied Party of
written or telephonic notification of such and authorization of delivery
thereof.
3.14 Guarantied Party as Agent.
(a) Guarantied Party has been appointed to act as Guarantied Party
hereunder by Lenders and, by their acceptance of the benefits hereof, Interest
Rate Exchangers. Guarantied Party shall be obligated, and shall have the right
hereunder, to make demands, to give notices, to exercise or refrain from
exercising any rights, and to take or refrain from taking any action, solely in
accordance with this Guaranty and the Credit Agreement; provided that Guarantied
Party shall exercise, or refrain from exercising, any remedies hereunder in
accordance with the instructions of (i) Requisite Lenders or (ii) after payment
in full of all Obligations under the Credit Agreement and the other Loan
Documents, the holders of a majority of the aggregate
VII-15
<PAGE>
notional amount (or, with respect to any Lender Interest Rate Agreement that has
been terminated in accordance with its terms, the amount then due and payable
(exclusive of expenses and similar payments but including any early termination
payments then due) under such Lender Interest Rate Agreement) under all Lender
Interest Rate Agreements (Requisite Lenders or, if applicable, such holders
being referred to herein as "Requisite Obligees"). In furtherance of the
foregoing provisions of this subsection 3.14, each Interest Rate Exchanger, by
its acceptance of the benefits hereof, agrees that it shall have no right
individually to enforce this Guaranty, it being understood and agreed by such
Interest Rate Exchanger that all rights and remedies hereunder may be exercised
solely by Guarantied Party for the benefit of Beneficiaries in accordance with
the terms of this subsection 3.14.
(b) Guarantied Party shall at all times be the same Person that is
Collateral Agent under the Credit Agreement. Written notice of resignation by
Collateral Agent pursuant to subsection 9.5 of the Credit Agreement shall also
constitute notice of resignation as Guarantied Party under this Guaranty;
removal of Collateral Agent pursuant to subsection 9.5 of the Credit Agreement
shall also constitute removal as Guarantied Party under this Guaranty; and
appointment of a successor Collateral Agent pursuant to subsection 9.5 of the
Credit Agreement shall also constitute appointment of a successor Guarantied
Party under this Guaranty. Upon the acceptance of any appointment as Collateral
Agent under subsection 9.5 of the Credit Agreement by a successor Collateral
Agent, that successor Collateral Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring or
removed Guarantied Party under this Guaranty, and the retiring or removed
Guarantied Party under this Guaranty shall promptly (i) transfer to such
successor Guarantied Party all sums held hereunder, together with all records
and other documents necessary or appropriate in connection with the performance
of the duties of the successor Guarantied Party under this Guaranty, and (ii)
take such other actions as may be necessary or appropriate in connection with
the assignment to such successor Guarantied Party of the rights created
hereunder, whereupon such retiring or removed Guarantied Party shall be
discharged from its duties and obligations under this Guaranty. After any
retiring or removed Guarantied Party's resignation or removal hereunder as
Guarantied Party, the provisions of this Guaranty shall inure to its benefit as
to any actions taken or omitted to be taken by it under this Guaranty while it
was Guarantied Party hereunder.
[Remainder of page intentionally left blank]
VII-16
<PAGE>
IN WITNESS WHEREOF, each of the undersigned Guarantors has caused this
Guaranty to be duly executed and delivered by its officer thereunto duly
authorized as of the date first written above.
ALASKA FINANCIAL SERVICES, INC.
CFC SERVICES CORP.
THE CONTINENTAL ALLIANCE, INC.
SOUTHWEST CREDIT SERVICES, INC.
By:___________________________________
Name:
Title:
ACCOUNT PORTFOLIOS, L.P.
GULF STATE CREDIT, L.P.
PERIMETER CREDIT, L.P.
By: ACCOUNT PORTFOLIOS G.P., INC.,
general partner
By:______________________________
Name:
Title:
VII-17
<PAGE>
A.M. MILLER & ASSOCIATES, INC.
ACCOUNT PORTFOLIOS G.P., INC.
ACCOUNT PORTFOLIOS, INC.
ASSET RECOVERY & MANAGEMENT CORP.
FM SERVICES CORPORATION
FURST AND FURST, INC.
INDIANA MUTUAL CREDIT ASSOCIATION, INC.
JENNIFER LOOMIS & ASSOCIATES, INC.
NATIONAL ACCOUNT SYSTEMS, INC.
PAYCO AMERICAN CORPORATION
PAYCO AMERICAN INTERNATIONAL CORP.
PAYCO-GENERAL AMERICAN CREDITS, INC.
PROFESSIONAL RECOVERIES INC.
QUALINK, INC.
UNIVERSITY ACCOUNTING SERVICE, INC.
By:____________________________________
Name:
Title:
Notice Address for the foregoing
Guarantors:
300 Galleria Parkway
Suite 690
Atlanta, Georgia 30339
Attention: Chief Financial Officer
Facsimile: (770) 988-2910
with a copy to:
McCown De Leeuw & Co.
101 East 52nd Street
31st Floor
New York, New York 10022
Attention: Tyler T. Zachem
Facsimile: (212) 355-6283
(212) 355-6945
VII-18
<PAGE>
and a copy to:
White & Case
1155 Avenue of the Americas
New York, New York 10036
Attention: Frank L. Schiff, Esq.
Facsimile: (212) 819-7817
VII-19
<PAGE>
IN WITNESS WHEREOF, the undersigned Additional Guarantor has caused this
Guaranty to be duly executed and delivered by its officer thereunto duly
authorized as of ______________, [199_] [200_].
[NAME OF ADDITIONAL GUARANTOR]
By:___________________________________
Name:
Title:
Notice Address:
________________________________
________________________________
________________________________
________________________________
VII-20
<PAGE>
EXHIBIT VIII
[FORM OF PLEDGE AGREEMENT]
PLEDGE AGREEMENT
This PLEDGE AGREEMENT (this "Agreement") is dated as of November 6, 1996
and entered into by and among OUTSOURCING SOLUTIONS INC., a Delaware corporation
("Company"), each of THE UNDERSIGNED DIRECT AND INDIRECT DOMESTIC SUBSIDIARIES
of Company (each of such undersigned Subsidiaries being a "Subsidiary Pledgor"
and collectively "Subsidiary Pledgors", and each of Company and Subsidiary
Pledgors being a "Pledgor" and collectively "Pledgors"; provided that after the
Closing Date, "Pledgors" shall be deemed to include any Additional Pledgors (as
hereinafter defined)) and SUNTRUST BANK, ATLANTA, as agent for and
representative of (in such capacity herein called "Secured Party") the financial
institutions ("Lenders") party to the Credit Agreement referred to below and any
Interest Rate Exchangers (as hereinafter defined).
PRELIMINARY STATEMENTS
A. Pledgors are the legal and beneficial owners of (i) the shares of stock
(the "Pledged Shares") described in Part A of Schedule I annexed hereto and
issued by the corporations named therein and (ii) the indebtedness (the "Pledged
Debt") described in Part B of said Schedule I and issued by the obligors named
therein.
B. Pursuant to that certain Credit Agreement dated as of November 6, 1996
(said Credit Agreement, as it may hereafter be amended, restated, supplemented
or otherwise modified from time to time, being the "Credit Agreement", the terms
defined therein and not otherwise defined herein being used herein as therein
defined), by and among Company, Lenders, Goldman Sachs Credit Partners L.P. and
The Chase Manhattan Bank, as Co-Administrative Agents, Secured Party, as
Collateral Agent, and Goldman Sachs Credit Partners L.P. and Chase Securities
Inc., as Arranging Agents, Lenders have made certain commitments, subject to the
terms and conditions set forth in the Credit Agreement, to extend certain credit
facilities to Company.
C. Company may from time to time enter, or may from time to time have
entered, into one or more Interest Rate Agreement (collectively, the "Lender
Interest Rate Agreements") with one or more Lenders or their Affiliates (in such
capacity, collectively, "Interest Rate Exchangers") in accordance with the terms
of the Credit Agreement, and it is desired that the obligations of Company under
the Lender Interest Rate Agreements, including without limitation the obligation
of Company to make payments thereunder in the event of early termination thereof
(all such obligations being the "Interest Rate Obligations"), together with all
obligations of Company under the Credit Agreement and the other Loan Documents,
be secured hereunder.
VIII-1
<PAGE>
D. Subsidiary Pledgors have executed and delivered that certain Subsidiary
Guaranty dated as of November 6, 1996 (said Subsidiary Guaranty, as it may
hereafter be amended, restated, supplemented or otherwise modified from time to
time, being the "Guaranty") in favor of Secured Party for the benefit of Lenders
and any Interest Rate Exchangers, pursuant to which each Subsidiary Pledgor has
guarantied the prompt payment and performance when due of all obligations of
Company under the Credit Agreement and all obligations of Company under the
Lender Interest Rate Agreements, including without limitation the obligation of
Company to make payments thereunder in the event of early termination thereof.
E. It is a condition precedent to the initial extensions of credit by
Lenders under the Credit Agreement that each Pledgor shall have granted the
security interests and undertaken the obligations contemplated by this
Agreement.
NOW, THEREFORE, in consideration of the premises and in order to induce
Lenders to make Loans and other extensions of credit under the Credit Agreement
and to induce Interest Rate Exchangers to enter into Lender Interest Rate
Agreements, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, each Pledgor hereby agrees with
Secured Party as follows:
SECTION 1. Pledge of Security.
Each Pledgor hereby pledges and assigns to Secured Party, and hereby grants
to Secured Party a security interest in, all of Pledgor's right, title and
interest in and to the following (the "Pledged Collateral"):
(a) the Pledged Shares owned by such Pledgor and the certificates
representing such Pledged Shares and any interest of such Pledgor in the
entries on the books of any financial intermediary pertaining to such
Pledged Shares, and all dividends, cash, warrants, rights, instruments and
other property or proceeds from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of such
Pledged Shares; provided, however, that to the extent the issuer of any of
the Pledged Shares is a controlled foreign corporation (used hereinafter as
such term is defined in Section 957(a) or a successor provision of the
Internal Revenue Code of 1986, as amended from time to time), such Pledgor
shall only be required to pledge Pledged Shares of, certificates
representing Pledged Shares of, and such interests pertaining to Pledged
Shares of such issuer possessing up to but not exceeding 65% of the voting
power of all classes of capital stock entitled to vote of such issuer, and
all dividends, cash, warrants, rights, instruments and other property or
proceeds from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of such Pledged Shares;
(b) the Pledged Debt owned by such Pledgor and the instruments
evidencing such Pledged Debt, and all interest, cash, instruments and other
property or proceeds
VIII-2
<PAGE>
from time to time received, receivable or otherwise distributed in respect
of or in exchange for any or all of such Pledged Debt;
(c) all additional shares of, and all securities convertible into and
warrants, options and other rights to purchase or otherwise acquire, stock
of any issuer of any Pledged Shares from time to time acquired by such
Pledgor in any manner (which shares shall be deemed to be part of the
Pledged Shares), the certificates or other instruments representing such
additional shares, securities, warrants, options or other rights and any
interest of such Pledgor in the entries on the books of any financial
intermediary pertaining to such additional shares (all such shares,
securities, warrants, options, rights, certificates, instruments and
interests collectively being "Additional Pledged Shares"), and all
dividends, cash, warrants, rights, instruments and other property or
proceeds from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of such Additional Pledged Shares;
provided, however, that to the extent that the issuer of any Additional
Pledged Shares is a controlled foreign corporation, such Pledgor shall only
be required to pledge Additional Pledged Shares of such issuer possessing
up to but not exceeding 65% of the voting power of all classes of capital
stock entitled to vote of such issuer, and all dividends, cash, warrants,
rights, instruments and other property or proceeds from time to time
received, receivable or otherwise distributed in respect of or in exchange
for any or all of such Additional Pledged Shares;
(d) all additional indebtedness from time to time owed to such Pledgor
by any obligor on any Pledged Debt and the instruments evidencing such
indebtedness, and all interest, cash, instruments and other property or
proceeds from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of such indebtedness;
(e) all shares of, and all securities convertible into and warrants,
options and other rights to purchase or otherwise acquire, stock of any
Person that, after the date of this Agreement, becomes, as a result of any
occurrence, a direct Subsidiary of such Pledgor (which shares shall be
deemed to be part of the Pledged Shares), the certificates or other
instruments representing such shares, securities, warrants, options or
other rights and any interest of such Pledgor in the entries on the books
of any financial intermediary pertaining to such shares (all such shares,
securities, warrants, options, rights, certificates, instruments and
interests collectively being "New Pledged Shares"), and all dividends,
cash, warrants, rights, instruments and other property or proceeds from
time to time received, receivable or otherwise distributed in respect of or
in exchange for any or all of such shares, securities, warrants, options or
other rights; provided, however, that in the event that any such direct
Subsidiary is a controlled foreign corporation, such Pledgor shall only be
required to pledge New Pledged Shares of such Subsidiary possessing up to
but not exceeding 65% of the voting power of all classes of capital stock
entitled to vote of such Subsidiary, and all dividends, cash, warrants,
rights, instruments and other property or proceeds from time to time
received, receivable or
VIII-3
<PAGE>
otherwise distributed in respect of or in exchange for any or all of such
New Pledged Shares;
(f) all indebtedness from time to time owed to such Pledgor by any
Person that, after the date of this Agreement, becomes, as a result of such
any occurrence, a direct or indirect Subsidiary of such Pledgor, and all
interest, cash, instruments and other property or proceeds from time to
time received, receivable or otherwise distributed in respect of or in
exchange for any or all of such indebtedness; and
(g) to the extent not covered by clauses (a) through (f) above, all
proceeds of any or all of the foregoing Pledged Collateral. For purposes of
this Agreement, the term "proceeds" includes whatever is receivable or
received when Pledged Collateral or proceeds are sold, exchanged, collected
or otherwise disposed of, whether such disposition is voluntary or
involuntary, and includes, without limitation, proceeds of any indemnity or
guaranty payable to such Pledgor or Secured Party from time to time with
respect to any of the Pledged Collateral.
SECTION 2. Security for Obligations.
This Agreement secures, and the Pledged Collateral pledged and assigned by
each Pledgor is collateral security for, the prompt payment or performance in
full when due, whether at stated maturity, by required prepayment, declaration,
acceleration, demand or otherwise (including without limitation the payment of
amounts that would become due but for the operation of the automatic stay under
Section 362(a) of the Bankruptcy Code, 11 U.S.C. ss.362(a)), of all Secured
Obligations with respect to such Pledgor. "Secured Obligations" means
(a) with respect to Company, all obligations and liabilities of every
nature of Company now or hereafter existing under or arising out of or in
connection with the Credit Agreement and the other Loan Documents and any
Lender Interest Rate Agreements, and
(b) with respect to each Subsidiary Pledgor and Additional Pledgor,
all obligations and liabilities of every nature of Pledgors now or
hereafter existing under or arising out of or in connection with the
Guaranty,
in each case together with all extensions or renewals thereof, whether for
principal, interest (including without limitation interest that, but for the
filing of a petition in bankruptcy with respect to Company, would accrue on such
obligations, whether or not a claim is allowed against Company for such interest
in the related bankruptcy proceeding), reimbursement of amounts drawn under
Letters of Credit, payments for early termination of Lender Interest Rate
Agreements, fees, expenses, indemnities or otherwise, whether voluntary or
involuntary, direct or indirect, absolute or contingent, liquidated or
unliquidated, whether or not jointly owed with others, and whether or not from
time to time decreased or extinguished and later increased,
VIII-4
<PAGE>
created or incurred, and all or any portion of such obligations or liabilities
that are paid, to the extent all or any part of such payment is avoided or
recovered directly or indirectly from Secured Party or any Lender or Interest
Rate Exchanger as a preference, fraudulent transfer or otherwise, and all
obligations of every nature of Pledgors now or hereafter existing under this
Agreement.
SECTION 3. Delivery of Pledged Collateral.
All certificates or instruments representing or evidencing the Pledged
Collateral shall be delivered to and held by or on behalf of Secured Party
pursuant hereto and shall be in suitable form for transfer by delivery or, as
applicable, shall be accompanied by the appropriate Pledgor's endorsement, where
necessary, or duly executed instruments of transfer or assignment in blank, all
in form and substance satisfactory to Secured Party. Upon the occurrence and
during the continuation of an Event of Default (as defined in the Credit
Agreement) or the occurrence of an Early Termination Date (as defined in a
Master Agreement or an Interest Rate Swap Agreement or Interest Rate and
Currency Exchange Agreement in the form prepared by the International Swap and
Derivatives Association Inc. or a similar event under any similar swap
agreement) under any Lender Interest Rate Agreement (either such occurrence
being an "Event of Default" for purposes of this Agreement), Secured Party shall
have the right, without notice to any Pledgor, to transfer to or to register in
the name of Secured Party or any of its nominees any or all of the Pledged
Collateral, subject only to the revocable rights specified in Section 7(a). In
addition, Secured Party shall have the right at any time to exchange
certificates or instruments representing or evidencing Pledged Collateral for
certificates or instruments of smaller or larger denominations.
SECTION 4. Representations and Warranties.
Each Pledgor represents and warrants as follows:
(a) Due Authorization, etc. of Pledged Collateral. All of the Pledged
Shares owned by such Pledgor have been duly authorized and validly issued
and are fully paid and non-assessable. All of the Pledged Debt owned by
such Pledgor has been duly authorized, authenticated or issued, and
delivered and is the legal, valid and binding obligation of the issuers
thereof and is not in default.
(b) Description of Pledged Collateral. The Pledged Shares owned by
such Pledgor constitute the percentage of the issued and outstanding shares
of stock of each issuer thereof set forth on Schedule I annexed hereto, and
there are no outstanding warrants, options or other rights to purchase, or
other agreements outstanding with respect to, or property that is now or
hereafter convertible into, or that requires the issuance or sale of, any
Pledged Shares. The Pledged Debt owned by such Pledgor constitutes all of
the issued and outstanding intercompany indebtedness evidenced by a
promissory note of the respective issuers thereof owing to such Pledgor.
VIII-5
<PAGE>
(c) Ownership of Pledged Collateral. Such Pledgor is the legal, record
and beneficial owner of the Pledged Collateral owned by such Pledgor free
and clear of any Lien except for the security interest created by this
Agreement.
(d) Perfection. The pledge of the Pledged Collateral pursuant to this
Agreement creates a valid and perfected first priority security interest in
the Pledged Collateral, securing the payment of the Secured Obligations.
SECTION 5. Transfers and Other Liens; Additional Pledged Collateral; etc.
Each Pledgor shall:
(a) not, except as expressly permitted by the Credit Agreement, (i)
sell, assign (by operation of law or otherwise) or otherwise dispose of, or
grant any option with respect to, any of the Pledged Collateral, (ii)
create or suffer to exist any Lien upon or with respect to any of the
Pledged Collateral, except for the security interest under this Agreement,
or (iii) permit any issuer of Pledged Shares to merge or consolidate unless
all the outstanding capital stock of the surviving or resulting corporation
is, upon such merger or consolidation, pledged hereunder and no cash,
securities or other property is distributed in respect of the outstanding
shares of any other constituent corporation; provided that if the surviving
or resulting corporation upon any such merger or consolidation involving an
issuer of Pledged Shares which is a controlled foreign corporation is a
controlled foreign corporation, then such Pledgor shall only be required to
pledge outstanding capital stock of such surviving or resulting corporation
possessing up to but not exceeding 65% of the voting power of all classes
of capital stock of such issuer entitled to vote; provided further that in
the event any Pledgor makes an Asset Sale permitted by the Credit Agreement
and the assets subject to such Asset Sale are Pledged Shares, Secured Party
shall release the Pledged Shares that are the subject of such Asset Sale to
such Pledgor free and clear of the lien and security interest under this
Agreement concurrently with the consummation of such Asset Sale; and
provided further, that as a condition precedent to such release, Secured
Party shall have received evidence satisfactory to it that arrangements
satisfactory to it have been made for delivery to Secured Party of the Net
Cash Proceeds of such Asset Sale in the event and to the extent that all or
any portion of such Net Cash Proceeds are required to be applied to prepay
the Loans under the Credit Agreement.
(b) (i) cause each issuer of Pledged Shares not to issue any stock or
other securities in addition to or in substitution for the Pledged Shares
issued by such issuer, except to a Pledgor, (ii) pledge hereunder,
immediately upon its acquisition (directly or indirectly) thereof, any and
all additional shares of stock or other securities of each issuer of
Pledged Shares, and (iii) pledge hereunder, immediately upon its
acquisition (directly or indirectly) thereof, any and all shares of stock
of any Person that, after the date of this Agreement, becomes, as a result
of any occurrence, a direct Subsidiary of any Pledgor; provided, that
notwithstanding anything contained in this clause (b) to the contrary, such
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Pledgor shall only be required to pledge the outstanding capital stock of a
controlled foreign corporation possessing up to but not exceeding 65% of
the voting power of all classes of capital stock of such controlled foreign
corporation entitled to vote;
(c) (i) pledge hereunder, immediately upon their issuance, any and all
instruments or other evidences of additional indebtedness from time to time
owed to such Pledgor by any obligor on the Pledged Debt, and (ii) pledge
hereunder, immediately upon their issuance, any and all instruments or
other evidences of indebtedness from time to time owed to such Pledgor by
any Person that after the date of this Agreement becomes, as a result of
any occurrence, a direct or indirect Subsidiary of any Pledgor;
(d) promptly deliver to Secured Party all written notices received by
it with respect to the Pledged Collateral; and
(e) pay promptly when due all taxes, assessments and governmental
charges or levies imposed upon, and all claims against, the Pledged
Collateral, except to the extent the validity thereof is being contested in
good faith; provided that such Pledgor shall in any event pay such taxes,
assessments, charges, levies or claims not later than five days prior to
the date of any proposed sale under any judgement, writ or warrant of
attachment entered or filed against Pledgor or any of the Pledged
Collateral as a result of the failure to make such payment.
SECTION 6. Further Assurances; Pledge Amendments.
(a) Each Pledgor agrees that from time to time, at the expense of Pledgors,
such Pledgor will promptly execute and deliver all further instruments and
documents, and take all further action, that may be necessary or desirable, or
that Secured Party may request, in order to perfect and protect any security
interest granted or purported to be granted hereby or to enable Secured Party to
exercise and enforce its rights and remedies hereunder with respect to any
Pledged Collateral. Without limiting the generality of the foregoing, such
Pledgor will: (i) execute and file such financing or continuation statements, or
amendments thereto, and such other instruments or notices, as may be necessary
or desirable, or as Secured Party may request, in order to perfect and preserve
the security interests granted or purported to be granted hereby and (ii) at
Secured Party's request, appear in and defend any action or proceeding that may
affect such Pledgor's title to or Secured Party's security interest in all or
any part of the Pledged Collateral.
(b) Each Pledgor further agrees that it will, upon obtaining any additional
shares of stock or other securities required to be pledged hereunder as provided
in Section 5(b) or (c), promptly (and in any event within five Business Days)
deliver to Secured Party a Pledge Amendment, duly executed by such Pledgor, in
substantially the form of Schedule II annexed hereto (a "Pledge Amendment"), in
respect of the additional Pledged Shares or Pledged Debt to be pledged pursuant
to this Agreement. Each Pledgor hereby authorizes Secured Party to attach each
Pledge Amendment to this Agreement and agrees that all Pledged Shares or Pledged
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Debt listed on any such Pledge Amendment delivered to Secured Party shall for
all purposes hereunder be considered Pledged Collateral; provided that the
failure of a Pledgor to execute a Pledge Amendment with respect to any
additional Pledged Shares or Pledged Debt pledged pursuant to this Agreement
shall not impair the security interest of Secured Party therein or otherwise
adversely affect the rights and remedies of Secured Party hereunder with respect
thereto.
SECTION 7. Voting Rights; Dividends; Etc.
(a) Pledgors' Rights. So long as no Event of Default shall have occurred
and be continuing:
(i) Pledgors shall be entitled to exercise any and all voting and
other consensual rights pertaining to the Pledged Collateral or any part
thereof for any purpose not inconsistent with the terms of this Agreement
or the Credit Agreement;
(ii) Pledgors shall be entitled to receive and retain, and to utilize
free and clear of the lien of this Agreement, any and all dividends and
interest paid in respect of the Pledged Collateral; provided, however, that
any and all
(1) dividends and interest paid or payable other than in cash in
respect of, and instruments and other property received, receivable or
otherwise distributed in respect of, or in exchange for, any Pledged
Collateral,
(2) dividends and other distributions paid or payable in cash in
respect of any Pledged Collateral in connection with a partial or
total liquidation or dissolution or in connection with a reduction of
capital, capital surplus or paid-in-surplus, and
(3) cash paid, payable or otherwise distributed in respect of
principal or in redemption of or in exchange for any Pledged
Collateral,
shall be, and shall forthwith be delivered to Secured Party to hold as,
Pledged Collateral and shall, if received by a Pledgor, be received in
trust for the benefit of Secured Party, be segregated from the other
property or funds of such Pledgor and be forthwith delivered to Secured
Party as Pledged Collateral in the same form as so received (with all
necessary endorsements); and
(iii) Secured Party shall promptly execute and deliver (or cause to be
executed and delivered) to Pledgors all such proxies, dividend payment
orders and other instruments as Pledgors may from time to time reasonably
request for the purpose of enabling Pledgors to exercise the voting and
other consensual rights which they are entitled to exercise pursuant to
paragraph (i) above and to receive the dividends, principal
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or interest payments which they are authorized to receive and retain
pursuant to paragraph (ii) above.
(b) Secured Party's Rights. Upon acceleration of the maturity of the Loans
in accordance with Section 8 of the Credit Agreement and upon the occurrence and
during the continuation of an Event of Default:
(i) upon written notice from Secured Party to a Pledgor, all rights of
such Pledgor to exercise the voting and other consensual rights which it
would otherwise be entitled to exercise pursuant to Section 7(a)(i) shall
cease, and all such rights shall thereupon become vested in Secured Party
who shall thereupon have the sole right to exercise such voting and other
consensual rights;
(ii) all rights of Pledgors to receive the dividends and interest
payments which they would otherwise be authorized to receive and retain
pursuant to Section 7(a)(ii) shall cease, and all such rights shall
thereupon become vested in Secured Party who shall thereupon have the sole
right to receive and hold as Pledged Collateral such dividends and interest
payments; and
(iii) all dividends, principal and interest payments which are
received by a Pledgor contrary to the provisions of paragraph (ii) of this
Section 7(b) shall be received in trust for the benefit of Secured Party,
shall be segregated from other funds of such Pledgor and shall forthwith be
paid over to Secured Party as Pledged Collateral in the same form as so
received (with any necessary endorsements).
(c) Irrevocable Proxy. In order to permit Secured Party to exercise the
voting and other consensual rights which it may be entitled to exercise pursuant
to Section 7(b)(i) and to receive all dividends and other distributions which it
may be entitled to receive under Section 7(a)(ii) or Section 7(b)(ii), (i) each
Pledgor shall promptly execute and deliver (or cause to be executed and
delivered) to Secured Party all such proxies, dividend payment orders and other
instruments as Secured Party may from time to time reasonably request and (ii)
without limiting the effect of the immediately preceding clause (i), each
Pledgor hereby grants to Secured Party an IRREVOCABLE PROXY to vote the Pledged
Shares owned by such Pledgor and to exercise all other rights, powers,
privileges and remedies to which a holder of the Pledged Shares would be
entitled (including without limitation giving or withholding written consents of
shareholders, calling special meetings of shareholders and voting at such
meetings), which proxy shall be effective, automatically and without the
necessity of any action (including any transfer of any Pledged Shares on the
record books of the issuer thereof) by any other Person (including the issuer of
the Pledged Shares or any officer or agent thereof), upon the occurrence of an
Event of Default and which proxy shall only terminate upon the payment in full
of the Secured Obligations.
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<PAGE>
SECTION 8. Secured Party Appointed Attorney-in-Fact.
Each Pledgor hereby irrevocably appoints Secured Party as such Pledgor's
attorney-in-fact, with full authority in the place and stead of such Pledgor and
in the name of such Pledgor, Secured Party or otherwise, from time to time in
Secured Party's discretion to take any action and to execute any instrument that
Secured Party may deem necessary or advisable to accomplish the purposes of this
Agreement, including without limitation:
(a) to file one or more financing or continuation statements, or
amendments thereto, relative to all or any part of the Pledged Collateral
without the signature of such Pledgor;
(b) to ask, demand, collect, sue for, recover, compound, receive and
give acquittance and receipts for moneys due and to become due under or in
respect of any of the Pledged Collateral;
(c) to receive, endorse and collect any instruments made payable to
such Pledgor representing any dividend, principal or interest payment or
other distribution in respect of the Pledged Collateral or any part thereof
and to give full discharge for the same; and
(d) to file any claims or take any action or institute any proceedings
that Secured Party may deem necessary or desirable for the collection of
any of the Pledged Collateral or otherwise to enforce the rights of Secured
Party with respect to any of the Pledged Collateral.
SECTION 9. Secured Party May Perform.
If any Pledgor fails to perform any agreement contained herein, Secured
Party may itself perform, or cause performance of, such agreement, and the
expenses of Secured Party incurred in connection therewith shall be payable by
Pledgors under Section 13(b).
SECTION 10. Standard of Care.
The powers conferred on Secured Party hereunder are solely to protect its
interest in the Pledged Collateral and shall not impose any duty upon it to
exercise any such powers. Except for the exercise of reasonable care in the
custody of any Pledged Collateral in its possession and the accounting for
moneys actually received by it hereunder, Secured Party shall have no duty as to
any Pledged Collateral, it being understood that Secured Party shall have no
responsibility for (a) ascertaining or taking action with respect to calls,
conversions, exchanges, maturities, tenders or other matters relating to any
Pledged Collateral, whether or not Secured Party has or is deemed to have
knowledge of such matters, (b) taking any necessary steps (other than steps
taken in accordance with the standard of care set forth above to maintain
possession of the
VIII-10
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Pledged Collateral) to preserve rights against any parties with respect to any
Pledged Collateral, (c) taking any necessary steps to collect or realize upon
the Secured Obligations or any guarantee therefor, or any part thereof, or any
of the Pledged Collateral, or (d) initiating any action to protect the Pledged
Collateral against the possibility of a decline in market value. Secured Party
shall be deemed to have exercised reasonable care in the custody and
preservation of Pledged Collateral in its possession if such Pledged Collateral
is accorded treatment substantially equal to that which Secured Party accords
its own property consisting of negotiable securities.
SECTION 11. Remedies.
(a) If any Event of Default shall have occurred and be continuing, Secured
Party may exercise in respect of the Pledged Collateral, in addition to all
other rights and remedies provided for herein or otherwise available to it, all
the rights and remedies of a secured party on default under the Uniform
Commercial Code as in effect in any relevant jurisdiction (the "Code") (whether
or not the Code applies to the affected Pledged Collateral), and Secured Party
may also in its sole discretion, without notice except as specified below, sell
the Pledged Collateral or any part thereof in one or more parcels at public or
private sale, at any exchange or broker's board or at any of Secured Party's
offices or elsewhere, for cash, on credit or for future delivery, at such time
or times and at such price or prices and upon such other terms as Secured Party
may deem commercially reasonable, irrespective of the impact of any such sales
on the market price of the Pledged Collateral. Secured Party or any Lender or
Interest Rate Exchanger may be the purchaser of any or all of the Pledged
Collateral at any such sale and Secured Party, as agent for and representative
of Lenders and Interest Rate Exchangers (but not any Lender or Lenders or
Interest Rate Exchanger or Interest Rate Exchangers in its or their respective
individual capacities unless Requisite Obligees (as defined in Section 15(a))
shall otherwise agree in writing), shall be entitled, for the purpose of bidding
and making settlement or payment of the purchase price for all or any portion of
the Pledged Collateral sold at any such public sale, to use and apply any of the
Secured Obligations as a credit on account of the purchase price for any Pledged
Collateral payable by Secured Party at such sale. Each purchaser at any such
sale shall hold the property sold absolutely free from any claim or right on the
part of any Pledgor, and each Pledgor hereby waives (to the extent permitted by
applicable law) all rights of redemption, stay and/or appraisal which it now has
or may at any time in the future have under any rule of law or statute now
existing or hereafter enacted. Each Pledgor agrees that, to the extent notice of
sale shall be required by law, at least ten days' notice to such Pledgor of the
time and place of any public sale or the time after which any private sale is to
be made shall constitute reasonable notification. Secured Party shall not be
obligated to make any sale of Pledged Collateral regardless of notice of sale
having been given. Secured Party may adjourn any public or private sale from
time to time by announcement at the time and place fixed therefor, and such sale
may, without further notice, be made at the time and place to which it was so
adjourned. Each Pledgor hereby waives any claims against Secured Party arising
by reason of the fact that the price at which any Pledged Collateral may have
been sold at such a private sale was less than the price which might have been
obtained at a public sale, even if Secured Party accepts the first offer
received and does not offer such Pledged Collateral to more than one offeree. If
the proceeds of any sale or other disposition of the Pledged
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Collateral are insufficient to pay all the Secured Obligations, Pledgors shall
be jointly and severally liable for the deficiency and the fees of any attorneys
employed by Secured Party to collect such deficiency.
(b) Each Pledgor recognizes that, by reason of certain prohibitions
contained in the Securities Act and applicable state securities laws, Secured
Party may be compelled, with respect to any sale of all or any part of the
Pledged Collateral conducted without prior registration or qualification of such
Pledged Collateral under the Securities Act and/or such state securities laws,
to limit purchasers to those who will agree, among other things, to acquire the
Pledged Collateral for their own account, for investment and not with a view to
the distribution or resale thereof. Each Pledgor acknowledges that any such
private sales may be at prices and on terms less favorable than those obtainable
through a public sale without such restrictions and, notwithstanding such
circumstances, such Pledgor agrees that any such private sale shall be deemed to
have been made in a commercially reasonable manner and that Secured Party shall
have no obligation to engage in public sales and no obligation to delay the sale
of any Pledged Collateral for the period of time necessary to permit the issuer
thereof to register it for a form of public sale requiring registration under
the Securities Act or under applicable state securities laws, even if such
issuer would, or should, agree to so register it.
(c) If Secured Party determines to exercise its right to sell any or all of
the Pledged Collateral, upon written request, each Pledgor shall and shall cause
each issuer of any Pledged Shares owned by such Pledgor to be sold hereunder
from time to time to furnish to Secured Party all such information as Secured
Party may request in order to determine the number of shares and other
instruments included in the Pledged Collateral which may be sold by Secured
Party in exempt transactions under the Securities Act and the rules and
regulations of the Securities and Exchange Commission thereunder, as the same
are from time to time in effect.
SECTION 12. Application of Proceeds.
All proceeds received by Secured Party in respect of any sale of,
collection from, or other realization upon all or any part of the Pledged
Collateral shall be applied as provided in subsection 2.4D of the Credit
Agreement.
SECTION 13. Indemnity and Expenses.
(a) Pledgors jointly and severally agree to indemnify Secured Party, each
Lender and each Interest Rate Exchanger from and against any and all claims,
losses and liabilities in any way relating to, growing out of or resulting from
this Agreement and the transactions contemplated hereby (including without
limitation enforcement of this Agreement), except to the extent such claims,
losses or liabilities result solely from Secured Party's or such Lender's or
Interest Rate Exchanger's gross negligence or willful misconduct as finally
determined by a court of competent jurisdiction.
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(b) Pledgors jointly and severally agree to pay to Secured Party upon
demand the amount of any and all costs and expenses, including the reasonable
fees and expenses of its counsel and of any experts and agents, that Secured
Party may incur in connection with (i) the administration of this Agreement,
(ii) the custody or preservation of, or the sale of, collection from, or other
realization upon, any of the Pledged Collateral, (iii) the exercise or
enforcement of any of the rights of Secured Party hereunder, or (iv) the failure
by any Pledgor to perform or observe any of the provisions hereof.
(c) The obligations of Pledgors in this Section 13 shall survive the
termination of this Agreement and the discharge of Pledgors' other obligations
under this Agreement, the Lender Interest Rate Agreements, the Credit Agreement
and the other Loan Documents.
SECTION 14. Continuing Security Interest; Transfer of Loans.
This Agreement shall create a continuing security interest in the Pledged
Collateral and shall (a) remain in full force and effect until the payment in
full of all Secured Obligations, the cancellation or termination of the
Commitments and the cancellation or expiration of all outstanding Letters of
Credit, (b) be binding upon Pledgors and their respective successors and
assigns, and (c) inure, together with the rights and remedies of Secured Party
hereunder, to the benefit of Secured Party and its successors, transferees and
assigns. Without limiting the generality of the foregoing clause (c), but
subject to the provisions of subsection 10.1 of the Credit Agreement, any Lender
may assign or otherwise transfer any Loans held by it to any other Person, and
such other Person shall thereupon become vested with all the benefits in respect
thereof granted to Lenders herein or otherwise. Upon the payment in full of all
Secured Obligations, the cancellation or termination of the Commitments and the
cancellation or expiration of all outstanding Letters of Credit, the security
interest granted hereby shall terminate and all rights to the Pledged Collateral
shall revert to the applicable Pledgors. Upon any such termination Secured Party
will, at Pledgors' expense, execute and deliver to Pledgors such documents as
Pledgors shall reasonably request to evidence such termination and Pledgors
shall be entitled to the return, upon their request and at their expense,
against receipt and without recourse to Secured Party, of such of the Pledged
Collateral as shall not have been sold or otherwise applied pursuant to the
terms hereof.
SECTION 15. Secured Party as Agent.
(a) Secured Party has been appointed to act as Secured Party hereunder by
Lenders and, by their acceptance of the benefits hereof, Interest Rate
Exchangers. Secured Party shall be obligated, and shall have the right
hereunder, to make demands, to give notices, to exercise or refrain from
exercising any rights, and to take or refrain from taking any action (including
without limitation the release or substitution of Pledged Collateral), solely in
accordance with this Agreement and the Credit Agreement; provided that Secured
Party shall exercise, or refrain from exercising, any remedies provided for in
Section 11 in accordance with the instructions of (i) Requisite Lenders or (ii)
after payment in full of all Obligations under the Credit Agreement
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and the other Loan Documents, the holders of a majority of the aggregate
notional amount (or, with respect to any Lender Interest Rate Agreement that has
been terminated in accordance with its terms, the amount then due and payable
(exclusive of expenses and similar payments but including any early termination
payments then due) under such Lender Interest Rate Agreement) under all Lender
Interest Rate Agreements (Requisite Lenders or, if applicable, such holders
being referred to herein as "Requisite Obligees"). In furtherance of the
foregoing provisions of this Section 15(a), each Interest Rate Exchanger, by its
acceptance of the benefits hereof, agrees that it shall have no right
individually to realize upon any of the Pledged Collateral hereunder, it being
understood and agreed by such Interest Rate Exchanger that all rights and
remedies hereunder may be exercised solely by Secured Party for the benefit of
Lenders and Interest Rate Exchangers in accordance with the terms of this
Section 15(a).
(b) Secured Party shall at all times be the same Person that is Collateral
Agent under the Credit Agreement. Written notice of resignation by Collateral
Agent pursuant to subsection 9.5 of the Credit Agreement shall also constitute
notice of resignation as Secured Party under this Agreement; removal of
Collateral Agent pursuant to subsection 9.5 of the Credit Agreement shall also
constitute removal as Secured Party under this Agreement; and appointment of a
successor Collateral Agent pursuant to subsection 9.5 of the Credit Agreement
shall also constitute appointment of a successor Secured Party under this
Agreement. Upon the acceptance of any appointment as Collateral Agent under
subsection 9.5 of the Credit Agreement by a successor Collateral Agent, that
successor Collateral Agent shall thereupon succeed to and become vested with all
the rights, powers, privileges and duties of the retiring or removed Secured
Party under this Agreement, and the retiring or removed Secured Party under this
Agreement shall promptly (i) transfer to such successor Secured Party all sums,
securities and other items of Collateral held hereunder, together with all
records and other documents necessary or appropriate in connection with the
performance of the duties of the successor Secured Party under this Agreement,
and (ii) execute and deliver to such successor Secured Party such amendments to
financing statements, and take such other actions, as may be necessary or
appropriate in connection with the assignment to such successor Secured Party of
the security interests created hereunder, whereupon such retiring or removed
Secured Party shall be discharged from its duties and obligations under this
Agreement. After any retiring or removed Collateral Agent's resignation or
removal hereunder as Secured Party, the provisions of this Agreement shall inure
to its benefit as to any actions taken or omitted to be taken by it under this
Agreement while it was Secured Party hereunder.
SECTION 16. Amendments; Etc.
No amendment, modification, termination or waiver of any provision of this
Agreement, and no consent to any departure by any Pledgor therefrom, shall in
any event be effective unless the same shall be in writing and signed by Secured
Party and, in the case of any such amendment or modification, by Pledgors;
provided that any Pledge Amendment in the form of Schedule II annexed hereto or
any amendment hereto pursuant to Section 19 shall be effective upon by any
Pledgor and Pledgors hereby waive any requirement of notice of or
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consent to any such Pledge Amendment or amendment. Any such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which it was given.
SECTION 17. Notices.
Any notice or other communication herein required or permitted to be given
shall be in writing and may be personally served, telexed or sent by
telefacsimile or United States mail or courier service and shall be deemed to
have been given when delivered in person or by courier service, upon receipt of
telefacsimile or telex (with received answerback), or three Business Days after
depositing it in the United States mail with postage prepaid and properly
addressed; provided that notices to Secured Party shall not be effective until
received. For the purposes hereof, the address of each party hereto shall be as
provided in subsection 10.8 of the Credit Agreement or as set forth under such
party's name on the signature pages hereof or such other address as shall be
designated by such party in a written notice delivered to the other parties
hereto.
SECTION 18. Failure or Indulgence Not Waiver; Remedies Cumulative.
No failure or delay on the part of Secured Party in the exercise of any
power, right or privilege hereunder shall impair such power, right or privilege
or be construed to be a waiver of any default or acquiescence therein, nor shall
any single or partial exercise of any such power, right or privilege preclude
any other or further exercise thereof or of any other power, right or privilege.
All rights and remedies existing under this Agreement are cumulative to, and not
exclusive of, any rights or remedies otherwise available.
SECTION 19. Additional Pledgors.
The initial Subsidiary Pledgors hereunder shall be such of the Subsidiaries
of Company as are signatories hereto on the date hereof. From time to time
subsequent to the date hereof, additional Subsidiaries of Company may become
parties hereto, as additional Pledgors (each an "Additional Pledgor"), by
executing an acknowledgement to this Agreement substantially in the form of
Schedule III annexed hereto. Upon delivery of any such counterpart to Chase Co-
Administrative Agent and Secured Party, notice of which is hereby waived by
Pledgors, each such Additional Pledgor shall be a Pledgor and shall be as fully
a party hereto as if such Additional Pledgor were an original signatory hereto.
Each Pledgor expressly agrees that its obligations arising hereunder shall not
be affected or diminished by the addition or release of any other Pledgor
hereunder, nor by any election of Chase Co-Administrative Agent not to cause any
Subsidiary of Company to become an Additional Pledgor hereunder. This Agreement
shall be fully effective as to any Pledgor that is or becomes a party hereto
regardless of whether any other Person becomes or fails to become or ceases to
be a Pledgor hereunder.
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SECTION 20. Severability.
In case any provision in or obligation under this Agreement shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
SECTION 21. Headings.
Section and subsection headings in this Agreement are included herein for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose or be given any substantive effect.
SECTION 22. Governing Law; Terms; Rules of Construction.
THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER
SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT LIMITATION SECTION
5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD
TO CONFLICTS OF LAWS PRINCIPLES, EXCEPT TO THE EXTENT THAT THE CODE PROVIDES
THAT THE PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER,
IN RESPECT OF ANY PARTICULAR PLEDGED COLLATERAL ARE GOVERNED BY THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF NEW YORK. Unless otherwise defined herein
or in the Credit Agreement, terms used in Articles 8 and 9 of the Uniform
Commercial Code in the State of New York are used herein as therein defined. The
rules of construction set forth in subsection 1.3 of the Credit Agreement shall
be applicable to this Agreement mutatis mutandis.
SECTION 23. Consent to Jurisdiction and Service of Process.
ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY PLEDGOR ARISING OUT OF OR
RELATING TO THIS AGREEMENT, OR ANY OBLIGATIONS HEREUNDER, MAY BE BROUGHT IN ANY
STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE, COUNTY AND CITY
OF NEW YORK. BY EXECUTING AND DELIVERING THIS AGREEMENT, EACH PLEDGOR, FOR
ITSELF AND IN CONNECTION WITH ITS PROPERTIES, IRREVOCABLY (I) ACCEPTS GENERALLY
AND UNCONDITIONALLY THE NONEXCLUSIVE JURISDICTION AND VENUE OF SUCH COURTS; (II)
WAIVES ANY DEFENSE OF FORUM NON CONVENIENS; (III) AGREES THAT SERVICE OF ALL
PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH COURT MAY BE MADE BY REGISTERED OR
CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO SUCH PLEDGOR AT
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ITS ADDRESS PROVIDED IN ACCORDANCE WITH SECTION 17; (IV) AGREES THAT SERVICE AS
PROVIDED IN CLAUSE (III) ABOVE IS SUFFICIENT TO CONFER PERSONAL JURISDICTION
OVER SUCH PLEDGOR IN ANY SUCH PROCEEDING IN ANY SUCH COURT, AND OTHERWISE
CONSTITUTES EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT; (V) AGREES THAT
SECURED PARTY RETAINS THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED
BY LAW OR TO BRING PROCEEDINGS AGAINST SUCH PLEDGOR IN THE COURTS OF ANY OTHER
JURISDICTION; AND (VI) AGREES THAT THE PROVISIONS OF THIS SECTION 23 RELATING TO
JURISDICTION AND VENUE SHALL BE BINDING AND ENFORCEABLE TO THE FULLEST EXTENT
PERMISSIBLE UNDER NEW YORK GENERAL OBLIGATIONS LAW SECTION 5-1402 OR OTHERWISE.
SECTION 24. Waiver of Jury Trial.
PLEDGORS AND SECURED PARTY HEREBY AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO
A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
AGREEMENT. The scope of this waiver is intended to be all-encompassing of any
and all disputes that may be filed in any court and that relate to the subject
matter of this transaction, including without limitation contract claims, tort
claims, breach of duty claims, and all other common law and statutory claims.
Each Pledgor and Secured Party acknowledge that this waiver is a material
inducement for Pledgors and Secured Party to enter into a business relationship,
that Pledgors and Secured Party have already relied on this waiver in entering
into this Agreement and that each will continue to rely on this waiver in their
related future dealings. Each Pledgor and Secured Party further warrant and
represent that each has reviewed this waiver with its legal counsel, and that
each knowingly and voluntarily waives its jury trial rights following
consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY
NOT BE MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WRITTEN
WAIVER SPECIFICALLY REFERRING TO THIS SECTION 24 AND EXECUTED BY EACH OF THE
PARTIES HERETO), AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT. In the event of
litigation, this Agreement may be filed as a written consent to a trial by the
court.
SECTION 25. Counterparts.
