<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 22, 1998
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
NATIONWIDE CREDIT, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
GEORGIA 7322 58-1900192
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NO.)
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)
MICHAEL LORD
CHIEF FINANCIAL OFFICER
6190 POWERS FERRY ROAD, 4TH FLOOR,
ATLANTA, GEORGIA 30339
(770) 644-7452
(NAME, ADDRESS, INCLUDING ZIP
CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT
FOR SERVICE)
COPIES TO:
STEPHEN M. BESEN, ESQ. ROD D. MILLER, ESQ.
WEIL, GOTSHAL & MANGES LLP WEIL, GOTSHAL & MANGES LLP
767 FIFTH AVENUE 100 CRESCENT COURT, SUITE 1300
NEW YORK, NEW YORK 10153 DALLAS, TEXAS 75201
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
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CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED PRICE(a) REGISTRATION FEE(b)
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<S> <C> <C>
10 1/4% Senior Notes due 2008.................. $100,000,000 $29,500
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</TABLE>
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(a) Estimated solely for the purpose of calculating the registration fee.
(b) Calculated in accordance with Rule 457(f) under the Securities Act of
1933, as amended.
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
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 THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES EXCHANGE COMMISSION BUT HAS NOT YET BECOME EFFECTIVE. 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 AND STATE IN WHICH SUCH OFFER, +
+SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION +
+UNDER THE SECURITIES LAWS OF ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION DATED JUNE 22, 1998
PROSPECTUS
OFFER TO EXCHANGE ALL OUTSTANDING 10 1/4% SENIOR NOTES DUE 2008
FOR
10 1/4% SERIES A SENIOR NOTES DUE 2008
OF
NATIONWIDE CREDIT, INC.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME, ON , 1998, UNLESS EXTENDED.
Nationwide Credit, Inc. ("NCI" or the "Company") hereby offers, upon the
terms and subject to the conditions set forth in this Prospectus and the
accompanying Letter of Transmittal (which together constitute the "Exchange
Offer"), to exchange an aggregate principal amount of up to $100,000,000 of 10
1/4 % Series A Senior Notes due 2008 (the "New Notes") of the Company, which
have been registered under the Securities Act of 1933, as amended (the
"Securities Act"), for a like principal amount of the issued and outstanding 10
1/4 % Senior Notes due 2008 (the "Old Notes") of the Company from the
registered holders thereof (the "Holders"). The terms of the New Notes are
identical in all material respects to the Old Notes, except for certain
transfer restrictions relating to the Old Notes. The new Notes will evidence
the same class of debt as the Old Notes and will be issued pursuant to, and
entitled to the benefits of, the Indenture governing the Old Notes (the
"Indenture"). As used herein, the term "Notes" means the Old Notes and the New
Notes, treated as a single class.
The Company will accept for exchange any and all Old Notes validly tendered
and not withdrawn prior to 5:00 P.M., New York City time, on , 1998, unless
extended (as so extended, the "Expiration Date"). Tenders of Old Notes may be
withdrawn at any time prior to the Expiration Date. The Exchange Offer is not
conditioned upon any minimum principal amount of Old Notes being tendered for
exchange pursuant to the Exchange Offer. The Exchange Offer is subject to
certain other customary conditions. See "The Exchange Offer."
On January 28, 1998, the Company issued $100,000,000 principal amount of Old
Notes (the "Offering") pursuant to exemptions from, or transactions not subject
to, the registration requirements of the Securities Act and applicable state
securities laws.
The Notes will be redeemable at the option of the Company, in whole or in
part, at any time on or after January 15, 2003, at the redemption prices set
forth herein, plus accrued and unpaid interest and Liquidated Damages (as
defined), if any, to the date of redemption. In addition, at any time prior to
January 15, 2001, the Company may, at its option, redeem up to 35% of the
aggregate principal amount of the Notes at a redemption price equal to 110.25%
of the principal amount thereof, plus accrued and unpaid interest and
Liquidated Damages, if any, thereon to the date of redemption, with the net
proceeds of an initial public offering of common stock of the Company or a
capital contribution to the Company's common equity of the net cash proceeds of
an initial public offering of the Company's direct parent; provided that at
least $50.0 million of the aggregate principal amount of Notes remains
outstanding immediately after the occurrence of such redemption. See
"Description of Notes--Optional Redemption."
Upon the occurrence of a Change of Control (as defined), the holders of the
Notes will have the right to require the Company to repurchase their Notes, in
whole or in part, at a price 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. See "Description of New Notes--Repurchase at
the Option of Holders--Change of Control."
The New Notes will constitute, and the Old Notes currently constitute,
general unsecured obligations of the Company, rank senior in right of payment
to all subordinated Indebtedness (as defined) of the Company and rank pari
passu in right of payment with all current and future unsecured senior
Indebtedness of the Company, including all borrowings under the Credit
Agreement (as defined). However, all borrowings under the Credit Agreement are
secured by a first priority Lien (as defined) on substantially all of the
assets of the Company and its Domestic Subsidiaries (as defined). The Company
currently has no Domestic Subsidiaries; however, all of the Company's future
Domestic Subsidiaries, if any, will jointly and severally guarantee the Notes
on a senior basis. As of December 31, 1997, after giving pro forma effect to
the Transactions (as defined), approximately $25.0 million would have been
outstanding under the Credit Agreement. See "Capitalization" and "Description
of New Notes."
For each Old Note accepted for exchange, the Holder of such Old Note will
receive a New Note having a principal amount equal to that of the surrendered
Old Note. The New Notes will bear interest from the most recent date to which
interest has been paid on the Old Notes or, if no interest has been paid on the
Old Notes, from January 28, 1998. Old Notes accepted for exchange will cease to
accrue interest from and after the date of consummation of the Exchange Offer.
Holders of Old Notes whose Old Notes are accepted for exchange will not receive
any payment in respect of accrued interest on such Old Notes.
The New Notes are being offered hereunder in order to satisfy certain
obligations of the Company contained in the Registration Rights Agreement (as
defined). Based on interpretations by the staff of the U.S. Securities and
Exchange Commission (the "SEC" or the "Commission") as set forth in no-action
letters issued to third parities, the Company believes that New Notes issued
pursuant to the Exchange Offer in exchange for Old Notes may be offered for
resale, resold and otherwise transferred by Holders thereof (other than any
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 with any person to engage in a distribution of such
New Notes. However, the SEC has not considered the Exchange Offer in the
context of a no-action letter and there can be no assurance that the staff of
the SEC would make a similar determination with respect to the Exchange Offer