This Agreement may be executed in one or more counterparts and by different
parties hereto in separate counterparts, each of which when so executed and
delivered shall be deemed an original, but all such counterparts together shall
constitute but one and the same instrument; signature pages may be detached from
multiple separate counterparts and attached to a single counterpart so that all
signature pages are physically attached to the same document.
VIII-17
<PAGE>
[Remainder of page intentionally left blank]
VIII-18
<PAGE>
IN WITNESS WHEREOF, Pledgors and Secured Party have caused this Agreement
to be duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
OUTSOURCING SOLUTIONS INC.
ALASKA FINANCIAL SERVICES, INC.
CFC SERVICES CORP.
THE CONTINENTAL ALLIANCE, INC.
SOUTHWEST CREDIT SERVICES, INC.
By:____________________________________
Name:
Title:
ACCOUNT PORTFOLIOS, L.P.
GULF STATE CREDIT, L.P.
PERIMETER CREDIT, L.P.
By: ACCOUNT PORTFOLIOS G.P., INC.,
general partner
By:_______________________________
Name:
Title:
VIII-19
<PAGE>
A.M. MILLER & ASSOCIATES, INC.
ACCOUNT PORTFOLIOS G.P., INC.
ACCOUNT PORTFOLIOS, INC.
ASSET RECOVERY & MANAGEMENT CORP.
FM SERVICES CORPORATION
FURST AND FURST, INC.
INDIANA MUTUAL CREDIT
ASSOCIATION, INC.
JENNIFER LOOMIS & ASSOCIATES, INC.
NATIONAL ACCOUNT SYSTEMS, INC.
PAYCO AMERICAN CORPORATION
PAYCO AMERICAN INTERNATIONAL CORP.
PAYCO-GENERAL AMERICAN CREDITS, INC.
PROFESSIONAL RECOVERIES INC.
QUALINK, INC.
UNIVERSITY ACCOUNTING SERVICE, INC.
By:____________________________________
Name:
Title:
Notice Address for the foregoing
Pledgors:
300 Galleria Parkway
Suite 690
Atlanta, Georgia 30339
Attention: Chief Financial Officer
Facsimile: (770) 988-2910
with a copy to:
McCown De Leeuw & Co.
101 East 52nd Street
31st Floor
New York, New York 10022
Attention: Tyler T. Zachem
Facsimile: (212) 355-6283
(212) 355-6945
VIII-20
<PAGE>
and a copy to:
White & Case
1155 Avenue of the Americas
New York, New York 10036
Attention: Frank L. Schiff, Esq.
Facsimile: (212) 819-7817
VIII-21
<PAGE>
SUNTRUST BANK, ATLANTA,
as Secured Party
By:____________________________________
Name:
Title:
By:____________________________________
Name:
Title:
VIII-22
<PAGE>
SCHEDULE I
TO PLEDGE AGREEMENT
Attached to and forming a part of the Pledge Agreement dated as of November
6, 1996, by and among the Pledgors referred to therein and SunTrust Bank,
Atlanta, as Secured Party.
Part A
================================================================================
Percent-
age of
Out-
Stock Number standing
Class of Certificate Par of Shares
Pledgor Stock Issuer Stock Nos. Value Shares Pledged
================================================================================
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
Part B
================================================================================
Pledgor Debt Issuer Amount of
Indebtedness
================================================================================
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
VIII-23
<PAGE>
SCHEDULE II
TO PLEDGE AGREEMENT
[FORM OF PLEDGE AMENDMENT]
This Pledge Amendment, dated _______________, [199_] [200_] is delivered
pursuant to Section 6(b) of the Pledge Agreement referred to below. The
undersigned hereby agrees that this Pledge Amendment may be attached to the
Pledge Agreement dated as of November 6, 1996, by and among the Pledgors
referred to therein and SunTrust Bank, Atlanta, as Secured Party (the "Pledge
Agreement", capitalized terms defined therein being used herein as therein
defined), and that the [Pledged Shares] [Pledged Debt] listed on this Pledge
Amendment shall be deemed to be part of the [Pledged Shares] [Pledged Debt] and
shall become part of the Pledged Collateral and shall secure all Secured
Obligations.
[NAME OF PLEDGOR]
By:_____________________________________
Name:
Title:
================================================================================
Percentage of
Class of Stock Par Number of Outstanding
Stock Issuer Stock Certificate Nos. Value Shares Shares Pledged
================================================================================
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
=====================================================
Amount of
Debt Issuer Indebtedness
=====================================================
-----------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
=====================================================
VIII-24
<PAGE>
SCHEDULE III
TO PLEDGE AGREEMENT
[FORM OF PLEDGE ACKNOWLEDGEMENT]
This Pledge Acknowledgement, dated _______________, [199_] [200_], is
delivered pursuant to Section 19 of the Pledge Agreement referred to below. The
undersigned hereby agrees that this Pledge Acknowledgement may be attached to
the Pledge Agreement dated November 6, 1996, by and among the Pledgors referred
to therein and SunTrust Bank, Atlanta, as Secured Party (the "Pledge Agreement",
capitalized terms defined therein being used herein as therein defined), that
the undersigned by executing and delivering this Acknowledgement hereby becomes
a Pledgor under the Pledge Agreement in accordance with Section 19 thereof and
agrees to be bound by all of the terms thereof, and that the [Pledged Shares]
[Pledged Debt] listed on this Pledge Acknowledgement shall be deemed to be part
of the [Pledged Shares] [Pledged Debt] and shall become part of the Pledged
Collateral and shall secure all Secured Obligations.
[NAME OF ADDITIONAL PLEDGOR]
By:_____________________________________
Name:
Title:
Notice Address:
VIII-25
<PAGE>
================================================================================
Percentage of
Class of Stock Par Number of Outstanding
Stock Issuer Stock Certificate Nos. Value Shares Shares Pledged
================================================================================
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
=====================================================
Amount of
Debt Issuer Indebtedness
=====================================================
-----------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
=====================================================
VIII-26
<PAGE>
EXHIBIT IX-A
[FORM OF SECURITY AGREEMENT]
SECURITY AGREEMENT
This SECURITY AGREEMENT (this "Agreement") is dated as of November 6, 1996
and entered into by and among OUTSOURCING SOLUTIONS INC., a Delaware corporation
("Company"), each of THE UNDERSIGNED DIRECT AND INDIRECT DOMESTIC SUBSIDIARIES
of Company (each of such undersigned Subsidiaries being a "Subsidiary Grantor"
and collectively "Subsidiary Grantors", and each of Company and Subsidiary
Grantors being a "Grantor" and collectively "Grantors"; provided that after the
Closing Date, "Grantors" shall include any Additional Grantors (as hereinafter
defined)) and SUNTRUST BANK, ATLANTA, as agent for and representative of (in
such capacity herein called "Secured Party") the financial institutions
("Lenders") party to the Credit Agreement referred to below and any Interest
Rate Exchangers (as hereinafter defined).
PRELIMINARY STATEMENTS
A. Pursuant to that certain Credit Agreement dated as of November 6, 1996
(said Credit Agreement, as it may hereafter be amended, restated, supplemented
or otherwise modified from time to time, being the "Credit Agreement", the terms
defined therein and not otherwise defined herein being used herein as therein
defined) by and among Company, Lenders, Goldman Sachs Credit Partners L.P. and
The Chase Manhattan Bank, as Co-Administrative Agents, Secured Party, as
Collateral Agent, and Goldman Sachs Credit Partners L.P. and Chase Securities
Inc., as Arranging Agents, Lenders have made certain commitments, subject to the
terms and conditions set forth in the Credit Agreement, to extend certain credit
facilities to Company.
B. Company may from time to time enter, or may from time to time have
entered, into one or more Interest Rate Agreement (collectively, the "Lender
Interest Rate Agreements") with one or more Lenders or their Affiliates (in such
capacity, collectively, "Interest Rate Exchangers") in accordance with the terms
of the Credit Agreement, and it is desired that the obligations of Company under
the Lender Interest Rate Agreements, including without limitation the obligation
of Company to make payments thereunder in the event of early termination thereof
(all such obligations being the "Interest Rate Obligations"), together with all
obligations of Company under the Credit Agreement and the other Loan Documents,
be secured hereunder.
C. Subsidiary Grantors have executed and delivered that certain Subsidiary
Guaranty dated as of November 6, 1996 (said Subsidiary Guaranty, as it may
hereafter be amended, restated, supplemented or otherwise modified from time to
time, being the "Guaranty") in favor of Secured Party for the benefit of Lenders
and any Interest Rate Exchangers, pursuant
IX-A-1
<PAGE>
to which Subsidiary Grantors have guarantied the prompt payment and performance
when due of all obligations of Company under the Credit Agreement and the other
Loan Documents and all obligations of Company under the Lender Interest Rate
Agreements, including without limitation the obligation of Company to make
payments thereunder in the event of early termination thereof.
D. It is a condition precedent to the initial extensions of credit by
Lenders under the Credit Agreement that Grantors shall have granted the security
interests and undertaken the obligations contemplated by this Agreement.
NOW, THEREFORE, in consideration of the premises and in order to induce
Lenders to make Loans and other extensions of credit under the Credit Agreement
and to induce Interest Rate Exchangers to enter into the Lender Interest Rate
Agreements, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, each Grantor hereby agrees with
Secured Party as follows:
SECTION 1. Grant of Security.
Each Grantor hereby assigns to Secured Party, and hereby grants to Secured
Party a security interest in, all of such Grantor's right, title and interest in
and to the following, in each case whether now or hereafter existing or in which
Grantor now has or hereafter acquires an interest and wherever the same may be
located (the "Collateral"):
(a) all equipment in all of its forms (including, but not limited to,
all machinery, all computers, all data processing, computer or office
equipment, all furniture and all trucks and other vehicles), all parts
thereof and all accessions thereto (any and all such equipment, parts and
accessions being the "Equipment");
(b) all inventory in all of its forms (including, but not limited to,
(i) all goods held by such Grantor for sale or lease or to be furnished
under contracts of service or so leased or furnished, (ii) all raw
materials, work in process, finished goods, and materials used or consumed
in the manufacture, packing, shipping, advertising, selling, leasing,
furnishing or production of such inventory or otherwise used or consumed in
such Grantor's business, (iii) all goods in which such Grantor has an
interest in mass or a joint or other interest or right of any kind, and
(iv) all goods which are returned to or repossessed by such Grantor) and
all accessions thereto and products thereof (all such inventory, accessions
and products being the "Inventory") and all negotiable and non-negotiable
documents of title (including without limitation warehouse receipts, dock
receipts and bills of lading) issued by any Person covering any Inventory
(any such negotiable document of title being a "Negotiable Document of
Title");
(c) all accounts, contract rights, chattel paper, documents,
instruments, general intangibles and other rights and obligations of any
kind owned by or owing to such Grantor and all rights in, to and under all
security agreements, leases and other
IX-A-2
<PAGE>
contracts securing or otherwise relating to any such accounts, contract
rights, chattel paper, documents, instruments, general intangibles or other
obligations (any and all such accounts, contract rights, chattel paper,
documents, instruments, general intangibles and other obligations being the
"Accounts", and any and all such security agreements, leases and other
contracts being the "Related Contracts");
(d) all agreements to which such Grantor is a party, as each such
agreement may be amended, restated, supplemented or otherwise modified from
time to time (said agreements, as so amended, restated, supplemented or
otherwise modified, being referred to herein individually as an "Assigned
Agreement" and collectively as the "Assigned Agreements"), including,
without limitation, (i) all rights of such Grantor to receive moneys due or
to become due under or pursuant to the Assigned Agreements, (ii) all rights
of such Grantor to receive proceeds of any insurance, indemnity, warranty
or guaranty with respect to the Assigned Agreements, (iii) all claims of
such Grantor for damages arising out of any breach of or default under the
Assigned Agreements, and (iv) all rights of such Grantor to terminate,
amend, supplement, modify or exercise rights or options under the Assigned
Agreements, to perform thereunder and to compel performance and otherwise
exercise all remedies thereunder;
(e) all cash, money, currency and deposit accounts, including without
limitation demand, time, savings, passbooks or similar accounts maintained
with Lenders or other banks, savings and loan associations or other
financial institutions (but excluding deposit accounts maintained in trust
by such Grantor or otherwise segregated from other funds of such Grantor
for the benefit of customers of such Grantor and containing only funds
owing to such customers);
(f) all trademarks, tradenames, tradesecrets, business names, patents,
patent applications, licenses, copyrights, registrations and franchise
rights owned by such Grantor, and all goodwill associated with any of the
foregoing;
(g) to the extent not included in any other paragraph of this Section
1, all other general intangibles (including without limitation tax refunds,
rights to payment or performance, choses in action and judgments taken on
any rights or claims included in the Collateral);
(h) all plant fixtures, business fixtures and other fixtures and
storage and office facilities, and all accessions thereto and products
thereof;
(i) all books, records, ledger cards, files, correspondence, computer
programs, tapes, disks and related data processing software that at any
time evidence or contain information relating to any of the Collateral or
are otherwise necessary or helpful in the collection thereof or realization
thereupon; and
(j) all proceeds, products, rents and profits of or from any and all
of the foregoing Collateral and, to the extent not otherwise included, all
payments under
IX-A-3
<PAGE>
insurance (whether or not Secured Party is the loss payee thereof), or any
indemnity, warranty or guaranty, payable by reason of loss or damage to or
otherwise with respect to any of the foregoing Collateral. For purposes of
this Agreement, the term "proceeds" includes whatever is receivable or
received when Collateral or proceeds are sold, exchanged, collected or
otherwise disposed of, whether such disposition is voluntary or
involuntary.
Notwithstanding anything herein to the contrary, in no event shall the
Collateral include, and no Grantor shall be deemed to have granted a security
interest in, any of such Grantor's rights or interests in any license, contract
or agreement to which such Grantor is a party or any of its rights or interests
thereunder to the extent, but only to the extent, that such a grant would, under
the terms of such license, contract or agreement or otherwise, result in a
breach of the terms of, or constitute a default under any license, contract or
agreement to which such Grantor is a party (other than to the extent that any
such term would be rendered ineffective pursuant to Section 9-318(4) of the
Uniform Commercial Code of any relevant jurisdiction or any other applicable law
(including the Bankruptcy Code) or principles of equity); provided, that
immediately upon the ineffectiveness, lapse or termination of any such
provision, the Collateral shall include, and such Grantor shall be deemed to
have granted a security interest in, all such rights and interests as if such
provision had never been in effect.
SECTION 2. Security for Obligations.
This Agreement secures, and the Collateral assigned by each Grantor is
collateral security for, the prompt payment or performance in full when due,
whether at stated maturity, by required prepayment, declaration, acceleration,
demand or otherwise (including without limitation the payment of amounts that
would become due but for the operation of the automatic stay under Section
362(a) of the Bankruptcy Code, 11 U.S.C. ss.362(a)), of all Secured Obligations
with respect to such Grantor. "Secured Obligations" means
(a) with respect to Company, all obligations and liabilities of every
nature of Company now or hereafter existing under or arising out of or in
connection with the Credit Agreement and the other Loan Documents and any
Lender Interest Rate Agreement, and
(b) with respect to each Subsidiary Grantor and Additional Grantor,
all obligations and liabilities of every nature of Grantors now or
hereafter existing under or arising out of or in connection with the
Guaranty,
in each case together with all extensions or renewals thereof, whether for
principal, interest (including without limitation interest that, but for the
filing of a petition in bankruptcy with respect to Company, would accrue on such
obligations, whether or not a claim is allowed against Company for such interest
in the related bankruptcy proceeding), reimbursement of amounts drawn under
Letters of Credit, payments for early termination of Lender Interest Rate
IX-A-4
<PAGE>
Agreements, fees, expenses, indemnities or otherwise, whether voluntary or
involuntary, direct or indirect, absolute or contingent, liquidated or
unliquidated, whether or not jointly owed with others, and whether or not from
time to time decreased or extinguished and later increased, created or incurred,
and all or any portion of such obligations or liabilities that are paid, to the
extent all or any part of such payment is avoided or recovered directly or
indirectly from Secured Party or any Lender or Interest Rate Exchanger as a
preference, fraudulent transfer or otherwise, and all obligations of every
nature of Grantors now or hereafter existing under this Agreement.
SECTION 3. Grantors Remain Liable.
Anything contained herein to the contrary notwithstanding, (a) each Grantor
shall remain liable under any contracts and agreements included in the
Collateral, to the extent set forth therein, to perform all of its duties and
obligations thereunder to the same extent as if this Agreement had not been
executed, (b) the exercise by Secured Party of any of its rights hereunder shall
not release any Grantor from any of its duties or obligations under the
contracts and agreements included in the Collateral, and (c) Secured Party shall
not have any obligation or liability under any contracts and agreements included
in the Collateral by reason of this Agreement, nor shall Secured Party be
obligated to perform any of the obligations or duties of any Grantor thereunder
or to take any action to collect or enforce any claim for payment assigned
hereunder.
SECTION 4. Representations and Warranties.
Each Grantor represents and warrants as follows:
(a) Ownership of Collateral. Except as expressly permitted by the
Credit Agreement and for the security interest created by this Agreement,
such Grantor owns the Collateral owned by such Grantor free and clear of
any Lien.
(b) Locations of Equipment and Inventory. All of the Equipment and
Inventory is, as of the date hereof, located at the places specified in
Schedule 4(b) annexed hereto.
(c) Negotiable Documents of Title. No Negotiable Documents of Title
are outstanding with respect to any of the Inventory.
(d) Office Locations. The chief place of business, the chief executive
office and the office where such Grantor keeps its records regarding the
Accounts and all originals of all chattel paper that evidence Accounts are,
and, except as set forth on Schedule 4(d) annexed hereto, have been for the
four month period preceding the date hereof, located at the locations set
forth on Schedule 4(d) annexed hereto.
IX-A-5
<PAGE>
(e) Names. No Grantor has in the past done, and no Grantor now does,
business under any other name (including any trade-name or fictitious
business name) except the names listed in Schedule 4(e) annexed hereto.
(f) Delivery of Certain Collateral. All notes and other instruments
(excluding checks) comprising any and all items of Collateral have been
delivered to Secured Party duly endorsed and accompanied by duly executed
instruments of transfer or assignment in blank.
(g) Perfection. The security interests in the Collateral granted to
Secured Party for the ratable benefit of the Lenders and Interest Rate
Exchangers hereunder constitute valid security interests in the Collateral.
Upon the filing of UCC financing statements naming each Grantor as
"debtor", naming Secured Party as "secured party" and describing the
Collateral in the filing offices set forth on Schedule 4(g) annexed hereto,
the security interests in the Collateral granted to Secured Party for the
ratable benefit of the Lenders and Interest Rate Exchangers will, to the
extent a security interest in the Collateral may be perfected by filing UCC
financing statements, constitute perfected security interests therein prior
to all other Liens.
SECTION 5. Further Assurances.
(a) Each Grantor agrees that from time to time, at the expense of Grantors,
such Grantor will promptly execute and deliver all further instruments and
documents, and take all further action, that may be necessary or desirable, or
that Secured Party may request, in order to perfect and protect any security
interest granted or purported to be granted hereby or to enable Secured Party to
exercise and enforce its rights and remedies hereunder with respect to any
Collateral. Without limiting the generality of the foregoing, each Grantor will:
(i) at the request of Secured Party, mark conspicuously each item of chattel
paper included in the Accounts, each Related Contract and, at the request of
Secured Party, each of its records pertaining to the Collateral, with a legend,
in form and substance satisfactory to Secured Party, indicating that such
Collateral is subject to the security interest granted hereby, (ii) at the
request of Secured Party, deliver and pledge to Secured Party hereunder all
promissory notes and other instruments (including checks) and all original
counterparts of chattel paper constituting Collateral, duly endorsed and
accompanied by duly executed instruments of transfer or assignment, all in form
and substance satisfactory to Secured Party, (iii) execute and file such
financing or continuation statements, or amendments thereto, and such other
instruments or notices, as may be necessary or desirable, or as Secured Party
may request, in order to perfect and preserve the security interests granted or
purported to be granted hereby, (iv) promptly after the acquisition by such
Grantor of any item of Equipment which is covered by a certificate of title
under a statute of any jurisdiction under the law of which indication of a
security interest on such certificate is required as a condition of perfection
thereof, execute and file with the registrar of motor vehicles or other
appropriate authority in such jurisdiction an application or other document
requesting the notation or other indication of the security interest created
hereunder on such certificate of title, (v) within 30 days after the end of each
calendar year and
IX-A-6
<PAGE>
June 30 of each calendar year, deliver to Agent copies of all such applications
or other documents filed during such semiannual period and copies of all such
certificates of title issued during such semiannual period indicating the
security interest created hereunder in the items of Equipment covered thereby,
(vi) at any reasonable time, upon request by Secured Party, exhibit the
Collateral to and allow inspection of the Collateral by Secured Party, or
persons designated by Secured Party, and (vii) at Secured Party's request,
appear in and defend any action or proceeding that may affect such Grantor's
title to or Secured Party's security interest in all or any part of the
Collateral.
(b) Each Grantor hereby authorizes Secured Party to file one or more
financing or continuation statements, and amendments thereto, relative to all or
any part of the Collateral without the signature of any Grantor. Each Grantor
agrees that a carbon, photographic or other reproduction of this Agreement or of
a financing statement signed by such Grantor shall be sufficient as a financing
statement and may be filed as a financing statement in any and all
jurisdictions.
(c) Each Grantor will furnish to Secured Party from time to time statements
and schedules further identifying and describing the Collateral and such other
reports in connection with the Collateral as Secured Party may reasonably
request, all in reasonable detail.
SECTION 6. Certain Covenants of Grantors.
Each Grantor shall:
(a) not use or permit any Collateral to be used unlawfully or in
violation of any provision of this Agreement or any applicable statute,
regulation or ordinance or any policy of insurance covering the Collateral;
(b) notify Secured Party of any change in such Grantor's name,
identity or corporate structure within 15 days of such change;
(c) give Secured Party 30 days' prior written notice of any change in
such Grantor's chief place of business, chief executive office or residence
or the office where such Grantor keeps its records regarding the Accounts
and all originals of all chattel paper that evidence Accounts; and
(d) pay promptly when due all property and other taxes, assessments
and governmental charges or levies imposed upon, and all claims (including
claims for labor, materials and supplies) against, the Collateral, except
to the extent the validity thereof is being contested in good faith;
provided that such Grantor shall in any event pay such taxes, assessments,
charges, levies or claims not later than five days prior to the date of any
proposed sale under any judgement, writ or warrant of attachment entered or
filed against such Grantor or any of the Collateral as a result of the
failure to make such payment.
IX-A-7
<PAGE>
SECTION 7. Special Covenants With Respect to Equipment and Inventory.
Each Grantor shall:
(a) keep the Equipment and Inventory owned by such Grantor at the
places therefor specified on Schedule 4(b) annexed hereto or, upon 30 days'
prior written notice to Secured Party, at such other places in
jurisdictions where all action that may be necessary or desirable, or that
Secured Party may request, in order to perfect and protect any security
interest granted or purported to be granted hereby, or to enable Secured
Party to exercise and enforce its rights and remedies hereunder, with
respect to such Equipment and Inventory shall have been taken;
(b) cause the Equipment owned by such Grantor to be maintained and
preserved in the same condition, repair and working order as when new,
ordinary wear and tear excepted, and in accordance with such Grantor's past
practices. Each Grantor shall promptly furnish to Secured Party a statement
respecting any material loss or damage to any of the Equipment owned by
such Grantor;
(c) keep correct and accurate records of Inventory owned by such
Grantor, itemizing and describing the kind, type and quantity of such
Inventory, such Grantor's cost therefor and (where applicable) the current
list prices for such Inventory;
(d) if any Inventory is in possession or control of any of such
Grantor's agents or processors, if the aggregate book value of all such
Inventory exceeds $500,000, and in any event upon the occurrence of an
Event of Default (as defined in the Credit Agreement) or the occurrence of
an Early Termination Date (as defined in a Master Agreement or an Interest
Rate Swap Agreement or Interest Rate and Currency Exchange Agreement in the
form prepared by the International Swap and Derivatives Association Inc. or
a similar event under any similar swap agreement) under any Lender Interest
Rate Agreement (either such occurrence being an "Event of Default" for
purposes of this Agreement), instruct such agent or processor to hold all
such Inventory for the account of Secured Party and subject to the
instructions of Secured Party.
(e) promptly upon the issuance and delivery to such Grantor of any
Negotiable Document of Title, deliver such Negotiable Document of Title to
Secured Party.
SECTION 8. Insurance.
Each Grantor shall, at its own expense, maintain insurance with respect to
the Equipment and Inventory in accordance with the terms of the Credit
Agreement.
IX-A-8
<PAGE>
SECTION 9. Special Covenants with respect to Accounts and Related Contracts.
(a) Each Grantor shall keep its chief place of business and chief executive
office and the office where it keeps its records concerning the Accounts and
Related Contracts, and all originals of all chattel paper that evidence
Accounts, at the location therefor specified in Section 4 or, upon 30 days'
prior written notice to Secured Party, at such other location in a jurisdiction
where all action that may be necessary or desirable, or that Secured Party may
request, in order to perfect and protect any security interest granted or
purported to be granted hereby, or to enable Secured Party to exercise and
enforce its rights and remedies hereunder, with respect to such Accounts and
Related Contracts shall have been taken. Each Grantor will hold and preserve
such records and chattel paper and will permit representatives of Secured Party
at any time during normal business hours to inspect and make abstracts from such
records and chattel paper, and each Grantor agrees to render to Secured Party,
at Grantor's cost and expense, such clerical and other assistance as may be
reasonably requested with regard thereto. Promptly upon the request of Secured
Party, each Grantor shall deliver to Secured Party complete and correct copies
of each Related Contract.
(b) Each Grantor shall, for not less than 3 years from the date on which
such Account arose, maintain (i) complete records of each Account of such
Grantor, including records of all payments received, credits granted and
merchandise returned, and (ii) all documentation relating thereto.
(c) Except as otherwise provided in this subsection (c), each Grantor shall
continue to collect, at its own expense, all amounts due or to become due to
such Grantor under the Accounts and Related Contracts. In connection with such
collections, each Grantor may take (and, at Secured Party's direction, shall
take) such action as such Grantor or Secured Party may deem necessary or
advisable to enforce collection of amounts due or to become due under the
Accounts; provided, however, that Secured Party shall have the right at any
time, upon the occurrence and during the continuation of an Event of Default or
a Potential Event of Default and upon written notice to such Grantor of its
intention to do so, to notify the account debtors or obligors under any Accounts
of the assignment of such Accounts to Secured Party and to direct such account
debtors or obligors to make payment of all amounts due or to become due to such
Grantor thereunder directly to Secured Party, to notify each Person maintaining
a lockbox or similar arrangement to which account debtors or obligors under any
Accounts have been directed to make payment to remit all amounts representing
collections on checks and other payment items from time to time sent to or
deposited in such lockbox or other arrangement directly to Secured Party and,
upon such notification and at the expense of Grantors, to enforce collection of
any such Accounts and to adjust, settle or compromise the amount or payment
thereof, in the same manner and to the same extent as such Grantor might have
done. After receipt by such Grantor of the notice from Secured Party referred to
in the proviso to the preceding sentence, (i) all amounts and proceeds
(including checks and other instruments) received by such Grantor in respect of
the Accounts and the Related Contracts shall be received in trust for the
benefit of Secured Party hereunder, shall be segregated from other funds of such
Grantor and shall be forthwith paid over or delivered to Secured Party in the
same form as so received (with any necessary endorsement) to be held as cash
Collateral and applied as provided
IX-A-9
<PAGE>
by Section 18, and (ii) such Grantor shall not adjust, settle or compromise the
amount or payment of any Account, or release wholly or partly any account debtor
or obligor thereof, or allow any credit or discount thereon.
SECTION 10. Special Provisions With Respect to the Assigned Agreements.
(a) Each Grantor shall at its expense:
(i) if consistent with sound business practices, perform and observe
all terms and provisions of the Assigned Agreements to be performed or
observed by it, maintain the Assigned Agreements in full force and effect,
enforce the Assigned Agreements in accordance with their terms, and take
all such action to such end as may be from time to time requested by
Secured Party; and
(ii) upon the reasonable request of Secured Party, furnish to Secured
Party, promptly upon receipt thereof, copies of all notices, requests and
other documents received by such Grantor under or pursuant to the Assigned
Agreements, and from time to time (A) furnish to Secured Party such
information and reports regarding the Assigned Agreements as Secured Party
may reasonably request and (B) upon request of Secured Party make to the
parties to such Assigned Agreements such demands and requests for
information and reports or for action as such Grantor is entitled to make
under the Assigned Agreements.
(b) Upon the occurrence and during the continuance of an Event of Default,
no Grantor shall:
(i) cancel or terminate any of the Assigned Agreements or consent to
or accept any cancellation or termination thereof;
(ii) amend or otherwise modify the Assigned Agreements or give any
consent, waiver or approval thereunder;
(iii) waive any default under or breach of the Assigned Agreements;
(iv) consent to or permit or accept any prepayment of amounts to
become due under or in connection with the Assigned Agreements, except as
expressly provided therein; or
(v) take any other action in connection with the Assigned Agreements
that would materially impair the value of the interest or rights of such
Grantor thereunder or that would materially impair the interest or rights
of Secured Party.
IX-A-10
<PAGE>
SECTION 11. Deposit Accounts.
Upon the occurrence and during the continuation of an Event of Default,
Secured Party may exercise dominion and control over, and refuse to permit
further withdrawals (whether of money, securities, instruments or other
property) from any deposit accounts maintained with Secured Party constituting
part of the Collateral.
SECTION 12. License of Patents, Trademarks, Copyrights, etc.
Each Grantor hereby assigns, transfers and conveys to Secured Party,
effective upon the occurrence of any Event of Default, the nonexclusive right
and license to use all trademarks, tradenames, copyrights, patents or technical
processes owned or used by such Grantor that relate to the Collateral and any
other collateral granted by such Grantor as security for the Secured
Obligations, together with any goodwill associated therewith, all to the extent
necessary to enable Secured Party to use, possess and realize on the Collateral
and to enable any successor or assign to enjoy the benefits of the Collateral.
This right and license shall inure to the benefit of all successors, assigns and
transferees of Secured Party and its successors, assigns and transferees,
whether by voluntary conveyance, operation of law, assignment, transfer,
foreclosure, deed in lieu of foreclosure or otherwise. Such right and license is
granted free of charge, without requirement that any monetary payment whatsoever
be made to such Grantor.
SECTION 13. Transfers and Other Liens.
No Grantor shall:
(a) sell, assign (by operation of law or otherwise) or otherwise
dispose of any of the Collateral, except as permitted by the Credit
Agreement; or
(b) except for the security interest created by this Agreement, create
or suffer to exist any Lien upon or with respect to any of the Collateral
to secure the indebtedness or other obligations of any Person.
SECTION 14. Secured Party Appointed Attorney-in-Fact.
Each Grantor hereby irrevocably appoints Secured Party as such Grantor's
attorney-in-fact, with full authority in the place and stead of such Grantor and
in the name of such Grantor, Secured Party or otherwise, from time to time in
Secured Party's discretion to take any action and to execute any instrument that
Secured Party may deem necessary or advisable to accomplish the purposes of this
Agreement, including without limitation:
IX-A-11
<PAGE>
(a) upon the occurrence and during the continuance of an Event of
Default, to obtain and adjust insurance required to be maintained by such
Grantor or paid to Secured Party pursuant to Section 8;
(b) upon the occurrence and during the continuance of an Event of
Default, to ask for, demand, collect, sue for, recover, compound, receive
and give acquittance and receipts for moneys due and to become due under or
in respect of any of the Collateral;
(c) upon the occurrence and during the continuance of an Event of
Default, to receive, endorse and collect any drafts or other instruments,
documents and chattel paper in connection with clauses (a) and (b) above;
(d) upon the occurrence and during the continuance of an Event of
Default, to file any claims or take any action or institute any proceedings
that Secured Party may deem necessary or desirable for the collection of
any of the Collateral or otherwise to enforce the rights of Secured Party
with respect to any of the Collateral;
(e) to pay or discharge taxes or Liens (other than Liens permitted
under this Agreement or the Credit Agreement) levied or placed upon or
threatened against the Collateral, the legality or validity thereof and the
amounts necessary to discharge the same to be determined by Secured Party
in its sole discretion, any such payments made by Secured Party to become
obligations of such Grantor to Secured Party, due and payable immediately
without demand;
(f) upon the occurrence and during the continuance of an Event of
Default, to sign and endorse any invoices, freight or express bills, bills
of lading, storage or warehouse receipts, drafts against debtors,
assignments, verifications and notices in connection with Accounts and
other documents relating to the Collateral; and
(g) upon the occurrence and during the continuance of an Event of
Default, generally to sell, transfer, pledge, make any agreement with
respect to or otherwise deal with any of the Collateral as fully and
completely as though Secured Party were the absolute owner thereof for all
purposes, and to do, at Secured Party's option and Grantors' expense, at
any time or from time to time, all acts and things that Secured Party deems
necessary to protect, preserve or realize upon the Collateral and Secured
Party's security interest therein in order to effect the intent of this
Agreement, all as fully and effectively as such Grantor might do.
SECTION 15. Secured Party May Perform.
If any Grantor fails to perform any agreement contained herein, Secured
Party may itself perform, or cause performance of, such agreement, and the
expenses of Secured Party incurred in connection therewith shall be payable by
such Grantor under Section 19(b).
IX-A-12
<PAGE>
SECTION 16. Standard of Care.
The powers conferred on Secured Party hereunder are solely to protect its
interest in the Collateral and shall not impose any duty upon it to exercise any
such powers. Except for the exercise of reasonable care in the custody of any
Collateral in its possession and the accounting for moneys actually received by
it hereunder, Secured Party shall have no duty as to any Collateral or as to the
taking of any necessary steps to preserve rights against prior parties or any
other rights pertaining to any Collateral. Secured Party shall be deemed to have
exercised reasonable care in the custody and preservation of Collateral in its
possession if such Collateral is accorded treatment substantially equal to that
which Secured Party accords its own property.
SECTION 17. Remedies.
If any Event of Default shall have occurred and be continuing, Secured
Party may exercise in respect of the Collateral, in addition to all other rights
and remedies provided for herein or otherwise available to it, all the rights
and remedies of a secured party on default under the Uniform Commercial Code as
in effect in any relevant jurisdiction (the "Code") (whether or not the Code
applies to the affected Collateral), and also may (a) require each Grantor to,
and each Grantor hereby agrees that it will at its expense and upon request of
Secured Party forthwith, assemble all or part of the Collateral as directed by
Secured Party and make it available to Secured Party at a place to be designated
by Secured Party that is reasonably convenient to both parties, (b) enter onto
the property where any Collateral is located and take possession thereof with or
without judicial process, (c) prior to the disposition of the Collateral, store,
process, repair or recondition the Collateral or otherwise prepare the
Collateral for disposition in any manner to the extent Secured Party deems
appropriate, (d) take possession of any Grantor's premises or place custodians
in exclusive control thereof, remain on such premises and use the same and any
of such Grantor's equipment for the purpose of completing any work in process,
taking any actions described in the preceding clause (c) and collecting any
Secured Obligation, and (e) without notice except as specified below, sell the
Collateral or any part thereof in one or more parcels at public or private sale,
at any of Secured Party's offices or elsewhere, for cash, on credit or for
future delivery, at such time or times and at such price or prices and upon such
other terms as Secured Party may deem commercially reasonable. Secured Party or
any Lender or Interest Rate Exchanger may be the purchaser of any or all of the
Collateral at any such sale and Secured Party, as agent for and representative
of Lenders and Interest Rate Exchangers (but not any Lender or Lenders or
Interest Rate Exchanger or Interest Rate Exchangers in its or their respective
individual capacities unless Requisite Obligees (as defined in Section 21(a))
shall otherwise agree in writing), shall be entitled, for the purpose of bidding
and making settlement or payment of the purchase price for all or any portion of
the Collateral sold at any such public sale, to use and apply any of the Secured
Obligations as a credit on account of the purchase price for any Collateral
payable by Secured Party at such sale. Each purchaser at any such sale shall
hold the property sold absolutely free from any claim or right on the part of
any Grantor, and each Grantor hereby waives (to the extent permitted by
applicable law) all rights of redemption, stay and/or appraisal which it now has
or may at any
IX-A-13
<PAGE>
time in the future have under any rule of law or statute now existing or
hereafter enacted. Each Grantor agrees that, to the extent notice of sale shall
be required by law, at least ten days' notice to such Grantor of the time and
place of any public sale or the time after which any private sale is to be made
shall constitute reasonable notification. Secured Party shall not be obligated
to make any sale of Collateral regardless of notice of sale having been given.
Secured Party may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so adjourned. Each
Grantor hereby waives any claims against Secured Party arising by reason of the
fact that the price at which any Collateral may have been sold at such a private
sale was less than the price which might have been obtained at a public sale,
even if Secured Party accepts the first offer received and does not offer such
Collateral to more than one offeree. If the proceeds of any sale or other
disposition of the Collateral are insufficient to pay all the Secured
Obligations, Grantors shall be jointly and severally liable for the deficiency
and the fees of any attorneys employed by Secured Party to collect such
deficiency.
SECTION 18. Application of Proceeds.
Except as expressly provided elsewhere in this Agreement, all proceeds
received by Secured Party in respect of any sale of, collection from, or other
realization upon all or any part of the Collateral shall be applied as provided
in subsection 2.4D of the Credit Agreement.
SECTION 19. Indemnity and Expenses.
(a) Grantors jointly and severally agree to indemnify Secured Party, each
Lender and each Interest Rate Exchanger from and against any and all claims,
losses and liabilities in any way relating to, growing out of or resulting from
this Agreement and the transactions contemplated hereby (including without
limitation enforcement of this Agreement), except to the extent such claims,
losses or liabilities result solely from Secured Party's or such Lender's or
Interest Rate Exchanger's gross negligence or willful misconduct as finally
determined by a court of competent jurisdiction.
(b) Grantors jointly and severally agree to pay to Secured Party upon
demand the amount of any and all costs and expenses, including the reasonable
fees and expenses of its counsel and of any experts and agents, that Secured
Party may incur in connection with (i) the administration of this Agreement,
(ii) the custody, preservation, use or operation of, or the sale of, collection
from, or other realization upon, any of the Collateral, (iii) the exercise or
enforcement of any of the rights of Secured Party hereunder, or (iv) the failure
by any Grantor to perform or observe any of the provisions hereof.
(c) The obligations of Grantors in this Section 19 shall survive the
termination of this Agreement and the discharge of Grantors' other obligations
under this Agreement, the Lender Interest Rate Agreements, the Credit Agreement
and the other Loan Documents.
IX-A-14
<PAGE>
SECTION 20. Continuing Security Interest; Transfer of Loans.
This Agreement shall create a continuing security interest in the
Collateral and shall (a) remain in full force and effect until the payment in
full of the Secured Obligations, the cancellation or termination of the
Commitments and the cancellation or expiration of all outstanding Letters of
Credit, (b) be binding upon Grantors and their respective successors and
assigns, and (c) inure, together with the rights and remedies of Secured Party
hereunder, to the benefit of Secured Party and its successors, transferees and
assigns. Without limiting the generality of the foregoing clause (c), but
subject to the provisions of subsection 10.1 of the Credit Agreement, any Lender
may assign or otherwise transfer any Loans held by it to any other Person, and
such other Person shall thereupon become vested with all the benefits in respect
thereof granted to Lenders herein or otherwise. Upon the payment in full of all
Secured Obligations, the cancellation or termination of the Commitments and the
cancellation or expiration of all outstanding Letters of Credit, the security
interest granted hereby shall terminate and all rights to the Collateral shall
revert to the applicable Grantors. Upon any such termination Secured Party will,
at Grantors' expense, execute and deliver to Grantors such documents as Grantors
shall reasonably request to evidence such termination.
SECTION 21. Secured Party as Agent.
(a) Secured Party has been appointed to act as Secured Party hereunder by
Lenders and, by their acceptance of the benefits hereof, Interest Rate
Exchangers. Secured Party shall be obligated, and shall have the right
hereunder, to make demands, to give notices, to exercise or refrain from
exercising any rights, and to take or refrain from taking any action (including
without limitation the release or substitution of Collateral), solely in
accordance with this Agreement and the Credit Agreement; provided that Secured
Party shall exercise, or refrain from exercising, any remedies provided for in
Section 17 in accordance with the instructions of (i) Requisite Lenders or (ii)
after payment in full of all Obligations under the Credit Agreement and the
other Loan Documents, the holders of a majority of the aggregate notional amount
(or, with respect to any Lender Interest Rate Agreement that has been terminated
in accordance with its terms, the amount then due and payable (exclusive of
expenses and similar payments but including any early termination payments then
due) under such Lender Interest Rate Agreement) under all Lender Interest Rate
Agreements (Requisite Lenders or, if applicable, such holders being referred to
herein as "Requisite Obligees"). In furtherance of the foregoing provisions of
this Section 21(a), each Interest Rate Exchanger, by its acceptance of the
benefits hereof, agrees that it shall have no right individually to realize upon
any of the Collateral hereunder, it being understood and agreed by such Interest
Rate Exchanger that all rights and remedies hereunder may be exercised solely by
Secured Party for the benefit of Lenders and Interest Rate Exchangers in
accordance with the terms of this Section 21(a).
(b) Secured Party shall at all times be the same Person that is Collateral
Agent under the Credit Agreement. Written notice of resignation by Collateral
Agent pursuant to subsection 9.5 of the Credit Agreement shall also constitute
notice of resignation as Secured Party under this Agreement; removal of
Collateral Agent pursuant to subsection 9.5 of the Credit Agreement
IX-A-15
<PAGE>
shall also constitute removal as Secured Party under this Agreement; and
appointment of a successor Collateral Agent pursuant to subsection 9.5 of the
Credit Agreement shall also constitute appointment of a successor Secured Party
under this Agreement. Upon the acceptance of any appointment as Collateral Agent
under subsection 9.5 of the Credit Agreement by a successor Collateral Agent,
that successor Collateral Agent shall thereupon succeed to and become vested
with all the rights, powers, privileges and duties of the retiring or removed
Secured Party under this Agreement, and the retiring or removed Secured Party
under this Agreement shall promptly (i) transfer to such successor Secured Party
all sums, securities and other items of Collateral held hereunder, together with
all records and other documents necessary or appropriate in connection with the
performance of the duties of the successor Secured Party under this Agreement,
and (ii) execute and deliver to such successor Secured Party such amendments to
financing statements, and take such other actions, as may be necessary or
appropriate in connection with the assignment to such successor Secured Party of
the security interests created hereunder, whereupon such retiring or removed
Secured Party shall be discharged from its duties and obligations under this
Agreement. After any retiring or removed Collateral Agent's resignation or
removal hereunder as Secured Party, the provisions of this Agreement shall inure
to its benefit as to any actions taken or omitted to be taken by it under this
Agreement while it was Secured Party hereunder.
SECTION 22. Additional Grantors.
The initial Subsidiary Grantors hereunder shall be such of the Subsidiaries
of Company as are signatories hereto on the date hereof. From time to time
subsequent to the date hereof, additional Subsidiaries of Company may become
parties hereto as additional Grantors (each an "Additional Grantor"), by
executing a counterpart of this Agreement. Upon delivery of any such counterpart
to Chase Co-Administrative Agent and Secured Party, notice of which is hereby
waived by Grantors, each such Additional Grantor shall be a Grantor and shall be
as fully a party hereto as if such Additional Grantor were an original signatory
hereto. Each Grantor expressly agrees that its obligations arising hereunder
shall not be affected or diminished by the addition or release of any other
Grantor hereunder, nor by any election of Chase Co-Administrative Agent not to
cause any Subsidiary of Company to become an Additional Grantor hereunder. This
Agreement shall be fully effective as to any Grantor that is or becomes a party
hereto regardless of whether any other Person becomes or fails to become or
ceases to be a Grantor hereunder.
SECTION 23. Amendments; Etc.
No amendment, modification, termination or waiver of any provision of this
Agreement, and no consent to any departure by any Grantor therefrom, shall in
any event be effective unless the same shall be in writing and signed by Secured
Party and, in the case of any such amendment or modification, by Grantors;
provided that any amendment hereto pursuant to Section 22 shall be effective
upon by any Additional Grantor and Grantors hereby waive any requirement of
notice of or consent to any such amendment. Any such waiver or
IX-A-16
<PAGE>
consent shall be effective only in the specific instance and for the specific
purpose for which it was given.
SECTION 24. Notices.
Any notice or other communication herein required or permitted to be given
shall be in writing and may be personally served, telexed or sent by
telefacsimile or United States mail or courier service and shall be deemed to
have been given when delivered in person or by courier service, upon receipt of
telefacsimile or telex (with received answerback), or three Business Days after
depositing it in the United States mail with postage prepaid and properly
addressed; provided that notices to Secured Party shall not be effective until
received. For the purposes hereof, the address of each party hereto shall be as
provided in subsection 10.8 of the Credit Agreement or as set forth under such
party's name on the signature pages hereof or such other address as shall be
designated by such party in a written notice delivered to the other parties
hereto.
SECTION 25. Failure or Indulgence Not Waiver; Remedies Cumulative.
No failure or delay on the part of Secured Party in the exercise of any
power, right or privilege hereunder shall impair such power, right or privilege
or be construed to be a waiver of any default or acquiescence therein, nor shall
any single or partial exercise of any such power, right or privilege preclude
any other or further exercise thereof or of any other power, right or privilege.
All rights and remedies existing under this Agreement are cumulative to, and not
exclusive of, any rights or remedies otherwise available.
SECTION 26. Severability.
In case any provision in or obligation under this Agreement shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
SECTION 27. Headings.
Section and subsection headings in this Agreement are included herein for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose or be given any substantive effect.
IX-A-17
<PAGE>
SECTION 28. Governing Law; Terms; Rules of Construction.
THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER
SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT LIMITATION SECTION
5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD
TO CONFLICTS OF LAWS PRINCIPLES, EXCEPT TO THE EXTENT THAT THE CODE PROVIDES
THAT THE PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER,
IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF NEW YORK. Unless otherwise defined herein
or in the Credit Agreement, terms used in Articles 8 and 9 of the Uniform
Commercial Code in the State of New York are used herein as therein defined. The
rules of construction set forth in subsection 1.3 of the Credit Agreement shall
be applicable to this Agreement mutatis mutandis.
SECTION 29. Consent to Jurisdiction and Service of Process.
ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY GRANTOR ARISING OUT OF OR
RELATING TO THIS AGREEMENT, OR ANY OBLIGATIONS HEREUNDER, MAY BE BROUGHT IN ANY
STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE, COUNTY AND CITY
OF NEW YORK. BY EXECUTING AND DELIVERING THIS AGREEMENT, EACH GRANTOR, FOR
ITSELF AND IN CONNECTION WITH ITS PROPERTIES, IRREVOCABLY (I) ACCEPTS GENERALLY
AND UNCONDITIONALLY THE NONEXCLUSIVE JURISDICTION AND VENUE OF SUCH COURTS; (II)
WAIVES ANY DEFENSE OF FORUM NON CONVENIENS; (III) AGREES THAT SERVICE OF ALL
PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH COURT MAY BE MADE BY REGISTERED OR
CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO SUCH GRANTOR AT ITS ADDRESS
PROVIDED IN ACCORDANCE WITH SECTION 24; (IV) AGREES THAT SERVICE AS PROVIDED IN
CLAUSE (III) ABOVE IS SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER SUCH
GRANTOR IN ANY SUCH PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES
EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT; (V) AGREES THAT SECURED PARTY
RETAINS THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO
BRING PROCEEDINGS AGAINST SUCH GRANTOR IN THE COURTS OF ANY OTHER JURISDICTION;
AND (VI) AGREES THAT THE PROVISIONS OF THIS SECTION 29 RELATING TO JURISDICTION
AND VENUE SHALL BE BINDING AND ENFORCEABLE TO THE FULLEST EXTENT PERMISSIBLE
UNDER NEW YORK GENERAL OBLIGATIONS LAW SECTION 5-1402 OR OTHERWISE.
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<PAGE>
SECTION 30. Waiver of Jury Trial.
GRANTORS AND SECURED PARTY HEREBY AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO
A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
AGREEMENT. The scope of this waiver is intended to be all-encompassing of any
and all disputes that may be filed in any court and that relate to the subject
matter of this transaction, including without limitation contract claims, tort
claims, breach of duty claims, and all other common law and statutory claims.
Each Grantor and Secured Party acknowledge that this waiver is a material
inducement for Grantors and Secured Party to enter into a business relationship,
that Grantors and Secured Party have already relied on this waiver in entering
into this Agreement and that each will continue to rely on this waiver in their
related future dealings. Each Grantor and Secured Party further warrant and
represent that each has reviewed this waiver with its legal counsel, and that
each knowingly and voluntarily waives its jury trial rights following
consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY
NOT BE MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WRITTEN
WAIVER SPECIFICALLY REFERRING TO THIS SECTION 30 AND EXECUTED BY EACH OF THE
PARTIES HERETO), AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT. In the event of
litigation, this Agreement may be filed as a written consent to a trial by the
court.
SECTION 31. Counterparts.
This Agreement may be executed in one or more counterparts and by different
parties hereto in separate counterparts, each of which when so executed and
delivered shall be deemed an original, but all such counterparts together shall
constitute but one and the same instrument; signature pages may be detached from
multiple separate counterparts and attached to a single counterpart so that all
signature pages are physically attached to the same document.
[Remainder of page intentionally left blank]
IX-A-19
<PAGE>
IN WITNESS WHEREOF, Grantors and Secured Party have caused this Agreement
to be duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
OUTSOURCING SOLUTIONS INC.
ALASKA FINANCIAL SERVICES, INC.
CFC SERVICES CORP.
THE CONTINENTAL ALLIANCE, INC.
SOUTHWEST CREDIT SERVICES, INC.
By:_____________________________________
Name:
Title:
ACCOUNT PORTFOLIOS, L.P.
GULF STATE CREDIT, L.P.
PERIMETER CREDIT, L.P.
By: ACCOUNT PORTFOLIOS G.P., INC.,
general partner
By:________________________________
Name:
Title:
IX-A-20
<PAGE>
A.M. MILLER & ASSOCIATES, INC.
ACCOUNT PORTFOLIOS G.P., INC.
ACCOUNT PORTFOLIOS, INC.
ASSET RECOVERY & MANAGEMENT CORP.
FM SERVICES CORPORATION
FURST AND FURST, INC.
INDIANA MUTUAL CREDIT
ASSOCIATION, INC.
JENNIFER LOOMIS & ASSOCIATES, INC.
NATIONAL ACCOUNT SYSTEMS, INC.
PAYCO AMERICAN CORPORATION
PAYCO AMERICAN INTERNATIONAL CORP.
PAYCO-GENERAL AMERICAN CREDITS, INC.
PROFESSIONAL RECOVERIES INC.
QUALINK, INC.
UNIVERSITY ACCOUNTING SERVICE, INC.
By:_____________________________________
Name:
Title:
Notice Address for the foregoing
Grantors:
300 Galleria Parkway
Suite 690
Atlanta, Georgia 30339
Attention: Chief Financial Officer
Facsimile: (770) 988-2910
with a copy to:
McCown De Leeuw & Co.
101 East 52nd Street
31st Floor
New York, New York 10022
Attention: Tyler T. Zachem
Facsimile: (212) 355-6283
(212) 355-6945
IX-A-21
<PAGE>
and a copy to:
White & Case
1155 Avenue of the Americas
New York, New York 10036
Attention: Frank L. Schiff, Esq.
Facsimile: (212) 819-7817
IX-A-22
<PAGE>
SUNTRUST BANK, ATLANTA,
as Secured Party
By:_____________________________________
Name:
Title:
By:_____________________________________
Name:
Title:
IX-A-23
<PAGE>
IN WITNESS WHEREOF, the undersigned Additional Grantor has caused this
Agreement to be duly executed and delivered by its officer thereunto duly
authorized as of __________, [199_] [200_].
[NAME OF ADDITIONAL GRANTOR]
By:_____________________________________
Name:
Title:
Notice Address:
____________________________
____________________________
____________________________
IX-A-24
<PAGE>
SCHEDULE 4(b)
TO
SECURITY AGREEMENT
Locations of Equipment and Inventory
Name of Company/Limited Partner- Locations of Equipment and Inventory
- -------------------------------- ------------------------------------
ship
- ----
IX-A-25
<PAGE>
SCHEDULE 4(d)
TO
SECURITY AGREEMENT
Office Locations
Name of Company/Limited Partnership Office Locations
- ----------------------------------- ----------------
IX-A-26
<PAGE>
SCHEDULE 4(e)
TO
SECURITY AGREEMENT
Other Names
Name of Company/Limited Partnership Other Names
- ----------------------------------- -----------
IX-A-27
<PAGE>
SCHEDULE 4(g)
TO
SECURITY AGREEMENT
Filing Offices
IX-A-28
<PAGE>
EXHIBIT IX-B
[FORM OF LIMITED PARTNERSHIP SECURITY AGREEMENT]
LIMITED PARTNERSHIP SECURITY AGREEMENT
This LIMITED PARTNERSHIP SECURITY AGREEMENT (this "Agreement") is dated as
of November 6, 1996 and entered into by and among each of THE UNDERSIGNED DIRECT
AND INDIRECT DOMESTIC SUBSIDIARIES of Outsourcing Solutions Inc., Delaware
corporation ("Company") (each of such undersigned Subsidiaries being a "Grantor"
and collectively, "Grantors"; provided that after the Closing Date, "Grantors"
shall include any Additional Grantors (as hereinafter defined)), and SUNTRUST
BANK, ATLANTA, as agent for and representative of (in such capacity herein
called "Secured Party") the financial institutions ("Lenders") party to the
Credit Agreement referred to below and any Interest Rate Exchangers (as
hereinafter defined).
PRELIMINARY STATEMENTS
A. Pursuant to that certain Credit Agreement dated as of November 6, 1996
(said Credit Agreement, as it may hereafter be amended, restated, supplemented
or otherwise modified from time to time, being the "Credit Agreement", the terms
defined therein and not otherwise defined herein being used herein as therein
defined) by and among Company, Lenders, Goldman Sachs Credit Partners L.P. and
The Chase Manhattan Bank, as Co-Administrative Agents, Secured Party, as
Collateral Agent, and Goldman Sachs Credit Partners L.P. and Chase Securities
Inc., as Arranging Agents, Lenders have made certain commitments, subject to the
terms and conditions set forth in the Credit Agreement, to extend certain credit
facilities to Company.
B. Company may from time to time enter, or may from time to time have
entered, into one or more Interest Rate Agreement (collectively, the "Lender
Interest Rate Agreements") with one or more Lenders or their Affiliates (in such
capacity, collectively, "Interest Rate Exchangers") in accordance with the terms
of the Credit Agreement.
C. Grantors are party to the limited partnership agreements described on
Schedule I annexed hereto (as such agreements have heretofore been and may
hereafter be amended, restated, supplemented or otherwise modified from time to
time, collectively, the "Partnership Agreements"), and Grantors own the limited
partnership interests and general partnership interests in the applicable
limited partnerships as set forth on Schedule I annexed hereto (collectively,
the "Partnerships");
D. Grantors, together with certain other Subsidiaries of Company, have
executed and delivered that certain Subsidiary Guaranty dated as of November 6,
1996 (said Subsidiary
IX-B-1
<PAGE>
Guaranty, as it may hereafter be amended, restated, supplemented or otherwise
modified from time to time, being the "Guaranty") in favor of Secured Party for
the benefit of Lenders and any Interest Rate Exchangers, pursuant to which each
Grantor has guarantied the prompt payment and performance when due of all
obligations of Company under the Credit Agreement and the other Loan Documents
and all obligations of Company under the Lender Interest Rate Agreements,
including without limitation the obligation of Company to make payments
thereunder in the event of the termination thereof.
E. It is a condition precedent to the initial extensions of credit by
Lenders under the Credit Agreement that Grantors shall have granted the security
interests and undertaken the obligations contemplated by this Agreement.
NOW, THEREFORE, in consideration of the premises and in order to induce
Lenders to make Loans and other extensions of credit under the Credit Agreement
and to induce Interest Rate Exchangers to enter into the Lender Interest Rate
Agreements and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, each Grantor hereby agrees with
Secured Party as follows:
SECTION 1. Grant of Security.
Each Grantor hereby pledges and assigns to Secured Party, and hereby grants
to Secured Party a security interest in, all of such Grantor's right, title and
interest in and to the following (the "Collateral"):
(a) all of such Grantor's right, title and interest as a limited
and/or general partner in the Partnerships, whether now owned or hereafter
acquired, including without limitation all of such Grantor's right, title
and interest in, to and under the Partnership Agreements to which it is a
party (including without limitation, if such Grantor is a general partner
of any Partnership, the right to vote with respect to and to manage and
administer the business of such Partnership) together with all other
rights, interests, claims and other property of such Grantor in any manner
arising out of or relating to its limited and/or general partnership
interest in the Partnerships, whatever their respective kind or character,
whether they are tangible or intangible property, and wheresoever they may
exist or be located, and further including without limitation all of the
rights of such Grantor as a limited and/or general partner: (i) to (x)
receive money due and to become due (including without limitation
dividends, distributions, interest, income from partnership properties and
operations, proceeds of sale of partnership assets and returns of capital)
under or pursuant to the Partnership Agreements, (y) receive payments upon
termination of the Partnership Agreements, and (z) receive any other
payments or distributions, whether cash or noncash, in respect of such
Grantor's limited and/or general partnership interest evidenced by the
Partnership Agreements; (ii) in and with respect to claims and causes of
action arising out of or relating to the Partnerships; and (iii) to have
access to the Partnerships' books and records and to other information
concerning or affecting the Partnerships;
IX-B-2
<PAGE>
(b) any "certificate of interest" or "certificates of interest" (or
other certificates or instruments however designated or titled) issued by
the Partnerships and evidencing such Grantor's interest as a limited and/or
general partner in the Partnerships (collectively, the "Certificates") and
any interest of such Grantor in the entries on the books of any financial
intermediary pertaining to such Grantor's interest as a limited and/or
general partner in the Partnerships;
(c) all books, records, ledger cards, files, correspondence, computer
programs, tapes, disks and related data processing software that at any
time evidence or contain information relating to any of the Collateral or
are otherwise necessary or helpful in the collection thereof or realization
thereupon; and
(d) all proceeds, products, rents and profits of or from any and all
of the foregoing Collateral and, to the extent not otherwise included, all
payments under insurance (whether or not Secured Party is the loss payee
thereof), or any indemnity, warranty or guaranty, payable by reason of loss
or damage to or otherwise with respect to any of the foregoing Collateral.
For purposes of this Agreement, the term "proceeds" includes whatever is
receivable or received when Collateral or proceeds are sold, exchanged,
collected or otherwise disposed of, whether such disposition is voluntary
or involuntary.
SECTION 2. Security for Obligations.
This Agreement secures, and the Collateral is collateral security for, the
prompt payment or performance in full when due, whether at stated maturity, by
required prepayment, declaration, acceleration, demand or otherwise (including
without limitation the payment of amounts that would become due but for the
operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11
U.S.C. ss.362(a)), of all Secured Obligations with respect to such Grantor.
"Secured Obligations" means all obligations and liabilities of every nature of
Grantors now or hereafter existing under or arising out of or in connection with
the Guaranty, together with all extensions or renewals thereof, whether for
principal, interest (including without limitation interest that, but for the
filing of a petition in bankruptcy with respect to Company, would accrue on such
obligations, whether or not a claim is allowed against Company for such interest
in the related bankruptcy proceeding), reimbursement of amounts drawn under
Letters of Credit, payments for early termination of Lender Interest Rate
Agreements, fees, expenses, indemnities or otherwise, whether voluntary or
involuntary, direct or indirect, absolute or contingent, liquidated or
unliquidated, whether or not jointly owed with others, and whether or not from
time to time decreased or extinguished and later increased, created or incurred,
and all or any portion of such obligations or liabilities that are paid, to the
extent all or any part of such payment is avoided or recovered directly or
indirectly from Secured Party or any Lender or Interest Rate Exchanger as a
preference, fraudulent transfer or otherwise, and all obligations of every
nature of Grantors now or hereafter existing under this Agreement.
IX-B-3
<PAGE>
SECTION 3. No Assumption.
Notwithstanding any of the foregoing, this Agreement shall not in any way
be deemed to obligate Secured Party, any Lender or any purchaser at a
foreclosure sale under this Agreement to assume any of Grantors' obligations,
duties, expenses or liabilities under the Partnership Agreement (including
without limitation any obligation of any Grantor as a general partner
thereunder) or under any and all other agreements now existing or hereafter
drafted or executed (collectively, the "Grantor Obligations") unless Secured
Party, any Lender or any such purchaser otherwise expressly agrees to assume any
or all of said Grantor Obligations in writing.
SECTION 4. Delivery of Certificate; Instructions to Partnerships Regarding
Registration of Pledge.
Any Certificate shall be delivered to and held by or on behalf of Secured
Party pursuant hereto and shall be in suitable form for transfer by delivery or
shall be accompanied by duly executed instruments of transfer or assignment in
blank, all in form and substance satisfactory to Secured Party. Grantor, at its
own expense, shall deliver to such of the Partnerships in which it is a partner
an order, satisfactory in form and substance to Secured Party, requesting that
the pledge of Grantor's interest as a limited and/or general partner in such
Partnership be registered on the books of such Partnership.
SECTION 5. Representations and Warranties.
Each Grantor represents and warrants as follows:
(a) Ownership of Collateral. Except as expressly permitted by the
Credit Agreement and for the security interest created by this Agreement,
such Grantor is the legal and beneficial owner of the Collateral pledged
and assigned hereunder free and clear of any Lien.
(b) Description of Collateral. Such Grantor is the owner and holder of
the limited and/or general partnership interests set forth on Schedule I
annexed hereto. The interest of such Grantor as a limited and/or general
partner in the Partnerships is not evidenced by one or more "certificates
of interest" or any other certificates or instruments however designated or
titled.
(c) Partnership Agreements. Each Partnership Agreement to which such
Grantor is a party, true and complete copies of which have been furnished
to Secured Party, is in full force and effect and has not been amended or
modified except as disclosed in writing to Secured Party. No default by
such Grantor exists under the Partnership Agreements and no event has
occurred or exists which, with notice or lapse of time or both, would
constitute a default by any Grantor thereunder.
IX-B-4
<PAGE>
(d) Office Locations; Other Names. The chief place of business, the
chief executive office and the office where such Grantor keeps its records
regarding the Collateral is, and has been for the four month period
preceding the date hereof, located at the locations set forth on Schedule
II annexed hereto.
(e) Names. No Grantor has in the past done, and no Grantor now does,
business under any other name (including any trade-name or fictitious
business name) except the names listed on Schedule II annexed hereto.
(f) Consents or Governmental Authorizations. No consent of any other
Person (including without limitation any other limited or general partner
of the Partnerships or any creditor of Grantors), and no authorization,
approval or other action by, and no notice to or filing with, any
governmental authority or regulatory body is required for either (i) the
grant by Grantors of the security interests granted hereby, (ii) the ,
delivery or performance of this Agreement by Grantors, or (iii) the
perfection of or the exercise by Secured Party of its rights and remedies
hereunder (except as may have been taken by or at the direction of
Grantors).
(g) Perfection. The security interests in the Collateral granted to
Secured Party for the ratable benefit of the Lenders and Interest Rate
Exchangers hereunder constitute valid security interests in the Collateral.
Upon the registration of the security interest of Secured Party hereunder
on the books and records of the Partnerships and the filing of UCC
financing statements naming each Grantor as "debtor", naming Secured Party
as "secured party" and describing the Collateral in the filing offices set
forth on Schedule III annexed hereto, the security interests in the
Collateral granted to Secured Party for the ratable benefit of the Lenders
and Interest Rate Exchangers will, to the extent a security interest in the
Collateral may be perfected by such registration and by filing UCC
financing statements, constitute valid and perfected security interests
therein prior to all other Liens.
SECTION 6. Further Assurances; New Partnership Interests.
(a) Each Grantor agrees that from time to time, at the expense of Grantors,
such Grantor will promptly execute and deliver all further instruments and
documents, and take all further action, that may be necessary or desirable, or
that Secured Party may request, in order to perfect and protect any security
interest granted or purported to be granted hereby or to enable Secured Party to
exercise and enforce its rights and remedies hereunder with respect to any
Collateral. Without limiting the generality of the foregoing, each Grantor will:
(i) deliver to any Partnership in which it is a partner such orders requesting
that the pledge of such Grantor's interest as a limited or general partner, as
the case may be, be registered on the books of such Partnership, (ii) execute
and file such financing or continuation statements, or amendments thereto, and
such other instruments or notices, as may be necessary or desirable, or as
Secured Party may request, in order to perfect and preserve the security
interests granted or purported to be granted hereby, and (iii) at Secured
Party's reasonable request, appear in and
IX-B-5
<PAGE>
defend any action or proceeding that may affect such Grantor's title to or
Secured Party's security interest in all or any part of the Collateral.
(b) Each Grantor further agrees that it will, upon obtaining any additional
partnership interests required to be pledged hereunder as provided in the Credit
Agreement, promptly (and in any event within ten Business Days), deliver to
Secured Party an amendment, duly executed by such Grantor, in substantially the
form of Schedule IV annexed hereto (an "Amendment"), in respect of the
additional partnership interests to be pledged pursuant to this Agreement. Each
Grantor hereby authorizes Secured Party to attach each Amendment to this
Agreement and agrees that all partnership interests listed on any such Amendment
shall for all purposes hereunder be considered Collateral; provided that the
failure of a Grantor to execute an Amendment with respect to any additional
partnership interests pledged pursuant to this Agreement shall not impair the
security interest of Secured Party therein or otherwise adversely affect the
rights and remedies of Secured Party hereunder with respect thereto.
(c) Each Grantor hereby authorizes Secured Party to file one or more
financing or continuation statements, and amendments thereto, relative to all or
any part of the Collateral without the signature of any Grantor. Each Grantor
agrees that a carbon, photographic or other reproduction of this Agreement or of
a financing statement signed by such Grantor shall be sufficient as a financing
statement and may be filed as a financing statement in any and all
jurisdictions.
(d) Each Grantor will furnish to Secured Party from time to time statements
and schedules further identifying and describing the Collateral and such other
reports in connection with the Collateral as Secured Party may reasonably
request, all in reasonable detail.
SECTION 7. Certain Covenants of Grantor.
Except as otherwise permitted pursuant to the Credit Agreement, each
Grantor shall:
(a) not use or permit any Collateral to be used unlawfully or in
violation of any provision of this Agreement or any applicable statute,
regulation or ordinance or any policy of insurance covering the Collateral;
(b) not (i) cancel or terminate any of the Partnership Agreements or
consent to or accept any cancellation or termination thereof, (ii) sell,
assign (by operation of law or otherwise) or otherwise dispose of any part
of its limited or general partnership interest in any of the Partnerships,
(iii) amend, supplement or otherwise modify any of the Partnership
Agreements (as in effect on the date hereof), (iv) waive any default under
or breach of any of the Partnership Agreements or waive, fail to enforce,
forgive or release any right, interest or entitlement of any kind,
howsoever arising, under or in respect of any of the Partnership Agreements
or vary or agree to the variation in any respect of any of the provisions
of any of the Partnership Agreements or of the performance of any other
Person under any of the Partnership Agreements, or (v)
IX-B-6
<PAGE>
petition, request or take any other legal or administrative action which
seeks, or may reasonably be expected, to rescind, terminate or suspend any
of the Partnership Agreements or to amend or modify any of the Partnership
Agreements, except where such amendment or modification would not have a
material adverse effect on Secured Party's rights in the Collateral;
(c) at its expense (i) perform and comply in all material respects
with all terms and provisions of the Partnership Agreements required to be
performed or complied with by it, (ii) maintain the Partnership Agreements
to which it is a party in full force and effect, (iii) enforce each of the
Partnership Agreements to which it is a party in accordance with its terms,
and (iv) take all such action to that end as from time to time may be
reasonably requested by Secured Party;
(d) not create or suffer to exist any Lien upon or with respect to any
of the Collateral to secure the indebtedness or other obligations of any
Person, except for the security interest created by this Agreement;
(e) not vote to permit the Partnerships to enter into any transaction
of merger or consolidation, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution);
(f) notify Secured Party of any change in Grantor's name, identity or
corporate or partnership structure within 15 days of such change;
(g) give Secured Party 30 days' prior written notice of any change in
such Grantor's chief place of business, chief executive office or residence
or the office where such Grantor keeps its records regarding the
Collateral; and
(h) pay promptly when due all taxes, assessments and governmental
charges or levies imposed upon, and all claims against, the Collateral,
except to the extent the validity thereof is being contested in good faith;
provided that such Grantor shall in any event pay such taxes, assessments,
charges, levies or claims not later than five days prior to the date of any
proposed sale under any judgement, writ or warrant of attachment entered or
filed against such Grantor or any of the Collateral as a result of the
failure to make such payment.
SECTION 8. Voting Rights; Profits, Interest and Dividends.
(a) So long as no Event of Default (as defined in the Credit Agreement) or
the occurrence of an Early Termination Date (as defined in a Master Agreement or
an Interest Rate Swap Agreement or Interest Rate and Currency Exchange Agreement
in the form prepared by the International Swap and Derivatives Association Inc.
or a similar event under any similar swap agreement) under any Lender Interest
Rate Agreement (either such occurrence being an "Event of Default" for purposes
of this Agreement) shall have occurred and be continuing:
IX-B-7
<PAGE>
(i) Grantors shall be entitled to exercise any and all voting and
other consensual rights pertaining to the Collateral or any part thereof
(including without limitation rights of approval arising under the
Partnership Agreements and, in the case of any Grantor which is a general
partner in any Partnership, the right to manage and administer the business
of such Partnership) for any purpose not inconsistent with the terms of
this Agreement or the Credit Agreement;
(ii) Grantors shall be entitled to receive and retain, and to utilize
free and clear of the lien of this Agreement, any and all payments,
including but not limited to profits, dividends and other distributions,
paid in respect of the Collateral; provided, however, that any and all
(A) profits, dividends, and other distributions paid or payable
other than in cash in respect of, and instruments and other property
received, receivable or otherwise distributed in respect of, or in
exchange for, any Collateral,
(B) profits, dividends and other distributions paid or payable in
cash in respect of any Collateral in connection with a partial or
total liquidation or dissolution or in connection with a reduction of
capital, and
(C) cash paid, payable or otherwise distributed in redemption of
or in exchange for any Collateral,
shall be, and shall forthwith be delivered to Secured Party to hold as,
Collateral and shall, if received by any Grantor, be received in trust for
the benefit of Secured Party, be segregated from the other property or
funds of such Grantor and be forthwith delivered to Secured Party as
Collateral in the same form as so received (with all necessary
endorsements); and
(iii) Secured Party shall execute and deliver (or cause to be executed
and delivered) to Grantors all such proxies and other instruments as
Grantors may from time to time reasonably request for the purpose of
enabling Grantors to exercise the voting and other consensual rights that
it is entitled to exercise pursuant to Section 8(a)(i) and to receive the
profits, dividends and other distributions that it is authorized to receive
and retain pursuant to Section 8(a)(ii).
(b) Upon acceleration of the maturity of the Loans in accordance with
Section 8 of the Credit Agreement and upon the occurrence and during the
continuation of an Event of Default:
(i) upon written notice from Secured Party to any Grantors, all rights
of such Grantor to exercise the voting and other consensual rights that it
would otherwise be entitled to exercise pursuant to Section 8(a)(i) shall
cease, and all such rights shall thereupon become vested in Secured Party
who shall thereupon have the sole right to exercise such voting and other
consensual rights;
IX-B-8
<PAGE>
(ii) all rights of each Grantor to receive any and all payments under
or in connection with the Partnership Agreements, including but not limited
to the profits, dividends, and other distributions which it would otherwise
be authorized to receive and retain pursuant to Section 8(a)(ii), shall
cease, and all such rights shall thereupon become vested in Secured Party
who shall thereupon have the sole right to receive and hold such payments
as Collateral; and
(iii) all payments which are received by any Grantor contrary to the
provisions of Section 8(b)(ii) shall be received in trust for the benefit
of Secured Party, shall be segregated from other funds of such Grantor and
shall be forthwith paid over to Secured Party as Collateral in the same
form as so received (with any necessary endorsement).
SECTION 9. Secured Party Appointed Attorney-in-Fact.
Each Grantor hereby irrevocably appoints Secured Party as such Grantor's
attorney-in-fact, with full authority in the place and stead of such Grantor and
in the name of such Grantor, Secured Party or otherwise, from time to time in
Secured Party's discretion to take any action and to execute any instrument that
Secured Party may deem necessary or advisable to accomplish the purposes of this
Agreement, including without limitation:
(a) to ask for, demand, collect, sue for, recover, compound, receive
and give acquittance and receipts for moneys due and to become due under or
in respect of any of the Collateral;
(b) to receive, endorse and collect all instruments made payable to
such Grantor representing any payment of profits, dividends or any other
distribution in respect of any of the Collateral;
(c) to file any claims or take any action or institute any proceedings
that Secured Party may deem necessary or desirable for the collection of
any of the Collateral or otherwise to enforce the rights of Secured Party
with respect to any of the Collateral; and
(d) to do, at Secured Party's option and Grantors' expense, at any
time or from time to time, all acts and things that Secured Party deems
necessary to protect, preserve or realize upon the Collateral and Secured
Party's security interest therein in order to effect the intent of this
Agreement, all as fully and effectively as such Grantor might do.
SECTION 10. Secured Party May Perform.
IX-B-9
<PAGE>
If any Grantor fails to perform any agreement contained herein, Secured
Party may itself perform, or cause performance of, such agreement, and the
expenses of Secured Party incurred in connection therewith shall be payable such
Grantor under Section 14 hereof.
SECTION 11. Standard of Care.
The powers conferred on Secured Party hereunder are solely to protect its
interest in the Collateral and shall not impose any duty upon it to exercise any
such powers. Except for the exercise of reasonable care in the custody of any
Collateral in its possession and the accounting for monies actually received by
it hereunder, Secured Party shall have no duty as to any Collateral or as to the
taking of any necessary steps to preserve rights against prior parties or any
other rights pertaining to any Collateral. Secured Party shall be deemed to have
exercised reasonable care in the custody and preservation of any Collateral in
its possession if such Collateral is accorded treatment substantially equal to
that which Secured Party accords its own property of a similar nature.
SECTION 12. Remedies.
(a) If any Event of Default shall have occurred and be continuing, Secured
Party may exercise in respect of the Collateral, in addition to all other rights
and remedies provided for herein or otherwise available to it, all the rights
and remedies of a secured party on default under the Uniform Commercial Code as
in effect in any relevant jurisdiction (the "Code") (whether or not the Code
applies to the affected Collateral), and Secured Party may also in its sole
discretion, without notice except as specified below, sell the Collateral or any
part thereof in one or more parcels at public or private sale, at any exchange
or broker's board or at any of Secured Party's offices or elsewhere, for cash,
on credit or for future delivery, at such time or times and at such price or
prices and upon such other terms as Secured Party may deem commercially
reasonable, irrespective of the impact of any such sales on the market price of
the Collateral. Secured Party or any Lender or Interest Rate Exchanger may be
the purchaser of any or all of the Collateral at any such sale and Secured
Party, as agent for and representative of Lenders and Interest Rate Exchangers
(but not any Lender or Lenders or Interest Rate Exchanger or Interest Rate
Exchangers in its or their respective individual capacities unless Requisite
Obligees (as defined in Section 16(a)) shall otherwise agree in writing), shall
be entitled, for the purpose of bidding and making settlement or payment of the
purchase price for all or any portion of the Collateral sold at any such public
sale, to use and apply any of the Secured Obligations as a credit on account of
the purchase price for any Collateral payable by Secured Party at such sale.
Each purchaser at any such sale shall hold the property sold absolutely free
from any claim or right on the part of any Grantor, and each Grantor hereby
waives (to the extent permitted by applicable law) all rights of redemption,
stay and/or appraisal which it now has or may at any time in the future have
under any rule of law or statute now existing or hereafter enacted. Each Grantor
agrees that, to the extent notice of sale shall be required by law, at least ten
days' notice to such Grantor of the time and place of any public sale or the
time after which any private sale is to be made shall constitute reasonable
notification. Secured Party
IX-B-10
<PAGE>
shall not be obligated to make any sale of Collateral regardless of notice of
sale having been given. Secured Party may adjourn any public or private sale
from time to time by announcement at the time and place fixed therefor, and such
sale may, without further notice, be made at the time and place to which it was
so adjourned. Each Grantor hereby waives any claims against Secured Party
arising by reason of the fact that the price at which any Collateral may have
been sold at such a private sale was less than the price which might have been
obtained at a public sale, even if Secured Party accepts the first offer
received and does not offer such Collateral to more than one offeree. If the
proceeds of any sale or other disposition of the Collateral are insufficient to
pay all the Secured Obligations, Grantors shall be jointly and severally liable
for the deficiency and the fees of any attorneys employed by Secured Party to
collect such deficiency.
(b) Each Grantor recognizes that, by reason of certain prohibitions
contained in the Securities Act of 1933, as from time to time amended (the
"Securities Act"), and applicable state securities laws, Secured Party may be
compelled, with respect to any sale of all or any part of the Collateral
conducted without prior registration or qualification of such Collateral under
the Securities Act and/or such state securities laws, to limit purchasers to
those who will agree, among other things, to acquire the Collateral for their
own account, for investment and not with a view to the distribution or resale
thereof. Each Grantor acknowledges that any such private sales may be at prices
and on terms less favorable than those obtainable through a public sale without
such restrictions and, notwithstanding such circumstances, each Grantor agrees
that any such private sale shall be deemed to have been made in a commercially
reasonable manner and that Secured Party shall have no obligation to engage in
public sales and no obligation to delay the sale of any Collateral for the
period of time necessary to permit the Partnerships to register it for a form of
public sale requiring registration under the Securities Act or under applicable
state securities laws, even if the Partnerships would, or should, agree to so
register it.
(c) If Secured Party determines to exercise its right to sell any or all of
the Collateral, upon written request, Grantors shall and shall cause the
Partnerships from time to time to furnish to Secured Party all such information
as Secured Party may request in order to determine the number and nature of the
interests included in the Collateral which may be sold by Secured Party in
exempt transactions under the Securities Act and the rules and regulations of
the Securities and Exchange Commission thereunder, as the same are from time to
time in effect.
SECTION 13. Application of Proceeds.
Except as expressly provided elsewhere in this Agreement, all proceeds
received by Secured Party in respect of any sale of, collection from, or other
realization upon all or any part of the Collateral shall be applied as provided
in subsection 2.4D of the Credit Agreement.
IX-B-11
<PAGE>
SECTION 14. Indemnity and Expenses.
(a) Grantors jointly and severally agree to indemnify Secured Party, each
Lender and each Interest Rate Exchanger from and against any and all claims,
losses and liabilities in any way relating to, growing out of or resulting from
this Agreement and the transactions contemplated hereby (including without
limitation enforcement of this Agreement), except to the extent such claims,
losses or liabilities result solely from Secured Party's or such Lender's or
Interest Rate Exchanger's gross negligence or willful misconduct as finally
determined by a court of competent jurisdiction.
(b) Grantors jointly and severally agree to pay to Secured Party upon
demand the amount of any and all costs and expenses, including the reasonable
fees and expenses of its counsel and of any experts and agents, that Secured
Party may incur in connection with (i) the administration of this Agreement,
(ii) the custody or preservation of, or the sale of, collection from, or other
realization upon, any of the Collateral, (iii) the exercise or enforcement of
any of the rights of Secured Party hereunder, or (iv) the failure by any Grantor
to perform or observe any of the provisions hereof.
(c) The obligations of Grantors in this Section 14 shall survive the
termination of this Agreement and the discharge of Grantors' other obligations
under this Agreement, the Lender Interest Rate Agreements, the Credit Agreement
and the other Loan Documents.
SECTION 15. Continuing Security Interest; Transfer of Loans.
This Agreement shall create a continuing security interest in the
Collateral and shall (a) remain in full force and effect until the payment in
full of the Secured Obligations, the cancellation or termination of the
Commitments and the cancellation or expiration of all outstanding Letters of
Credit, (b) be binding upon Grantors and their respective successors and
assigns, and (c) inure, together with the rights and remedies of Secured Party
hereunder, to the benefit of Secured Party and its successors, transferees and
assigns. Without limiting the generality of the foregoing clause (c), but
subject to the provisions of subsection 10.1 of the Credit Agreement, any Lender
may assign or otherwise transfer any Loans held by it to any other Person, and
such other Person shall thereupon become vested with all the benefits in respect
thereof granted to Lenders herein or otherwise. Upon the payment in full of all
Secured Obligations, the cancellation or termination of the Commitments and the
cancellation or expiration of all outstanding Letters of Credit, the security
interest granted hereby shall terminate and all rights to the Collateral shall
revert to the applicable Grantors. Upon any such termination Secured Party will,
at Grantors' expense, execute and deliver to Grantors such documents as Grantors
shall reasonably request to evidence such termination.
IX-B-12
<PAGE>
SECTION 16. Secured Party as Agent.
(a) Secured Party has been appointed to act as Secured Party hereunder by
Lenders and, by their acceptance of the benefits hereof, Interest Rate
Exchangers. Secured Party shall be obligated, and shall have the right
hereunder, to make demands, to give notices, to exercise or refrain from
exercising any rights, and to take or refrain from taking any action (including
without limitation the release or substitution of Collateral), solely in
accordance with this Agreement and the Credit Agreement; provided that Secured
Party shall exercise, or refrain from exercising, any remedies provided for in
Section 12 in accordance with the instructions of (i) Requisite Lenders or (ii)
after payment in full of all Obligations under the Credit Agreement and the
other Loan Documents, the holders of a majority of the aggregate notional amount
(or, with respect to any Lender Interest Rate Agreement that has been terminated
in accordance with its terms, the amount then due and payable (exclusive of
expenses and similar payments but including any early termination payments then
due) under such Lender Interest Rate Agreement) under all Lender Interest Rate
Agreements (Requisite Lenders or, if applicable, such holders being referred to
herein as "Requisite Obligees"). In furtherance of the foregoing provisions of
this Section 16(a), each Interest Rate Exchanger, by its acceptance of the
benefits hereof, agrees that it shall have no right individually to realize upon
any of the Collateral hereunder, it being understood and agreed by such Interest
Rate Exchanger that all rights and remedies hereunder may be exercised solely by
Secured Party for the benefit of Lenders and Interest Rate Exchangers in
accordance with the terms of this Section 16(a).
(b) Secured Party shall at all times be the same Person that is Collateral
Agent under the Credit Agreement. Written notice of resignation by Collateral
Agent pursuant to subsection 9.5 of the Credit Agreement shall also constitute
notice of resignation as Secured Party under this Agreement; removal of
Collateral Agent pursuant to subsection 9.5 of the Credit Agreement shall also
constitute removal as Secured Party under this Agreement; and appointment of a
successor Collateral Agent pursuant to subsection 9.5 of the Credit Agreement
shall also constitute appointment of a successor Secured Party under this
Agreement. Upon the acceptance of any appointment as Collateral Agent under
subsection 9.5 of the Credit Agreement by a successor Collateral Agent, that
successor Collateral Agent shall thereupon succeed to and become vested with all
the rights, powers, privileges and duties of the retiring or removed Secured
Party under this Agreement, and the retiring or removed Secured Party under this
Agreement shall promptly (i) transfer to such successor Secured Party all sums,
securities and other items of Collateral held hereunder, together with all
records and other documents necessary or appropriate in connection with the
performance of the duties of the successor Secured Party under this Agreement,
and (ii) execute and deliver to such successor Secured Party such amendments to
financing statements, and take such other actions, as may be necessary or
appropriate in connection with the assignment to such successor Secured Party of
the security interests created hereunder, whereupon such retiring or removed
Secured Party shall be discharged from its duties and obligations under this
Agreement. After any retiring or removed Collateral Agent's resignation or
removal hereunder as Secured Party, the provisions of this Agreement shall inure
to its benefit as to any actions taken or omitted to be taken by it under this
Agreement while it was Secured Party hereunder.
IX-B-13
<PAGE>
SECTION 17. Amendments; Etc.
No amendment, modification, termination or waiver of any provision of this
Agreement, and no consent to any departure by any Grantor therefrom, shall in
any event be effective unless the same shall be in writing and signed by Secured
Party and, in the case of any such amendment or modification, by Grantors;
provided that any amendment hereto pursuant to Section 20 or Section 6(b) shall
be effective upon by any Additional Grantor and Grantors hereby waive any
requirement of notice of or consent to any such amendment. Any such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which it was given.
SECTION 18. Notices.
Any notice or other communication herein required or permitted to be given
shall be in writing and may be personally served, telexed or sent by
telefacsimile or United States mail or courier service and shall be deemed to
have been given when delivered in person or by courier service, upon receipt of
telefacsimile or telex (with received answerback), or three Business Days after
depositing it in the United States mail with postage prepaid and properly
addressed; provided that notices to Secured Party shall not be effective until
received. For the purposes hereof, the address of each party hereto shall be as
provided in subsection 10.8 of the Credit Agreement or as set forth under such
party's name on the signature pages hereof or such other address as shall be
designated by such party in a written notice delivered to the other parties
hereto.
SECTION 19. Failure or Indulgence Not Waiver; Remedies Cumulative.
No failure or delay on the part of Secured Party in the exercise of any
power, right or privilege hereunder shall impair such power, right or privilege
or be construed to be a waiver of any default or acquiescence therein, nor shall
any single or partial exercise of any such power, right or privilege preclude
any other or further exercise thereof or of any other power, right or privilege.
All rights and remedies existing under this Agreement are cumulative to, and not
exclusive of, any rights or remedies otherwise available.
SECTION 20. Additional Grantors.
The initial Grantors hereunder shall be such of the Subsidiaries of Company
as are signatories hereto on the date hereof. From time to time subsequent to
the date hereof, additional Subsidiaries of Company may become parties hereto as
additional Grantors (each an "Additional Grantor"), by executing an
acknowledgement to this Agreement substantially in the form of Schedule V
annexed hereto. Upon delivery of any such acknowledgment to Chase
Co-Administrative Agent and Secured Party, notice of which is hereby waived by
Grantors, each such Additional Grantor shall be a Grantor and shall be as fully
a party hereto as if such
IX-B-14
<PAGE>
Additional Grantor were an original signatory hereto. Each Grantor expressly
agrees that its obligations arising hereunder shall not be affected or
diminished by the addition or release of any other Grantor hereunder, nor by any
election of Chase Co-Administrative Agent not to cause any Subsidiary of Company
to become an Additional Grantor hereunder. This Agreement shall be fully
effective as to any Grantor that is or becomes a party hereto regardless of
whether any other Person becomes or fails to become or ceases to be a Grantor
hereunder.
SECTION 21. Severability.
In case any provision in or obligation under this Agreement shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
SECTION 22. Headings.
Section and subsection headings in this Agreement are included herein for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose or be given any substantive effect.
SECTION 23. Governing Law; Terms; Rules of Construction.
THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER
SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT LIMITATION SECTION
5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD
TO CONFLICTS OF LAWS PRINCIPLES, EXCEPT TO THE EXTENT THAT THE CODE PROVIDES
THAT THE PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER,
IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF NEW YORK. Unless otherwise defined herein
or in the Credit Agreement, terms used in Articles 8 and 9 of the Uniform
Commercial Code in the State of New York are used herein as therein defined. The
rules of construction set forth in subsection 1.3 of the Credit Agreement shall
be applicable to this Agreement mutatis mutandis.
SECTION 24. Consent to Jurisdiction and Service of Process.
ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY GRANTOR ARISING OUT OF OR
RELATING TO THIS AGREEMENT, OR ANY OBLIGATIONS HEREUNDER, MAY BE BROUGHT IN ANY
STATE OR FEDERAL COURT OF
IX-B-15
<PAGE>
COMPETENT JURISDICTION IN THE STATE, COUNTY AND CITY OF NEW YORK. BY EXECUTING
AND DELIVERING THIS AGREEMENT, EACH GRANTOR, FOR ITSELF AND IN CONNECTION WITH
ITS PROPERTIES, IRREVOCABLY (I) ACCEPTS GENERALLY AND UNCONDITIONALLY THE
NONEXCLUSIVE JURISDICTION AND VENUE OF SUCH COURTS; (II) WAIVES ANY DEFENSE OF
FORUM NON CONVENIENS; (III) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH
PROCEEDING IN ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN
RECEIPT REQUESTED, TO SUCH GRANTOR AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH
SECTION 18; (IV) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (III) ABOVE IS
SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER SUCH GRANTOR IN ANY SUCH
PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND BINDING
SERVICE IN EVERY RESPECT; (V) AGREES THAT SECURED PARTY RETAINS THE RIGHT TO
SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS
AGAINST SUCH GRANTOR IN THE COURTS OF ANY OTHER JURISDICTION; AND (VI) AGREES
THAT THE PROVISIONS OF THIS SECTION 24 RELATING TO JURISDICTION AND VENUE SHALL
BE BINDING AND ENFORCEABLE TO THE FULLEST EXTENT PERMISSIBLE UNDER NEW YORK
GENERAL OBLIGATIONS LAW SECTION 5-1402 OR OTHERWISE.
SECTION 25. Waiver of Jury Trial.
GRANTORS AND SECURED PARTY HEREBY AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO
A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
AGREEMENT. The scope of this waiver is intended to be all-encompassing of any
and all disputes that may be filed in any court and that relate to the subject
matter of this transaction, including without limitation contract claims, tort
claims, breach of duty claims, and all other common law and statutory claims.
Each Grantor and Secured Party acknowledge that this waiver is a material
inducement for Grantors and Secured Party to enter into a business relationship,
that Grantors and Secured Party have already relied on this waiver in entering
into this Agreement and that each will continue to rely on this waiver in their
related future dealings. Each Grantor and Secured Party further warrant and
represent that each has reviewed this waiver with its legal counsel, and that
each knowingly and voluntarily waives its jury trial rights following
consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY
NOT BE MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WRITTEN
WAIVER SPECIFICALLY REFERRING TO THIS SECTION 25 AND EXECUTED BY EACH OF THE
PARTIES HERETO), AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT. In the event of
litigation, this Agreement may be filed as a written consent to a trial by the
court.
IX-B-16
<PAGE>
SECTION 26. Counterparts.
This Agreement may be executed in one or more counterparts and by different
parties hereto in separate counterparts, each of which when so executed and
delivered shall be deemed an original, but all such counterparts together shall
constitute but one and the same instrument; signature pages may be detached from
multiple separate counterparts and attached to a single counterpart so that all
signature pages are physically attached to the same document.
[Remainder of page intentionally left blank]
IX-B-17
<PAGE>
IN WITNESS WHEREOF, Grantors and Secured Party have caused this Agreement
to be duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
ACCOUNT PORTFOLIOS G.P., INC.
ACCOUNT PORTFOLIOS, INC.
By:____________________________________
Name:
Title:
ACCOUNT PORTFOLIOS, L.P.
By: ACCOUNT PORTFOLIOS G.P., INC.
General Partner
By:_______________________________
Name:
Title:
Notice Address for the foregoing
Grantors:
300 Galleria Parkway
Suite 690
Atlanta, Georgia 30339
Attention: Chief Financial Officer
Facsimile: (770) 988-2910
with a copy to:
McCown De Leeuw & Co.
101 East 52nd Street
31st Floor
New York, New York 10022
Attention: Tyler T. Zachem
Facsimile: (212) 355-6283
(212) 355-6945
IX-B-18
<PAGE>
and a copy to:
White & Case
1155 Avenue of the Americas
New York, New York 10036
Attention: Frank L. Schiff, Esq.
Facsimile: (212) 819-7817
IX-B-19
<PAGE>
SUNTRUST BANK, ATLANTA,
as Secured Party
By:_____________________________________
Name:
Title:
By:_____________________________________
Name:
Title:
IX-B-20
<PAGE>
SCHEDULE I
TO LIMITED PARTNERSHIP SECURITY AGREEMENT
Partnership Interests
1. [Name of Agreement of Limited Partnership]
=============================================================
Partner (General or Limited) Partnership Interests
=============================================================
-------------------------------------------------------------
-------------------------------------------------------------
=============================================================
IX-B-21
<PAGE>
SCHEDULE II
TO LIMITED PARTNERSHIP SECURITY AGREEMENT
Office Locations
Other Names
Name of Company/Limited Partnership Other Names
- ----------------------------------- -----------
IX-B-22
<PAGE>
SCHEDULE III
TO LIMITED PARTNERSHIP SECURITY AGREEMENT
Filing Offices
IX-B-23
<PAGE>
SCHEDULE IV
TO LIMITED PARTNERSHIP SECURITY AGREEMENT
[FORM OF AMENDMENT]
This Amendment, dated _______________, [199_] [200_] is delivered pursuant
to Section 6(b) of the Limited Partnership Security Agreement referred to below.
The undersigned hereby agrees that this Amendment may be attached to the Limited
Partnership Security Agreement dated as of November 6, 1996, by and among the
Grantors referred to therein and SunTrust Bank, Atlanta, as Secured Party (the
"Limited Partnership Security Agreement", capitalized terms defined therein
being used herein as therein defined), and that the partnership interests listed
on this Amendment shall be deemed to be part of the Collateral and shall secure
all Secured Obligations.
[NAME OF GRANTOR]
By:___________________________________
Name:
Title:
Partnership Interests
1. [Name of Agreement of Limited Partnership]
=============================================================
Partner (General or Limited) Partnership Interests
=============================================================
-------------------------------------------------------------
-------------------------------------------------------------
=============================================================
IX-B-24
<PAGE>
SCHEDULE V
TO LIMITED PARTNERSHIP SECURITY AGREEMENT
[FORM OF ACKNOWLEDGEMENT]
This Acknowledgement, dated _______________, [199_] [200_], is delivered
pursuant to Section 20 of the Limited Partnership Security Agreement referred to
below. The undersigned hereby agrees that this Acknowledgement may be attached
to the Limited Partnership Security Agreement dated November 6, 1996, by and
among the Grantors referred to therein and SunTrust Bank, Atlanta, as Secured
Party (the "Limited Partnership Security Agreement", capitalized terms defined
therein being used herein as therein defined), that the undersigned by executing
and delivering this Acknowledgement hereby becomes a Grantor under the Limited
Partnership Security Agreement in accordance with Section 20 thereof and agrees
to be bound by all of the terms thereof, and that the partnership interests
described on this Acknowledgement shall be deemed to be part of the and shall
become part of the Collateral and shall secure all Secured Obligations.
[NAME OF ADDITIONAL GRANTOR]
By:____________________________________
Name:
Title:
Notice Address:
_________________________________
_________________________________
_________________________________
_________________________________
Partnership Interests
1. [Name of Agreement of Limited Partnership]
=============================================================
Partner (General or Limited) Partnership Interests
=============================================================
-------------------------------------------------------------
-------------------------------------------------------------
=============================================================
IX-B-25
<PAGE>
EXHIBIT IX-C
[FORM OF TRADEMARK SECURITY AGREEMENT]
TRADEMARK SECURITY AGREEMENT
This TRADEMARK SECURITY AGREEMENT (this "Agreement") is dated as of
November 6, 1996 and entered into by and among OUTSOURCING SOLUTIONS INC., a
Delaware corporation ("Company"), THE UNDERSIGNED DIRECT AND INDIRECT DOMESTIC
SUBSIDIARIES of Company (each of such undersigned Subsidiaries being a
"Subsidiary Grantor" and collectively "Subsidiary Grantors" and each of Company
and Subsidiary Grantors being a "Grantor" and collectively, "Grantors"; provided
that after the Closing Date, "Grantors" shall include any Additional Grantors
(as hereinafter defined)) and SUNTRUST BANK, ATLANTA, as agent for and
representative of (in such capacity herein called "Secured Party") the financial
institutions ("Lenders") party to the Credit Agreement referred to below and any
Interest Rate Exchangers (as hereinafter defined).
PRELIMINARY STATEMENTS
A. Pursuant to that certain Credit Agreement dated as of November 6, 1996
(said Credit Agreement, as it may hereafter be amended, restated, supplemented
or otherwise modified from time to time, being the "Credit Agreement", the terms
defined therein and not otherwise defined herein being used herein as therein
defined) by and among Company, Lenders, Goldman Sachs Credit Partners L.P. and
The Chase Manhattan Bank, as Co-Administrative Agents, Secured Party, as
Collateral Agent, and Goldman Sachs Credit Partners L.P. and Chase Securities
Inc., as Arranging Agents, Lenders have made certain commitments, subject to the
terms and conditions set forth in the Credit Agreement, to extend certain credit
facilities to Company.
B. Company may from time to time enter, or may from time to time have
entered, into one or more Interest Rate Agreement (collectively, the "Lender
Interest Rate Agreements") with one or more Lenders or their Affiliates (in such
capacity, collectively, "Interest Rate Exchangers") in accordance with the terms
of the Credit Agreement, and it is desired that the obligations of Company under
the Lender Interest Rate Agreements, including without limitation the obligation
of Company to make payments thereunder in the event of early termination thereof
(all such obligations being the "Interest Rate Obligations"), together with all
obligations of Company under the Credit Agreement and the other Loan Documents,
be secured hereunder.
C. Subsidiary Grantors have executed and delivered that certain Subsidiary
Guaranty dated as of November 6, 1996 (said Subsidiary Guaranty, as it may
hereafter be amended, restated, supplemented or otherwise modified from time to
time, being the "Guaranty") in favor of Secured Party for the benefit of Lenders
and any Interest Rate Exchangers, pursuant to which Subsidiary Grantors have
guarantied the prompt payment and performance when due
IX-C-1
<PAGE>
of all obligations of Company under the Credit Agreement and the other Loan
Documents and all obligations of Company under the Lender Interest Rate
Agreements, including without limitation the obligation of Company to make
payments thereunder in the event of early termination thereof.
D. Grantors own and use in their business, and will in the future adopt and
so use, various intangible assets, including trademarks, service marks, designs,
logos, indicia, tradenames, corporate names, company names, business names,
fictitious business names, trade styles and/or other source and/or business
identifiers and applications pertaining thereto (collectively, the
"Trademarks").
E. Secured Party desires Grantors to assign and grant to it a lien on and
security interest in all of Grantors' existing and future Trademarks, all
registrations that have been or may hereafter be issued or applied for thereon
in the United States and any state thereof and in foreign countries (the
"Registrations"), all common law and other rights in and to the Trademarks in
the United States and any state thereof and in foreign countries (the "Trademark
Rights"), all goodwill of Grantors' business symbolized by the Trademarks and
associated therewith, including without limitation the documents and things
described in Section 1(b) (the "Associated Goodwill"), and all proceeds of the
Trademarks, the Registrations, the Trademark Rights and the Associated Goodwill,
and Grantors agree to assign and grant to Secured Party a secured and protected
interest in the Trademarks, the Registrations, the Trademark Rights, the
Associated Goodwill and all the proceeds thereof as provided herein.
F. Pursuant to the Security Agreement, each Grantor has assigned and
granted to Secured Party a lien on and security interest in, among other assets,
all Grantors' equipment, inventory, accounts and general intangibles relating to
the products and services sold or delivered under or in connection with the
Trademarks such that, upon the occurrence and during the continuation of an
Event of Default (as defined in the Credit Agreement) or the occurrence of an
Early Termination Date (as defined in a Master Agreement or an Interest Rate
Swap Agreement or Interest Rate and Currency Exchange Agreement in the form
prepared by the International Swap and Derivatives Association Inc. or a similar
event under any similar swap agreement) under any Lender Interest Rate Agreement
(either such occurrence being an "Event of Default" for purposes of this
Agreement), Secured Party would be able to exercise its remedies consistent with
the Security Agreement, this Agreement and applicable law to foreclose upon
Grantors' business and use the Trademarks, the Registrations and the Trademark
Rights in conjunction with the continued operation of such business, maintaining
substantially the same product and service specifications and quality as
maintained by Grantors, and benefit from the Associated Goodwill.
G. It is a condition precedent to the initial extensions of credit by
Lenders under the Credit Agreement that Grantors shall have assigned and granted
the security interests and undertaken the obligations contemplated by this
Agreement.
NOW, THEREFORE, in consideration of the premises and in order to induce
Lenders to make Loans and other extensions of credit under the Credit Agreement
and to induce Interest
IX-C-2
<PAGE>
Rate Exchangers to enter into the Lender Interest Rate Agreements, and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, each Grantor hereby agrees with Secured Party as follows:
SECTION 1. Assignment and Grant of Security.
Each Grantor hereby grants to Secured Party a security interest in all of
such Grantor's right, title and interest in and to the following, in each case
whether now or hereafter existing or in which Grantor now has or hereafter
acquires an interest and wherever the same may be located (the "Collateral"):
(a) each of the Trademarks and rights and interests in Trademarks
which are presently, or in the future may be, owned or held (whether
pursuant to a license or otherwise) by such Grantor, in whole or in part
(including without limitation the Trademarks specifically identified in
Schedule I annexed hereto, as the same may be amended pursuant hereto from
time to time), and including all Trademark Rights with respect thereto and
all federal, state and foreign Registrations therefor heretofore or
hereafter granted or applied for, the right (but not the obligation) to
register claims under any state or federal trademark law or regulation or
any trademark law or regulation of any foreign country and to apply for,
renew and extend the Trademarks, Registrations and Trademark Rights, the
right (but not the obligation) to sue or bring opposition or cancellation
proceedings in the name of such Grantor or in the name of Secured Party or
otherwise for past, present and future infringements of the Trademarks,
Registrations or Trademark Rights and all rights (but not obligations)
corresponding thereto in the United States and any foreign country, and the
Associated Goodwill; it being understood that the rights and interests
included herein shall include, without limitation, all rights and interests
pursuant to licensing or other contracts in favor of such Grantor
pertaining to the Trademarks, Registrations or Trademark Rights presently
or in the future owned or used by third parties but, in the case of third
parties which are not Affiliates of such Grantor, only to the extent
permitted by such licensing or other contracts or otherwise permitted by
applicable law and, if not so permitted under any such contracts and
applicable law, only with the consent of such third parties;
(b) the following documents and things in such Grantor's possession,
or subject to such Grantor's right to possession, related to (Y) the
production, sale and delivery by such Grantor, or by any Affiliate,
licensee or subcontractor of such Grantor, of products or services sold or
delivered by or under the authority of such Grantor in connection with the
Trademarks, Registrations or Trademark Rights (which products and services
shall, for purposes of this Agreement, be deemed to include, without
limitation, products and services sold or delivered pursuant to
merchandising operations utilizing any Trademarks, Registrations or
Trademark Rights); or (Z) any retail or other merchandising operations
conducted under the name of or in connection with the Trademarks,
Registrations or Trademark Rights by such Grantor or any Affiliate,
licensee or subcontractor of such Grantor:
IX-C-3
<PAGE>
(i) all lists and ancillary documents that identify and describe
any of such Grantor's customers, or those of their Affiliates,
licensees or subcontractors, for products sold and services delivered
under or in connection with the Trademarks or Trademark Rights,
including without limitation any lists and ancillary documents that
contain a customer's name and address, the name and address of any of
its warehouses, branches or other places of business, the identity of
the Person or Persons having the principal responsibility on a
customer's behalf for ordering products or services of the kind
supplied by such Grantor, or the credit, payment, discount, delivery
or other sale terms applicable to such customer, together with
information setting forth the total purchases, by brand, product,
service, style, size or other criteria, and the patterns of such
purchases;
(ii) all product and service specification documents and
production and quality control manuals used in the manufacture or
delivery of products and services sold or delivered under or in
connection with the Trademarks or Trademark Rights;
(iii) all documents which reveal the name and address of any
source of supply, and any terms of purchase and delivery, for any and
all materials, components and services used in the production of
products and services sold or delivered under or in connection with
the Trademarks or Trademark Rights; and
(iv) all documents constituting or concerning the then current or
proposed advertising and promotion by such Grantor or its Affiliates,
licensees or subcontractors of products and services sold or delivered
under or in connection with the Trademarks or Trademark Rights
including, without limitation, all documents which reveal the media
used or to be used and the cost for all such advertising conducted
within the described period or planned for such products and services;
and
(c) all proceeds, products, rents and profits (including without
limitation license royalties and proceeds of infringement suits) of or from
any and all of the foregoing Collateral and, to the extent not otherwise
included, all payments under insurance (whether or not Secured Party is the
loss payee thereof), or any indemnity, warranty or guaranty, payable by
reason of loss or damage to or otherwise with respect to any of the
foregoing Collateral. For purposes of this Agreement, the term "proceeds"
includes whatever is receivable or received when Collateral or proceeds are
sold, exchanged, collected or otherwise disposed of, whether such
disposition is voluntary or involuntary.
IX-C-4
<PAGE>
SECTION 2. Security for Obligations.
This Agreement secures, and the Collateral assigned by each Grantor is
collateral security for, the prompt payment or performance in full when due,
whether at stated maturity, by required prepayment, declaration, acceleration,
demand or otherwise (including without limitation the payment of amounts that
would become due but for the operation of the automatic stay under Section
362(a) of the Bankruptcy Code, 11 U.S.C. ss.362(a)), of all Secured Obligations
with respect to such Grantor. "Secured Obligations" means
(a) with respect to Company, all obligations and liabilities of every
nature of Company now or hereafter existing under or arising out of or in
connection with the Credit Agreement and the other Loan Documents and any
Lender Interest Rate Agreement, and
(b) with respect to each Subsidiary Grantor and Additional Grantor,
all obligations and liabilities of every nature of Grantors now or
hereafter existing under or arising out of or in connection with the
Guaranty,
in each case together with all extensions or renewals thereof, whether for
principal, interest (including without limitation interest that, but for the
filing of a petition in bankruptcy with respect to Company, would accrue on such
obligations, whether or not a claim is allowed against Company for such interest
in the related bankruptcy proceeding), reimbursement of amounts drawn under
Letters of Credit, payments for early termination of Lender Interest Rate
Agreements, fees, expenses, indemnities or otherwise, whether voluntary or
involuntary, direct or indirect, absolute or contingent, liquidated or
unliquidated, whether or not jointly owed with others, and whether or not from
time to time decreased or extinguished and later increased, created or incurred,
and all or any portion of such obligations or liabilities that are paid, to the
extent all or any part of such payment is avoided or recovered directly or
indirectly from Secured Party or any Lender or Interest Rate Exchanger as a
preference, fraudulent transfer or otherwise, and all obligations of every
nature of Grantors now or hereafter existing under this Agreement.
SECTION 3. Grantors Remains Liable.
Anything contained herein to the contrary notwithstanding, (a) each Grantor
shall remain liable under any contracts and agreements included in the
Collateral, to the extent set forth therein, to perform all of its duties and
obligations thereunder to the same extent as if this Agreement had not been
executed, (b) the exercise by Secured Party of any of its rights hereunder shall
not release any Grantor from any of its duties or obligations under the
contracts and agreements included in the Collateral, and (c) Secured Party shall
not have any obligation or liability under any contracts and agreements included
in the Collateral by reason of this Agreement, nor shall Secured Party be
obligated to perform any of the obligations or duties of any Grantor thereunder
or to take any action to collect or enforce any claim for payment assigned
hereunder.
IX-C-5
<PAGE>
SECTION 4. Representations and Warranties.
Each Grantor represents and warrants as follows:
(a) Ownership of Collateral. Except as expressly permitted by the
Credit Agreement and for the security interest assigned and created by this
Agreement, such Grantor is the legal and beneficial owner of the entire
right, title and interest in and to each Material Trademark Property, free
and clear of any Lien other than Liens of mechanics, materialmen, attorneys
and other similar liens imposed by laws in the ordinary course of business
in connection with the establishment, creation or application for
Registration of any Trademarks, Registrations or Trademark Rights for sums
not yet delinquent or being contested in good faith (such Liens being
referred to herein as "Permitted Trademark Liens"). Except such as may have
been filed in favor of Secured Party relating to this Agreement, no
effective financing statement or other instrument similar in effect
covering all or any part of the Collateral is on file in any filing or
recording office, including the United States Patent and Trademark Office.
(b) Description of Collateral. A true and complete list of all
Trademarks, Registrations and Trademark Rights owned, held (whether
pursuant to a license or otherwise) or used by such Grantor, in whole or in
part, as of the date of this Agreement is set forth in Schedule I annexed
hereto. Each Trademark, Registration or Trademark Right designated on
Schedule I annexed hereto as a Material Trademark Property, and each other
Trademark, Registration or Trademark Right hereafter arising or otherwise
owned, held or used by any Grantor that is material to any of such
Grantor's business or operations is referred to herein as a "Material
Trademark Property".
(c) Validity and Enforceability of Collateral. To the knowledge of
Grantors, each Material Trademark Property is valid, subsisting and
enforceable. As of the Closing Date, such Grantor is not aware of any
pending or threatened claim by any third party that any Material Trademark
Property is invalid or unenforceable or that the use of any Material
Trademark Property violates the rights of any third person or of any basis
for any such claim, and there is no such pending or threatened claim
whether arising prior to or after the Closing Date, that could reasonably
be expected to have a Material Adverse Effect.
(d) Office Locations. The chief place of business, the chief executive
office and the office where such Grantor keeps its records regarding the
Collateral is, and has been for the four month period preceding the date
hereof, at the locations set forth on Schedule II annexed hereto.
(e) Names. No Grantor has in the past done, and no Grantor now does,
business under any other name (including any tradename or fictitious
business name) except under the names listed on Schedule III annexed
hereto.
IX-C-6
<PAGE>
(f) Perfection. The security interests in the Collateral granted to
Secured Party for the ratable benefit of the Lenders and Interest Rate
Exchangers hereunder constitute valid security interests in the Collateral.
Upon the filing of UCC financing statements naming each Grantor as
"debtor", naming Secured Party as "secured party" and describing the
Collateral in the filing offices set forth on Schedule 4(g) annexed hereto
and the recording of this Agreement with the United Sates Patent and
Trademark Office, the security interests in the Collateral granted to
Secured Party for the ratable benefit of the Lenders and Interest Rate
Exchangers will, to the extent a security interest in the Collateral may be
perfected by filing UCC financing statements and recording this Agreement,
constitute valid and perfected security interests therein prior to all
other Liens (subject only to Permitted Trademark Liens).
SECTION 5. Further Assurances; New Trademarks, Registrations and Trademark
Rights; Certain Inspection Rights.
(a) Each Grantor agrees that from time to time, at the expense of Grantors,
such Grantor will promptly execute and deliver all further instruments and
documents, and take all further action, that may be necessary or desirable, or
that Secured Party may request, in order to perfect and protect any security
interest assigned or purported to be assigned or granted hereby or to enable
Secured Party to exercise and enforce its rights and remedies hereunder with
respect to any Collateral. Without limiting the generality of the foregoing,
each Grantor will: (i) at the request of Secured Party, mark conspicuously each
of its records pertaining to the Collateral with a legend, in form and substance
satisfactory to Secured Party, indicating that such Collateral is subject to the
security interest granted hereby, (ii) execute and file such financing or
continuation statements, or amendments thereto, and such other instruments or
notices, as may be necessary or desirable, or as Secured Party may request, in
order to perfect and preserve the security interests granted or purported to be
granted hereby, (iii) use its best efforts to obtain any necessary consents of
third parties to the assignment and perfection of a security interest to Secured
Party with respect to any Collateral, and (iv) at Secured Party's request,
appear in and defend any action or proceeding that may affect such Grantor's
title to or Secured Party's security interest in all or any part of the
Collateral.
(b) Each Grantor hereby authorizes Secured Party to file one or more
financing or continuation statements, and amendments thereto, relative to all or
any part of the Collateral without the signature of any Grantor. Each Grantor
agrees that a carbon, photographic or other reproduction of this Agreement or of
a financing statement signed by such Grantor shall be sufficient as a financing
statement and may be filed as a financing statement in any and all
jurisdictions.
(c) Each Grantor hereby authorizes Secured Party to modify this Agreement
without obtaining such Grantor's approval of or signature to such modification
by amending Schedule I annexed hereto to include reference to any right, title
or interest in any existing Trademark, Registration or Trademark Right or any
Trademark, Registration or Trademark Right acquired or developed by any Grantor
after the hereof or to delete any reference to any right,
IX-C-7
<PAGE>
title or interest in any Trademark, Registration or Trademark Right in which no
Grantor has or claims any right, title or interest.
(d) Each Grantor will furnish to Secured Party from time to time statements
and schedules further identifying and describing the Collateral and such other
reports in connection with the Collateral as Secured Party may reasonably
request, all in reasonable detail.
(e) If any Grantor shall obtain rights to any new Trademarks, Registrations
or Trademark Rights, the provisions of this Agreement shall automatically apply
thereto. Each Grantor shall promptly notify Secured Party in writing of any
rights to any new Trademarks or Trademark Rights acquired by such Grantor after
the date hereof and of any Registrations issued or applications for Registration
made after the date hereof, which notice shall state whether such Trademark,
Registration or Trademark Right constitutes a Material Trademark Property.
Concurrently with the filing of an application for Registration for any
Trademark, the applicable Grantor shall execute, deliver and record in all
places where this Agreement is recorded an appropriate Trademark Security
Agreement, substantially in the form hereof, with appropriate insertions, or an
amendment to this Agreement, in form and substance satisfactory to Secured
Party, pursuant to which such Grantor shall assign and grant a security interest
to the extent of its interest in such Registration as provided herein to Secured
Party unless so doing would, in the reasonable judgment of such Grantor, after
due inquiry, result in the grant of a Registration in the name of Secured Party,
in which event such Grantor shall give written notice to Secured Party as soon
as reasonably practicable and the filing shall instead be undertaken as soon as
practicable but in no case later than immediately following the grant of the
Registration.
(f) Each Grantor hereby grants to Secured Party and its employees,
representatives and agents the right to visit such Grantor's and any of its
Affiliate's or subcontractor's plants, facilitates and other places of business
that are utilized in connection with the manufacture, production, inspection,
storage or sale of products and services sold or delivered under any of the
Trademarks, Registrations or Trademark Rights (or which were so utilized during
the prior six month period), and to inspect the quality control and all other
records relating thereto upon reasonable notice to such Grantor and as often as
my be reasonably requested.
SECTION 6. Certain Covenants of Grantors.
Each Grantor shall:
(a) not use or permit any Collateral to be used unlawfully or in
violation of any provision of this Agreement or any applicable statute,
regulation or ordinance or any policy of insurance covering the Collateral;
(b) notify Secured Party of any change in such Grantor's name,
identity or corporate structure within 15 days of such change;
IX-C-8
<PAGE>
(c) give Secured Party 30 days' prior written notice of any change in
such Grantor's chief place of business or chief executive office or the
office where such Grantor keeps its records regarding the Collateral;
(d) pay promptly when due all property and other taxes, assessments
and governmental charges or levies imposed upon, and all claims (including
claims for labor, materials and supplies) against, the Collateral, except
to the extent the validity thereof is being contested in good faith;
provided that such Grantor shall in any event pay such taxes, assessments,
charges, levies or claims not later than five days prior to the date of any
proposed sale under any judgement, writ or warrant of attachment entered or
filed against such Grantor or any of the Collateral as a result of the
failure to make such payment;
(e) not sell, assign (by operation of law or otherwise) or otherwise
dispose of any of the Collateral, except as permitted by the Credit
Agreement;
(f) except for Permitted Trademark Liens and the security interest
assigned and created by this Agreement, not create or suffer to exist any
Lien upon or with respect to any of the Collateral to secure the
indebtedness or other obligations of any Person;
(g) diligently keep reasonable records respecting the Collateral
assigned by it hereunder and at all times keep at least one complete set of
its records concerning substantially all of the Trademarks, Registrations
and Trademark Rights at its chief executive office or principal place of
business;
(h) not permit the inclusion in any contract to which it becomes a
party of any provision that could or might in any way conflict with this
Agreement or impair or prevent the assignment and creation of a security
interest in any Grantor's rights and interests in any property included
within the definitions of any Trademarks, Registrations, Trademark Rights
and Associated Goodwill acquired;
(i) use proper statutory notice in connection with its use of each
Material Trademark Property to the extent reasonably necessary for the
protection of such Material Trademark Property;
(j) use consistent standards of quality (which may be consistent with
such Grantor's past practices) in the manufacture, sale and delivery of
products and services sold or delivered under or in connection with the
Trademarks, Registrations and Trademark Rights, including, to the extent
applicable, in the operation and maintenance of its retail stores and other
merchandising operations; and
(k) upon any officer of such Grantor obtaining knowledge thereof,
promptly notify Secured Party in writing of any event that may materially
and adversely affect the value of the Collateral or any portion thereof,
the ability of any Grantor or Secured Party
IX-C-9
<PAGE>
to dispose of the Collateral or any portion thereof, or the rights and
remedies of Secured Party in relation thereto, including without limitation
the levy of any legal process against the Collateral or any portion
thereof.
SECTION 7. Amounts Payable in Respect of the Collateral.
Except as otherwise provided in this Section 7, each Grantor shall continue
to collect, at its own expense, all amounts due or to become due to Grantors in
respect of the Collateral or any portion thereof. In connection with such
collections, each Grantor may take (and, at Secured Party's direction, shall
take) such action as such Grantor or Secured Party may deem necessary or
advisable to enforce collection of such amounts; provided, however, that Secured
Party shall have the right at any time, upon the occurrence and during the
continuation of an Event of Default or a Potential Event of Default and upon
written notice to such Grantor of its intention to do so, to notify the obligors
with respect to any such amounts of the existence of the security interest
assigned and created hereby, and to direct such obligors to make payment of all
such amounts directly to Secured Party, and, upon such notification and at the
expense of Grantors, to enforce collection of any such amounts and to adjust,
settle or compromise the amount or payment thereof, in the same manner and to
the same extent as such Grantor might have done. After receipt by such Grantor
of the notice from Secured Party referred to in the proviso to the preceding
sentence, (i) all amounts and proceeds (including checks and other instruments)
received by such Grantor in respect of amounts due to such Grantor in respect of
the Collateral or any portion thereof shall be received in trust for the benefit
of Secured Party hereunder, shall be segregated from other funds of such Grantor
and shall be forthwith paid over or delivered to Secured Party in the same form
as so received (with any necessary endorsement) to be held as cash Collateral
and applied as provided by Section 14, and (ii) such Grantor shall not adjust,
settle or compromise the amount or payment of any such amount or release wholly
or partly any obligor with respect thereto or allow any credit or discount
thereon.
SECTION 8. Trademark Applications and Litigation.
(a) Each Grantor shall have the duty diligently to prosecute any trademark
application relating to any Material Trademark Property that is pending as of
the date of this Agreement, to make federal application on any existing or
future registerable but unregistered Material Trademark Property (whenever it is
commercially reasonable in the reasonable judgement of such Grantor to do so),
and to file and prosecute opposition and cancellation proceedings, renew
Registrations and do any and all acts which are necessary or desirable to
preserve and maintain all rights in all Material Trademark Properties. Any
expenses incurred in connection therewith shall be borne solely by Grantors. No
Grantor shall abandon any Material Trademark Property.
(b) Except as provided in Section 8(d), each Grantor shall have the right
to commence and prosecute in its own name, as real party in interest, for its
own benefit and at its own expense, such suits, proceedings or other actions for
infringement, unfair competition, dilution or other damage as are in its
reasonable business judgment necessary to protect the Collateral.
IX-C-10
<PAGE>
Secured Party shall provide, at Grantor's expense, all reasonable and necessary
cooperation in connection with any such suit, proceeding or action including,
without limitation, joining as a necessary party.
(c) Each Grantor shall promptly, following its becoming aware thereof,
notify Secured Party of the institution of, or of any adverse determination in,
any proceeding (whether in the United States Patent and Trademark Office or any
federal, state, local or foreign court) described in Section 8(a) or 8(b) or
regarding such Grantor's claim of ownership in or right to use any of the
Trademarks, Registrations or Trademark Rights, its right to register the same,
or its right to keep and maintain such Registration. Such Grantor shall provide
to Secured Party any information with respect thereto requested by Secured
Party.
(d) Anything contained herein to the contrary notwithstanding, upon the
occurrence and during the continuation of an Event of Default, Secured Party
shall have the right (but not the obligation) to bring suit, in the name of any
Grantor, Secured Party or otherwise, to enforce any Trademark, Registration,
Trademark Right and any license thereunder and to enforce its rights hereunder
in Associated Goodwill, in which event each Grantor shall, at the request of
Secured Party, do any and all lawful acts and execute any and all documents
required by Secured Party in aid of such enforcement and each Grantor shall
promptly, upon demand, reimburse and indemnify Secured Party as provided in
Section 15 in connection with the exercise of its rights under this Section 8.
To the extent that Secured Party shall elect not to bring suit to enforce any
Trademark, Registration, Trademark Right or any license thereunder or to enforce
its rights hereunder in Associated Goodwill as provided in this Section 8(d),
each Grantor agrees to use all reasonable measures, whether by action, suit,
proceeding or otherwise, to prevent the infringement of any of the Trademarks,
Registrations or Trademark Rights or of Grantors' or Secured Party's rights in
Associated Goodwill by others and for that purpose agrees to diligently maintain
any action, suit or proceeding against any Person so infringing necessary to
prevent such infringement.
SECTION 9. Non-Disturbance Agreements, etc.
If and to the extent that any Grantor is permitted to license the
Collateral, Secured Party shall enter into a non-disturbance agreement or other
similar arrangement, at Grantors' request and expense, with such Grantor and any
licensee of any Collateral permitted hereunder in form and substance
satisfactory to Secured Party pursuant to which (a) Secured Party shall agree
not to disturb or interfere with such licensee's rights under its license
agreement with such Grantor so long as such licensee is not in default
thereunder and (b) such licensee shall acknowledge and agree that the Collateral
licensed to it is subject to the security interest assigned and created in favor
of Secured Party and the other terms of this Agreement.
IX-C-11
<PAGE>
SECTION 10. Secured Party Appointed Attorney-in-Fact.
Each Grantor hereby irrevocably appoints Secured Party as such Grantor's
attorney-in-fact, with full authority in the place and stead of such Grantor and
in the name of such Grantor, Secured Party or otherwise, from time to time in
Secured Party's discretion to take any action and to execute any instrument that
Secured Party may deem necessary or advisable to accomplish the purposes of this
Agreement, including without limitation:
(a) to endorse such Grantor's name on all applications, documents,
papers and instruments necessary for Secured Party in the use or
maintenance of the Collateral;
(b) to ask for, demand, collect, sue for, recover, compound, receive
and give acquittance and receipts for moneys due and to become due under or
in respect of any of the Collateral;
(c) to receive, endorse and collect any drafts or other instruments,
documents and chattel paper in connection with clause (b) above;
(d) to file any claims or take any action or institute any proceedings
that Secured Party may deem necessary or desirable for the collection of
any of the Collateral or otherwise to enforce the rights of Secured Party
with respect to any of the Collateral;
(e) to pay or discharge taxes or Liens (other than Liens permitted
under this Agreement or the Credit Agreement) levied or placed upon or
threatened against the Collateral, the legality or validity thereof and the
amounts necessary to discharge the same to be determined by Secured Party
in its sole discretion, any such payments made by Secured Party to become
obligations of such Grantor to Secured Party, due and payable immediately
without demand; and
(f) upon the occurrence and during the continuance of an Event of
Default, (i) to execute and deliver any of the assignments or documents
requested by Secured Party pursuant to Section 13(b), (ii) to grant or
issue an exclusive or non-exclusive license to the Collateral or any
portion thereof to any Person, and (iii) otherwise generally to sell,
transfer, pledge, make any agreement with respect to or otherwise deal with
any of the Collateral as fully and completely as though Secured Party were
the absolute owner thereof for all purposes, and to do, at Secured Party's
option and Grantors' expense, at any time or from time to time, all acts
and things that Secured Party deems necessary to protect, preserve or
realize upon the Collateral and Secured Party's security interest therein
in order to effect the intent of this Agreement, all as fully and
effectively as such Grantor might do.
IX-C-12
<PAGE>
SECTION 11. Secured Party May Perform.
If any Grantor fails to perform any agreement contained herein, Secured
Party may itself perform, or cause performance of, such agreement, and the
expenses of Secured Party incurred in connection therewith shall be payable by
such Grantor under Section 15.
SECTION 12. Standard of Care.
The powers conferred on Secured Party hereunder are solely to protect its
interest in the Collateral and shall not impose any duty upon it to exercise any
such powers. Except for the exercise of reasonable care in the custody of any
Collateral in its possession and the accounting for monies actually received by
it hereunder, Secured Party shall have no duty as to any Collateral or as to the
taking of any necessary steps to preserve rights against prior parties or any
other rights pertaining to any Collateral. Secured Party shall be deemed to have
exercised reasonable care in the custody and preservation of any Collateral in
its possession if such Collateral is accorded treatment substantially equal to
that which Secured Party accords its own property of a similar nature.
SECTION 13. Remedies.
If any Event of Default shall have occurred and be continuing:
(a) Secured Party may exercise in respect of the Collateral, in
addition to all other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party on default
under the Uniform Commercial Code as in effect in any relevant jurisdiction
(the "Code") (whether or not the Code applies to the affected Collateral),
and also may (i) require each Grantor to, and each Grantor hereby agrees
that it will at its expense and upon request of Secured Party forthwith,
assemble all or part of the Collateral as directed by Secured Party and
make it available to Secured Party at a place to be designated by Secured
Party that is reasonably convenient to both parties, (ii) enter onto the
property where any Collateral is located and take possession thereof with
or without judicial process, (iii) prior to the disposition of the
Collateral, store the Collateral or otherwise prepare the Collateral for
disposition in any manner to the extent Secured Party deems appropriate,
(iv) take possession of any Grantor's premises or place custodians in
exclusive control thereof, remain on such premises and use the same for the
purpose of taking any actions described in the preceding clause (iii) and
collecting any Secured Obligation, (v) exercise any and all rights and
remedies of Grantors under or in connection with the contracts related to
the Collateral or otherwise in respect of the Collateral, including without
limitation any and all rights of Grantors to demand or otherwise require
payment of any amount under, or performance of any provision of, such
contracts, and (vi) without notice except as specified below, sell the
Collateral or any part thereof in one or more parcels at public or private
sale, at any of Secured Party's offices or elsewhere, for cash, on credit
or for future delivery, at such
IX-C-13
<PAGE>
time or times and at such price or prices and upon such other terms as
Secured Party may deem commercially reasonable. Secured Party or any Lender
or Interest Rate Exchanger may be the purchaser of any or all of the
Collateral at any such sale and Secured Party, as agent for and
representative of Lenders and Interest Rate Exchangers (but not any Lender
or Lenders or Interest Rate Exchanger or Interest Rate Exchangers in its or
their respective individual capacities unless Requisite Obligees (as
defined in Section 17(a)) shall otherwise agree in writing), shall be
entitled, for the purpose of bidding and making settlement or payment of
the purchase price for all or any portion of the Collateral sold at any
such public sale, to use and apply any of the Secured Obligations as a
credit on account of the purchase price for any Collateral payable by
Secured Party at such sale. Each purchaser at any such sale shall hold the
property sold absolutely free from any claim or right on the part of any
Grantor, and each Grantor hereby waives (to the extent permitted by
applicable law) all rights of redemption, stay and/or appraisal which it
now has or may at any time in the future have under any rule of law or
statute now existing or hereafter enacted. Each Grantor agrees that, to the
extent notice of sale shall be required by law, at least ten days' notice
to such Grantor of the time and place of any public sale or the time after
which any private sale is to be made shall constitute reasonable
notification. Secured Party shall not be obligated to make any sale of
Collateral regardless of notice of sale having been given. Secured Party
may adjourn any public or private sale from time to time by announcement at
the time and place fixed therefor, and such sale may, without further
notice, be made at the time and place to which it was so adjourned. Each
Grantor hereby waives any claims against Secured Party arising by reason of
the fact that the price at which any Collateral may have been sold at such
a private sale was less than the price which might have been obtained at a
public sale, even if Secured Party accepts the first offer received and
does not offer such Collateral to more than one offeree. If the proceeds of
any sale or other disposition of the Collateral are insufficient to pay all
the Secured Obligations, Grantors shall be jointly and severally liable for
the deficiency and the fees of any attorneys employed by Secured Party to
collect such deficiency.
(b) Upon written demand from Secured Party, each Grantor shall execute
and deliver to Secured Party an assignment or assignments of the
Trademarks, Registrations, Trademark Rights and the Associated Goodwill and
such other documents as are requested by Secured Party. Each Grantor agrees
that such an assignment and/or recording shall be applied to reduce the
Secured Obligations outstanding only to the extent that Secured Party (or
any Lender) receives cash proceeds in respect of the sale of, or other
realization upon, the Collateral.
(c) Within five Business Days after written notice from Secured Party,
each Grantor shall make available to Secured Party, to the extent within
each applicable Grantor's power and authority, such personnel in such
Grantor's employ on the date of such Event of Default as Secured Party may
reasonably designate, by name, title or job responsibility, to permit such
Grantor to continue, directly or indirectly, to produce, advertise and sell
the products and services sold or delivered by such Grantor under or in
connection with the Trademarks, Registrations and Trademark Rights, such
persons
IX-C-14
<PAGE>
to be available to perform their prior functions on Secured Party's behalf
and to be compensated by Secured Party at Grantors' expense on a per diem,
pro-rata basis consistent with the salary and benefit structure applicable
to each as of the date of such Event of Default.
SECTION 14. Application of Proceeds.
Except as expressly provided elsewhere in this Agreement, all proceeds
received by Secured Party in respect of any sale of, collection from, or other
realization upon all or any part of the Collateral shall be applied as provided
in subsection 2.4D of the Credit Agreement.
SECTION 15. Indemnity and Expenses.
(a) Grantors jointly and severally agree to indemnify Secured Party, each
Lender and each Interest Rate Exchanger from and against any and all claims,
losses and liabilities in any way relating to, growing out of or resulting from
this Agreement and the transactions contemplated hereby (including without
limitation enforcement of this Agreement), except to the extent such claims,
losses or liabilities result solely from Secured Party's or such Lender's or
Interest Rate Exchanger's gross negligence or willful misconduct as finally
determined by a court of competent jurisdiction.
(b) Grantors jointly and severally agree to pay to Secured Party upon
demand the amount of any and all costs and expenses, including the reasonable
fees and expenses of its counsel and of any experts and agents, that Secured
Party may incur in connection with (i) the administration of this Agreement,
(ii) the custody, preservation, use or operation of, or the sale of, collection
from, or other realization upon, any of the Collateral, (iii) the exercise or
enforcement of any of the rights of Secured Party hereunder, or (iv) the failure
by any Grantor to perform or observe any of the provisions hereof.
(c) The obligations of Grantors in this Section 15 shall survive the
termination of this Agreement and the discharge of Grantors' other obligations
under this Agreement, the Interest Rate Agreements, the Credit Agreement and the
other Loan Documents.
SECTION 16. Continuing Security Interest; Transfer of Loans.
This Agreement shall assign and create a continuing security interest in
the Collateral and shall (a) remain in full force and effect until the payment
in full of the Secured Obligations, the cancellation or termination of the
Commitments and the cancellation or expiration of all outstanding Letters of
Credit, (b) be binding upon Grantors and their respective successors and
assigns, and (c) inure, together with the rights and remedies of Secured Party
hereunder, to the benefit of Secured Party and its successors, transferees and
assigns. Without limiting the generality of the foregoing clause (c), but
subject to the provisions of subsection 10.1 of the Credit Agreement, any Lender
may assign or otherwise transfer any Loans held by it to any
IX-C-15
<PAGE>
other Person, and such other Person shall thereupon become vested with all the
benefits in respect thereof granted to Lenders herein or otherwise. Upon the
payment in full of all Secured Obligations, the cancellation or termination of
the Commitments and the cancellation or expiration of all outstanding Letters of
Credit, the security interest assigned and granted hereby shall terminate and
all rights to the Collateral shall revert to the applicable Grantors. Upon any
such termination Secured Party will, at Grantors' expense, execute and deliver
to Grantors such documents as Grantors shall reasonably request to evidence such
termination.
SECTION 17. Secured Party as Agent.
(a) Secured Party has been appointed to act as Secured Party hereunder by
Lenders and, by their acceptance of the benefits hereof, Interest Rate
Exchangers. Secured Party shall be obligated, and shall have the right
hereunder, to make demands, to give notices, to exercise or refrain from
exercising any rights, and to take or refrain from taking any action (including
without limitation the release or substitution of Collateral), solely in
accordance with this Agreement and the Credit Agreement; provided that Secured
Party shall exercise, or refrain from exercising, any remedies provided for in
Section 13 in accordance with the instructions of (i) Requisite Lenders or (ii)
after payment in full of all Obligations under the Credit Agreement and the
other Loan Documents, the holders of a majority of the aggregate notional amount
(or, with respect to any Lender Interest Rate Agreement that has been terminated
in accordance with its terms, the amount then due and payable (exclusive of
expenses and similar payments but including any early termination payments then
due) under such Lender Interest Rate Agreement) under all Lender Interest Rate
Agreements (Requisite Lenders or, if applicable, such holders being referred to
herein as "Requisite Obligees"). In furtherance of the foregoing provisions of
this Section 17(a), each Interest Rate Exchanger, by its acceptance of the
benefits hereof, agrees that it shall have no right individually to realize upon
any of the Collateral hereunder, it being understood and agreed by such Interest
Rate Exchanger that all rights and remedies hereunder may be exercised solely by
Secured Party for the benefit of Lenders and Interest Rate Exchangers in
accordance with the terms of this Section 17(a).
(b) Secured Party shall at all times be the same Person that is Collateral
Agent under the Credit Agreement. Written notice of resignation by Collateral
Agent pursuant to subsection 9.5 of the Credit Agreement shall also constitute
notice of resignation as Secured Party under this Agreement; removal of
Collateral Agent pursuant to subsection 9.5 of the Credit Agreement shall also
constitute removal as Secured Party under this Agreement; and appointment of a
successor Collateral Agent pursuant to subsection 9.5 of the Credit Agreement
shall also constitute appointment of a successor Secured Party under this
Agreement. Upon the acceptance of any appointment as Collateral Agent under
subsection 9.5 of the Credit Agreement by a successor Collateral Agent, that
successor Collateral Agent shall thereupon succeed to and become vested with all
the rights, powers, privileges and duties of the retiring or removed Secured
Party under this Agreement, and the retiring or removed Secured Party under this
Agreement shall promptly (i) transfer to such successor Secured Party all sums,
securities and other items of Collateral held hereunder, together with all
records and other documents necessary or appropriate in connection with the
performance of the duties of the successor
IX-C-16
<PAGE>
Secured Party under this Agreement, and (ii) execute and deliver to such
successor Secured Party such amendments to financing statements, and take such
other actions, as may be necessary or appropriate in connection with the
assignment to such successor Secured Party of the security interests created
hereunder, whereupon such retiring or removed Secured Party shall be discharged
from its duties and obligations under this Agreement. After any retiring or
removed Collateral Agent's resignation or removal hereunder as Secured Party,
the provisions of this Agreement shall inure to its benefit as to any actions
taken or omitted to be taken by it under this Agreement while it was Secured
Party hereunder.
SECTION 18. Amendments; Etc.
No amendment, modification, termination or waiver of any provision of this
Agreement, and no consent to any departure by any Grantor therefrom, shall in
any event be effective unless the same shall be in writing and signed by Secured
Party and, in the case of any such amendment or modification, by Grantors;
provided that any amendment hereto pursuant to Section 21 or Section 5(c) shall
be effective upon by any Additional Grantor and Grantors hereby waive any
requirement of notice of or consent to any such amendment. Any such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which it was given.
SECTION 19. Notices.
Any notice or other communication herein required or permitted to be given
shall be in writing and may be personally served, telexed or sent by
telefacsimile or United States mail or courier service and shall be deemed to
have been given when delivered in person or by courier service, upon receipt of
telefacsimile or telex (with received answerback), or three Business Days after
depositing it in the United States mail with postage prepaid and properly
addressed; provided that notices to Secured Party shall not be effective until
received. For the purposes hereof, the address of each party hereto shall be
provided in subsection 10.8 of the Credit Agreement or as set forth under such
party's name on the signature pages hereof or such other address as shall be
designated by such party in a written notice delivered to the other parties
hereto.
SECTION 20. Failure or Indulgence Not Waiver; Remedies Cumulative.
No failure or delay on the part of Secured Party in the exercise of any
power, right or privilege hereunder shall impair such power, right or privilege
or be construed to be a waiver of any default or acquiescence therein, nor shall
any single or partial exercise of any such power, right or privilege preclude
any other or further exercise thereof or of any other power, right or privilege.
All rights and remedies existing under this Agreement are cumulative to, and not
exclusive of, any rights or remedies otherwise available.
IX-C-17
<PAGE>
SECTION 21. Additional Grantors.
The initial Subsidiary Grantors hereunder shall be such of the Subsidiaries
of Company as are signatories hereto on the date hereof. From time to time
subsequent to the date hereof, additional Subsidiaries of Company may become
parties hereto as additional Grantors (each an "Additional Grantor"), by
executing an acknowledgement to this Agreement substantially in the form of
Schedule V annexed hereto. Upon delivery of any such acknowledgment to Chase
Co-Administrative Agent and Secured Party, notice of which is hereby waived by
Grantors, each such Additional Grantor shall be a Grantor and shall be as fully
a party hereto as if such Additional Grantor were an original signatory hereto.
Each Grantor expressly agrees that its obligations arising hereunder shall not
be affected or diminished by the addition or release of any other Grantor
hereunder, nor by any election of Chase Co-Administrative Agent not to cause any
Subsidiary of Company to become an Additional Grantor hereunder. This Agreement
shall be fully effective as to any Grantor that is or becomes a party hereto
regardless of whether any other Person becomes or fails to become or ceases to
be a Grantor hereunder.
SECTION 22. Severability.
In case any provision in or obligation under this Agreement shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
SECTION 23. Headings.
Section and subsection headings in this Agreement are included herein for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose or be given any substantive effect.
SECTION 24. Governing Law; Terms; Rules of Construction.
THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER
SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT LIMITATION SECTION
5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD
TO CONFLICTS OF LAWS PRINCIPLES, EXCEPT TO THE EXTENT THAT THE CODE PROVIDES
THAT THE PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER,
IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF NEW YORK. Unless otherwise defined herein
or in the Credit Agreement, terms used in Articles 8 and 9 of the Uniform
Commercial Code in the State of New York are
IX-C-18
<PAGE>
used herein as therein defined. The rules of construction set forth in
subsection 1.3 of the Credit Agreement shall be applicable to this Agreement
mutatis mutandis.
SECTION 25. Consent to Jurisdiction and Service of Process.
ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY GRANTOR ARISING OUT OF OR
RELATING TO THIS AGREEMENT, OR ANY OBLIGATIONS HEREUNDER, MAY BE BROUGHT IN ANY
STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE, COUNTY AND CITY
OF NEW YORK. BY EXECUTING AND DELIVERING THIS AGREEMENT, EACH GRANTOR, FOR
ITSELF AND IN CONNECTION WITH ITS PROPERTIES, IRREVOCABLY (I) ACCEPTS GENERALLY
AND UNCONDITIONALLY THE NONEXCLUSIVE JURISDICTION AND VENUE OF SUCH COURTS; (II)
WAIVES ANY DEFENSE OF FORUM NON CONVENIENS; (III) AGREES THAT SERVICE OF ALL
PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH COURT MAY BE MADE BY REGISTERED OR
CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO SUCH GRANTOR AT ITS ADDRESS
PROVIDED IN ACCORDANCE WITH SECTION 19; (IV) AGREES THAT SERVICE AS PROVIDED IN
CLAUSE (III) ABOVE IS SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER SUCH
GRANTOR IN ANY SUCH PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES
EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT; (V) AGREES THAT SECURED PARTY
RETAINS THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO
BRING PROCEEDINGS AGAINST SUCH GRANTOR IN THE COURTS OF ANY OTHER JURISDICTION;
AND (VI) AGREES THAT THE PROVISIONS OF THIS SECTION 25 RELATING TO JURISDICTION
AND VENUE SHALL BE BINDING AND ENFORCEABLE TO THE FULLEST EXTENT PERMISSIBLE
UNDER NEW YORK GENERAL OBLIGATIONS LAW SECTION 5-1402 OR OTHERWISE.
SECTION 26. Waiver of Jury Trial.
GRANTORS AND SECURED PARTY HEREBY AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO
A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
AGREEMENT. The scope of this waiver is intended to be all-encompassing of any
and all disputes that may be filed in any court and that relate to the subject
matter of this transaction, including without limitation contract claims, tort
claims, breach of duty claims, and all other common law and statutory claims.
Each Grantor and Secured Party acknowledge that this waiver is a material
inducement for Grantors and Secured Party to enter into a business relationship,
that Grantors and Secured Party have already relied on this waiver in entering
into this Agreement and that each will continue to rely on this waiver in their
related future dealings. Each Grantor and Secured Party further warrant and
represent that each has reviewed this waiver with its legal counsel, and that
each knowingly and voluntarily waives its jury trial rights following
consultation with legal counsel. THIS
IX-C-19
<PAGE>
WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN
WRITING (OTHER THAN BY A MUTUAL WRITTEN WAIVER SPECIFICALLY REFERRING TO THIS
SECTION 26 AND EXECUTED BY EACH OF THE PARTIES HERETO), AND THIS WAIVER SHALL
APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO
THIS AGREEMENT. In the event of litigation, this Agreement may be filed as a
written consent to a trial by the court.
SECTION 27. Counterparts.
This Agreement may be executed in one or more counterparts and by different
parties hereto in separate counterparts, each of which when so executed and
delivered shall be deemed an original, but all such counterparts together shall
constitute but one and the same instrument; signature pages may be detached from
multiple separate counterparts and attached to a single counterpart so that all
signature pages are physically attached to the same document.
[Remainder of page intentionally left blank]
IX-C-20
<PAGE>
IN WITNESS WHEREOF, Grantors and Secured Party have caused this Agreement
to be duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
OUTSOURCING SOLUTIONS INC.
ALASKA FINANCIAL SERVICES, INC.
CFC SERVICES CORP.
THE CONTINENTAL ALLIANCE, INC.
SOUTHWEST CREDIT SERVICES, INC.
By:_____________________________________
Name:
Title:
ACCOUNT PORTFOLIOS, L.P.
GULF STATE CREDIT, L.P.
PERIMETER CREDIT, L.P.
By: ACCOUNT PORTFOLIOS G.P., INC.,
general partner
By:________________________________
Name:
Title:
IX-C-21
<PAGE>
A.M. MILLER & ASSOCIATES, INC.
ACCOUNT PORTFOLIOS G.P., INC.
ACCOUNT PORTFOLIOS, INC.
ASSET RECOVERY & MANAGEMENT CORP.
FM SERVICES CORPORATION
FURST AND FURST, INC.
INDIANA MUTUAL CREDIT ASSOCIATION, INC.
JENNIFER LOOMIS & ASSOCIATES, INC.
NATIONAL ACCOUNT SYSTEMS, INC.
PAYCO AMERICAN CORPORATION
PAYCO AMERICAN INTERNATIONAL CORP.
PAYCO-GENERAL AMERICAN CREDITS, INC.
PROFESSIONAL RECOVERIES INC.
QUALINK, INC.
UNIVERSITY ACCOUNTING SERVICE, INC.
By:_____________________________________
Name:
Title:
Notice Address for the foregoing
Grantors:
300 Galleria Parkway
Suite 690
Atlanta, Georgia 30339
Attention: Chief Financial Officer
Facsimile: (770) 988-2910
with a copy to:
McCown De Leeuw & Co.
101 East 52nd Street
31st Floor
New York, New York 10022
Attention: Tyler T. Zachem
Facsimile: (212) 355-6283
(212) 355-6945
IX-C-22
<PAGE>
and a copy to:
White & Case
1155 Avenue of the Americas
New York, New York 10036
Attention: Frank L. Schiff, Esq.
Facsimile: (212) 819-7817
IX-C-23
<PAGE>
SUNTRUST BANK, ATLANTA,
as Secured Party
By:_____________________________________
Name:
Title:
By:_____________________________________
Name:
Title:
IX-C-24
<PAGE>
SCHEDULE I
TO
TRADEMARK SECURITY AGREEMENT
Registered United States Trademark Registration Registration
Owner Description Number Date
- ---------- ----------- ------------ ------------
IX-C-25
<PAGE>
SCHEDULE II
TO
TRADEMARK SECURITY AGREEMENT
Office Locations
Name of Company/Limited Partnership Office Location
- ----------------------------------- ---------------
IX-C-26
<PAGE>
SCHEDULE III
TO
TRADEMARK SECURITY AGREEMENT
Other Names
Name of Company/Limited Partnership Other Names
- ----------------------------------- -----------
IX-C-27
<PAGE>
SCHEDULE IV
TO
TRADEMARK SECURITY AGREEMENT
Filing Offices
IX-C-28
<PAGE>
SCHEDULE V
TO TRADEMARK SECURITY AGREEMENT
[FORM OF ACKNOWLEDGEMENT]
This Acknowledgement, dated _______________, [199_] [200_], is delivered
pursuant to Section 20 of the Trademark Security Agreement referred to below.
The undersigned hereby agrees that this Acknowledgement may be attached to the
Trademark Security Agreement dated November 6, 1996, by and among the Grantors
referred to therein and SunTrust Bank, Atlanta, as Secured Party (the "Trademark
Security Agreement", capitalized terms defined therein being used herein as
therein defined), that the undersigned by executing and delivering this
Acknowledgement hereby becomes a Grantor under the Trademark Security Agreement
in accordance with Section 20 thereof and agrees to be bound by all of the terms
thereof, and that the Registrations and Trademark Rights described on this
Acknowledgement shall be deemed to be part of the and shall become part of the
Collateral and shall secure all Secured Obligations.
[NAME OF ADDITIONAL GRANTOR]
By:_____________________________________
Name:
Title:
Notice Address:
_________________________________
_________________________________
_________________________________
_________________________________
Registrations
Registered Trademark Registration Registration
Owner Description Number Date Jurisdiction
- ---------- --------- ------------ ------------ ------------
IX-C-29
<PAGE>
EXHIBIT X
[FORM OF COMPLIANCE CERTIFICATE]
COMPLIANCE CERTIFICATE
THE UNDERSIGNED HEREBY CERTIFIES THAT:
(1) I am the duly elected [Title] of Outsourcing Solutions Inc., a
Delaware corporation ("Company");
(2) I have reviewed the terms of that certain Credit Agreement dated
as of November 6, 1996, by and among Company, the financial institutions
listed therein as Lenders, Goldman Sachs Credit Partners L.P. and The Chase
Manhattan Bank, as Co-Administrative Agents, SunTrust Bank, Atlanta, as
Collateral Agent, and Goldman Sachs Credit Partners L.P. and Chase
Securities Inc., as Arranging Agents, as amended, restated, supplemented or
otherwise modified to the date hereof (said Credit Agreement, as so
amended, restated, supplemented or otherwise modified, being the "Credit
Agreement", the terms defined therein and not otherwise defined in this
Certificate (including Attachment No. 1 annexed hereto and made a part
hereof) being used in this Certificate as therein defined), and the terms
of the other Loan Documents, and I have made, or have caused to be made
under my supervision, a review in reasonable detail of the transactions and
condition of Company and its Subsidiaries during the accounting period
covered by the attached financial statements; and
(3) The examination described in paragraph (2) above did not disclose,
and I have no knowledge of, the existence of any condition or event which
constitutes an Event of Default or Potential Event of Default during or at
the end of the accounting period covered by the attached financial
statements or as of the date of this Certificate[, except as set forth
below].
[Set forth [below] [in a separate attachment to this Certificate] are all
exceptions to paragraph (3) above listing, in detail, the nature of the
condition or event, the period during which it has existed and the action which
Company has taken, is taking, or proposes to take with respect to each such
condition or event:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
_______________________________________________________________________________]
X-1
<PAGE>
The foregoing certifications, together with the computations set forth in
Attachment No. 1 annexed hereto and made a part hereof and the financial
statements delivered with this Certificate in support hereof, are made and
delivered this __________ day of _____________, [199_] [200_] pursuant to
subsection 6.1(iv) of the Credit Agreement.
OUTSOURCING SOLUTIONS INC.
By:_____________________________________
Name:
Title:
X-2
<PAGE>
ATTACHMENT NO. 1
TO COMPLIANCE CERTIFICATE
This Attachment No. 1 is attached to and made a part of a Compliance
Certificate dated as of ____________, [199_][200_] and pertains to the period
from ____________, [199_][200_] to ____________, [199_][200_]. Subsection
references herein relate to subsections of the Credit Agreement.
A. Indebtedness
1. Indebtedness under Capital Leases of the type described
in subsection 7.1(iv): $____________
2. Indebtedness secured by Liens permitted under
subsection 7.2A(iii): $____________
3. Indebtedness of the type described in subsection
7.1(iv) (A.1 + A.2): $____________
4. Maximum Indebtedness permitted under subsection
7.1(iv): $ 15,000,000
5. Aggregate amount of Permitted Seller Notes issued after
the Closing Date: $____________
6. Maximum amount of Permitted Seller Notes permitted to
be issued under subsection 7.1(vii): $____________
7. Indebtedness of the type described in subsection
7.1(viii): $____________
8. Maximum Indebtedness permitted under subsection 7.1(v-
iii): $ 5,000,000
B. Liens
1. Indebtedness secured by Liens described in subsection
7.2A(iv): $____________
2. Maximum Indebtedness permitted to be secured by Liens
under subsection 7.2A(iv): $ 2,000,000
X-3
<PAGE>
C. Investments
1. Investments made after the Closing Date in Joint
Ventures of the type described in subsection 7.3(v): $____________
2. Maximum permitted under subsection 7.3(v): $ 5,000,000
3. Investments consisting of notes received in Asset Sales
of the type described in subsection 7.3(vi): $____________
4. Total sales price of assets sold in applicable Asset
Sales in which notes described under subsection 7.3(vi)
are received: $____________
5. Maximum portion of sales price permitted to be received
as notes under subsection 7.3(vi) (.20 x (C.4)): $____________
6. Maximum outstanding principal amount of notes permitted
under subsection 7.3(vi): $ 2,000,000
7. Investments of the type described in subsection
7.3(ix): $____________
8. Maximum permitted under subsection 7.3(ix): $ 2,500,000
D. Contingent Obligations
1. Contingent Obligations of the type described in
subsection 7.4(iv): $____________
2. Maximum permitted under subsection 7.4(iv): $ 1,000,000
3. Contingent Obligations of the type described in
subsection 7.4(ix): $____________
4. Maximum permitted under subsection 7.4(ix): $ 1,000,000
E. Restricted Junior Payments
1. Restricted Junior Payments of the type described in
subsection 7.5(iii): $____________
2. Maximum permitted under subsection 7.5(iii): $ 1,000,000
X-4
<PAGE>
F. Minimum Interest Coverage Ratio (for the Calculation Period
ending _____________, [199_] [200_])
1. Consolidated Net Income: $____________
2. Consolidated Interest Expense: $____________
3. Provisions for taxes based on income: $____________
4. Total depreciation expense: $____________
5. Total amortization expense: $____________
6. Other non-cash items reducing Consolidated Net Income: $____________
7. Non-recurring charges identified prior to the first
Anniversary with respect to the rationalization of the
business of Company and its Subsidiaries following the
Acquisition, to the extent deducted in determining
Consolidated Net Income (if greater than $10,000, enter
"$10,000"): $____________
8. Non-recurring charges identified incurred after the
Closing Date in connection with the resolution of
litigation of Company and its Subsidiaries disclosed in
the Offering Circular relating to the Subordinated
Notes, to the extent deducted in determining
Consolidated Net Income: $____________
9. Non-cash items increasing Consolidated Net Income: $____________
10. Payments made with respect to Earn Out Agreements
permitted under the Credit Agreement, to the extent
not otherwise deducted in determining Consolidated
Net Income: $____________
11. Payments made with respect to Management Fees, to the
extent not otherwise deducted in determining
Consolidated Net Income: $____________
12. Consolidated EBITDA ((F.1 + F.2 + F.3 + F.4 + F.5 +
F.6 + F.7 + F.8) - (F.9 + F.10 + F.11)): $____________
13. Consolidated Interest Expense: $____________
X-5
<PAGE>
14. Interest Coverage Ratio ((F.12):(F.13)): _____:1.00
15. Minimum Interest Coverage Ratio required under
subsection 7.6A: _____:1.00
G. Maximum Leverage Ratio (as of _____________, [199_] [200_])
1. Consolidated Total Debt: $____________
2. Consolidated EBITDA for the Calculation Period ended on
the above date (F.12 above): $____________
3. Maximum Leverage Ratio permitted under subsection 7.6B: _____:1.00
H. Minimum Fixed Charge Coverage Ratio (for Calculation Period
ending _____________, [199_] [200_])
1. Consolidated EBITDA (F.12 above): $____________
2. Scheduled cash repayments of principal of all
Indebtedness (as reduced by prepayments previously
made): $____________
3. Consolidated Interest Expense (F.13 above): $____________
4. Consolidated Maintenance Capital Expenditures: $____________
5. Taxes based on income actually paid in cash: $____________
6. Consolidated Fixed Charges (H.2 + H.3 + H.4 + H.5): $____________
7. Fixed Charge Coverage Ratio ((H.1):(H.6)): _____:1.00
8. Minimum Fixed Charge Coverage Ratio required under
subsection 7.6C: _____:1.00
I. Consolidated Maintenance Capital Expenditures (for the
Fiscal Year ending December 31, [199_] [200_] [to date]) $____________
1. Consolidated Maintenance Capital Expenditures: $____________
X-6
<PAGE>
2. Maximum Consolidated Maintenance Capital Expenditures
Amount permitted under subsection 7.6D (as adjusted
(calculations and supporting information therefor
attached hereto) in accordance with the provisos to
such subsection): $____________
J. Fundamental Changes
1. Aggregate fair market value of assets sold in Asset
Sales described in subsection 7.7(iv) during the
period commencing _________________, [199_] [200_]: $____________
2. Consolidated EBITDA (F.12 above): $____________
3. Maximum Asset Sales permitted under subsection
7.7(iv) (.20 x (J.2)): $____________
4. Permitted Acquisitions made during preceding 12-month
period: $____________
5. Permitted Portfolio Acquisitions made during preceding
12-month period: $____________
6. Aggregate amount expended for acquisitions described
under subsection 7.7(v) for the preceding 12-month
period: $____________
7. Maximum amount permitted to be expended on acquisitions
permitted under subsection 7.7(v) (calculations and
supporting information therefor attached hereto), as
adjusted in accordance with the proviso to such
subsection: $____________
[K. Consolidated Excess Cash Flow (for the Fiscal Year ending
December 31, [199_] [200_]) [for Fiscal Years 1997 and
thereafter]
1. Consolidated EBITDA (F.12 above): $____________
2. Consolidated Working Capital Adjustment: $____________
3. Voluntary and scheduled cash repayments of
Consolidated Total Debt (excluding repayments of
Revolving Loans
X-7
<PAGE>
except to the extent the Revolving Loan Commitments
are permanently reduced): $____________
4. Consolidated Capital Expenditures (minus any portion
thereof financed with proceeds of Indebtedness): $____________
5. Consolidated Interest Expense (F.13 above): $____________
6. Provisions for current taxes based on income and
payable in cash: $____________
7. Consolidated Excess Cash Flow ((K.1 + K.2) -
(K.3 + K.4 + K.5 + K.6)): $____________
8. Portion of Consolidated Excess Cash Flow required
to be prepaid (.50 x (K.7 [- $7,500,000 [FOR 1997
ONLY]])): $____________
L. Leverage Ratio (as of ___________, [199_] [200_], for
purposes of determining Pricing Reduction, if any)
1. Consolidated Total Debt: $____________
2. Consolidated EBITDA (F.12 above): $____________
3. Leverage Ratio ((L.1):(L.2)) _____:1.00
X-8
<PAGE>
EXHIBIT XI
[FORM OF OPINION OF WHITE & CASE]
XI-A-1
<PAGE>
EXHIBIT XII
[FORM OF OPINION OF O'MELVENY & MYERS LLP]
[O'M&M Letterhead]
[Date]
1996
657,392-031
[doc ID]
Goldman Sachs Credit Partners L.P.,
as Arranging Agent and Co-Administrative Agent
85 Broad Street
New York, New York 10004
The Chase Manhattan Bank,
as Co-Administrative Agent
Chase Securities Inc.,
as Arranging Agent
270 Park Avenue
New York, New York 10017
SunTrust Bank, Atlanta,
as Collateral Agent
25 Park Place, 23rd Floor
Atlanta, Georgia 30303
and
The Lenders Party to the Credit
Agreement Referenced Below
Re: Loans to Outsourcing Solutions Inc.
Ladies and Gentlemen:
We have acted as counsel to Goldman Sachs Credit Partners L.P. and The
Chase Manhattan Bank, as Co-Administrative Agents (in such capacity,
"Co-Administrative Agents"), and Goldman Sachs Credit Partners L.P. and Chase
Securities Inc., as Arranging Agents (in such capacity, the "Arranging Agents"),
in connection with the preparation and delivery of a Credit
XII-1
<PAGE>
Goldman Sachs Credit Partners L.P.
The Chase Manhattan Bank
Chase Securities Inc.
SunTrust Bank, Atlanta
[date]
Page 2
Agreement dated as of November 6, 1996 (the "Credit Agreement") among
Outsourcing Solutions Inc., a Delaware corporation ("Company"), the financial
institutions listed therein as lenders, Arranging Agents, SunTrust Bank,
Atlanta, as Collateral Agent (in such capacity, "Collateral Agent"), and
Co-Administrative Agents (collectively, Co-Administrative Agents, Collateral
Agent and Arranging Agents are "Agents") and in connection with the preparation
and delivery of certain related documents.
We have participated in various conferences with representatives of Company
and Agents and conferences and telephone calls with White & Case, counsel to
Loan Parties, during which the Credit Agreement and related matters have been
discussed, and we have also participated in the meeting held on the date hereof
(the "Closing") incident to the funding of the initial loans made under the
Credit Agreement. We have reviewed the forms of the Credit Agreement and the
exhibits thereto, including the forms of the promissory notes annexed thereto
(the "Notes"), and the opinion of White & Case (the "Opinion") and the officers'
certificates and other documents delivered at the Closing. We have assumed the
genuineness of all signatures, the authenticity of all documents submitted to us
as originals or copies and the due authority of all persons executing the same,
and we have relied as to factual matters on the documents that we have reviewed.
Although we have not independently considered all of the matters covered by
the Opinion to the extent necessary to enable us to express the conclusions
therein stated, we believe that the Credit Agreement and the exhibits thereto
are in substantially acceptable legal form and that the Opinion and the
officers' certificates and other documents delivered in connection with the and
delivery of, and as conditions to the making of the initial loans under, the
Credit Agreement and the Notes are substantially responsive to the requirements
of the Credit Agreement.
Respectfully submitted,
XII-2
<PAGE>
EXHIBIT XIII
[FORM OF ASSIGNMENT AGREEMENT]
ASSIGNMENT AGREEMENT
This ASSIGNMENT AGREEMENT (this "Agreement") is entered into by and between
the parties designated as Assignor ("Assignor") and Assignee ("Assignee") above
the signatures of such parties on the Schedule of Terms attached hereto and
hereby made an integral part hereof (the "Schedule of Terms") and relates to
that certain Credit Agreement described in the Schedule of Terms (said Credit
Agreement, as amended, restated, supplemented or otherwise modified to the date
hereof and as it may hereafter be amended, restated, supplemented or otherwise
modified from time to time, being the "Credit Agreement", the terms defined
therein and not otherwise defined herein being used herein as therein defined).
IN CONSIDERATION of the agreements, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
SECTION 1. Assignment and Assumption.
(a) Effective upon the Settlement Date specified in Item 4 of the Schedule
of Terms (the "Settlement Date"), Assignor hereby sells and assigns to Assignee,
without recourse, representation or warranty (except as expressly set forth
herein), and Assignee hereby purchases and assumes from Assignor, that
percentage interest in all of Assignor's rights and obligations as a Lender
arising under the Credit Agreement and the other Loan Documents with respect to
Assignor's Commitments and outstanding Loans, if any, which represents, as of
the Settlement Date, the percentage interest specified in Item 3 of the Schedule
of Terms of all rights and obligations of Lenders arising under the Credit
Agreement and the other Loan Documents with respect to the Commitments and any
outstanding Loans (the "Assigned Share"). Without limiting the generality of the
foregoing, the parties hereto hereby expressly acknowledge and agree that any
assignment of all or any portion of Assignor's rights and obligations relating
to Assignor's Revolving Loan Commitment shall include (i) in the event Assignor
is an Issuing Lender with respect to any outstanding Letters of Credit (any such
Letters of Credit being "Assignor Letters of Credit"), the sale to Assignee of a
participation in the Assignor Letters of Credit and any drawings thereunder as
contemplated by subsection 3.1C of the Credit Agreement and (ii) the sale to
Assignee of a ratable portion of any participations previously purchased by
Assignor pursuant to said subsection 3.1C with respect to any Letters of Credit
other than the Assignor Letters of Credit.
(b) In consideration of the assignment described above, Assignee hereby
agrees to pay to Assignor, on the Settlement Date, the principal amount of any
outstanding Loans included within the Assigned Share, such payment to be made by
wire transfer of immediately available
XIII-1
<PAGE>
funds in accordance with the applicable payment instructions set forth in Item 5
of the Schedule of Terms.
(c) Assignor hereby represents and warrants that Item 3 of the Schedule of
Terms correctly sets forth the amount of the Commitments, the outstanding
Tranche A Term Loan, the outstanding Tranche B Term Loan and the Pro Rata Share
corresponding to the Assigned Share.
(d) Assignor and Assignee hereby agree that, upon giving effect to the
assignment and assumption described above, (i) Assignee shall be a party to the
Credit Agreement and shall have all of the rights and obligations under the Loan
Documents, and shall be deemed to have made all of the covenants and agreements
contained in the Loan Documents, arising out of or otherwise related to the
Assigned Share, and (ii) Assignor shall be absolutely released from any of such
obligations, covenants and agreements assumed or made by Assignee in respect of
the Assigned Share. Assignee hereby acknowledges and agrees that the agreement
set forth in this Section 1(d) is expressly made for the benefit of Company,
Agents, Assignor and the other Lenders and their respective successors and
permitted assigns.
(e) Assignor and Assignee hereby acknowledge and confirm their
understanding and intent that (i) this Agreement shall effect the assignment by
Assignor and the assumption by Assignee of Assignor's rights and obligations
with respect to the Assigned Share, (ii) any other assignments by Assignor of a
portion of its rights and obligations with respect to the Commitments and any
outstanding Loans shall have no effect on the Commitments, the outstanding
Tranche A Term Loan, the outstanding Tranche B Term Loan and the Pro Rata Share
corresponding to the Assigned Share as set forth in Item 3 of the Schedule of
Terms or on the interest of Assignee in any outstanding Revolving Loans
corresponding thereto, and (iii) from and after the Settlement Date, Chase
Co-Administrative Agent shall make all payments under the Credit Agreement in
respect of the Assigned Share (including without limitation all payments of
principal and accrued but unpaid interest, commitment fees and letter of credit
fees with respect thereto) (1) in the case of any such interest and fees that
shall have accrued prior to the Settlement Date, to Assignor, and (2) in all
other cases, to Assignee; provided that Assignor and Assignee shall make
payments directly to each other to the extent necessary to effect any
appropriate adjustments in any amounts distributed to Assignor and/or Assignee
by Chase Co-Administrative Agent under the Loan Documents in respect of the
Assigned Share in the event that, for any reason whatsoever, the payment of
consideration contemplated by Section 1(b) occurs on a date other than the
Settlement Date.
SECTION 2. Certain Representations, Warranties and Agreements.
(a) Assignor represents and warrants that it is the legal and beneficial
owner of the Assigned Share, free and clear of any adverse claim.
(b) Assignor shall not be responsible to Assignee for the , effectiveness,
genuineness, validity, enforceability, collectibility or sufficiency of any of
the Loan Documents or for any representations, warranties, recitals or
statements made therein or made in any written
XIII-2
<PAGE>
or oral statements or in any financial or other statements, instruments, reports
or certificates or any other documents furnished or made by Assignor to Assignee
or by or on behalf Company or of any other Loan Party to Assignor or Assignee in
connection with the Loan Documents and the transactions contemplated thereby or
for the financial condition or business affairs of Company or any other Person
liable for the payment of any Obligations, nor shall Assignor be required to
ascertain or inquire as to the performance or observance of any of the terms,
conditions, provisions, covenants or agreements contained in any of the Loan
Documents or as to the use of the proceeds of the Loans or the use of the
Letters of Credit or as to the existence or possible existence of any Event of
Default or Potential Event of Default.
(c) Assignee represents and warrants that it is an Eligible Assignee; that
it has experience and expertise in the making or purchasing of loans such as the
Loans; that it has acquired the Assigned Share for its own account in the
ordinary course of its business and without a view to distribution of the Loans
within the meaning of the Securities Act or the Exchange Act or other federal
securities laws (it being understood that, subject to the provisions of
subsection 10.1 of the Credit Agreement, the disposition of the Assigned Share
or any interests therein shall at all times remain within its exclusive
control); and that it has received, reviewed and approved a copy of the Credit
Agreement (including all Exhibits and Schedules thereto).
(d) Assignee represents and warrants that it has received from Assignor
such financial information regarding Company and its Subsidiaries as is
available to Assignor and as Assignee has requested, that it has made its own
independent investigation of the financial condition and affairs of Company and
its Subsidiaries in connection with the assignment evidenced by this Agreement,
and that it has made and shall continue to make its own appraisal of the
creditworthiness of Company and its Subsidiaries. Assignor shall have no duty or
responsibility, either initially or on a continuing basis, to make any such
investigation or any such appraisal on behalf of Assignee or to provide Assignee
with any other credit or other information with respect thereto, whether coming
into its possession before the making of the initial Loans or at any time or
times thereafter, and Assignor shall not have any responsibility with respect to
the accuracy of or the completeness of any information provided to Assignee.
(e) Each party to this Agreement represents and warrants to the other party
hereto that it has full power and authority to enter into this Agreement and to
perform its obligations hereunder in accordance with the provisions hereof, that
this Agreement has been duly authorized, executed and delivered by such party
and that this Agreement constitutes a legal, valid and binding obligation of
such party, enforceable against such party in accordance with its terms, except
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights
generally and by general principles of equity.
SECTION 3. Miscellaneous.
(a) Each of Assignor and Assignee hereby agrees from time to time, upon
request of the other such party hereto, to take such additional actions and to
execute and deliver such
XIII-3
<PAGE>
additional documents and instruments as such other party may reasonably request
to effect the transactions contemplated by, and to carry out the intent of, this
Agreement.
(b) Neither this Agreement nor any term hereof may be changed, waived,
discharged or terminated, except by an instrument in writing signed by the party
(including, if applicable, any party required to evidence its consent to or
acceptance of this Agreement) against whom enforcement of such change, waiver,
discharge or termination is sought.
(c) Unless otherwise specifically provided herein, any notice or other
communication herein required or permitted to be given shall be in writing and
may be personally served, telexed or sent by telefacsimile or United States mail
or courier service and shall be deemed to have been given when delivered in
person or by courier service, upon receipt of telefacsimile or telex, or three
Business Days after depositing it in the United States mail with postage prepaid
and properly addressed. For the purposes hereof, the notice address of each of
Assignor and Assignee shall be as set forth on the Schedule of Terms or, as to
either such party, such other address as shall be designated by such party in a
written notice delivered to the other such party. In addition, the notice
address of Assignee set forth on the Schedule of Terms shall serve as the
initial notice address of Assignee for purposes of subsection 10.8 of the Credit
Agreement.
(d) In case any provision in or obligation under this Agreement shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
(e) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER
SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT LIMITATION SECTION
5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD
TO CONFLICTS OF LAWS PRINCIPLES.
(f) This Agreement shall be binding upon, and shall inure to the benefit
of, the parties hereto and their respective successors and assigns.
(g) This Agreement may be executed in one or more counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument; signature pages may
be detached from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached to the same
document.
(h) This Agreement shall become effective upon the date (the "Effective
Date") upon which all of the following conditions are satisfied: (i) the of a
counterpart hereof by each of Assignor and Assignee, (ii) the giving of notice
to Company, (iii) the receipt by Chase Co-Administrative Agent of the processing
and recordation fee referred to in subsection 10.1B(i) of the Credit Agreement,
(iv) in the event Assignee is a Non-US Lender (as defined in subsection
XIII-4
<PAGE>
2.7B(iii)(a) of the Credit Agreement), the delivery by Assignee to Chase
Co-Administrative Agent of such forms, certificates or other evidence with
respect to United States federal income tax withholding matters as Assignee may
be required to deliver to Chase Co-Administrative Agent pursuant to said
subsection 2.7B(iii)(a), (v) the of a counterpart hereof by each
Co-Administrative Agent as evidence of its consent hereto to the extent required
under subsection 10.1B(i) of the Credit Agreement and by Chase Co-Administrative
Agent as evidence of its acceptance hereof in accordance with subsection
10.1B(ii) of the Credit Agreement, (vi) the receipt by Chase Co-Administrative
Agent of originals or telefacsimiles of the counterparts described above and
authorization of delivery thereof, and (vii) the recordation by Chase
Co-Administrative Agent in the Register of the pertinent information regarding
the assignment effected hereby in accordance with subsection 10.1B(ii) of the
Credit Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their respective officers thereunto duly
authorized, such being made as of the Effective Date in the applicable spaces
provided on the Schedule of Terms.
XIII-5
<PAGE>
SCHEDULE OF TERMS
1. Company: OUTSOURCING SOLUTIONS INC.
2. Name and Date of Credit Agreement: Credit Agreement dated as of November 6,
1996, by and among Company, the financial institutions listed therein as
Lenders, Goldman Sachs Credit Partners L.P. and The Chase Manhattan Bank,
as Co-Administra- tive Agents, SunTrust Bank, Atlanta, as Collateral Agent,
and Goldman Sachs Credit Partners L.P. and Chase Securities Inc., as
Arranging Agents.
<TABLE>
<CAPTION>
3. Amounts: Re: Tranche A Re: Tranche B Re: Revolving
Term Loans Term Loans Loans
<S> <C> <C> <C>
(a) Aggregate Commitments of all
all Lenders: $ $ $
----------- ----------- -----------
(b) Assigned Share/Pro Rata Share: % % %
----------- ----------- -----------
(c) Amount of Assigned Share of
Commitments: $ $ $
----------- ----------- -----------
(d) Amount of Assigned Share of
Term Loans: $ $
----------- -----------
</TABLE>
4. Settlement Date: ____________, [199_][200_]
5. Payment Instructions:
ASSIGNOR: ASSIGNEE:
___________________________ __________________________________
___________________________ __________________________________
___________________________ __________________________________
Attention:_________________ Attention:________________________
Reference:_________________ Reference:________________________
6. Notice Addresses:
ASSIGNOR: ASSIGNEE:
___________________________ __________________________________
___________________________ __________________________________
___________________________ __________________________________
Attention:_________________ Attention:________________________
Reference:_________________ Reference:________________________
XIII-6
<PAGE>
7. Signatures:
[NAME OF ASSIGNOR], [NAME OF ASSIGNEE],
as Assignor as Assignee
By:__________________________ By:__________________________
Name: Name:
Title: Title:
Consented to in accordance with Consented to and accepted in accor-
subsection 10.1B(i) of the Credit dance with subsections 10.1B(i) and
Agreement (ii) of the Credit Agreement
GOLDMAN SACHS CREDIT THE CHASE MANHATTAN
PARTNERS L.P., BANK,
as Co-Administrative Agent as Chase Co-Administrative Agent
By:__________________________ By:__________________________
Name: Name:
Title: Title:
XIII-7
<PAGE>
EXHIBIT XIV
[FORM OF PERMITTED SELLER NOTE]
% NON-NEGOTIABLE SUBORDINATED NOTE
[Insert Date] $_____________
OUTSOURCING SOLUTIONS INC., a Delaware corporation (the "Borrower"), hereby
promises upon the terms and subject to the provisions hereof to pay to [NAME OF
SELLER] (the "Holder"), the principal amount of [___________] Dollars
($____________).
This ___% Non-Negotiable Junior Subordinated Note (the "Note") was issued
pursuant to the Purchase Agreement (the "Purchase Agreement") dated as of
[__________, [199_] [200_], between the Borrower and the Holder.
1. Definitions. As used herein, the following terms shall have the
following meanings:
"Indebtedness" means (i) all obligations for borrowed money or for the
deferred purchase price of property or services (including, without limitation,
all obligations contingent or otherwise in connection with acceptance, letter of
credit or similar facilities, (ii) all obligations evidenced by bonds, notes,
debentures or other similar instruments or securities, (iii) all indebtedness
created or arising under any sale and leaseback arrangement, conditional sale or
other title retention agreement with respect to property owned or acquired
(whether or not the rights and remedies of the seller or lender under such
agreement in the event of default are limited to repossession or sale of such
property), (iv) all rental obligations under capital leases to the extent not
included in clause (iii) above, (v) all guarantees (direct or indirect), all
contingent reimbursement obligations under undrawn letters of credit and all
other contingent obligations in respect of, or obligations to purchase or
otherwise acquire or to assure payment of, indebtedness of others and (vi)
indebtedness of others secured by any lien upon property, whether or not
assumed, but only to the extent of such property's fair market value.
"Person" means an individual, a partnership, a corporation, an association,
a limited liability company, a joint stock company, a trust, a joint venture, an
unincorporated organization and a governmental entity or any department, agency
or political subdivision thereof
"Senior Agent" shall mean The Chase Manhattan Bank, N.A., as Co-
Administrative Agent for the Lenders under the Senior Credit Agreement, and its
successors in such capacity, or if there is then no acting Administrative Agent
under the Senior Credit Agreement, financial institutions holding a majority in
principal amount of the Senior Debt outstanding thereunder.
XIV-1
<PAGE>
"Senior Credit Agreement" shall mean the Credit Agreement, dated as of
November 6, 1996, by and among the Borrower, Goldman Sachs Credit Partners L.P.
and The Chase Manhattan Bank, N.A., as Co-Administrative Agents, SunTrust Bank,
Atlanta, as Collateral Agent, Goldman Sachs Credit Partners L.P. and Chase
Securities Inc., as Arranging Agents, and the financial institutions listed
therein as Lenders, as amended, restated, modified or supplemented from time to
time hereafter, together with any credit agreement or similar document from time
to time executed by the Borrower to evidence any Refinancing (as defined in the
definition of Senior Indebtedness) or successive Refinancings.
"Senior Indebtedness" shall mean (i) all Obligations (as defined in the
Senior Credit Agreement) (including Contingent Obligations, as defined in the
Senior Credit Agreement) now or hereafter incurred pursuant to and in accordance
with the terms of the Senior Debt Documents, (ii) any additional Indebtedness
incurred under or pursuant to the Senior Credit Agreement and the other Senior
Debt Documents whether such Obligations or additional Indebtedness involve
principal prepayment charges, interest (including, without limitation, interest
accruing after the filing of a petition initiating any proceeding under the
Bankruptcy Code, whether or not allowed as a claim in such proceeding)
indemnities or reimbursement of fees, expenses or other amounts, and (iii) any
indebtedness incurred for the purpose of refinancing, restructuring, extending
or renewing (collectively, "Refinancing") the obligations of the Borrower under
the Senior Credit Agreement as set forth in clauses (i) and (ii) above.
"Senior Debt Documents" shall mean the Senior Credit Agreement and all
other documents and instruments delivered or filed in connection with the
creation or incurrence of any Senior Indebtedness (including, without
limitation, the guaranty agreements executed and delivered by the subsidiaries
of the Borrower in respect of the Obligations under the Senior Credit
Agreement).
"Senior Lenders" shall mean the financial institutions party to the Senior
Credit Agreement as "Lenders" from time to time.
2. Payment of Interest. Interest shall accrue on the unpaid principal
amount of this Note from the date hereof at the rate of [____]% per annum [NOT
TO EXCEED 12%] (the "Interest Rate"), calculated on the basis of a 365 day year.
The Borrower shall pay interest semi-annually in arrears on the fifteenth day of
January and July in each year (each, an "Interest Payment Date") commencing on
___________, [199_][200_].
3. Payment of Principal.
(a) Scheduled Payment. Subject to the provisions of Section 4 hereof, on
[_____________], [199_][200_] (the "Maturity Date"), the Borrower shall pay to
the holder of this Note the entire principal amount of this Note, plus all
accrued and unpaid interest hereon which is then unpaid.
(b) Optional Prepayments. Subject to the provisions of Section 4 hereof,
the Borrower may, at any time and from time to time, without premium or penalty,
prepay all or a
XIV-2
<PAGE>
portion of the unpaid principal amount of this Note, together with unpaid
interest accrued since the preceding Interest Payment Date to which interest has
been paid on such portion of the principal amount which it is prepaying;
provided, that no such prepayment shall be made if such prepayment is then
prohibited by the terms of any Senior Indebtedness. A prepayment of less than
all of the unpaid principal amount of this Note shall not relieve the Borrower
of its obligation to make the scheduled payment on this Note on the Maturity
Date. Each partial payment under this Note shall first be credited to accrued
and unpaid interest on the principal being prepaid, and the remainder shall be
credited to principal. Whenever any payment to be made hereunder shall be due on
a date which is not a business day, the payment shall be made on the next
succeeding business day and such extension of time shall be included in the
computation of interest with respect to such payment
4. Subordination.
(a) Agreement to Subordinate. The Borrower and, by its acceptance hereof,
each Holder agree that the indebtedness of the Borrower evidenced by this Note,
whether for principal, interest on any other amount payable under or in respect
hereof and all rights or claims arising out of or associated with such
Indebtedness (the "Subordinated Obligations"), shall be junior and subordinate
in right of payment to the prior payment in full in cash of all Senior
Indebtedness, in accordance with the provisions of this Section 4. Each holder
of Senior Indebtedness shall be deemed to have acquired Senior Indebtedness in
reliance upon the agreements of the Borrower and the holder of this Note
contained in this Section 4. The provisions of this Section 4 shall be
reinstated if at any time any payment of any of the Senior Indebtedness is
rescinded or must otherwise be returned by any holder of Senior Indebtedness or
any representative of such holder upon the insolvency, bankruptcy or
reorganization of the Borrower. Any provision of this Note to the contrary
notwithstanding (other than the provision contained in Section 6), the Borrower
shall not make, and no Holder shall accept, any payment or prepayment of
principal, or prepayment of other amounts due thereunder, of any kind whatsoever
(including without limitation by distribution of assets, set off, exchange or
any other manner) with respect to the Subordinated Obligations at any time when
any of the Senior Indebtedness remains outstanding. Holder may receive interest
payments in respect of the Subordinated Obligations in accordance with the terms
of this Note except to the extent and at the times prohibited or restricted by
the provisions of this Section 4. In no event shall the Holder commence any
action or proceeding to contest the provisions of this Section 4 or the priority
of the Liens (as defined in the Senior Credit Agreement) granted to the holders
of the Senior Indebtedness by the Borrower. No Holder shall take, accept or
receive any collateral security from the Borrower for the payment of the
Subordinated Obligations.
(b) Liquidation, Dissolution, Bankruptcy. In the event of any insolvency,
bankruptcy, dissolution, winding up, liquidation, arrangement, reorganization,
marshalling of assets or liabilities, composition, assignment for the benefit of
creditors or other similar proceedings relating to the Borrower, its debts, its
property or its operations, whether voluntary or involuntary, including, without
limitation the filing of any petition or the taking of any action to commence
any of the foregoing (which, in the case of action by a third party, is not
dismissed within 60 days) (a "Bankruptcy Event"), all Senior Indebtedness shall
first be paid in full in
XIV-3
<PAGE>
cash or other immediately available funds before Holder shall be entitled to
receive or retain any payment or distribution of assets of the Borrower with
respect to any Subordinated Obligations. In the event of any such Bankruptcy
Event, any payment or distribution of assets to which Holder would be entitled
if the Subordinated Obligations were not subordinated to the Senior Indebtedness
in accordance with this Section 4, whether in cash, property, securities or
otherwise, shall be paid or delivered by the debtor, custodian, trustee or agent
or other Person making such payment or distribution, or by the Holder if
received by it, directly to the Senior Agent on behalf of the holders of the
Senior Indebtedness for application to the payment of the Senior Indebtedness
remaining unpaid, to the extent necessary to make payment in full in cash or
other immediately available funds of all Senior Indebtedness remaining unpaid,
after giving effect to any concurrent payment or distribution to or for the
holders of the Senior Indebtedness.
(c) No Payments with Respect to Subordinated Obligations in Certain
Circumstances.
(i) In circumstances in which Section 4(b) is not applicable, no
payment of any nature (including, without limitation, any distribution of
assets) in respect of the Subordinated Obligations (including, without
limitation, pursuant to any judgment with respect thereto or on account of the
purchase or redemption or other acquisition of Subordinated Obligations, by set
off, prepayment exchange or other manner) shall be made by or on behalf of the
Borrower if, at the time of such payment:
(A) a default in the payment when due (whether at the
maturity thereof, or upon acceleration of maturity or otherwise and
without giving effect to any applicable grace periods) of all or any
portion of the Senior Indebtedness (whether of principal, interest or
any other amount with respect thereto) shall have occurred, and such
default shall not have been cured or waived in accordance with the
terms of the Senior Debt Documents; or
(B) subject to the last sentence of this Section 4(c), (x)
the Borrower shall have received notice from the Senior Agent of the
occurrence of one or more Events of Default (as defined in the Senior
Credit Agreement) in respect of the Senior Indebtedness (other than
payment defaults described in Section 4(c)(i)(A) above), (y) each such
Event of Default shall not have been cured or waived in accordance
with the terms of the Senior Debt Documents, and (z) 180 days shall
not have elapsed since the date such notice was received.
The Borrower may resume payments (and may make any payments missed due to
the application of Section 4(c)(i) in respect of the Subordinated Obligations or
any judgment with respect thereto:
(A) in the case of a default referred to in clause (A) of
this Section 4(c)(i), upon a cure or waiver thereof in accordance with
the terms of the Senior Debt Documents; or
XIV-4
<PAGE>
(B) in the case of an Event of Default or Events of Default
referred to in clause (B) of this Section 4(c)(i), upon the earlier to
occur of (1) the cure or waiver of all such Events of Default in
accordance with the terms of the Senior Debt Documents, or (2) the
expiration of such period of 180 days.
(ii) Following any acceleration of the maturity of any Senior
Indebtedness and as long as such acceleration shall continue unrescinded
and unannulled, such Senior Indebtedness shall first be paid in full in
cash, or provision for such payment shall be made in a manner satisfactory
to the holders of the Senior Indebtedness, before any payment is made on
account of or applied on the Subordinated Obligations.
(iii) The Borrower shall give prompt written notice to the Holder of
(i) any default in respect of Senior Obligations referred to in Section
4(c)(i)(A) and (ii) any notice of the type described in Section 4(c)(i)(B)
from the Senior Agent.
(d) When Distribution Must Be Paid Over. In the event that Holder shall
receive any payment or distribution of assets that Holder is not entitled to
receive or retain under the provisions of this Note, Holder shall hold any
amount so received in trust for the holders of Senior Indebtedness, shall
segregate such assets from other assets held by Holder and shall forthwith turn
over such payment or distribution (without liability for interest thereon) to
the Senior Agent on behalf of the holders of Senior Indebtedness in the form
received (with any necessary endorsement) to be applied to Senior Indebtedness.
(e) Exercise of Remedies. So long as any Senior Indebtedness is outstanding
(including any loans, any letters of credit, any commitments to lend or any
lender guarantees), Holder (solely in its capacity as a holder of this Note)
shall not exercise any rights or remedies with respect to an Event of Default
under this Note, including, without limitation, any action (l) to demand or sue
for collection of amounts payable hereunder, (2) to accelerate the principal of
this Note, or (3) to commence or join with any other creditor (other than the
holder of a majority in principal amount of the Senior Indebtedness) in
commencing any proceeding in connection with or premised on the occurrence of a
Bankruptcy Event prior to the earlier of:
(A) the payment in full in cash or other immediately
available funds of all Senior Indebtedness;
(B) the initiation of a proceeding (other than a proceeding
prohibited by clause (3) of this Section 4(e)) in connection with or
premised upon the occurrence of a Bankruptcy Event;
(C) the expiration of 180 days immediately following the
receipt by the Senior Agent of notice of the occurrence of such Event
of Default from the Holder; and
(D) the acceleration of the maturity of the Senior
Indebtedness;
XIV-5
<PAGE>
provided, however, that if, with respect to (B) and (D) above, such proceeding
or acceleration, respectively, is rescinded, or with respect to (C) above,
during such 180-day period such Event of Default has been cured or waived, the
prohibition against taking the actions described in this section 4(e) shall
automatically be reinstated as of the date of the rescission, cure or waiver, as
applicable. In all events, unless an event described in clause (A), (B) or (D)
above has occurred and not been rescinded, the Holder shall give thirty (30)
days prior written notice to the Senior Agent before taking any action described
in this Section 4(e), which notice shall describe with specificity the action
that the Holder in good faith intends to take.
(f) Acceleration of Payment of Note. If this Note is declared due and
payable prior to the Maturity Date, no direct or indirect payment that is due
solely by reason of such declaration shall be made, nor shall application be
made of any distribution of assets of the Borrower (whether by set off or in any
other manner, including, without limitation, from or by way of collateral) to
the payment, purchase or other acquisition or retirement of this Note, unless,
in either case, (i) all amounts due or to become due on or in respect of the
Senior Indebtedness (including with respect to any outstanding letters of
credit) shall have been previously paid in full in cash or other immediately
available funds or in any other manner satisfactory to all holders of such
Senior Indebtedness, (ii) all commitments to lend under Senior Indebtedness
shall have been terminated, (iii) all guarantees constituting Senior
Indebtedness shall have been terminated and (iv) all lender guarantees
constituting Senior Indebtedness shall have been permanently reduced to zero.
(g) Proceedings Against Borrower. So long as any Senior Indebtedness is
outstanding (including any loans, any commitments to lend or open lender
guarantees or any lender guarantees, Holder (solely in its capacity as a holder
of this Note) shall not commence any bankruptcy, insolvency, reorganization or
other similar proceeding against Borrower.
(h) Amending Senior Indebtedness. Any holder of Senior Indebtedness may, at
any time and from time to time, without the consent of or notice to Holder (i)
modify or amend the terms of the Senior Indebtedness provided that such Senior
Indebtedness cannot be extended or renewed past December 31, 2003, (ii) sell,
exchange, release, fail to perfect a lien on or a security interest in or
otherwise in any manner deal with or apply any property pledged or mortgaged to
secure, or otherwise securing, Senior Indebtedness, (iii) release any guarantor
or any other person liable in any manner for the Senior Indebtedness, (iv)
exercise or refrain from exercising any rights against Borrower or any other
person, (v) apply any sums by whomever paid or however realized to Senior
Indebtedness or (vi) take any other action that might be deemed to impair in any
way the rights of the holder of this Note. Any and all of such actions may be
taken by the holders of Senior Indebtedness without incurring responsibility to
Holder and without impairing or releasing the obligations of Holder to the
holders of Senior Indebtedness.
(i) Certain Rights in Bankruptcy. Holder hereby irrevocably authorizes and
empowers each holder of Senior Indebtedness (and its representative or
representatives) to demand, sue for, collect and receive all payments and
distributions under the terms of this Note, to file and prove all claims
(including claims in bankruptcy) relating to this Note, to exercise any
XIV-6
<PAGE>
right to vote arising with respect to this Note and any claims hereunder in any
bankruptcy, insolvency or similar proceeding and take any and all other actions
in the name of Holder (solely in its capacity as a holder of this Note), as such
holder of Senior Indebtedness determines to be necessary or appropriate.
(j) Subrogation. No payment or distribution to any holder of Senior
Indebtedness pursuant to the provisions of this Note shall entitle Holder to
exercise any right of subrogation in respect thereof until (i)(w) all Senior
Indebtedness shall have been paid in full in cash or other immediately available
funds or in any other manner satisfactory to all holders of Senior Indebtedness,
(x) all commitments to lend under Senior Indebtedness shall have been
terminated, (y) all guarantees constituting Senior Indebtedness shall have been
terminated and (z) all lender guarantees constituting Senior Indebtedness shall
have been permanently reduced to zero or (ii) all holders of Senior Indebtedness
have consented in writing to the taking of such action.
(k) Relative Rights. The provisions of this Section 4 are for the benefit
of the holders of Senior Indebtedness (and their successors and assigns) and
shall be enforceable by them directly against Holder. Holder acknowledges and
agrees that any breach of the provisions of this Section 4 will cause
irreparable harm for which the payment of monetary damages may be inadequate.
For this reason, Holder agrees that, in addition to any remedies at law or
equity to which a holder of the Senior Indebtedness may be entitled, a holder of
the Senior Indebtedness will be entitled to an injunction or other equitable
relief to prevent breaches of the provisions of this Section 4 and/or to compel
specific performance of such provisions. The provisions of this Section 4 shall
continue to be effective or be reinstated, as the case may be, if at any time
any payment of Senior Indebtedness is rescinded or must otherwise be returned by
any holder of Senior Indebtedness upon the occurrence of a Bankruptcy Event or
otherwise, all as though such payment had not been made. The provisions of this
Section 4 are not intended to impair and shall not impair as between Borrower
and Holder, the obligation of Borrower, which is absolute and unconditional, to
pay Holder all amounts owing under this Note.
(l) Reliance on Orders and Decrees. Subject to the provisions of Section
4(d) hereof, upon any payment or distribution of assets of Borrower, whether in
cash, property, securities or otherwise, Holder shall be entitled to rely upon
any order or decree entered by any court of competent jurisdiction in which any
insolvency, bankruptcy, receivership, liquidation, reorganization, dissolution,
winding up or similar case or proceeding is pending, or a certificate of the
trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee for
the benefit of creditors, agent or other Person making such payment or
distribution, delivered to Holder for the purpose of ascertaining the Persons
entitled to participate in such payment or distribution, the holders of Senior
Indebtedness, the amount thereof or payable thereon, the amount or amounts paid
or distributed thereon and all other facts pertinent thereto or to this Section
4.
XIV-7
<PAGE>
5. Events of Default.
(a) Definition. The following shall be an "Event of Default" under this
Note;
(i) the Borrower shall fail to make any payment of interest on
this Note when the same shall become due and payable and such failure shall
continue for a period of 5 days;
(ii) the Borrower shall fail to make any payment of the principal
of this Note when the same shall become due and payable, whether on the
Maturity Date or otherwise;
(iii) (A) the Borrower shall commence any case, proceeding or
action (x) under any existing or future law of any jurisdiction, domestic
or foreign, relating to bankruptcy, insolvency, reorganization or relief of
debtors, seeking to have an order for relief entered with respect to it, or
seeking to adjudicate it a bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to its debts, or (y)
seeking appointment of a receiver, trustee, custodian or other similar
official for it or for all or any substantial part of its assets, (B) the
Borrower shall make a general assignment for the benefit of its creditors,
(C) there shall be commenced against the Borrower any case, proceeding or
other action of a nature referred to in clause (A) above which shall not
have been vacated or discharged within 60 days from the commencement
thereof, or (iv) a court shall enter a decree or order for relief in any
involuntary case under Title 11 of the United States Code, as amended from
time to time, or any applicable bankruptcy or similar law now or hereafter
in effect, which decree or order is not stayed, vacated, discharged, or
bonded pending appeal within 60 days from the entry thereof; or
(iv) the acceleration of the maturity of the Senior Indebtedness.
(b) Remedies. If an Event of Default shall occur and be continuing, then,
subject to the provisions of Section 4, the Holder may, upon written notice to
the Borrower, declare all amounts owing under this Note to be immediately due
and payable.
Subject to the immediately preceding paragraph and to Section 4 above, the
Holder shall also have all other rights in respect of this Note following the
occurrence and during the continuance of an Event of Default which are available
pursuant to applicable law or in equity.
[6. Right of Set-Off. Anything in this Note to the contrary
notwithstanding, nothing in this Note shall preclude the Borrower from timely
exercising such Borrower's right pursuant to Section ______ of the Purchase
Agreement to set-off indemnification claims against this Note and/or interest
payments under this Note.]
XIV-8
<PAGE>
7. No Presentment. The Borrower, for itself and any guarantors hereof, and
their successors and assigns, waives presentment, demand, protest and notice
thereof or of dishonor, and waives any right to be released by reason of any
extension of time or change in the terms of payment.
8. Amendment. So long as any Senior Indebtedness is outstanding (including
any commitment under the Senior Agent Documents) the terms of this Note may be
amended only with the consent of the Senior Agent. Subject to the foregoing,
without the consent of the Senior Agent hereof, this Note may be amended by the
Borrower and the Holder to cure any ambiguity, defect or inconsistency that does
not affect the subordination provisions hereof or the rights of the Senior
Lenders.
9. Cancellation. After all unpaid principal and interest owed on this Note
has been paid in full, this Note shall be surrendered to the Borrower for
cancellation and shall not be reissued.
10. Transfer Restrictions: Acknowledgment of Security Interest. This Note
shall not be transferrable by the Holder hereof without the prior written
consent of the Borrower (which consent shall not be unreasonably withheld). The
Holder hereby acknowledges, and agrees to, the Borrower's grant of its interest
herein to the Lenders under the Credit Agreement, dated as of the date hereof,
to collaterally secure the Borrower's obligations under such Credit Agreement.
11. Payment of Expenses. The Borrower agrees to pay all costs and expenses
(including reasonable attorneys' fees) reasonably incurred by the Holder after
the occurrence and during the continuance of an Event of Default in enforcing
any obligations under this Note or in collecting any payments due from Borrower
under this Note (including in connection with a bankruptcy or insolvency
proceeding with respect to the Borrower).
12. Governing Law. The construction, validity and interpretation of this
Note shall be governed by and construed in accordance with the domestic laws of
the State of New York, without giving effect to any choice of law or conflict of
law provision or rule (whether of the State of New York or any other
jurisdiction) that would cause the application of the laws of any jurisdiction
other than the State of New York.
13. Descriptive Headings. The descriptive headings of this Note are
inserted for convenience only, and do not constitute a part of this Note.
XIV-9
<PAGE>
IN WITNESS WHEREOF, the Borrower has executed and delivered this Note on
the date first written above.
OUTSOURCING SOLUTIONS INC.
By:____________________________________
Name:
Title:
Agreed:
[NAME OF SELLER]
By:________________________________
Name:
Title:
XIV-10
<PAGE>
EXHIBIT XV
[FORM OF CERTIFICATE RE NON-BANK STATUS]
CERTIFICATE RE NON-BANK STATUS
Reference is hereby made to that certain Credit Agreement dated as of
November 6, 1996 (said Credit Agreement, as amended, restated, supplemented or
otherwise modified to the date hereof, being the "Credit Agreement"), by and
among Outsourcing Solutions Inc., a Delaware corporation, the financial
institutions listed therein as Lenders ("Lenders"), Goldman Sachs Credit
Partners L.P. and The Chase Manhattan Bank, as co-administrative agents for
Lenders, SunTrust Bank, Atlanta, as collateral agent, and Goldman Sachs Credit
Partners L.P. and Chase Securities Inc., as arranging agents. Pursuant to
subsection 2.7B(iii) of the Credit Agreement, the undersigned hereby certifies
that it is not a "bank" or other Person described in Section 881(c)(3) of the
Internal Revenue Code of 1986, as amended.
[NAME OF LENDER]
By:____________________________________
Name:
Title:
XV-1
<PAGE>
EXHIBIT XVI
[FORM OF COLLATERAL ACCOUNT AGREEMENT]
COLLATERAL ACCOUNT AGREEMENT
This COLLATERAL ACCOUNT AGREEMENT (this "Agreement") is dated as of
November 6, 1996 and entered into by and between OUTSOURCING SOLUTIONS INC., a
Delaware corporation ("Pledgor"), and SUNTRUST BANK, ATLANTA, as agent for and
representative of (in such capacity herein called "Secured Party") the financial
institutions ("Lenders") party to the Credit Agreement referred to below.
PRELIMINARY STATEMENTS
A. Pursuant to that certain Credit Agreement dated as of November 6, 1996
(said Credit Agreement, as it may hereafter be amended, restated, supplemented
or otherwise modified from time to time, being the "Credit Agreement", the terms
defined therein and not otherwise defined herein being used herein as therein
defined), by and among Pledgor,, Goldman Sachs Credit Partners L.P. and The
Chase Manhattan Bank, as Co-Administrative Agents, Secured Party, as Collateral
Agent, and Goldman Sachs Credit Partners L.P. and Chase Securities Inc., as
Arranging Agents, Lenders have made certain commitments, subject to the terms
and conditions set forth in the Credit Agreement, to extend certain credit
facilities to Pledgor.
B. It is a condition precedent to the initial extensions of credit by
Lenders under the Credit Agreement that Pledgor shall have granted the security
interests and undertaken the obligations contemplated by this Agreement.
NOW, THEREFORE, in consideration of the premises and in order to induce
Lenders to make Loans and issue Letters of Credit under the Credit Agreement and
for other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, Pledgor hereby agrees with Secured Party as follows:
SECTION 1. Certain Definitions.
The following terms used in this Agreement shall have the following
meanings:
"Collateral" means (i) the Collateral Account, (ii) all amounts on
deposit from time to time in the Collateral Account, (iii) all interest,
cash, instruments, securities and other property from time to time
received, receivable or otherwise distributed in respect of or in exchange
for any or all of the Collateral, and (iv) to the extent not covered by
clauses (i) through (iii) above, all proceeds of any or all of the
foregoing Collateral.
XVI-1
<PAGE>
"Collateral Account" means the restricted deposit account established
and maintained by Secured Party pursuant to subsection 2(a).
"Secured Obligations" means all obligations and liabilities of every
nature of Pledgor now or hereafter existing under or arising out of or in
connection with the Credit Agreement and the other Loan Documents and all
extensions or renewals thereof, whether for principal, interest (including
without limitation interest that, but for the filing of a petition in
bankruptcy with respect to Pledgor, would accrue on such obligations),
reimbursement of amounts drawn under Letters of Credit, fees, expenses,
indemnities or otherwise, whether voluntary or involuntary, direct or
indirect, absolute or contingent, liquidated or unliquidated, whether or
not jointly owed with others, and whether or not from time to time
decreased or extinguished and later increased, created or incurred, and all
or any portion of such obligations or liabilities that are paid, to the
extent all or any part of such payment is avoided or recovered directly or
indirectly from Secured Party or any Lender as a preference, fraudulent
transfer or otherwise, and all obligations of every nature of Pledgor now
or hereafter existing under this Agreement.
SECTION 2. Establishment and Operation of Collateral Account.
(a) Secured Party is hereby authorized to establish and maintain at its
office at _____________________________________________, as a blocked account in
the name of Secured Party and under the sole dominion and control of Secured
Party, a restricted deposit account designated as "Outsourcing Solutions Inc.
Collateral Account".
(b) The Collateral Account shall be operated in accordance with the terms
of this Agreement.
(c) All amounts at any time held in the Collateral Account shall be
beneficially owned by Pledgor but shall be held in the name of Secured Party
hereunder, for the benefit of Lenders, as collateral security for the Secured
Obligations upon the terms and conditions set forth herein. Pledgor shall have
no right to withdraw, transfer or, except as expressly set forth herein,
otherwise receive any funds deposited into the Collateral Account.
(d) Anything contained herein to the contrary notwithstanding, the
Collateral Account shall be subject to such applicable laws, and such applicable
regulations of the Board of Governors of the Federal Reserve System and of any
other appropriate banking or governmental authority, as may now or hereafter be
in effect.
SECTION 3. Deposits of Cash Collateral.
(a) All deposits of funds in the Collateral Account shall be made by wire
transfer (or, if applicable, by intra-bank transfer from another account of
Pledgor) of immediately available funds, in each case addressed as follows:
XVI-2
<PAGE>
Account No.:
ABA No.:
Reference:
Attention:
Pledgor shall, promptly after initiating a transfer of funds to the Collateral
Account, give notice to Secured Party by telefacsimile of the date, amount and
method of delivery of such deposit.
(b) If an Event of Default has occurred and is continuing and, in
accordance with Section 8 of the Credit Agreement, Pledgor is required to pay to
Secured Party an amount equal to the maximum amount that may at any time be
drawn under all Letters of Credit then outstanding under the Credit Agreement,
Pledgor shall deliver funds in such an amount for deposit in the Collateral
Account in accordance with Section 3(a). Upon any drawing under any outstanding
Letter of Credit in respect of which Pledgor has deposited in the Collateral
Account any amounts described above, Secured Party shall apply such amounts to
reimburse the Issuing Lender for the amount of such drawing. In the event the
amount deposited in the Collateral Account pursuant to this Section 3(b) exceeds
the maximum amount available to be drawn under all Letters of Credit, Secured
Party shall apply such excess amount then on deposit in the Collateral Account
in accordance with subsection 2.4D of the Credit Agreement.
(c) Pledgor shall, promptly after initiating a transfer of funds to the
Collateral Account, give notice to Secured Party by telefacsimile of the date,
amount and method of delivery of such deposit.
SECTION 4. Pledge of Security for Secured Obligations.
Pledgor hereby pledges and assigns to Secured Party, and hereby grants to
Secured Party a security interest in, all of Pledgor's right, title and interest
in and to the Collateral as collateral security for the prompt payment or
performance in full when due, whether at stated maturity, by required
prepayment, declaration, acceleration, demand or otherwise (including the
payment of amounts that would become due but for the operation of the automatic
stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. ss.362(a)), of all
Secured Obligations.
SECTION 5. No Investment of Amounts in the Collateral Account; Interest on
Amounts in the Collateral Account.
(a) Cash held by Secured Party in the Collateral Account shall not be
invested by Secured Party but instead shall be maintained as a cash deposit in
the Collateral Account pending application thereof as elsewhere provided in this
Agreement.
(b) To the extent permitted under Regulation Q of the Board of Governors of
the Federal Reserve System, any cash held in the Collateral Account shall bear
interest at the standard rate paid by Secured Party to its customers for
deposits of like amounts and terms.
XVI-3
<PAGE>
(c) Subject to Secured Party's rights under Section 12, any interest earned
on deposits of cash in the Collateral Account in accordance with subsection 5(b)
shall be deposited directly in, and held in the Collateral Account.
SECTION 6. Representations and Warranties.
Pledgor represents and warrants as follows:
(a) Ownership of Collateral. Pledgor is (or at the time of transfer
thereof to Secured Party will be) the legal and beneficial owner of the
Collateral from time to time transferred by Pledgor to Secured Party, free
and clear of any Lien except for the security interest created by this
Agreement.
(b) Governmental Authorizations. No authorization, approval or other
action by, and no notice to or filing with, any governmental authority or
regulatory body is required for either (i) the grant by Pledgor of the
security interest granted hereby, (ii) the , delivery or performance of
this Agreement by Pledgor, or (iii) the perfection of or the exercise by
Secured Party of its rights and remedies hereunder (except as may have been
taken by or at the direction of Pledgor).
(c) Perfection. The pledge and assignment of the Collateral pursuant
to this Agreement creates a valid and perfected first priority security
interest in the Collateral, securing the payment of the Secured
Obligations.
(d) Other Information. All information heretofore, herein or hereafter
supplied to Secured Party by or on behalf of Pledgor with respect to the
Collateral is accurate and complete in all respects.
SECTION 7. Further Assurances.
Pledgor agrees that from time to time, at the expense of Pledgor, Pledgor
will promptly execute and deliver all further instruments and documents, and
take all further action, that may be necessary or desirable, or that Secured
Party may request, in order to perfect and protect any security interest granted
or purported to be granted hereby or to enable Secured Party to exercise and
enforce its rights and remedies hereunder with respect to any Collateral.
Without limiting the generality of the foregoing, Pledgor will: (a) execute and
file such financing or continuation statements, or amendments thereto, and such
other instruments or notices, as may be necessary or desirable, or as Secured
Party may request, in order to perfect and preserve the security interests
granted or purported to be granted hereby and (b) at Secured Party's request,
appear in and defend any action or proceeding that may affect Pledgor's
beneficial title to or Secured Party's security interest in all or any part of
the Collateral.
XVI-4
<PAGE>
SECTION 8. Transfers and other Liens.
Pledgor agrees that it will not (a) sell, assign (by operation of law or
otherwise) or otherwise dispose of any of the Collateral or (b) create or suffer
to exist any Lien upon or with respect to any of the Collateral, except for the
security interest under this Agreement.
SECTION 9. Secured Party Appointed Attorney-in-Fact.
Pledgor hereby irrevocably appoints Secured Party as Pledgor's
attorney-in-fact, with full authority in the place and stead of Pledgor and in
the name of Pledgor, Secured Party or otherwise, from time to time in Secured
Party's discretion to take any action and to execute any instrument that Secured
Party may deem necessary or advisable to accomplish the purposes of this
Agreement, including without limitation to file one or more financing or
continuation statements, or amendments thereto, relative to all or any part of
the Collateral without the signature of Pledgor.
SECTION 10. Secured Party May Perform.
If Pledgor fails to perform any agreement contained herein, Secured Party
may itself perform, or cause performance of, such agreement, and the expenses of
Secured Party incurred in connection therewith shall be payable by Pledgor under
subsection 10.2 of the Credit Agreement.
SECTION 11. Standard of Care.
The powers conferred on Secured Party hereunder are solely to protect its
interest in the Collateral and shall not impose any duty upon it to exercise any
such powers. Except for the exercise of reasonable care in the custody of any
Collateral in its possession and the accounting for moneys actually received by
it hereunder, Secured Party shall have no duty as to any Collateral, it being
understood that Secured Party shall have no responsibility for (a) taking any
necessary steps (other than steps taken in accordance with the standard of care
set forth above to maintain possession of the Collateral) to preserve rights
against any parties with respect to any Collateral or (b) taking any necessary
steps to collect or realize upon the Secured Obligations or any guarantee
therefor, or any part thereof, or any of the Collateral. Secured Party shall be
deemed to have exercised reasonable care in the custody and preservation of
Collateral in its possession if such Collateral is accorded treatment
substantially equal to that which Secured Party accords its own property of like
kind.
XVI-5
<PAGE>
SECTION 12. Remedies.
(a) If any Event of Default or Potential Event of Default shall have
occurred and be continuing, Secured Party may (i) transfer any or all of the
Collateral to an account established in Secured Party's name (whether at Secured
Party or otherwise) or (ii) otherwise register title to any Collateral in the
name of Secured Party or one of its nominees or agents, without reference to any
interest of Pledgor.
(b) If any Event of Default shall have occurred and be continuing, subject
to the provisions of subsection 3(b), Secured Party may exercise in respect of
the Collateral, in addition to all other rights and remedies otherwise available
to it, all the rights and remedies of a secured party on default under the
Uniform Commercial Code as in effect in any relevant jurisdiction (the "Code")
(whether or not the Code applies to the affected Collateral).
(c) If the proceeds of any disposition of the Collateral are insufficient
to pay all the Secured Obligations, Pledgor shall be liable for the deficiency
and the fees of any attorneys employed by Secured Party to collect such
deficiency.
(d) Anything contained herein to the contrary notwithstanding, any of the
Collateral consisting of cash held by Secured Party in the Collateral Account
shall be subject to Secured Party's rights of set-off under subsection 10.4 of
the Credit Agreement.
SECTION 13. Continuing Security Interest; Transfer of Loans.
This Agreement shall create a continuing security interest in the
Collateral and shall (a) remain in full force and effect until the payment in
full of the Secured Obligations, the cancellation or termination of the
Commitments and the cancellation or expiration of all outstanding Letters of
Credit, (b) be binding upon Pledgor, its successors and assigns, and (c) inure,
together with the rights and remedies of Secured Party hereunder, to the benefit
of Secured Party and its successors, transferees and assigns. Without limiting
the generality of the foregoing clause (c), but subject to the provisions of
subsection 10.1 of the Credit Agreement, any Lender may assign or otherwise
transfer any Loans held by it to any other Person, and such other Person shall
thereupon become vested with all the benefits in respect thereof granted to
Lenders herein or otherwise. Upon the payment in full of all Secured
Obligations, the cancellation or termination of the Commitments and the
cancellation or expiration of all outstanding Letters of Credit, the security
interest granted hereby shall terminate and all rights to the Collateral shall
revert to Pledgor. Upon any such termination Secured Party shall, at Pledgor's
expense, execute and deliver to Pledgor such documents as Pledgor shall
reasonably request to evidence such termination and Pledgor shall be entitled to
the return, upon its request and at its expense, against receipt and without
recourse to Secured Party, of such of the Collateral as shall not have been
otherwise applied pursuant to the terms hereof.
XVI-6
<PAGE>
SECTION 14. Secured Party as Agent.
(a) Secured Party has been appointed to act as Secured Party hereunder by
Lenders. Secured Party shall be obligated, and shall have the right hereunder,
to make demands, to give notices, to exercise or refrain from exercising any
rights, and to take or refrain from taking any action (including without
limitation the release or substitution of Collateral), solely in accordance with
this Agreement and the Credit Agreement.
(b) Secured Party shall at all times be the same Person that is Collateral
Agent under the Credit Agreement. Written notice of resignation by Collateral
Agent pursuant to subsection 9.5 of the Credit Agreement shall also constitute
notice of resignation as Secured Party under this Agreement; removal of
Collateral Agent pursuant to subsection 9.5 of the Credit Agreement shall also
constitute removal as Secured Party under this Agreement; and appointment of a
successor Collateral Agent pursuant to subsection 9.5 of the Credit Agreement
shall also constitute appointment of a successor Secured Party under this
Agreement. Upon the acceptance of any appointment as Collateral Agent under
subsection 9.5 of the Credit Agreement by a successor Collateral Agent, that
successor Collateral Agent shall thereupon succeed to and become vested with all
the rights, powers, privileges and duties of the retiring or removed Secured
Party under this Agreement, and the retiring or removed Secured Party under this
Agreement shall promptly (i) transfer to such successor Secured Party all sums
held by Secured Party hereunder (which shall be deposited in a new Collateral
Account established and maintained by such successor Secured Party), together
with all records and other documents necessary or appropriate in connection with
the performance of the duties of the successor Secured Party under this
Agreement, and (ii) execute and deliver to such successor Secured Party such
amendments to financing statements, and take such other actions, as may be
necessary or appropriate in connection with the assignment to such successor
Secured Party of the security interests created hereunder, whereupon such
retiring or removed Secured Party shall be discharged from its duties and
obligations under this Agreement. After any retiring or removed Collateral
Agent's resignation or removal hereunder as Secured Party, the provisions of
this Agreement shall inure to its benefit as to any actions taken or omitted to
be taken by it under this Agreement while it was Secured Party hereunder.
SECTION 15. Amendments; Etc.
No amendment, modification, termination or waiver of any provision of this
Agreement, and no consent to any departure by Pledgor therefrom, shall in any
event be effective unless the same shall be in writing and signed by Secured
Party and, in the case of any such amendment or modification, by Pledgor. Any
such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which it was given.
XVI-7
<PAGE>
SECTION 16. Notices.
Unless otherwise specifically provided herein, any notice or other
communication herein required or permitted to be given shall be in writing and
may be personally served, telexed or sent by telefacsimile or United States mail
or courier service and shall be deemed to have been given when delivered in
person or by courier service, upon receipt of telefacsimile or telex (with
received answerback), or three Business Days after depositing it in the United
States mail with postage prepaid and properly addressed; provided that notices
to Secured Party shall not be effective until received. For the purposes hereof,
the address of each party hereto shall be as provided in subsection 10.8 of the
Credit Agreement.
SECTION 17. Failure or Indulgence Not Waiver; Remedies Cumulative.
No failure or delay on the part of Secured Party in the exercise of any
power, right or privilege hereunder shall impair such power, right or privilege
or be construed to be a waiver of any default or acquiescence therein, nor shall
any single or partial exercise of any such power, right or privilege preclude
any other or further exercise thereof or of any other power, right or privilege.
All rights and remedies existing under this Agreement are cumulative to, and not
exclusive of, any rights or remedies otherwise available.
SECTION 18. Severability.
In case any provision in or obligation under this Agreement shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
SECTION 19. Headings.
Section and subsection headings in this Agreement are included herein for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose or be given any substantive effect.
SECTION 20. Governing Law; Terms.
THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER
SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT LIMITATION SECTION
5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD
TO CONFLICTS OF LAWS PRINCIPLES, EXCEPT TO THE EXTENT THAT THE CODE PROVIDES
THAT THE PERFECTION OF THE SECURITY INTEREST
XVI-8
<PAGE>
HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE
GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK. Unless
otherwise defined herein or in the Credit Agreement, terms used in Articles 8
and 9 of the Uniform Commercial Code in the State of New York are used herein as
therein defined.
SECTION 21. Counterparts.
This Agreement may be executed in one or more counterparts and by different
parties hereto in separate counterparts, each of which when so executed and
delivered shall be deemed an original, but all such counterparts together shall
constitute but one and the same instrument; signature pages may be detached from
multiple separate counterparts and attached to a single counterpart so that all
signature pages are physically attached to the same document.
[Remainder of page intentionally left blank]
XVI-9
<PAGE>
IN WITNESS WHEREOF, Pledgor and Secured Party have caused this Agreement to
be duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
OUTSOURCING SOLUTIONS INC.
By:_____________________________________
Name:
Title:
XVI-10
<PAGE>
SUNTRUST BANK, ATLANTA,
as Secured Party
By:_____________________________________
Name:
Title:
By:_____________________________________
Name:
Title:
XVI-11
<PAGE>
OUTSOURCING SOLUTIONS INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(IN THOUSANDS OF DOLLARS EXCEPT RATIO DATA)
EXHIBIT 12.1
<TABLE>
<CAPTION>
APLP OSI
---------------------------------------------------------- -------------------------------
FROM FROM FROM
JANUARY 1, SEPTEMBER 21, SEPTEMBER 21,
YEAR ENDED DECEMBER 31, TO TO TO
------------------------------------------ SEPTEMBER 20, DECEMBER 31, SEPTEMBER 30,
1991 1992 1993 1994 1995 1995 1995
--------- --------- --------- --------- -------------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED HISTORICAL FINANCIAL
DATA--OSI:
Earnings were calculated as
follows:
Income (loss) before taxes....... $ 573 $ 456 $ 10,107 $ 25,091 $ 8,984 $ (4,082) $ 124
Add: Fixed charges............... 194 1,232 1,421 2,981 1,022 1,415 12
--------- --------- --------- --------- -------------- -------------- ------
Earnings......................... $ 767 $ 1,688 $ 11,528 $ 28,072 $ 10,006 $ (2,667) $ 136
--------- --------- --------- --------- -------------- -------------- ------
--------- --------- --------- --------- -------------- -------------- ------
Fixed charges were calculated as
follows:
Interest expense(a).............. $ 194 $ 1,229 $ 1,388 $ 2,941 $ 955 $ 1,365 $ 5
Portion of rentals attributable
to interest.................... -- 3 33 40 67 50 7
--------- --------- --------- --------- -------------- -------------- ------
194 1,232 1,421 2,981 1,022 1,415 12
Preferred stock dividends(b)..... -- -- -- -- -- 373 --
--------- --------- --------- --------- -------------- -------------- ------
Fixed charges.................... $ 194 $ 1,232 $ 1,421 $ 2,981 $ 1,022 $ 1,788 $ 12
--------- --------- --------- --------- -------------- -------------- ------
--------- --------- --------- --------- -------------- -------------- ------
Ratio of earnings to fixed
charges........................ 4.0x 1.4x 8.1x 9.4x 9.8x -- 11.3x
--------- --------- --------- --------- -------------- -------------- ------
--------- --------- --------- --------- -------------- -------------- ------
Deficiency....................... $ (4,455)
--------------
--------------
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30,
1996
--------------
<S> <C>
SELECTED HISTORICAL FINANCIAL
DATA--OSI:
Earnings were calculated as
follows:
Income (loss) before taxes....... $ (12,770)
Add: Fixed charges............... 6,252
--------------
Earnings......................... $ (6,518)
--------------
--------------
Fixed charges were calculated as
follows:
Interest expense(a).............. $ 5,633
Portion of rentals attributable
to interest.................... 619
--------------
6,252
Preferred stock dividends(b)..... 1,022
--------------
Fixed charges.................... $ 7,274
--------------
--------------
Ratio of earnings to fixed
charges........................ --
--------------
--------------
Deficiency....................... $ (13,792)
--------------
--------------
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------------------------------- ---------------
1991 1992 1993 1994 1995 1995
--------- --------- --------- --------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
SELECTED HISTORICAL FINANCIAL DATA--PAYCO:
Earnings were calculated as follows:
Income before taxes............................. $ 8,229 $ 5,782 $ 7,267 $ 8,385 $ 9,380 $ 7,982
Add: Fixed charges.............................. 1,728 1,796 2,289 1,948 2,692 1,967
--------- --------- --------- --------- -------------- -------
Earnings........................................ $ 9,957 $ 7,578 $ 9,556 $ 10,333 $ 12,072 $ 9,949
--------- --------- --------- --------- -------------- -------
--------- --------- --------- --------- -------------- -------
Fixed charges were calculated as follows:
Interest expense................................ $ 55 $ 94 $ 268 $ 148 $ 770 $ 531
Portion of rentals attributable to interest..... 1,673 1,702 2,021 1,800 1,922 1,436
--------- --------- --------- --------- -------------- -------
Fixed charges................................... $ 1,728 $ 1,796 $ 2,289 $ 1,948 $ 2,692 $ 1,967
--------- --------- --------- --------- -------------- -------
--------- --------- --------- --------- -------------- -------
Ratio of earnings to fixed charges.............. 5.8x 4.2x 4.2x 5.3x 4.5x 5.1x
--------- --------- --------- --------- -------------- -------
--------- --------- --------- --------- -------------- -------
<CAPTION>
1996
---------------
<S> <C>
SELECTED HISTORICAL FINANCIAL DATA--PAYCO:
Earnings were calculated as follows:
Income before taxes............................. $ 5,309
Add: Fixed charges.............................. 2,099
-------
Earnings........................................ $ 7,408
-------
-------
Fixed charges were calculated as follows:
Interest expense................................ $ 694
Portion of rentals attributable to interest..... 1,405
-------
Fixed charges................................... $ 2,099
-------
-------
Ratio of earnings to fixed charges.............. 3.5x
-------
-------
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
PRO FORMA NINE MONTHS ENDED LAST TWELVE
YEAR ENDED SEPTEMBER 30, MONTHS ENDED
DECEMBER 31, ------------------------------ SEPTEMBER 30,
1995 1995 1996 1996
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
COMPANY PRO FORMA:
Earnings were calculated as follows:
Loss before taxes............................................. $ (26,902) $ (17,984) $ (18,518) $ (27,436)
Add: Fixed charges............................................ 28,293 21,284 20,778 27,787
-------------- -------------- -------------- --------------
Earnings...................................................... $ 1,391 $ 3,300 $ 2,260 $ 351
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
Fixed charges were calculated as follows:
Interest expense(a)........................................... $ 25,943 $ 19,548 $ 18,921 $ 25,316
Portion of rentals attributable to interest................... 2,350 1,736 1,857 2,471
-------------- -------------- -------------- --------------
28,293 21,284 20,778 27,787
Preferred stock dividends(b).................................. 1,360 1,013 1,097 1,444
-------------- -------------- -------------- --------------
Fixed charges................................................. $ 29,653 $ 22,297 $ 21,875 $ 29,231
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
Ratio of earnings to fixed charges............................ -- -- -- --
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
Deficiency.................................................... $ (28,262) $ (18,997) $ (19,615) $ (28,880)
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
</TABLE>
- ------------------------------
(a) Interest expense includes amortization of debt issuance costs.
(b) Preferred stock dividends have been increased to reflect the pretax amounts
which would be required to meet dividend payments.
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES OF THE REGISTRANT
Name of Subsidiary Jurisdiction of Incorporation
CFC Services Corp. Delaware
A.M. Miller & Associates, Inc. Minnesota
The Continental Alliance, Inc. Washington
(d/b/a Continental Credit Services,
Inc.)
Alaska Financial Services, Inc. Alaska
Southwest Credit Services, Inc. Arizona
Account Portfolios, Inc. Delaware
Account Portfolios G.P., Inc. Delaware
Account Portfolios, L.P. Georgia
Perimeter Credit, L.P. Georgia
Gulf State Credit, L.P. Georgia
Payco American Corporation Wisconsin
Payco-General American Credits, Inc. Delaware
National Account Systems, Inc. Delaware
University Accounting Service, Inc. Wisconsin
Asset Recovery & Management Corp. Wisconsin
Indiana Mutual Credit Association, Inc. Indiana
<PAGE>
Furst and Furst, Inc. Wisconsin
Jennifer Loomis & Associates, Inc. Arizona
FM Services Corporation Arizona
Qualink, Inc. Wisconsin
Professional Recoveries Inc. Wisconsin
Payco American International Corp. Wisconsin
Reliance National Insurance Co. Ltd. Bermuda
Federal Collection Bureau, S.A. DE Mexico
C.V.
Pay Tech, Inc. Wisconsin
<PAGE>
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Outsourcing Solutions
Inc. on Form S-4 of our report dated August 9, 1996 (October 11, 1996 as to
Note 10) (relating to the financial statements of Outsourcing Solutions
Inc.), appearing in the Prospectus, which is part of this Registration
Statement.
We also consent to the reference to us under the heading "Experts" in such
Prospectus.
DELOITTE & TOUCHE LLP
Atlanta, Georgia
November 26, 1996
<PAGE>
Exhibit 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Outsourcing Solutions
Inc. on Form S-4 of our report dated August 9, 1996 (relating to the financial
statements of Account Portfolios, L.P.), appearing in the Prospectus, which is
part of this Registration Statement.
We also consent to the reference to us under the heading "Experts" in such
Prospectus.
DELOITTE & TOUCHE LLP
Atlanta, Georgia
November 26, 1996
<PAGE>
Exhibit 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
report (and to all references to our Firm) included in or made a part of this
registration statement.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin
November 25, 1996
<PAGE>
Exhibit 23.4
CONSENT OF INDEPENDENT CERTIFIED ACCOUNTANTS
We have issued our report dated January 17, 1996, accompanying the
financial statements of A.M. Miller & Associates, Inc. for the year ended
December 31, 1995. We hereby consent to the inclusion of the above-mentioned
report in this registration statement on Form S-4 of Outsourcing Solutions Inc.
We also consent to the reference to our firm under the caption "Experts".
SCHWEITZER RUBIN KARON & BREMER
Certified Public Accountants
November 26, 1996
Minneapolis, Minnesota
<PAGE>
Registration No.
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2 ______)
WILMINGTON TRUST COMPANY
(Exact name of trustee as specified in its charter)
Delaware 51-0055023
(State of incorporation) (I.R.S. employer identification no.)
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
(Address of principal executive offices)
Cynthia L. Corliss
Vice President and Trust Counsel
Wilmington Trust Company
Rodney Square North
Wilmington, Delaware 19890
(302) 651-8516
(Name, address and telephone number of agent for service)
OUTSOURCING SOLUTIONS INC.
(Exact name of obligor as specified in its charter)
Delaware 58-2197161
(State of incorporation) (I.R.S. employer identification no.)
300 Galleria Parkway
Suite 690
Atlanta, Georgia 30339
(Address of principal executive offices) (Zip Code)
11% Series B Senior Subordinated Notes due 2006
(Title of the indenture securities)
================================================================================
<PAGE>
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
Federal Deposit Insurance Co. State Bank Commissioner
Five Penn Center Dover, Delaware
Suite #2901
Philadelphia, PA
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee, describe each
affiliation:
Based upon an examination of the books and records of the trustee and
upon information furnished by the obligor, the obligor is not an affiliate
of the trustee.
ITEM 3. LIST OF EXHIBITS.
List below all exhibits filed as part of this Statement of Eligibility
and Qualification.
A. Copy of the Charter of Wilmington Trust Company, which includes the
certificate of authority of Wilmington Trust Company to commence
business and the authorization of Wilmington Trust Company to exercise
corporate trust powers.
B. Copy of By-Laws of Wilmington Trust Company.
C. Consent of Wilmington Trust Company required by Section 321(b) of
Trust Indenture Act.
D. Copy of most recent Report of Condition of Wilmington Trust Company.
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Wilmington Trust Company, a corporation organized and
existing under the laws of Delaware, has duly caused this Statement of
Eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Wilmington and State of Delaware on the 20th day
of November, 1996.
WILMINGTON TRUST COMPANY
[SEAL]
Attest: /s/ Donald G. MacKelcan By: /s/ Norma P. Closs
-------------------------- ----------------------------------
Assistant Secretary Name: Norma P. Closs
Title: Vice President
2
<PAGE>
EXHIBIT A
AMENDED CHARTER
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
AS EXISTING ON MAY 9, 1987
<PAGE>
AMENDED CHARTER
OR
ACT OF INCORPORATION
OF
WILMINGTON TRUST COMPANY
WILMINGTON TRUST COMPANY, originally incorporated by an Act of the General
Assembly of the State of Delaware, entitled "An Act to Incorporate the Delaware
Guarantee and Trust Company", approved March 2, A.D. 1901, and the name of which
company was changed to "WILMINGTON TRUST COMPANY" by an amendment filed in the
Office of the Secretary of State on March 18, A.D. 1903, and the Charter or Act
of Incorporation of which company has been from time to time amended and changed
by merger agreements pursuant to the corporation law for state banks and trust
companies of the State of Delaware, does hereby alter and amend its Charter or
Act of Incorporation so that the same as so altered and amended shall in its
entirety read as follows:
FIRST: - The name of this corporation is WILMINGTON TRUST COMPANY.
SECOND: - The location of its principal office in the State of Delaware is
at Rodney Square North, in the City of Wilmington, County of New Castle;
the name of its resident agent is WILMINGTON TRUST COMPANY whose address is
Rodney Square North, in said City. In addition to such principal office,
the said corporation maintains and operates branch offices in the City of
Newark, New Castle County, Delaware, the Town of Newport, New Castle
County, Delaware, at Claymont, New Castle County, Delaware, at Greenville,
New Castle County Delaware, and at Milford Cross Roads, New Castle County,
Delaware, and shall be empowered to open, maintain and operate branch
offices at Ninth and Shipley Streets, 418 Delaware Avenue, 2120 Market
Street, and 3605 Market Street, all in the City of Wilmington, New Castle
County, Delaware, and such other branch offices or places of business as
may be authorized from time to time by the agency or agencies of the
government of the State of Delaware empowered to confer such authority.
THIRD: - (a) The nature of the business and the objects and purposes
proposed to be transacted, promoted or carried on by this Corporation are
to do any or all of the things herein mentioned as fully and to the same
extent as natural persons might or could do and in any part of the world,
viz.:
(1) To sue and be sued, complain and defend in any Court of law or
equity and to make and use a common seal, and alter the seal at
pleasure, to hold, purchase, convey, mortgage or otherwise deal in
real and personal estate and property, and to appoint such officers
and agents as the business of
<PAGE>
the Corporation shall require, to make by-laws not inconsistent with
the Constitution or laws of the United States or of this State, to
discount bills, notes or other evidences of debt, to receive deposits
of money, or securities for money, to buy gold and silver bullion and
foreign coins, to buy and sell bills of exchange, and generally to
use, exercise and enjoy all the powers, rights, privileges and
franchises incident to a corporation which are proper or necessary for
the transaction of the business of the Corporation hereby created.
(2) To insure titles to real and personal property, or any estate or
interests therein, and to guarantee the holder of such property, real
or personal, against any claim or claims, adverse to his interest
therein, and to prepare and give certificates of title for any lands
or premises in the State of Delaware, or elsewhere.
(3) To act as factor, agent, broker or attorney in the receipt,
collection, custody, investment and management of funds, and the
purchase, sale, management and disposal of property of all
descriptions, and to prepare and execute all papers which may be
necessary or proper in such business.
(4) To prepare and draw agreements, contracts, deeds, leases,
conveyances, mortgages, bonds and legal papers of every description,
and to carry on the business of conveyancing in all its branches.
(5) To receive upon deposit for safekeeping money, jewelry, plate,
deeds, bonds and any and all other personal property of every sort and
kind, from executors, administrators, guardians, public officers,
courts, receivers, assignees, trustees, and from all fiduciaries, and
from all other persons and individuals, and from all corporations
whether state, municipal, corporate or private, and to rent boxes,
safes, vaults and other receptacles for such property.
(6) To act as agent or otherwise for the purpose of registering,
issuing, certificating, countersigning, transferring or underwriting
the stock, bonds or other obligations of any corporation, association,
state or municipality, and may receive and manage any sinking fund
therefor on such terms as may be agreed upon between the two parties,
and in like manner may act as Treasurer of any corporation or
municipality.
(7) To act as Trustee under any deed of trust, mortgage, bond or other
instrument issued by any state, municipality, body politic,
corporation, association or person, either alone or in conjunction
with any other person or persons, corporation or corporations.
2
<PAGE>
(8) To guarantee the validity, performance or effect of any contract
or agreement, and the fidelity of persons holding places of
responsibility or trust; to become surety for any person, or persons,
for the faithful performance of any trust, office, duty, contract or
agreement, either by itself or in conjunction with any other person,
or persons, corporation, or corporations, or in like manner become
surety upon any bond, recognizance, obligation, judgment, suit, order,
or decree to be entered in any court of record within the State of
Delaware or elsewhere, or which may now or hereafter be required by
any law, judge, officer or court in the State of Delaware or
elsewhere.
(9) To act by any and every method of appointment as trustee, trustee
in bankruptcy, receiver, assignee, assignee in bankruptcy, executor,
administrator, guardian, bailee, or in any other trust capacity in the
receiving, holding, managing, and disposing of any and all estates and
property, real, personal or mixed, and to be appointed as such
trustee, trustee in bankruptcy, receiver, assignee, assignee in
bankruptcy, executor, administrator, guardian or bailee by any
persons, corporations, court, officer, or authority, in the State of
Delaware or elsewhere; and whenever this Corporation is so appointed
by any person, corporation, court, officer or authority such trustee,
trustee in bankruptcy, receiver, assignee, assignee in bankruptcy,
executor, administrator, guardian, bailee, or in any other trust
capacity, it shall not be required to give bond with surety, but its
capital stock shall be taken and held as security for the performance
of the duties devolving upon it by such appointment.
(10) And for its care, management and trouble, and the exercise of any
of its powers hereby given, or for the performance of any of the
duties which it may undertake or be called upon to perform, or for the
assumption of any responsibility the said Corporation may be entitled
to receive a proper compensation.
(11) To purchase, receive, hold and own bonds, mortgages, debentures,
shares of capital stock, and other securities, obligations, contracts
and evidences of indebtedness, of any private, public or municipal
corporation within and without the State of Delaware, or of the
Government of the United States, or of any state, territory, colony,
or possession thereof, or of any foreign government or country; to
receive, collect, receipt for, and dispose of interest, dividends and
income upon and from any of the bonds, mortgages, debentures, notes,
shares of capital stock, securities, obligations, contracts, evidences
of indebtedness and other property held and owned by it, and to
exercise in respect of all such bonds, mortgages, debentures, notes,
shares of capital stock, securities, obligations, contracts, evidences
of indebtedness and other property, any and all the rights, powers and
privileges of individual
3
<PAGE>
owners thereof, including the right to vote thereon; to invest and
deal in and with any of the moneys of the Corporation upon such
securities and in such manner as it may think fit and proper, and from
time to time to vary or realize such investments; to issue bonds and
secure the same by pledges or deeds of trust or mortgages of or upon
the whole or any part of the property held or owned by the
Corporation, and to sell and pledge such bonds, as and when the Board
of Directors shall determine, and in the promotion of its said
corporate business of investment and to the extent authorized by law,
to lease, purchase, hold, sell, assign, transfer, pledge, mortgage and
convey real and personal property of any name and nature and any
estate or interest therein.
(b) In furtherance of, and not in limitation, of the powers conferred by
the laws of the State of Delaware, it is hereby expressly provided that the
said Corporation shall also have the following powers:
(1) To do any or all of the things herein set forth, to the same
extent as natural persons might or could do, and in any part of the
world.
(2) To acquire the good will, rights, property and franchises and to
undertake the whole or any part of the assets and liabilities of any
person, firm, association or corporation, and to pay for the same in
cash, stock of this Corporation, bonds or otherwise; to hold or in any
manner to dispose of the whole or any part of the property so
purchased; to conduct in any lawful manner the whole or any part of
any business so acquired, and to exercise all the powers necessary or
convenient in and about the conduct and management of such business.
(3) To take, hold, own, deal in, mortgage or otherwise lien, and to
lease, sell, exchange, transfer, or in any manner whatever dispose of
property, real, personal or mixed, wherever situated.
(4) To enter into, make, perform and carry out contracts of every kind
with any person, firm, association or corporation, and, without limit
as to amount, to draw, make, accept, endorse, discount, execute and
issue promissory notes, drafts, bills of exchange, warrants, bonds,
debentures, and other negotiable or transferable instruments.
(5) To have one or more offices, to carry on all or any of its
operations and businesses, without restriction to the same extent as
natural persons might or could do, to purchase or otherwise acquire,
to hold, own, to mortgage, sell, convey or otherwise dispose of, real
and personal property, of every class and description, in any State,
District, Territory or Colony of the United States, and in any foreign
country or place.
4
<PAGE>
(6) It is the intention that the objects, purposes and powers
specified and clauses contained in this paragraph shall (except where
otherwise expressed in said paragraph) be nowise limited or restricted
by reference to or inference from the terms of any other clause of
this or any other paragraph in this charter, but that the objects,
purposes and powers specified in each of the clauses of this paragraph
shall be regarded as independent objects, purposes and powers.
FOURTH: - (a) The total number of shares of all classes of stock which the
Corporation shall have authority to issue is forty-one million (41,000,000)
shares, consisting of:
(1) One million (1,000,000) shares of Preferred stock, par value
$10.00 per share (hereinafter referred to as "Preferred Stock"); and
(2) Forty million (40,000,000) shares of Common Stock, par value $1.00
per share (hereinafter referred to as "Common Stock").
(b) Shares of Preferred Stock may be issued from time to time in one or
more series as may from time to time be determined by the Board of
Directors each of said series to be distinctly designated. All shares of
any one series of Preferred Stock shall be alike in every particular,
except that there may be different dates from which dividends, if any,
thereon shall be cumulative, if made cumulative. The voting powers and the
preferences and relative, participating, optional and other special rights
of each such series, and the qualifications, limitations or restrictions
thereof, if any, may differ from those of any and all other series at any
time outstanding; and, subject to the provisions of subparagraph 1 of
Paragraph (c) of this Article FOURTH, the Board of Directors of the
Corporation is hereby expressly granted authority to fix by resolution or
resolutions adopted prior to the issuance of any shares of a particular
series of Preferred Stock, the voting powers and the designations,
preferences and relative, optional and other special rights, and the
qualifications, limitations and restrictions of such series, including, but
without limiting the generality of the foregoing, the following:
(1) The distinctive designation of, and the number of shares of
Preferred Stock which shall constitute such series, which number may
be increased (except where otherwise provided by the Board of
Directors) or decreased (but not below the number of shares thereof
then outstanding) from time to time by like action of the Board of
Directors;
(2) The rate and times at which, and the terms and conditions on
which, dividends, if any, on Preferred Stock of such series shall be
paid, the extent of the preference or relation, if any, of such
dividends to the dividends payable on any other class or classes, or
series of the same or other class of
5
<PAGE>
stock and whether such dividends shall be cumulative or
non-cumulative;
(3) The right, if any, of the holders of Preferred Stock of such
series to convert the same into or exchange the same for, shares of
any other class or classes or of any series of the same or any other
class or classes of stock of the Corporation and the terms and
conditions of such conversion or exchange;
(4) Whether or not Preferred Stock of such series shall be subject to
redemption, and the redemption price or prices and the time or times
at which, and the terms and conditions on which, Preferred Stock of
such series may be redeemed.
(5) The rights, if any, of the holders of Preferred Stock of such
series upon the voluntary or involuntary liquidation, merger,
consolidation, distribution or sale of assets, dissolution or
winding-up, of the Corporation.
(6) The terms of the sinking fund or redemption or purchase account,
if any, to be provided for the Preferred Stock of such series; and
(7) The voting powers, if any, of the holders of such series of
Preferred Stock which may, without limiting the generality of the
foregoing include the right, voting as a series or by itself or
together with other series of Preferred Stock or all series of
Preferred Stock as a class, to elect one or more directors of the
Corporation if there shall have been a default in the payment of
dividends on any one or more series of Preferred Stock or under such
circumstances and on such conditions as the Board of Directors may
determine.
(c) (1) After the requirements with respect to preferential dividends on
the Preferred Stock (fixed in accordance with the provisions of section (b)
of this Article FOURTH), if any, shall have been met and after the
Corporation shall have complied with all the requirements, if any, with
respect to the setting aside of sums as sinking funds or redemption or
purchase accounts (fixed in accordance with the provisions of section (b)
of this Article FOURTH), and subject further to any conditions which may be
fixed in accordance with the provisions of section (b) of this Article
FOURTH, then and not otherwise the holders of Common Stock shall be
entitled to receive such dividends as may be declared from time to time by
the Board of Directors.
(2) After distribution in full of the preferential amount, if any,
(fixed in accordance with the provisions of section (b) of this
Article Fourth), to be distributed to the holders of Preferred Stock
in the event of voluntary or involuntary liquidation, distribution or
sale of assets, dissolution or winding-up, of the Corporation, the
holders of the Common Stock shall be entitled to
6
<PAGE>
receive all of the remaining assets of the Corporation, tangible and
intangible, of whatever kind available for distribution to
stockholders ratably in proportion to the number of shares of Common
Stock held by them respectively.
(3) Except as may otherwise be required by law or by the provisions of
such resolution or resolutions as may be adopted by the Board of
Directors pursuant to section (b) of this Article FOURTH, each holder
of Common Stock shall have one vote in respect of each share of Common
Stock held on all matters voted upon by the stockholders.
(d) No holder of any of the shares of any class or series of stock or of
options, warrants or other rights to purchase shares of any class or series
of stock or of other securities of the Corporation shall have any
preemptive right to purchase or subscribe for any unissued stock of any
class or series or any additional shares of any class or series to be
issued by reason of any increase of the authorized capital stock of the
Corporation of any class or series, or bonds, certificates of indebtedness,
debentures or other securities convertible into or exchangeable for stock
of the Corporation of any class or series, or carrying any right to
purchase stock of any class or series, but any such unissued stock,
additional authorized issue of shares of any class or series of stock or
securities convertible into or exchangeable for stock, or carrying any
right to purchase stock, may be issued and disposed of pursuant to
resolution of the Board of Directors to such persons, firms, corporations
or associations, whether such holders or others, and upon such terms as may
be deemed advisable by the Board of Directors in the exercise of its sole
discretion.
(e) The relative powers, preferences and rights of each series of Preferred
Stock in relation to the relative powers, preferences and rights of each
other series of Preferred Stock shall, in each case, be as fixed from time
to time by the Board of Directors in the resolution or resolutions adopted
pursuant to authority granted in section (b) of this Article FOURTH and the
consent, by class or series vote or otherwise, of the holders of such of
the series of Preferred Stock as are from time to time outstanding shall
not be required for the issuance by the Board of Directors of any other
series of Preferred Stock whether or not the powers, preferences and rights
of such other series shall be fixed by the Board of Directors as senior to,
or on a parity with, the powers, preferences and rights of such outstanding
series, or any of them; provided, however, that the Board of Directors may
provide in the resolution or resolutions as to any series of Preferred
Stock adopted pursuant to section (b) of this Article FOURTH that the
consent of the holders of a majority (or such greater proportion as shall
be therein fixed) of the outstanding shares of such series voting thereon
shall be required for the issuance of any or all other series of Preferred
Stock.
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(f) Subject to the provisions of section (e), shares of any series of
Preferred Stock may be issued from time to time as the Board of Directors
of the Corporation shall determine and on such terms and for such
consideration as shall be fixed by the Board of Directors.
(g) Shares of Common Stock may be issued from time to time as the Board of
Directors of the Corporation shall determine and on such terms and for such
consideration as shall be fixed by the Board of Directors.
(h) The authorized amount of shares of Common Stock and of Preferred Stock
may, without a class or series vote, be increased or decreased from time to
time by the affirmative vote of the holders of a majority of the stock of
the Corporation entitled to vote thereon.
FIFTH: - (a) The business and affairs of the Corporation shall be conducted
and managed by a Board of Directors. The number of directors constituting
the entire Board shall be not less than five nor more than twenty-five as
fixed from time to time by vote of a majority of the whole Board, provided,
however, that the number of directors shall not be reduced so as to shorten
the term of any director at the time in office, and provided further, that
the number of directors constituting the whole Board shall be twenty-four
until otherwise fixed by a majority of the whole Board.
(b) The Board of Directors shall be divided into three classes, as nearly
equal in number as the then total number of directors constituting the
whole Board permits, with the term of office of one class expiring each
year. At the annual meeting of stockholders in 1982, directors of the first
class shall be elected to hold office for a term expiring at the next
succeeding annual meeting, directors of the second class shall be elected
to hold office for a term expiring at the second succeeding annual meeting
and directors of the third class shall be elected to hold office for a term
expiring at the third succeeding annual meeting. Any vacancies in the Board
of Directors for any reason, and any newly created directorships resulting
from any increase in the directors, may be filled by the Board of
Directors, acting by a majority of the directors then in office, although
less than a quorum, and any directors so chosen shall hold office until the
next annual election of directors. At such election, the stockholders shall
elect a successor to such director to hold office until the next election
of the class for which such director shall have been chosen and until his
successor shall be elected and qualified. No decrease in the number of
directors shall shorten the term of any incumbent director.
(c) Notwithstanding any other provisions of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and notwithstanding the
fact that some lesser percentage may be specified by law, this Charter or
Act of Incorporation or the By-Laws of the Corporation), any director or
the entire Board of Directors of the
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Corporation may be removed at any time without cause, but only by the
affirmative vote of the holders of two-thirds or more of the outstanding
shares of capital stock of the Corporation entitled to vote generally in
the election of directors (considered for this purpose as one class) cast
at a meeting of the stockholders called for that purpose.
(d) Nominations for the election of directors may be made by the Board of
Directors or by any stockholder entitled to vote for the election of
directors. Such nominations shall be made by notice in writing, delivered
or mailed by first class United States mail, postage prepaid, to the
Secretary of the Corporation not less than 14 days nor more than 50 days
prior to any meeting of the stockholders called for the election of
directors; provided, however, that if less than 21 days' notice of the
meeting is given to stockholders, such written notice shall be delivered or
mailed, as prescribed, to the Secretary of the Corporation not later than
the close of the seventh day following the day on which notice of the
meeting was mailed to stockholders. Notice of nominations which are
proposed by the Board of Directors shall be given by the Chairman on behalf
of the Board.
(e) Each notice under subsection (d) shall set forth (i) the name, age,
business address and, if known, residence address of each nominee proposed
in such notice, (ii) the principal occupation or employment of such nominee
and (iii) the number of shares of stock of the Corporation which are
beneficially owned by each such nominee.
(f) The Chairman of the meeting may, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with
the foregoing procedure, and if he should so determine, he shall so declare
to the meeting and the defective nomination shall be disregarded.
(g) No action required to be taken or which may be taken at any annual or
special meeting of stockholders of the Corporation may be taken without a
meeting, and the power of stockholders to consent in writing, without a
meeting, to the taking of any action is specifically denied.
SIXTH: - The Directors shall choose such officers, agent and servants as
may be provided in the By-Laws as they may from time to time find necessary
or proper.
SEVENTH: - The Corporation hereby created is hereby given the same powers,
rights and privileges as may be conferred upon corporations organized under
the Act entitled "An Act Providing a General Corporation Law", approved
March 10, 1899, as from time to time amended.
EIGHTH: - This Act shall be deemed and taken to be a private Act.
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NINTH: - This Corporation is to have perpetual existence.
TENTH: - The Board of Directors, by resolution passed by a majority of the
whole Board, may designate any of their number to constitute an Executive
Committee, which Committee, to the extent provided in said resolution, or
in the By-Laws of the Company, shall have and may exercise all of the
powers of the Board of Directors in the management of the business and
affairs of the Corporation, and shall have power to authorize the seal of
the Corporation to be affixed to all papers which may require it.
ELEVENTH: - The private property of the stockholders shall not be liable
for the payment of corporate debts to any extent whatever.
TWELFTH: - The Corporation may transact business in any part of the world.
THIRTEENTH: - The Board of Directors of the Corporation is expressly
authorized to make, alter or repeal the By-Laws of the Corporation by a
vote of the majority of the entire Board. The stockholders may make, alter
or repeal any By-Law whether or not adopted by them, provided however, that
any such additional By-Laws, alterations or repeal may be adopted only by
the affirmative vote of the holders of two-thirds or more of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors (considered for this purpose as one
class).
FOURTEENTH: - Meetings of the Directors may be held outside of the State of
Delaware at such places as may be from time to time designated by the
Board, and the Directors may keep the books of the Company outside of the
State of Delaware at such places as may be from time to time designated by
them.
FIFTEENTH: - (a) In addition to any affirmative vote required by law, and
except as otherwise expressly provided in sections (b) and (c) of this
Article FIFTEENTH:
(A) any merger or consolidation of the Corporation or any Subsidiary
(as hereinafter defined) with or into (i) any Interested Stockholder
(as hereinafter defined) or (ii) any other corporation (whether or not
itself an Interested Stockholder), which, after such merger or
consolidation, would be an Affiliate (as hereinafter defined) of an
Interested Stockholder, or
(B) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of related transactions)
to or with any Interested Stockholder or any Affiliate of any
Interested Stockholder of any assets of the Corporation or any
Subsidiary having an aggregate fair market value of $1,000,000 or
more, or
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(C) the issuance or transfer by the Corporation or any Subsidiary (in
one transaction or a series of related transactions) of any securities
of the Corporation or any Subsidiary to any Interested Stockholder or
any Affiliate of any Interested Stockholder in exchange for cash,
securities or other property (or a combination thereof) having an
aggregate fair market value of $1,000,000 or more, or
(D) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation, or
(E) any reclassification of securities (including any reverse stock
split), or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its Subsidiaries or any
similar transaction (whether or not with or into or otherwise
involving an Interested Stockholder) which has the effect, directly or
indirectly, of increasing the proportionate share of the outstanding
shares of any class of equity or convertible securities of the
Corporation or any Subsidiary which is directly or indirectly owned by
any Interested Stockholder, or any Affiliate of any Interested
Stockholder,
shall require the affirmative vote of the holders of at least two-thirds of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors, considered for the purpose of this
Article FIFTEENTH as one class ("Voting Shares"). Such affirmative vote shall be
required notwithstanding the fact that no vote may be required, or that some
lesser percentage may be specified, by law or in any agreement with any national
securities exchange or otherwise.
(2) The term "business combination" as used in this Article FIFTEENTH shall
mean any transaction which is referred to any one or more of clauses (A)
through (E) of paragraph 1 of the section (a).
(b) The provisions of section (a) of this Article FIFTEENTH shall not
be applicable to any particular business combination and such business
combination shall require only such affirmative vote as is required by
law and any other provisions of the Charter or Act of Incorporation of
ByLaws if such business combination has been approved by a majority of
the whole Board.
(c) For the purposes of this Article FIFTEENTH:
(1) A "person" shall mean any individual firm, corporation or other entity.
(2) "Interested Stockholder" shall mean, in respect of any business
combination, any person (other than the Corporation or any Subsidiary) who
or which as of the record date for the determination of stockholders
entitled to notice of and to vote on
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such business combination, or immediately prior to the consummation of any
such transaction:
(A) is the beneficial owner, directly or indirectly, of more than 10%
of the Voting Shares, or
(B) is an Affiliate of the Corporation and at any time within two
years prior thereto was the beneficial owner, directly or indirectly,
of not less than 10% of the then outstanding voting Shares, or
(C) is an assignee of or has otherwise succeeded in any share of
capital stock of the Corporation which were at any time within two
years prior thereto beneficially owned by any Interested Stockholder,
and such assignment or succession shall have occurred in the course of
a transaction or series of transactions not involving a public
offering within the meaning of the Securities Act of 1933.
(3) A person shall be the "beneficial owner" of any Voting Shares:
(A) which such person or any of its Affiliates and Associates (as
hereafter defined) beneficially own, directly or indirectly, or
(B) which such person or any of its Affiliates or Associates has (i)
the right to acquire (whether such right is exercisable immediately or
only after the passage of time), pursuant to any agreement,
arrangement or understanding or upon the exercise of conversion
rights, exchange rights, warrants or options, or otherwise, or (ii)
the right to vote pursuant to any agreement, arrangement or
understanding, or
(C) which are beneficially owned, directly or indirectly, by any other
person with which such first mentioned person or any of its Affiliates
or Associates has any agreement, arrangement or understanding for the
purpose of acquiring, holding, voting or disposing of any shares of
capital stock of the Corporation.
(4) The outstanding Voting Shares shall include shares deemed owned through
application of paragraph (3) above but shall not include any other Voting
Shares which may be issuable pursuant to any agreement, or upon exercise of
conversion rights, warrants or options or otherwise.
(5) "Affiliate" and "Associate" shall have the respective meanings given
those terms in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as in effect on December 31, 1981.
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(6) "Subsidiary" shall mean any corporation of which a majority of any
class of equity security (as defined in Rule 3a11-1 of the General Rules
and Regulations under the Securities Exchange Act of 1934, as in effect in
December 31, 1981) is owned, directly or indirectly, by the Corporation;
provided, however, that for the purposes of the definition of Investment
Stockholder set forth in paragraph (2) of this section (c), the term
"Subsidiary" shall mean only a corporation of which a majority of each
class of equity security is owned, directly or indirectly, by the
Corporation.
(d) majority of the directors shall have the power and duty to
determine for the purposes of this Article FIFTEENTH on the basis of
information known to them, (1) the number of Voting Shares
beneficially owned by any person (2) whether a person is an Affiliate
or Associate of another, (3) whether a person has an agreement,
arrangement or understanding with another as to the matters referred
to in paragraph (3) of section (c), or (4) whether the assets subject
to any business combination or the consideration received for the
issuance or transfer of securities by the Corporation, or any
Subsidiary has an aggregate fair market value of $1,00,000 or more.
(e) Nothing contained in this Article FIFTEENTH shall be construed to
relieve any Interested Stockholder from any fiduciary obligation
imposed by law.
SIXTEENTH: Notwithstanding any other provision of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and in addition to any
other vote that may be required by law, this Charter or Act of
Incorporation by the By-Laws), the affirmative vote of the holders of at
least two-thirds of the outstanding shares of the capital stock of the
Corporation entitled to vote generally in the election of directors
(considered for this purpose as one class) shall be required to amend,
alter or repeal any provision of Articles FIFTH, THIRTEENTH, FIFTEENTH or
SIXTEENTH of this Charter or Act of Incorporation.
SEVENTEENTH: (a) a Director of this Corporation shall not be liable to the
Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a Director, except to the extent such exemption from
liability or limitation thereof is not permitted under the Delaware General
Corporation Laws as the same exists or may hereafter be amended.
(b) Any repeal or modification of the foregoing paragraph shall not
adversely affect any right or protection of a Director of the
Corporation existing hereunder with respect to any act or omission
occurring prior to the time of such repeal or modification."
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EXHIBIT B
BY-LAWS
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
AS EXISTING ON DECEMBER 21, 1995
<PAGE>
BY-LAWS OF WILMINGTON TRUST COMPANY
ARTICLE I
STOCKHOLDERS' MEETINGS
Section 1. The Annual Meeting of Stockholders shall be held on the third
Thursday in April each year at the principal office at the Company or at such
other date, time, or place as may be designated by resolution by the Board of
Directors.
Section 2. Special meetings of all stockholders may be called at any time
by the Board of Directors, the Chairman of the Board or the President.
Section 3. Notice of all meetings of the stockholders shall be given by
mailing to each stockholder at least ten (10 days before said meeting, at his
last known address, a written or printed notice fixing the time and place of
such meeting.
Section 4. A majority in the amount of the capital stock of the Company
issued and outstanding on the record date, as herein determined, shall
constitute a quorum at all meetings of stockholders for the transaction of any
business, but the holders of a small number of shares may adjourn, from time to
time, without further notice, until a quorum is secured. At each annual or
special meeting of stockholders, each stockholder shall be entitled to one vote,
either in person or by proxy, for each shares of stock registered in the
stockholder's name on the books of the Company on the record date for any such
meeting as determined herein.
ARTICLE II
DIRECTORS
Section 1. The number and classification of the Board of Directors shall be
as set forth in the Charter of the Bank.
Section 2. No person who has attained the age of seventy-two (72) years
shall be nominated for election to the Board of Directors of the Company,
provided, however, that this limitation shall not apply to any person who was
serving as director of the Company on September 16, 1971.
Section 3. The class of Directors so elected shall hold office for three
years or until their successors are elected and qualified.
Section 4. The affairs and business of the Company shall be managed and
conducted by the Board of Directors.
Section 5. Regular meetings of the Board of Directors shall be held on the
third Thursday of each month at the principal office of the Company, or at such
other place and
<PAGE>
time as may be designated by the Board of Directors, the Chairman of the Board,
or the President.
Section 6. Special meetings of the Board of Directors may be called at any
time by the Chairman of the Board of Directors or by the President, and shall be
called upon the written request of a majority of the directors.
Section 7. A majority of the directors elected and qualified shall be
necessary to constitute a quorum for the transaction of business at any meeting
of the Board of Directors.
Section 8. Written notice shall be sent by mail to each director of any
special meeting of the Board of Directors, and of any change in the time or
place of any regular meeting, stating the time and place of such meeting, which
shall be mailed not less than two days before the time of holding such meeting.
Section 9. In the event of the death, resignation, removal, inability to
act, or disqualification of any director, the Board of Directors, although less
than a quorum, shall have the right to elect the successor who shall hold office
for the remainder of the full term of the class of directors in which the
vacancy occurred, and until such director's successor shall have been duly
elected and qualified.
Section 10. The Board of Directors at its first meeting after its election
by the stockholders shall appoint an Executive Committee, a Trust Committee, an
Audit Committee and a Compensation Committee, and shall elect from its own
members a Chairman of the Board of Directors and a President who may be the same
person. The Board of Directors shall also elect at such meeting a Secretary and
a Treasurer, who may be the same person, may appoint at any time such other
committees and elect or appoint such other officers as it may deem advisable.
The Board of Directors may also elect at such meeting one or more Associate
Directors.
Section 11. The Board of Directors may at any time remove, with or without
cause, any member of any Committee appointed by it or any associate director or
officer elected by it and may appoint or elect his successor.
Section 12. The Board of Directors may designate an officer to be in charge
of such of the departments or division of the Company as it may deem advisable.
ARTICLE III
COMMITTEES
Section I. Executive Committee
(A) The Executive Committee shall be composed of not more than nine
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members who shall be selected by the Board of Directors from its own members and
who shall hold office during the pleasure of the Board.
(B) The Executive Committee shall have all the powers of the Board of
Directors when it is not in session to transact all business for and in behalf
of the Company that may be brought before it.
(C) The Executive Committee shall meet at the principal office of the
Company or elsewhere in its discretion at such times to be determined by a
majority of its members, or at the call of the Chairman of the Executive
Committee or at the call of the Chairman of the Board of Directors. The majority
of its members shall be necessary to constitute a quorum for the transaction of
business. Special meetings of the Executive Committee may be held at any time
when a quorum is present.
(D) Minutes of each meeting of the Executive Committee shall be kept
and submitted to the Board of Directors at its next meeting.
(E) The Executive Committee shall advise and superintend all
investments that may be made of the funds of the Company, and shall direct the
disposal of the same, in accordance with such rules and regulations as the Board
of Directors from time to time make.
(F) In the event of a state of disaster of sufficient severity to
prevent the conduct and management of the affairs and business of the Company by
its directors and officers as contemplated by these By-Laws any two available
members of the Executive Committee as constituted immediately prior to such
disaster shall constitute a quorum of that Committee for the full conduct and
management of the affairs and business of the Company in accordance with the
provisions of Article III of these By-Laws; and if less than three members of
the Trust Committee is constituted immediately prior to such disaster shall be
available for the transaction of its business, such Executive Committee shall
also be empowered to exercise all of the powers reserved to the Trust Committee
under Article III Section 2 hereof. In the event of the unavailability, at such
time, of a minimum of two members of such Executive Committee, any three
available directors shall constitute the Executive Committee for the full
conduct and management of the affairs and business of the Company in accordance
with the foregoing provisions of this Section. This By-Law shall be subject to
implementation by Resolutions of the Board of Directors presently existing or
hereafter passed from time to time for that purpose, and any provisions of these
By-Laws (other than this Section) and any resolutions which are contrary to the
provisions of this Section or to the provisions of any such implementary
Resolutions shall be suspended during such a disaster period until it shall be
determined by any interim Executive Committee acting under this section that it
shall be to the advantage of the Company to resume the conduct and management of
its affairs and business under all of the other provisions of these By-Laws.
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Section 2. Trust Committee
(A) The Trust Committee shall be composed of not more than thirteen
members who shall be selected by the Board of Directors, a majority of whom
shall be members of the Board of Directors and who shall hold office during the
pleasure of the Board.
(B) The Trust Committee shall have general supervision over the Trust
Department and the investment of trust funds, in all matters, however, being
subject to the approval of the Board of Directors.
(C) The Trust Committee shall meet at the principal office of the
Company or elsewhere in its discretion at least once a month. A majority of its
members shall be necessary to constitute a quorum for the transaction of
business. Special meetings of the Trust Committee may be held at any time when a
quorum is present.
(D) Minutes of each meeting of the Trust Committee shall be kept and
promptly submitted to the Board of Directors.
(E) The Trust Committee shall have the power to appoint Committees
and/or designate officers or employees of the Company to whom supervision over
the investment of trust funds may be delegated when the Trust Committee is not
in session.
Section 3. Audit Committee
(A) The Audit Committee shall be composed of five members who shall be
selected by the Board of Directors from its own members, none of whom shall be
an officer of the Company, and shall hold office at the pleasure of the Board.
(B) The Audit Committee shall have general supervision over the Audit
Division in all matters however subject to the approval of the Board of
Directors; it shall consider all matters brought to its attention by the officer
in charge of the Audit Division, review all reports of examination of the
Company made by any governmental agency or such independent auditor employed for
that purpose, and make such recommendations to the Board of Directors with
respect thereto or with respect to any other matters pertaining to auditing the
Company as it shall deem desirable.
(C) The Audit Committee shall meet whenever and wherever the majority
of its members shall deem it to be proper for the transaction of its business,
and a majority of its Committee shall constitute a quorum.
Section 4. Compensation Committee
(A) The Compensation Committee shall be composed of not more than
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<PAGE>
five (5) members who shall be selected by the Board of Directors from its own
members who are not officers of the Company and who shall hold office during the
pleasure of the Board.
(B) The Compensation Committee shall in general advise upon all
matters of policy concerning the Company brought to its attention by the
management and from time to time review the management of the Company, major
organizational matters, including salaries and employee benefits and
specifically shall administer the Executive Incentive Compensation Plan.
(C) Meetings of the Compensation Committee may be called at any time
by the Chairman of the Compensation Committee, the Chairman of the Board of
Directors, or the President of the Company.
Section 5. Associate Directors
(A) Any person who has served as a director may be elected by the
Board of Directors as an associate director, to serve during the pleasure of the
Board.
(B) An associate director shall be entitled to attend all directors
meetings and participate in the discussion of all matters brought to the Board,
with the exception that he would have no right to vote. An associate director
will be eligible for appointment to Committees of the Company, with the
exception of the Executive Committee, Audit Committee and Compensation
Committee, which must be comprised solely of active directors.
Section 6. Absence or Disqualification of Any Member of a Committee
(A) In the absence or disqualification of any member of any Committee
created under Article III of the By-Laws of this Company, the member or members
thereof present at any meeting and not disqualified from voting, whether or not
he or they constitute a quorum, may unanimously appoint another member of the
Board of Directors to act at the meeting in the place of any such absence or
disqualified member.
ARTICLE IV
OFFICERS
Section 1. The Chairman of the Board of Directors shall preside at all
meetings of the Board and shall have such further authority and powers and shall
perform such duties as the Board of Directors may from time to time confer and
direct. He shall also exercise such powers and perform such duties as may from
time to time be agreed upon between himself and the President of the Company.
Section 2. The Vice Chairman of the Board of Directors shall preside at all
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<PAGE>
meetings of the Board of Directors at which the Chairman of the Board shall not
be present and shall have such further authority and powers and shall perform
such duties as the Board of Directors or the Chairman of the Board may from time
to time confer and direct.
Section 3. The President shall have the powers and duties pertaining to the
office of the President conferred or imposed upon him by statute or assigned to
him by the Board of Directors in the absence of the Chairman of the Board the
President shall have the powers and duties of the Chairman of the Board.
Section 4. The Chairman of the Board of Directors or the President as
designated by the Board of Directors, shall carry into effect all legal
directions of the Executive Committee and of the Board of Directors, and shall
at all times exercise general supervision over the interest, affairs and
operations of the Company and perform all duties incident to his office.
Section 5. There may be one or more Vice Presidents, however denominated by
the Board of Directors, who may at any time perform all the duties of the
Chairman of the Board of Directors and/or the President and such other powers
and duties as may from time to time be assigned to them by the Board of
Directors, the Executive Committee, the Chairman of the Board or the President
and by the officer in charge of the department or division to which they are
assigned.
Section 6. The Secretary shall attend to the giving of notice of meetings
of the stockholders and the Board of Directors, as well as the Committees
thereof, to the keeping of accurate minutes of all such meetings and to
recording the same in the minute books of the Company. In addition to the other
notice requirements of these By-Laws and as may be practicable under the
circumstances, all such notices shall be in writing and mailed well in advance
of the scheduled date of any other meeting. He shall have custody of the
corporate seal and shall affix the same to any documents requiring such
corporate seal and to attest the same.
Section 7. The Treasurer shall have general supervision over all assets and
liabilities of the Company. He shall be custodian of and responsible for all
monies, funds and valuables of the Company and for the keeping of proper records
of the evidence of property or indebtedness and of all the transactions of the
Company. He shall have general supervision of the expenditures of the Company
and shall report to the Board of Directors at each regular meeting of the
condition of the Company, and perform such other duties as may be assigned to
him from time to time by the Board of Directors of the Executive Committee.
Section 8. There may be a Controller who shall exercise general supervision
over the internal operations of the Company, including accounting, and shall
render to the Board of Directors at appropriate times a report relating to the
general condition and internal operations of the Company.
6
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There may be one or more subordinate accounting or controller officers
however denominated, who may perform the duties of the Controller and such
duties as may be prescribed by the Controller.
Section 9. The officer designated by the Board of Directors to be in charge
of the Audit Division of the Company with such title as the Board of Directors
shall prescribe, shall report to and be directly responsible only to the Board
of Directors.
There shall be an Auditor and there may be one or more Audit Officers,
however denominated, who may perform all the duties of the Auditor and such
duties as may be prescribed by the officer in charge of the Audit Division.
Section 10. There may be one or more officers, subordinate in rank to all
Vice Presidents with such functional titles as shall be determined from time to
time by the Board of Directors, who shall ex officio hold the office Assistant
Secretary of this Company and who may perform such duties as may be prescribed
by the officer in charge of the department or division to whom they are
assigned.
Section 11. The powers and duties of all other officers of the Company
shall be those usually pertaining to their respective offices, subject to the
direction of the Board of Directors, the Executive Committee, Chairman of the
Board of Directors or the President and the officer in charge of the department
or division to which they are assigned.
ARTICLE V
STOCK AND STOCK CERTIFICATES
Section 1. Shares of stock shall be transferrable on the books of the
Company and a transfer book shall be kept in which all transfers of stock shall
be recorded.
Section 2. Certificate of stock shall bear the signature of the President
or any Vice President, however denominated by the Board of Directors and
countersigned by the Secretary or Treasurer or an Assistant Secretary, and the
seal of the corporation shall be engraved thereon. Each certificate shall recite
that the stock represented thereby is transferrable only upon the books of the
Company by the holder thereof or his attorney, upon surrender of the certificate
properly endorsed. Any certificate of stock surrendered to the Company shall be
cancelled at the time of transfer, and before a new certificate or certificates
shall be issued in lieu thereof. Duplicate certificates of stock shall be issued
only upon giving such security as may be satisfactory to the Board of Directors
or the Executive Committee.
Section 3. The Board of Directors of the Company is authorized to fix in
advance a record date for the determination of the stockholders entitled to
notice of, and to vote at, any meeting of stockholders and any adjournment
thereof, or entitled to receive payment of
<PAGE>
any dividend, or to any allotment or rights, or to exercise any rights in
respect of any change, conversion or exchange of capital stock, or in connection
with obtaining the consent of stockholders for any purpose, which record date
shall not be more than 60 nor less than 10 days proceeding the date of any
meeting of stockholders or the date for the payment of any dividend, or the date
for the allotment of rights, or the date when any change or conversion or
exchange of capital stock shall go into effect, or a date in connection with
obtaining such consent.
ARTICLE VI
SEAL
Section 1. The corporate seal of the Company shall be in the following
form:
Between two concentric circles the words "Wilmington Trust Company"
within the inner circle the words "Wilmington, Delaware."
ARTICLE VII
FISCAL YEAR
Section 1. The fiscal year of the Company shall be the calendar year.
ARTICLE VIII
EXECUTION OF INSTRUMENTS OF THE COMPANY
Section 1. The Chairman of the Board, the President or any Vice President,
however denominated by the Board of Directors, shall have full power and
authority to enter into, make, sign, execute, acknowledge and/or deliver and the
Secretary or any Assistant Secretary shall have full power and authority to
attest and affix the corporate seal of the Company to any and all deeds,
conveyances, assignments, releases, contracts, agreements, bonds, notes,
mortgages and all other instruments incident to the business of this Company or
in acting as executor, administrator, guardian, trustee, agent or in any other
fiduciary or representative capacity by any and every method of appointment or
by whatever person, corporation, court officer or authority in the State of
Delaware, or elsewhere, without any specific authority, ratification, approval
or confirmation by the Board of Directors or the Executive Committee, and any
and all such instruments shall have the same force and validity as although
expressly authorized by the Board of Directors and/or the Executive Committee.
8
<PAGE>
ARTICLE IX
COMPENSATION OF DIRECTORS AND MEMBERS OF COMMITTEES
Section 1. Directors and associate directors of the Company, other than
salaried officers of the Company, shall be paid such reasonable honoraria or
fees for attending meetings of the Board of Directors as the Board of Directors
may from time to time determine. Directors and associate directors who serve as
members of committees, other than salaried employees of the Company, shall be
paid such reasonable honoraria or fees for services as members of committees as
the Board of Directors shall from time to time determine and directors and
associate directors may be employed by the Company for such special services as
the Board of Directors may from time to time determine and shall be paid for
such special services so performed reasonable compensation as may be determined
by the Board of Directors.
ARTICLE X
INDEMNIFICATION
Section 1. (A) The Corporation shall indemnify and hold harmless, to the
fullest extent permitted by applicable law as it presently exists or may
hereafter be amended, any person who was or is made or is threatened to be made
a party or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (a "proceeding") by reason of
the fact that he, or a person for whom he is the legal representative, is or was
a director, officer, employee or agent of the Corporation or is or was serving
at the request of the Corporation as a director, officer, employee, fiduciary or
agent of another corporation or of a partnership, joint venture, trust,
enterprise or non-profit entity, including service with respect to employee
benefit plans, against all liability and loss suffered and expenses reasonably
incurred by such person. The Corporation shall indemnify a person in connection
with a proceeding initiated by such person only if the proceeding was authorized
by the Board of Directors of the Corporation.
(B) The Corporation shall pay the expenses incurred in defending any
proceeding in advance of its final disposition, PROVIDED, HOWEVER, that the
payment of expenses incurred by a Director officer in his capacity as a Director
or officer in advance of the final disposition of the proceeding shall be made
only upon receipt of an undertaking by the Director or officer to repay all
amounts advanced if it should be ultimately determined that the Director or
officer is not entitled to be indemnified under this Article or otherwise.
(C) If a claim for indemnification or payment of expenses, under this
Article X is not paid in full within ninety days after a written claim therefor
has been received by the Corporation the claimant may file suit to recover the
unpaid amount of such claim and, if successful in whole or in part, shall be
entitled to be paid the expense of
9
<PAGE>
prosecuting such claim. In any such action the Corporation shall have the burden
of proving that the claimant was not entitled to the requested indemnification
of payment of expenses under applicable law.
(D) The rights conferred on any person by this Article X shall not be
exclusive of any other rights which such person may have or hereafter acquire
under any statute, provision of the Charter or Act of Incorporation, these
By-Laws, agreement, vote of stockholders or disinterested Directors or
otherwise.
(E) Any repeal or modification of the foregoing provisions of this
Article X shall not adversely affect any right or protection hereunder of any
person in respect of any act or omission occurring prior to the time of such
repeal or modification.
ARTICLE XI
AMENDMENTS TO THE BY-LAWS
Section 1. These By-Laws may be altered, amended or repealed, in whole or
in part, and any new By-Law or By-Laws adopted at any regular or special meeting
of the Board of Directors by a vote of the majority of all the members of the
Board of Directors then in office.
10
<PAGE>
EXHIBIT C
Section 321(b) Consent
Pursuant to Section 321(b) of the Trust Indenture Act of 1939, as amended,
Wilmington Trust Company hereby consents that reports of examinations by
Federal, State, Territorial or District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon requests therefor.
WILMINGTON TRUST COMPANY
Dated: November 20, 1996 By: /s/ Norma P. Closs
-------------------
Name: Norma P. Closs
Title: Vice President
<PAGE>
EXHIBIT D
NOTICE
This form is intended to assist state nonmember banks and savings
banks with state publication requirements. It has not been approved by
any state banking authorities. Refer to your appropriate state banking
authorities for your state publication requirements.
R E P O R T O F C O N D I T I O N
Consolidating domestic subsidiaries of the
WILMINGTON TRUST COMPANY of WILMINGTON
- ------------------------------------------- ------------
Name of Bank City
in the State of DELAWARE, at the close of business on September 30, 1996.
ASSETS
Thousands of dollars
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coins ............ 198,288
Interest-bearing balances ...................................... 0
Held-to-maturity securities ........................................ 489,428
Available-for-sale securities ...................................... 783,718
Federal funds sold ................................................. 19,000
Securities purchased under agreements to resell .................... 48,500
Loans and lease financing receivables:
Loans and leases, net of unearned income .... 3,620,289
LESS: Allowance for loan and lease losses ... 49,721
LESS: Allocated transfer risk reserve ....... 0
Loans and leases, net of unearned income, allowance, and reserve 3,570,568
Assets held in trading accounts .................................... 0
Premises and fixed assets (including capitalized leases) ........... 83,675
Other real estate owned ............................................ 4,607
Investments in unconsolidated subsidiaries and associated companies 85
Customers' liability to this bank on acceptances outstanding ....... 0
Intangible assets .................................................. 4,131
Other assets ....................................................... 101,592
Total assets ....................................................... 5,303,592
CONTINUED ON NEXT PAGE
<PAGE>
LIABILITIES
Deposits:
In domestic offices ................................................ 3,457,641
Noninterest-bearing ......................... 740,731
Interest-bearing ............................ 2,716,910
Federal funds purchased ............................................ 135,889
Securities sold under agreements to repurchase ..................... 213,617
Demand notes issued to the U.S. Treasury ........................... 94,999
Trading liabilities ................................................ 0
Other borrowed money: .............................................. ///////
With original maturity of one year or less ..................... 844,000
With original maturity of more than one year ................... 28,000
Mortgage indebtedness and obligations under capitalized leases...... 0
Bank's liability on acceptances executed and outstanding ........... 0
Subordinated notes and debentures .................................. 0
Other liabilities .................................................. 103,818
Total liabilities .................................................. 4,877,964
Limited-life preferred stock and related surplus ................... 0
EQUITY CAPITAL
Perpetual preferred stock and related surplus ...................... 0
Common Stock ....................................................... 500
Surplus ............................................................ 62,119
Undivided profits and capital reserves ............................. 363,705
Net unrealized holding gains (losses) on available-for-sale securities (696)
Total equity capital ............................................... 425,628
Total liabilities, limited-life preferred stock, and equity capital. 5,303,592
2
<PAGE>
EXHIBIT 99.1
LETTER OF TRANSMITTAL
FOR
TENDER OF 11% SENIOR SUBORDINATED NOTES DUE 2006
IN EXCHANGE FOR
11% SERIES B SENIOR SUBORDINATED NOTES DUE 2006
OUTSOURCING SOLUTIONS INC.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON ___________________, 1997, UNLESS EXTENDED (THE "EXPIRATION
DATE").
OLD NOTES TENDERED IN THE EXCHANGE OFFER MAY BE WITHDRAWN AT ANY
TIME PRIOR TO THE EXPIRATION DATE.
DELIVER TO THE EXCHANGE AGENT:
WILMINGTON TRUST COMPANY
By Registered or
Certified Mail or by
Overnight Courier: By Hand:
Wilmington Trust Company Wilmington Trust Company
Attn: _______________ Attn: _______________
Corporate Trust & c/o Harris Trust Co.
Administration Window of New York as Agent
1100 North Market Street 75 Water Street
Rodney Square North New York, NY 10004
Wilmington, DE 19890-0001
By Facsimile:
Wilmington Trust Company
----------------------------
Confirm by Telephone:
(212) ________
--------------
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THE ONE LISTED
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS ACCOMPANYING
<PAGE>
EXHIBIT 99.1
Page 2
THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF
TRANSMITTAL IS COMPLETED.
The undersigned hereby acknowledges receipt and review of the Prospectus
dated ____________________, 1996 (the "Prospectus") of Outsourcing Solutions
Inc. (the "Company") and this Letter of Transmittal (the "Letter of
Transmittal"), which together describe the Company's offer (the "Exchange
Offer") to exchange its 11% Series B Senior Subordinated Notes due November 1,
2006 (the "New Notes"), which have been registered under the Securities Act of
1933, as amended (the "Securities Act"), pursuant to a Registration Statement of
which the Prospectus is a part, for a like principal amount of its issued and
outstanding 11% Senior Subordinated Notes due November 1, 2006 (the "Old
Notes"). Capitalized terms used but not defined herein have the respective
meaning given to them in the Prospectus.
The Company reserves the right, at any time or from time to time, to extend
the Exchange Offer at its discretion, in which event the term "Expiration Date"
shall mean the latest time and date in which the Exchange Offer is extended. The
Company shall notify the holders of the Old Notes of any extension by oral or
written notice prior to 9:00 A.M., New York City time, on the next business day
after the previously scheduled Expiration Date.
This Letter of Transmittal is to be used by a Holder of Old Notes either if
original Old Notes are to be forwarded herewith or if delivery of Old Notes, if
available, is to be made by book-entry transfer to the account maintained by the
Exchange Agent at The Depository Trust Company (the "Book-Entry Transfer
Facility") pursuant to the procedures set forth in the Prospectus under the
caption "The Exchange Offer-Book-Entry Transfer." Holders of Old Notes whose Old
Notes are not immediately available, or who are unable to deliver their Old
Notes and all other documents required by this Letter of Transmittal to the
Exchange Agent on or prior to the Expiration Date, or who are unable to complete
the procedure for book-entry transfer on a timely basis, must tender their Old
Notes according to the guaranteed delivery procedures set forth in the
Prospectus under the caption "The Exchange Offer- Guaranteed Delivery
Procedures." See Instruction 1. Delivery of documents to the Book-Entry Transfer
Facility does not constitute delivery to the Exchange Agent.
<PAGE>
EXHIBIT 99.1
Page 3
The term "Holder" with respect to the Exchange Offer means any person in
whose name Old Notes are registered on the books of the Company or any other
person who has obtained a properly completed bond power from the registered
Holder. The undersigned has completed, executed and delivered this Letter of
Transmittal to indicate the action the undersigned desires to take with respect
to the Exchange Offer. Holders who wish to tender their Old Notes must complete
this Letter of Transmittal in its entirety.
The undersigned has checked the appropriate boxes below and signed this
Letter of Transmittal to indicate the action the undersigned desires to take
with respect to the Exchange Offer.
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE PROSPECTUS CAREFULLY
BEFORE CHECKING ANY BOX BELOW.
THE INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED.
QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE PROSPECTUS
AND THIS LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE AGENT.
List below the Old Notes to which this Letter of Transmittal relates. If
the space below is inadequate, list the registered numbers and principal amounts
on a separate signed schedule and affix the list to this Letter of Transmittal.
<PAGE>
EXHIBIT 99.1
Page 4
================================================================================
DESCRIPTION OF OLD NOTES TENDERED
- --------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) AGGREGATE
OF REGISTERED HOLDER(S), PRINCIPAL
EXACTLY AS NAME(S) APPEAR(S) AMOUNT PRINCIPAL
ON OLD NOTES REGISTERED REPRESENTED AMOUNT
(PLEASE FILL IN, IF BLANK) NUMBERS* BY NOTE(S) TENDERED**
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL
- --------------------------------------------------------------------------------
* Need not be completed by book-entry Holders.
** Unless otherwise indicated, any tendering Holder of Old Notes will be
deemed to have tendered the entire aggregate principal amount represented
by such Old Notes. All tenders must be in integral multiples of $1,000.
================================================================================
|_| CHECK HERE IF TENDERED OLD NOTES ARE ENCLOSED HEREWITH.
|_| CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY
TRANSFER FACILITY AND COMPLETE THE FOLLOWING (FOR USE BY ELIGIBLE
INSTITUTIONS ONLY):
Name of Tendering Institution:__________________________________________________
Account Number:_________________________________________________________________
Transaction Code Number:________________________________________________________
|_| CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE
OF GUARANTEED DELIVERY ENCLOSED HEREWITH AND COMPLETE THE FOLLOWING (FOR
USE BY ELIGIBLE INSTITUTIONS ONLY):
Name(s) of Registered Holder(s) of Old Notes:
________________________________________________________________________________
Date of Execution of Notice of Guaranteed Delivery:_____________________________
<PAGE>
EXHIBIT 99.1
Page 5
Window Ticket Number (if available):____________________________________________
Name of Eligible Institution that Guaranteed Delivery:
- --------------------------------------------------------------------------------
Account Number (if delivered by book-entry transfer):
- --------------------------------------------------------------------------------
|_| CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name:___________________________________________________________________________
Address:________________________________________________________________________
If the undersigned is not a broker-dealer, the undersigned represents that
it is not engaged in, and does not intend to engage in, a distribution of New
Notes. If the undersigned is a broker-dealer that will receive New Notes for its
own account in exchange for Old Notes, it acknowledges that the Old Notes were
acquired as a result of market-making activities or other trading activities and
that it will deliver a prospectus in connection with any resale of such New
Notes; however, by so acknowledging and by delivering a prospectus, the
undersigned will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Subject to the terms and conditions of the Exchange Offer, the undersigned
hereby tenders to the Company for exchange the principal amount of Old Notes
indicated above. Subject to and effective upon the acceptance for exchange of
the principal amount of Old Notes tendered in accordance with this Letter of
Transmittal, the undersigned hereby exchanges, assigns and transfers to the
Company all right, title and interest in and to the Old Notes tendered for
exchange hereby. The undersigned hereby irrevocably constitutes and appoints the
Exchange Agent, the agent and attorney-in-fact of the undersigned (with full
knowledge that the Exchange Agent also acts as the agent of the
<PAGE>
EXHIBIT 99.1
Page 6
Company in connection with the Exchange Offer) with respect to the tendered Old
Notes with full power of substitution to (i) deliver such Old Notes, or transfer
ownership of such Old Notes on the account books maintained by the Book- Entry
Transfer Facility, to the Company and deliver all accompanying evidences of
transfer and authenticity, and (ii) present such Old Notes for transfer on the
books of the Company and receive all benefits and otherwise exercise all rights
of beneficial ownership of such Old Notes, all in accordance with the terms of
the Exchange Offer. The power of attorney granted in this paragraph shall be
deemed to be irrevocable and coupled with an interest.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, exchange, assign and transfer the Old Notes
tendered hereby and to acquire the New Notes issuable upon the exchange of such
tendered Old Notes, and that the Company will acquire good and unencumbered
title thereto, free and clear of all liens, restrictions, charges and
encumbrances and not subject to any adverse claim, when the same are accepted
for exchange by the Company.
The undersigned acknowledge(s) that this Exchange Offer is being made in
reliance upon interpretations contained in no-action letters issued to third
parties by the staff of the Securities and Exchange Commission (the
"Commission") that the New Notes issued in exchange for the Old Notes pursuant
to the Exchange Offer may be offered for resale, resold and otherwise
transferred by Holders thereof (other than any such Holder that is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act), without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such New Notes are acquired in
the ordinary course of such Holders' business and such Holders are not engaging
in and do not intend to engage in a distribution of the New Notes and have no
arrangement or understanding with any person to participate in a distribution of
such New Notes. The undersigned hereby further represent(s) to the Company that
(i) any New Notes acquired in exchange for Old Notes tendered hereby are being
acquired in the ordinary course of business of the person receiving such New
Notes, whether or not the undersigned, (ii) neither the undersigned nor any such
other person is engaging in or intends to engage in a distribution of the New
Notes, (iii) neither the undersigned nor any such other person has an
<PAGE>
EXHIBIT 99.1
Page 7
arrangement or understanding with any person to participate in the distribution
of such New Notes, and (iv) neither the Holder nor any such other person is an
"affiliate," as defined in Rule 405 under the Securities Act, of the Company or,
if it is an affiliate, it will comply with the registration and prospectus
delivery requirements of the Securities Act to the extent applicable.
If the undersigned or the person receiving the New Notes is a broker-dealer
that is receiving New Notes for its own account in exchange for Old Notes that
were acquired as a result of market-making activities or other trading
activities, the undersigned acknowledges that it or such other person will
deliver a prospectus in connection with any resale of such New Notes; however,
by so acknowledging and by delivering a prospectus, the undersigned will not be
deemed to admit that the undersigned or such other person is an "underwriter"
within the meaning of the Securities Act. The undersigned acknowledges that if
the undersigned is participating in the Exchange Offer for the purpose of
distributing the New Notes (i) the undersigned cannot rely on the position of
the staff of the Commission in certain no-action letters and, in the absence of
an exemption therefrom, must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with a secondary
resale transaction of the New Notes, in which case the registration statement
must contain the selling security holder information required by Item 507 or
Item 508, as applicable, of Regulation S-K of the Commission, and (ii) failure
to comply with such requirements in such instance could result in the
undersigned incurring liability under the Securities Act for which the
undersigned is not indemnified by the Company.
If the undersigned or the person receiving the New Notes is an "affiliate"
(as defined in Rule 405 under the Securities Act), the undersigned represents to
the Company that the undersigned understands and acknowledges that the New Notes
may not be offered for resale, resold or otherwise transferred by the
undersigned or such other person without registration under the Securities Act
or an exemption therefrom.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Exchange Agent or the Company to be necessary or
desirable to
<PAGE>
EXHIBIT 99.1
Page 8
complete the exchange, assignment and transfer of the Old Notes tendered hereby,
including the transfer of such Old Notes on the account books maintained by the
Book-Entry Transfer Facility.
For purposes of the Exchange Offer, the Company shall be deemed to have
accepted for exchange validly tendered Old Notes when, as and if the Company
gives oral or written notice thereof to the Exchange Agent. Any tendered Old
Notes that are not accepted for exchange pursuant to the Exchange Offer for any
reason will be returned, without expense, to the undersigned at the address
shown below or at a different address as may be indicated herein under "Special
Delivery Instructions" as promptly as practicable after the Expiration Date.
All authority conferred or agreed to be conferred by this Letter of
Transmittal shall survive the death, incapacity or dissolution of the
undersigned, and every obligation of the undersigned under this Letter of
Transmittal shall be binding upon the undersigned's heirs, personal
representatives, successors and assigns.
The undersigned acknowledges that the Company's acceptance of properly
tendered Old Notes pursuant to the procedures described under the caption "The
Exchange Offer -- Procedures for Tendering" in the Prospectus and in the
instructions hereto will constitute a binding agreement between the undersigned
and the Company upon the terms and subject to the conditions of the Exchange
Offer.
Unless otherwise indicated under "Special Issuance Instructions," please
issue the New Notes issued in exchange for the Old Notes accepted for exchange
and return any Old Notes not tendered or not exchanged, in the name(s) of the
undersigned. Similarly, unless otherwise indicated under "Special Delivery
Instructions," please mail or deliver the New Notes issued in exchange for the
Old Notes accepted for exchange and any Old Notes not tendered or not exchanged
(and accompanying documents, as appropriate) to the undersigned at the address
shown below the undersigned's signature(s). In the event that both "Special
Issuance Instructions" and "Special Delivery Instructions" are completed, please
issue the New Notes issued in exchange for the Old Notes accepted for exchange
in the name(s) of, and return any Old Notes not tendered or not exchanged to,
the person(s) so indicated. The
<PAGE>
EXHIBIT 99.1
Page 9
undersigned recognizes that the Company has no obligation pursuant to the
"Special Issuance Instructions" and "Special Delivery Instructions" to transfer
any Old Notes from the name of the registered holder(s) thereof if the Company
does not accept for exchange any of the Old Notes so tendered for exchange.
<PAGE>
EXHIBIT 99.1
Page 10
SPECIAL ISSUANCE INSTRUCTIONS (SEE INSTRUCTIONS 5 AND 6)
To be completed ONLY (i) if Old Notes in a principal amount not tendered,
or New Notes issued in exchange for Old Notes accepted for exchange, are to be
issued in the name of someone other than the undersigned, or (ii) if Old Notes
tendered by book-entry transfer which are not exchanged are to be returned by
credit to an account maintained at the Book-Entry Transfer Facility. Issue New
Notes and/or Old Notes to:
Name(s):________________________________________________________________________
(Please Type or Print)
Address:
________________________________________________________________________________
________________________________________________________________________________
(Include Zip Code)
________________________________________________________________________________
(Tax Identification or Social Security No.)
(Complete Substitute Form W-9)
|_| Credit unexchanged Old Notes delivered by book-entry transfer to the
Book-Entry Transfer Facility set forth below:
________________________________________________________________________________
(Book-Entry Transfer Facility
Account Number, if applicable)
PLEASE SIGN HERE WHETHER OR NOT
OLD NOTES ARE BEING PHYSICALLY TENDERED HEREBY
(Complete Accompanying Substitute Form W-9 on Reverse Side)
__________________________________________________ ____________________________
Date
__________________________________________________ ____________________________
Date
Area Code and Telephone Number:_________________________________________________
<PAGE>
EXHIBIT 99.1
Page 11
The above lines must be signed by the registered Holder(s) of Old Notes as
name(s) appear(s) on the Old Notes or on a security position listing, or by
person(s) authorized to become registered Holder(s) by a properly completed bond
power from the registered Holder(s), a copy of which must be transmitted with
this Letter of Transmittal. If Old Notes to which this Letter of Transmittal
relate are held of record by two or more joint Holders, then all such Holders
must sign this Letter of Transmittal. If signature is by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation or other
person acting in a fiduciary or representative capacity, then such person must
(i) set forth his or her full title below and (ii) unless waived by the Company,
submit evidence satisfactory to the Company of such person's authority so to
act. See Instruction 5 regarding the completion of this Letter of Transmittal,
printed below.
Name(s):________________________________________________________________________
(Please Type or Print)
Capacity:_______________________________________________________________________
Address:
________________________________________________________________________________
________________________________________________________________________________
(Include Zip Code)
<PAGE>
EXHIBIT 99.1
Page 12
MEDALLION SIGNATURE GUARANTEE
(If Required by Instruction 5)
Certain signatures must be Guaranteed by an Eligible Institution.
Signature(s) Guaranteed by an Eligible Institution:
________________________________________________________________________________
(Authorized Signature)
________________________________________________________________________________
(Title)
________________________________________________________________________________
(Name of Firm)
________________________________________________________________________________
(Address, Include Zip Code)
________________________________________________________________________________
(Area Code and Telephone Number)
Dated:____________________, 19__
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 5 AND 6)
To be completed ONLY if Old Notes in a principal amount not tendered, or
New Notes issued in exchange for Old Notes accepted for exchange, are to be
mailed or delivered to someone other than the undersigned, or to the undersigned
at an address other than that shown below the undersigned's signature.
Mail or deliver New Notes and/or Old Notes to:
Name:
________________________________________________________________________________
(Please Type or Print)
Address:
________________________________________________________________________________
________________________________________________________________________________
(Include Zip Code)
________________________________________________________________________________
(Tax Identification or Social Security No.)
<PAGE>
EXHIBIT 99.1
Page 13
INSTRUCTIONS
FORMING PART OF THE TERMS AND
CONDITIONS OF THE EXCHANGE OFFER
1. Delivery of this Letter of Transmittal and Old Notes or Book-Entry
Confirmations. All physically delivered Old Notes or any confirmation of a
book-entry transfer to the Exchange Agent's account at the Book-Entry Transfer
Facility of Old Notes tendered by book-entry transfer (a "Book-Entry
Confirmation"), as well as a properly completed and duly executed copy of this
Letter of Transmittal or facsimile hereof, and any other documents required by
this Letter of Transmittal, must be received by the Exchange Agent at its
address set forth herein prior to 5:00 p.m., New York City time, on the
Expiration Date. The method of delivery of the tendered Old Notes, this Letter
of Transmittal and all other required documents to the Exchange Agent is at the
election and risk of the Holder and, except as otherwise provided below, the
delivery will be deemed made only when actually received or confirmed by the
Exchange Agent. Instead of delivery by mail, it is recommended that the Holder
use an overnight or hand delivery service. In all cases, sufficient time should
be allowed to assure delivery to the Exchange Agent before the Expiration Date.
No Letter of Transmittal or Old Notes should be sent to the Company.
2. Guaranteed Delivery Procedures. Holders who wish to tender their Old
Notes and (a) whose Old Notes are not immediately available, or (b) who cannot
deliver their Old Notes, this Letter of Transmittal or any other documents
required hereby to the Exchange Agent prior to the Expiration Date or (c) who
are unable to complete the procedure for book-entry transfer on a timely basis,
must tender their Old Notes according to the guaranteed delivery procedures set
forth in the Prospectus. Pursuant to such procedures: (i) such tender must be
made by or through a firm which is a member of a registered national securities
exchange or of the National Association of Securities Dealers Inc. or a
commercial bank or a trust company having an office or correspondent in the
United States (an "Eligible Institution"); (ii) prior to the Expiration Date,
the Exchange Agent must have received from the Eligible Institution a properly
completed and duly executed Notice of Guaranteed Delivery (by facsimile
transmission, mail or hand delivery) setting forth the name and address of the
<PAGE>
EXHIBIT 99.1
Page 14
Holder of the Old Notes, the registration number(s) of such Old Notes and the
principal amount of Old Notes tendered, stating that the tender is being made
thereby and guaranteeing that, within three (3) New York Stock Exchange, Inc.
("NYSE") trading days after the Expiration Date, this Letter of Transmittal (or
facsimile hereof) together with the Old Notes (or a Book-Entry Confirmation) in
proper form for transfer, must be received by the Exchange Agent within three
(3) NYSE trading days after the Expiration Date; and (iii) the certificates for
all physically tendered shares of Old Notes, in proper form for transfer, or
Book-Entry Confirmation, as the case may be, and all other documents required by
this Letter are received by the Exchange Agent within three (3) NYSE trading
days after the date of execution of the Notice of Guaranteed Delivery.
Any Holder of Old Notes who wishes to tender Old Notes pursuant to the
guaranteed delivery procedures described above must ensure that the Exchange
Agent receives the Notice of Guaranteed Delivery prior to 5:00 p.m., New York
City time, on the Expiration Date. Upon request of the Exchange Agent, a Notice
of Guaranteed Delivery will be sent to Holders who wish to tender their Old
Notes according to the guaranteed delivery procedures set forth above.
See "The Exchange Offer -- Guaranteed Delivery Procedures" section of the
Prospectus.
3. Tender by Holder. Only a Holder of Old Notes may tender such Old Notes
in the Exchange Offer. Any beneficial Holder of Old Notes who is not the
registered Holder and who wishes to tender should arrange with the registered
Holder to execute and deliver this Letter of Transmittal on his behalf or must,
prior to completing and executing this Letter of Transmittal and delivering his
Old Notes, either make appropriate arrangements to register ownership of the Old
Notes in such Holder's name or obtain a properly completed bond power from the
registered Holder.
4. Partial Tenders. Tenders of Old Notes will be accepted only in integral
multiples of $1,000. If less than the entire principal amount of any Old Notes
is tendered, the tendering Holder should fill in the principal amount tendered
in the third column of the box entitled "Description of Old Notes" above. The
entire principal
<PAGE>
EXHIBIT 99.1
Page 15
amount of Old Notes delivered to the Exchange Agent will be deemed to have been
tendered unless otherwise indicated. If the entire principal amount of all Old
Notes is not tendered, then Old Notes for the principal amount of Old Notes not
tendered and New Notes issued in exchange for any Old Notes accepted will be
sent to the Holder at his or her registered address, unless a different address
is provided in the appropriate box on this Letter of Transmittal, promptly after
the Old Notes are accepted for exchange.
5. Signatures on this Letter of Transmittal; Bond Powers and Endorsements;
Medallion Guarantee of Signatures. If this Letter of Transmittal (or facsimile
hereof) is signed by the record Holder(s) of the Old Notes tendered hereby, the
signature must correspond with the name(s) as written on the face of the Old
Notes without alteration, enlargement or any change whatsoever. If this Letter
of Transmittal is signed by a participant in the Book-Entry Transfer Facility,
the signature must correspond with the name as it appears on the security
position listing as the Holder of the Old Notes.
If this Letter of Transmittal (or facsimile hereof) is signed by the
registered Holder or Holders of Old Notes listed and tendered hereby and the New
Notes issued in exchange therefor is to be issued (or any untendered principal
amount of Old Notes is to be reissued) to the registered Holder, the said Holder
need not and should not endorse any tendered Old Notes, nor provide a separate
bond power. In any other case, such Holder must either properly endorse the Old
Notes tendered or transmit a properly completed separate bond power with this
Letter of Transmittal, with the signatures on the endorsement or bond power
guaranteed by an Eligible Institution.
If this Letter of Transmittal (or facsimile hereof) is signed by a person
other than the registered Holder or Holders of any Old Notes listed, such Old
Notes must be endorsed or accompanied by appropriate bond powers, in each case
signed as the name of the registered Holder or Holders appears on the Old Notes.
If this Letter of Transmittal (or facsimile hereof) or any Old Notes of
bond powers are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, or officers of corporations or others acting in a fiduciary
or representative capacity, such persons should so indicate
<PAGE>
EXHIBIT 99.1
Page 16
when signing, and, unless waived by the Company, evidence satisfactory to the
Company of their authority so to act must be submitted with this Letter of
Transmittal.
Endorsements on Old Notes or signatures on bond powers required by this
Instruction 5 must be guaranteed by an Eligible Institution.
No signature guarantee is required if (i) this Letter of Transmittal is
signed by the registered holder(s) of the Old Notes tendered herewith (or by a
participant in the Book-Entry Transfer Facility whose name appears on a security
position listing as the owner of the tendered Old Notes) and the issuance of New
Notes (and any Old Notes not tendered or not accepted) are to be issued directly
to such registered holder(s) (or, if signed by a participant in the Book-Entry
Transfer Facility, any New Notes or Old Notes not tendered or not accepted are
to be deposited to such participant's account at such Book-Entry Transfer
Facility) and neither the box entitled "Special Delivery Instructions" nor the
box entitled "Special Registration Instructions" has been completed, or (ii)
such Old Notes are tendered for the account of an Eligible Institution. In all
other cases, all signatures on this Letter of Transmittal must be guaranteed by
an Eligible Institution.
6. Special Registration and Delivery Instructions. Tendering holders should
indicate, in the applicable box or boxes, the name and address (or account at
the Book-Entry Transfer Facility) to which New Notes or substitute Old Notes for
principal amounts not tendered or not accepted for exchange are to be issued or
sent, if different from the name and address of the person signing this Letter
of Transmittal. In the case of issuance in a different name, the taxpayer
identification or social security number of the person named must also be
indicated.
7. Transfer Taxes. The Company will pay all transfer taxes, if any,
applicable to the exchange of Old Notes pursuant to the Exchange Offer. If,
however, New Notes or Old Notes for principal amounts not tendered or accepted
for exchange are to be delivered to, or are to be registered or issued in the
name of, any person other than the registered Holder of the Old Notes tendered
hereby, or if tendered Old Notes are registered in the name of any person other
than the person signing this Letter of Transmittal, or if a transfer tax is
imposed for any reason
<PAGE>
EXHIBIT 99.1
Page 17
other than the exchange of Old Notes pursuant to the Exchange Offer, then the
amount of any such transfer taxes (whether imposed on the registered Holder or
any other persons) will be payable by the tendering Holder. If satisfactory
evidence of payment of such taxes or exemption therefrom is not submitted with
this Letter of Transmittal, the amount of such transfer taxes will be billed
directly to such tendering Holder.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 7, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE OLD NOTES LISTED IN THIS LETTER OF
TRANSMITTAL.
8. Tax Identification Number. Federal income tax law required that a holder
of any Old Notes which are accepted for exchange must provide the Company (as
payor) with its correct taxpayer identification number ("TIN"), which, in the
case of a holder who is an individual in his or her social security number. If
the Company is not provided with the correct TIN, the Holder may be subject to a
$50 penalty imposed by Internal Revenue Service. (If withholding results in an
over-payment of taxes, a refund may be obtained.) Certain holders (including,
among others, all corporations and certain foreign individuals) are not subject
to these backup withholding and reporting requirements. See the enclosed
"Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9 for additional instructions.
To prevent backup withholding, each tendering holder must provide such
holder's correct TIN by completing the Substitute Form W-9 set forth herein,
certifying that the TIN provided is correct (or that such holder is awaiting a
TIN), and that (i) the holder has not been notified by the Internal Revenue
Service that such holder is subject to backup withholding as a result of failure
to report all interest or dividends or (ii) the Internal Revenue Service has
notified the holder that such holder is no longer subject to backup withholding.
If the Old Notes are registered in more than one name or are not in the name of
the actual owner, see the enclosed "Guidelines for Certification of Taxpayer
Identification Number of Substitute Form W-9 for information on which TIN to
report.
The Company reserves the right in its sole discretion to take whatever
steps are necessary to comply with the Company's obligation regarding backup
withholding.
<PAGE>
EXHIBIT 99.1
Page 18
9. Validity of Tenders. All questions as to the validity, form, eligibility
(including time of receipt), and acceptance of tendered Old Notes will be
determined by the Company, in its sole discretion, which determination will be
final and binding. The Company reserves the right to reject any and all Old
Notes not validly tendered or any Old Notes, the Company's acceptance of which
would, in the opinion of the Company or its counsel, be unlawful. The Company
also reserves the right to waive any conditions of the Exchange Offer or defects
or irregularities in tenders of Old Notes as to any ineligibility of any holder
who seeks to tender Old Notes in the Exchange Offer. The interpretation of the
terms and conditions of the Exchange Offer (includes this Letter of Transmittal
and the instructions hereto) by the Company shall be final and binding on all
parties. Unless waived, any defects or irregularities in connection with tenders
of Old Notes must be cured within such time as the Company shall determine. The
Company will use reasonable efforts to give notification of defects or
irregularities with respect to tenders of Old Notes, but shall not incur any
liability for failure to give such notification.
10. Waiver of Conditions. The Company reserves the absolute right to waive,
in whole or part, any of the conditions to the Exchange Offer set forth in the
Prospectus.
11. No Conditional Tender. No alternative, conditional, irregular or
contingent tender of Old Notes on transmittal of this Letter of Transmittal will
be accepted.
12. Mutilated, Lost, Stolen or Destroyed Old Notes. Any Holder whose Old
Notes have been mutilated, lost, stolen or destroyed should contact the Exchange
Agent at the address indicated above for further instructions.
13. Requests for Assistance or Additional Copies. Requests for assistance
or for additional copies of the Prospectus or this Letter of Transmittal may be
directed to the Exchange Agent at the address or telephone number set forth on
the cover page of this Letter of Transmittal. Holders may also contact their
broker, dealer, commercial bank, trust company or other nominee for assistance
concerning the Exchange Offer.
<PAGE>
EXHIBIT 99.1
Page 19
14. Acceptance of Tendered Old Notes and Issuance of New Notes; Return of
Old Notes. Subject to the terms and conditions of the Exchange Offer, the
Company will accept for exchange all validly tendered Old Notes as soon as
practicable after the Exchange Date and will issue New Notes therefor as soon as
practicable thereafter. For purposes of the Exchange Offer, the Company shall be
deemed to have accepted tendered Old Notes when, as and if the Company has given
written and oral notice thereof to the Exchange Agent. If any tendered Old Notes
are not exchanged pursuant to the Exchange Offer for any reason, such
unexchanged Old Notes will be returned, without expense, to the undersigned at
the address shown above (or credited to the undersigned's account at the
Book-Entry Transfer Facility designated above) or at a different address as may
be indicated under the box entitled "Special Delivery Instructions."
15. Withdrawal. Tenders may be withdrawn only pursuant to the limited
withdrawal rights set forth in the Prospectus under the caption "The Exchange
Offer -- Withdrawal of Tenders."
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A MANUALLY SIGNED FACSIMILE HEREOF
(TOGETHER WITH THE OLD NOTES) WHICH MUST BE DELIVERED BY BOOK-ENTRY TRANSFER OR
IN ORIGINAL HARD COPY FROM) OR THE NOTICE OF GUARANTEED DELIVERY MUST BE
RECEIVED BY THE EXCHANGE AGENT PRIOR TO THE EXPIRATION TIME.
<PAGE>
EXHIBIT 99.1
Page 20
(TO BE COMPLETED BY ALL TENDERING HOLDERS (SEE INSTRUCTION 5))
PAYER'S NAME: NATIONAL FIBERSTOK CORPORATION
================================================================================
SUBSTITUTE PART I--Taxpayer Social
FORM W-9 Identification No.--For Security
DEPARTMENT OF THE TREASURY all accounts, enter your Number
INTERNAL REVENUE SERVICE taxpayer identification _________
number in the appropriate
box. For most individuals
and sole proprietors, this OR
is your social security
number. For other Employer
entities, it is your Identifi-
Employer Identification cation
Number. If you do not Number
have a number, see How to
Obtain a TIN in the _________
enclosed Guidelines.
Note: If the account is
in more than one name, see
Employer Identification
Number the chart on page 2
of the enclosed Guidelines
to determine what number
to enter.
- --------------------------------------------------------------------------------
Payer's Request for Part II--For Payees Exempt From Backup
Taxpayer Identification Withholding (see enclosed Guidelines)
Number
================================================================================
CERTIFICATION--Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification Number
(or I am waiting for a number to be issued to me), and either (a) I have
mailed or delivered an application to receive a taxpayer identification
number to the appropriate Internal Revenue Service Center or Social
Security Administration Office or (b) I intend to mail or deliver an
application in the near future. I understand that if I do not provide a
taxpayer identification number within sixty (60) days, 31% of all
reportable payments made to me thereafter will be withheld until I provide
a number;
(2) I am not subject to backup withholding either because (a) I am exempt from
backup withholding, or (b) I have not been notified by the Internal Revenue
Service ("IRS") that I am subject to backup withholding as a result of a
failure to report all interest or
<PAGE>
EXHIBIT 99.1
Page 21
dividends, or (c) the IRS has notified me that I am no longer subject to
backup withholding; and
(3) Any other information provided on this form is true, correct and complete.
________________________________________________________________________________
SIGNATURE_________________________________ Date____________________________
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU WITH RESPECT TO THE NEW NOTES. PLEASE
REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W- 9 FOR ADDITIONAL DETAILS.
<PAGE>
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
for
Tender of 11% Senior Subordinated Notes due 2006
in Exchange for
11% Series B Senior Subordinated Notes due 2006
OUTSOURCING SOLUTIONS INC.
This form or one substantially equivalent hereto must be used by a holder
to accept the Exchange Offer of Outsourcing Solutions Inc., a Delaware
corporation (the "Company"), who wishes to tender 11% Senior Subordinated Notes
due 2006 (the "Old Notes") to the Exchange Agent pursuant to the guaranteed
delivery procedures described in "The Exchange Offer -- Guaranteed Delivery
Procedures" of the Company's Prospectus, dated ____________, 1996 (the
"Prospectus") and in Instruction 2 to the related Letter of Transmittal. Any
holder who wishes to tender Old Notes pursuant to such guaranteed delivery
procedures must ensure that the Exchange Agent receives this Notice of
Guaranteed Delivery prior to the Expiration Date (as defined below) of the
Exchange Offer. Capitalized terms used but not defined herein have the meanings
ascribed to them in the Prospectus or the Letter of Transmittal.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
_______________, 1997, UNLESS EXTENDED (THE "EXPIRATION DATE"). OLD NOTES
TENDERED IN THE EXCHANGE OFFER MAY BE WITHDRAWN AT ANY TIME PRIOR TO THE
EXPIRATION DATE.
The Exchange Agent for the Exchange Offer is:
WILMINGTON TRUST COMPANY
By Registered or Certified
Mail or by Overnight Courier: By Hand:
Wilmington Trust Company Wilmington Trust Company
Attn:_____________ Attn:________________
Corporate Trust &
Administration Window c/o Harris Trust Company
1100 North Market Street of New York, as Agent
Rodney Square North 75 Water Street
Wilmington, DE 19890-0001 New York, NY 10004
<PAGE>
EXHIBIT 99.2
Page 2
By Facsimile:
------------------
Confirm by Telephone:
------------------
---------------------------------------------
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET
FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY.
THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE
SIGNATURES. IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE
GUARANTEED BY AN "ELIGIBLE INSTITUTION" UNDER THE INSTRUCTIONS THERETO, SUCH
SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE PROVIDED BOX ON THE
LETTER OF TRANSMITTAL FOR GUARANTEE OF SIGNATURES.
<PAGE>
EXHIBIT 99.2
Page 3
Ladies and Gentlemen:
The undersigned hereby tenders to the Company, upon the terms and subject
to the conditions set forth in the Prospectus and the related Letter of
Transmittal, receipt of which is hereby acknowledged, the principal amount of
Old Notes set forth below pursuant to the guaranteed delivery procedures set
forth in the Prospectus and in Instruction 2 of the Letter of Transmittal.
The undersigned hereby tenders the Old Notes listed below:
CERTIFICATE NUMBER(S) AGGREGATE AGGREGATE
(IF KNOWN) OF OLD NOTES OR PRINCIPAL PRINCIPAL
ACCOUNT NUMBER AT THE AMOUNT AMOUNT
BOOK-ENTRY FACILITY REPRESENTED TENDERED
-------------------------- ----------- ---------
PLEASE SIGN AND COMPLETE
Signatures of Registered
Holder(s) or Authorized
Signatory:
______________________________ Date:_________________________
______________________________ Address:
______________________________
Name(s) of Registered
Holder(s): ______________________________
______________________________ Area Code and Telephone No.:
______________________________ ______________________________
This Notice of Guaranteed Delivery must be signed by the Holder(s) exactly
as their name(s) appear on certificates for Old Notes or on a security position
listing as the owner of Old Notes, or by person(s) authorized to become
Holder(s) by endorsements and documents transmitted with this Notice of
Guaranteed Delivery. If signature is by a trustee, executor,
<PAGE>
EXHIBIT 99.2
Page 4
administrator, guardian, attorney-in-fact, officer or other person acting in a
fiduciary or representative capacity, such person must provide the following
information.
PLEASE PRINT NAME(S) AND ADDRESS(ES)
Names(s):
- --------------------------------------------
- --------------------------------------------
- --------------------------------------------
Capacity:
- --------------------------------------------
Address(es):
- --------------------------------------------
- --------------------------------------------
<PAGE>
EXHIBIT 99.2
Page 5
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm which is a member of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
or is a commercial bank or trust company having an office or correspondent in
the United States, or is otherwise an "eligible guarantor institution" within
the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934,
guarantees deposit with the Exchange Agent of the Letter of Transmittal (or
facsimile thereof), together with the Old Notes tendered hereby in proper form
for transfer (or confirmation of the book-entry transfer of such Old Notes into
the Exchange Agent's account at the Book-Entry Transfer Facility described in
the Prospectus under the caption "The Exchange Offer -- Guaranteed Delivery
Procedures" and in the Letter of Transmittal and any other required documents,
all by 5:00 p.m., New York City time, within five New York Stock Exchange
trading days following the Expiration Date.
Name of Firm:
_______________________________ _______________________________________
(AUTHORIZED SIGNATURE)
Address:
_______________________________ Name:__________________________________
(INCLUDE ZIP CODE)
Title:_________________________________
Area Code and Tel. Number: (PLEASE TYPE OR PRINT)
_______________________________ Date:____________________________, 19__
DO NOT SEND OLD NOTES WITH THIS FORM. ACTUAL SURRENDER OF OLD NOTES MUST BE MADE
PURSUANT TO, AND BE ACCOMPANIED BY A PROPERLY COMPLETED AND DULY EXECUTED LETTER
OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS.
<PAGE>
EXHIBIT 99.2
Page 6
INSTRUCTIONS FOR NOTICE OF GUARANTEED DELIVERY
1. Delivery of this Notice of Guaranteed Delivery. A properly completed and
duly executed copy of this Notice of Guaranteed Delivery and any other documents
required by this Notice of Guaranteed Delivery must be received by the Exchange
Agent at its address set forth herein prior to the Expiration Date. The method
of delivery of this Notice of Guaranteed Delivery and any other required
documents to the Exchange Agent is at the election and sole risk of the holder,
and the delivery will be deemed made only when actually received by the Exchange
Agent. If delivery is by mail, registered mail with return receipt requested,
properly insured, is recommended. As an alternative to delivery by mail, the
holders may wish to consider using an overnight or hand delivery service. In all
cases, sufficient time should be allowed to assure timely delivery. For a
description of the guaranteed delivery procedures, see Instruction 2 of the
Letter of Transmittal.
2. Signatures on this Notice of Guaranteed Delivery. If this Notice of
Guaranteed Delivery is signed by the registered holder(s) of the Old Notes
referred to herein, the signature must correspond with the name(s) written on
the face of the Old Notes without alteration, enlargement, or any change
whatsoever. If this Notice of Guaranteed Delivery is signed by a participant of
the Book-Entry Transfer Facility whose name appears on a security position
listing as the owner of the Old Notes, the signature must correspond with the
name shown on the security position listing as the owner of the Old Notes.
If this Notice of Guaranteed Delivery is signed by a person other than
the registered holder(s) of any Old Notes listed or a participant of the
Book-Entry Transfer Facility, this Notice of Guaranteed Delivery must be
accompanied by appropriate bond powers, signed as the name of the
registered holder(s) appears on the Old Notes or signed as the name of the
participant shown on the Book-Entry Transfer Facility's security position
listing.
If this Notice of Guaranteed Delivery is signed by a trustee,
executor, administrator, guardian, attorney-in-fact, officer of a
corporation, or other person acting in a fiduciary or representative
capacity, such person should so indicate when signing and submit with the
Letter of Transmittal evidence
<PAGE>
EXHIBIT 99.2
Page 7
satisfactory to the Company of such person's authority to so act.
3. Requests for Assistance or Additional Copies. Questions and requests for
assistance and requests for additional copies of the Prospectus may be directed
to the Exchange Agent at the address specified in the Prospectus. Holders may
also contact their broker, dealer, commercial bank, trust company, or other
nominee for assistance concerning the Exchange Offer.
<PAGE>
EXHIBIT 99.3
Letter to Brokers
for
Tender of 11% Senior Subordinated Notes Due 2006
in Exchange for
11% Series B Senior Subordinated Notes Due 2006
OUTSOURCING SOLUTIONS INC.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON __________________, 1997, UNLESS EXTENDED (THE "EXPIRATION DATE").
OLD NOTES TENDERED IN THE EXCHANGE OFFER MAY BE WITHDRAWN
AT ANY TIME PRIOR TO THE EXPIRATION DATE.
To Registered Holders and Depository
Trust Company Participants:
We are enclosing herewith the material listed below relating to the
offer by Outsourcing Solutions Inc. (the "Company"), a Delaware corporation,
to exchange its 11% Series B Senior Subordinated Notes Due 2006, (the "New
Notes"), which have been registered under the Securities Act of 1933, as
amended (the "Securities Act"), for a like principal amount of its issued
and outstanding 11% Senior Subordinated Notes Due 2006 (the "Old Notes") upon
the terms and subject to the conditions set forth in the Company's Prospectus,
dated _______________, 1996, and the related Letter of Transmittal (which
together constitute the "Exchange Offer").
Enclosed herewith are copies of the following documents:
1. Prospectus dated _______________, 1996;
2. Letter of Transmittal (together with accompanying Substitute Form
W-9 Guidelines);
3. Notice of Guaranteed Delivery; and
4. Letter which may be sent to your clients for whose account you
hold Old Notes in your name or in the name of your nominee, with space
provided for obtaining such client's instruction with regard to the
Exchange Offer.
We urge you to contact your clients promptly. Please note that the
Exchange Offer will expire on the Expiration Date unless extended.
The Exchange Offer is not conditioned upon any minimum number of Old
Notes being tendered.
<PAGE>
EXHIBIT 99.3
Page 2
Pursuant to the Letter of Transmittal, each holder of Old Notes will
represent to the Company that (i) the New Notes acquired pursuant to the
Exchange Offer are being acquired in the ordinary course of business of the
undersigned, (ii) neither the undersigned nor any such other person has an
arrangement or understanding with any person to participate in the distribution
within the meaning of the Securities Act of such New Notes, (iii) if the
undersigned is not a broker-dealer, or is a broker-dealer but will not receive
New Notes for its own account in exchange for Old Notes, neither the undersigned
nor any such other person is engaged in or intends to participate in the
distribution of such New Notes and (iv) neither the undersigned nor any such
other person is an "affiliate" of the Company within the meaning of Rule 405
under the Securities Act or, if the undersigned is an "affiliate," that the
undersigned will comply with the registration and prospectus delivery
requirements of the Securities Act to the extent applicable. If the undersigned
is a broker-dealer (whether or not it is also an "affiliate") that will receive
New Notes for its own account in exchange for Old Notes, it represents that such
Old Notes were acquired as a result of market-making activities or other trading
activities, and it acknowledges that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of such New
Notes. By acknowledging that it will deliver and by delivering a prospectus
meeting the requirements of the Securities Act in connection with any resale of
such New Notes, the undersigned is not deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
The enclosed Letter to Clients contains an authorization by the
beneficial owners of the Old Notes for you to make the foregoing
representations.
The Company will not pay any fee or commission to any broker or dealer
or to any other persons (other than the Exchange Agent) in connection with the
solicitation of tenders of Old Notes pursuant to the Exchange Offer. The
Company will pay or cause to be paid any transfer taxes payable on the transfer
of Old Notes to it, except as otherwise provided in Instruction 7 of the
enclosed Letter of Transmittal.
Additional copies of the enclosed material may be obtained from the
undersigned.
Very truly yours,
WILMINGTON TRUST COMPANY
<PAGE>
EXHIBIT 99.4
Letter to Clients
for
Tender of 11% Senior Subordinated Notes Due 2006
in Exchange for
11% Series B Senior Subordinated Notes Due 2006
OUTSOURCING SOLUTIONS INC.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON __________________, 1997, UNLESS EXTENDED (THE "EXPIRATION DATE").
OLD NOTES TENDERED IN THE EXCHANGE OFFER MAY BE WITHDRAWN
AT ANY TIME PRIOR TO THE EXPIRATION DATE.
To Our Clients:
We are enclosing herewith a Prospectus, dated ______________, 1996, of
Outsourcing Solutions Inc. (the "Company"), a Delaware corporation, and a
related Letter of Transmittal (which together constitute the "Exchange Offer")
relating to the offer by the Company, to exchange its 11% Series B Senior
Subordinated Notes Due 2006 (the "New Notes"), which have been registered
under the Securities Act of 1933, as amended (the "Securities Act"), for a
like principal amount of its issued and outstanding 11% Senior Subordinated
Notes Due 2006 (the "Old Notes"), upon the terms and subject to the conditions
set forth in the Exchange Offer.
The Exchange Offer is not conditioned upon any minimum number of Old
Notes being tendered.
We are the holder of record of Old Notes held by us for your own
account. A tender of such Old Notes can be made only by us as the record holder
and pursuant to your instructions. The Letter of Transmittal is furnished to
you for your information only and cannot be used by you to tender Old Notes held
by us for your account.
We request instructions as to whether you wish to tender any or all of
the Old Notes held by us for your account pursuant to the terms and conditions
of the Exchange Offer. We also request that you confirm that we may on your
behalf make the representations contained in the Letter of Transmittal.
Pursuant to the Letter of Transmittal, each holder of Old Notes will
represent to the Company that (i) the New Notes acquired pursuant to the
Exchange Offer are being acquired in the ordinary course of business of the
undersigned, (ii) neither the undersigned nor any such other person has an
arrangement or understanding with any person to participate in the distribution
within the meaning of the Securities Act of such New Notes, (iii) if the
undersigned is not a
<PAGE>
EXHIBIT 99.4
Page 2
broker-dealer, or is a broker-dealer but will not receive New Notes for its own
account in exchange for Old Notes, neither the undersigned nor any such other
person is engaged in or intends to participate in the distribution of such New
Notes and (iv) neither the undersigned nor any such other person is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act or, if the undersigned is an "affiliate," that the undersigned will comply
with the registration and prospectus delivery requirements of the Securities Act
to the extent applicable. If the undersigned is a broker-dealer (whether or not
it is also an "affiliate") that will receive New Notes for its own account in
exchange for Old Notes, it represents that such Old Notes were acquired as a
result of market-making activities or other trading activities, and it
acknowledges that it will deliver a prospectus meeting the requirements of the
Securities Act in connection with any resale of such New Notes. By
acknowledging that it will deliver and by delivering a prospectus meeting the
requirements of the Securities Act in connection with any resale of such New
Notes, the undersigned is not deemed to admit that it is an "underwriter" within
the meaning of the Securities Act.
Very truly yours,
<PAGE>
EXHIBIT 99.5
Instruction to Registered Holder and/or Book
Entry Transfer Participant from Beneficial Owner
for
Tender of 11% Senior Subordinated Notes Due 2006
in Exchange for
11% Series B Senior Subordinated Notes Due 2006
OUTSOURCING SOLUTIONS INC.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON __________________, 1997, UNLESS EXTENDED (THE "EXPIRATION DATE").
OLD NOTES TENDERED IN THE EXCHANGE OFFER MAY BE WITHDRAWN
AT ANY TIME PRIOR TO THE EXPIRATION DATE.
To Registered Holder and/or Participant
of the Book-Entry Transfer Facility:
The undersigned hereby acknowledges receipt of the Prospectus dated
_________________, 1996 (the "Prospectus") of Outsourcing Solutions Inc., a
Delaware corporation (the "Company"), and the accompanying Letter of Transmittal
(the "Letter of Transmittal"), that together constitute the Company's offer (the
"Exchange Offer") to exchange its 11% Series B Senior Subordinated Notes Due
2006 (the "New Notes") for all of its outstanding 11% Senior Subordinated Notes
Due 2006 (the "Old Notes"). Capitalized terms used but not defined herein have
the meanings ascribed to them in the Prospectus.
This will instruct you, the registered holder and/or book-entry
transfer facility participant, as to the action to be taken by you relating to
the Exchange Offer with respect to the Old Notes held by you for the account of
the undersigned.
The aggregate face amount of the Old Notes held by you for the account
of the undersigned is (FILL IN AMOUNT):
$_____________________ of the 11% Senior Subordinated Notes Due 2006.
With respect to the Exchange Offer, the undersigned hereby instructs
you (CHECK APPROPRIATE BOX):
/ / To TENDER the following Old Notes held by you for the account of
the undersigned (INSERT PRINCIPAL AMOUNT OF OLD NOTES TO BE TENDERED (IF
ANY)): $____________________
/ / Not to TENDER any Old Notes held by you for the account of the
undersigned.
<PAGE>
EXHIBIT 99.5
Page 2
If the undersigned instructs you to tender the Old Notes held by you
for the account of the undersigned, it is understood that you are authorized to
make, on behalf of the undersigned (and the undersigned, by its signature below,
hereby makes to you), the representation and warranties contained in the Letter
of Transmittal that are to be made with respect to the undersigned as a
beneficial owner, including, but not limited to, the representations, that (i)
the New Notes acquired pursuant to the Exchange Offer are being acquired in the
ordinary course of business of the undersigned, (ii) neither the undersigned nor
any such other person has an arrangement or understanding with any person to
participate in the distribution within the meaning of the Securities Act of
1933, as amended (the "Securities Act") of such New Notes, (iii) if the
undersigned is not a broker-dealer, or is a broker-dealer but will not receive
New Notes for its own account in exchange for Old Notes, neither the undersigned
nor any such other person is engaged in or intends to participate in the
distribution of such New Notes and (iv) neither the undersigned nor any such
other person is an "affiliate" of the Company within the meaning of Rule 405
under the Securities Act or, if the undersigned is an "affiliate," that the
undersigned will comply with the registration and prospectus delivery
requirements of the Securities Act to the extent applicable. If the undersigned
is a broker-dealer (whether or not it is also an "affiliate") that will receive
New Notes for its own account in exchange for Old Notes, it represents that such
Old Notes were acquired as a result of market-making activities or other trading
activities, and it acknowledges that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of such New
Notes. By acknowledging that it will deliver and by delivering a prospectus
meeting the requirements of the Securities Act in connection with any resale of
such New Notes, the undersigned is not deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
SIGN HERE
Name of beneficial owner(s):
----------------------------------------------------
Signature(s):
-------------------------------------------------------------------
Name(s) (please print):
--------------------------------------------------------
Address:
------------------------------------------------------------------------
Telephone Number:
---------------------------------------------------------------
Taxpayer Identification or Social Security Number:
------------------------------
Date:
---------------------------------------------------------------------------
<PAGE>
EXHIBIT 99.6
------------
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER.--
Social Security numbers have nine digits separated by two hyphens: i.e., 000-
00-0000. Employer identification numbers have nine digits separated by only one
hyphen: i.e., 00-0000000. The table below will help determine the number to
give the payer.
GIVE THE SOCIAL
FOR THIS TYPE OF ACCOUNT: SECURITY NUMBER OF:
- ------------------------ ------------------
1. An individual's account The individual
2. Two or more individuals (joint account) The actual owner of the
account or, if combined funds,
any one of the individuals(1)
3. Husband and wife (joint account) The actual owner of the
account or, if joint funds,
either person(1)
4. Custodian account of a minor The minor(2)
(Uniform Gift to Minors Act)
5. Adult and minor (joint account) The adult or, if the minor is
the only contributor, the
minor(1)
6. Account in the name of guardian The ward, minor, or
or committee for a designated ward, incompetent person(3)
minor or incompetent person
7. a. The usual revocable savings The grantor-trustee(1)
trust account (grantor is
also trustee)
b. So-called trust account that is The actual owner(1)
not a legal or valid trust under
state law
<PAGE>
EXHIBIT 99.6
Page 2
GIVE THE SOCIAL
FOR THIS TYPE OF ACCOUNT: SECURITY NUMBER OF:
- ------------------------ ------------------
8. Sole proprietorship account The owner(4)
9. A valid trust, estate, or pension trust The legal entity (Do not
furnish the identification
number of the personal
representative or trustee
unless the legal entity itself
is not designated in the
account title.)(5)
10. Corporate account The organization
11. Religious, charitable, or educational The corporation
organization account
12. Partnership account The partnership
13. Association, club or other tax-exempt The organization
organization
14. A broker or registered nominee The broker or nominee
15. Account with the Department of The public entity
Agriculture in the name of a public
entity (such as a State or local
government, school district, or prison)
that receives agricultural program
payments
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner.
<PAGE>
EXHIBIT 99.6
Page 3
(5) List first and circle the name of the legal trust, estate or pension trust.
NOTE: If no name is circled when there is more than one name, the number
will be considered to be that of the first name listed.
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include the
following:
- - A corporation.
- - A financial institution.
- - An organization exempt from tax under section 501(a) of the Internal
Revenue Code of 1986, as amended (the "Code"), or an individual retirement
plan.
- - The United States or any agency or instrumentality thereof.
- - A State, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.
- - A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
- - An international organization or any agency or instrumentality thereof.
- - A registered dealer in securities or commodities registered in the United
States or a possession of the United States.
- - A real estate investment trust.
<PAGE>
EXHIBIT 99.6
Page 4
- - A common trust fund operated by a bank under section 584(a) of the Code.
- - An exempt charitable remainder trust, or a nonexempt trust described in
section 4947(a)(1) of the Code.
- - An entity registered at all times under the Investment Company Act of 1940.
- - A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to
backup withholding include the following:
- - Payments to nonresident aliens subject to withholding under section 1441 of
the Code.
- - Payments to partnerships not engaged in a trade or business in the United
States and which have at least one nonresident partner.
- - Payments of patronage dividends where the amount received is not paid in
money.
- - Payments made by certain foreign organizations.
- - Payments made to a nominee.
Payments of interest not generally subject to backup withholding include
the following:
- - Payments of interest on obligations issued by individuals. Note: You may
be subject to backup withholding if this interest is $600 or more and is
paid in the course of the payer's trade or business and you have not
provided your correct taxpayer identification number to the payer.
- - Payments of tax-exempt interest (including exempt-interest dividends under
section 852 of the Code).
- - Payments described in section 6049(b)(5) of the Code to non-resident
aliens.
- - Payments on tax-free covenant bonds under section 1451 of the Code.
<PAGE>
EXHIBIT 99.6
Page 5
- - Payments made by certain foreign organizations.
- - Payments made to a nominee.
EXEMPT PAYEES DESCRIBED ABOVE MUST STILL COMPLETE THE SUBSTITUTE FORM W-9
ENCLOSED HEREWITH TO AVOID POSSIBLE ERRONEOUS BACKUP WITHHOLDING. FILE
SUBSTITUTE FORM W-9 WITH THE PAYER, REMEMBERING TO CERTIFY YOUR TAXPAYER
IDENTIFICATION NUMBER ON PART III OF THE FORM, WRITE "EXEMPT" ON THE FACE OF THE
FORM AND SIGN AND DATE THE FORM AND RETURN IT TO THE PAYER.
Payments that are not subject to information reporting are also not subject
to backup withholding. For details, see sections 6041, 6041A(a), 6042, 6044,
6045, 6049, 6050A, and 605ON of the Code and their regulations.
PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividends,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. The IRS uses the numbers for
identification purposes and to help verify the accuracy of your tax return.
Payers must be given the numbers whether or not recipients are required to file
a tax return. Payers must generally withhold 31% of taxable interest,
dividends, and certain other payments to a payee who does not furnish a taxpayer
identification number to a payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail
to furnish your taxpayer identification number to a payer, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
<PAGE>
EXHIBIT 99.6
Page 6
PAYER'S NAME: WILMINGTON TRUST COMPANY
SUBSTITUTE Part I--Please Part III--Social Security
FORM W-9 provide your TIN Number OR Employer
DEPARTMENT OF THE TREASURY in the box at Identification Number
INTERNAL REVENUE SERVICE right and certify __________________
by signing and (If awaiting TIN write
dating below. "Applied For")
Payer's Request Part II--For Payees Exempt From Backup
for Taxpayer Identification Withholding, see the enclosed Guidelines for
Number (TIN) Certification of Taxpayer Identification
Number on Substitute Form W-9 and complete as
instructed therein.
CERTIFICATION--Under penalties of perjury, I certify that:
(1) The Number shown on this form is my correct Taxpayer Identification
Number (or I am waiting for a number to be issued to me); and
(2) I am not subject to backup withholding either because I have not been
notified by the Internal Revenue Service (IRS) that I am subject to
backup withholding as a result of a failure to report all interest or
dividends, or the IRS has notified me that I am no longer subject to
backup withholding.
CERTIFICATE INSTRUCTIONS--You must cross out item (2) above if you have been
notified by the IRS that you are subject to backup withholding because of
underreporting interest or dividends on your tax return. However, if after
being notified by the IRS that you were subject to backup withholding, you
received another notification from the IRS that you were no longer subject to
backup withholding, do not cross out item (2). (Also see instructions in the
enclosed Guidelines.)
NAME_________________________________
(Please Print)
SIGNATURE____________________________ DATE____________________
NOTE: FAILURE TO COMPLETE AND RETURN THIS SUBSTITUTE FORM W-9 MAY RESULT IN
BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE
OFFER TO PURCHASE. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR
CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9
FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU ARE AWAITING A TIN.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
<PAGE>
EXHIBIT 99.6
Page 7
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (1) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or (2)
I intend to mail or deliver an application in the near future. I understand
that if I do not provide a taxpayer identification number within sixty (60)
days, 31% of all payments with respect to the Old Notes or the New Notes made to
me thereafter will be withheld until I provide a number.
SIGNATURE_________________________ DATE_________________
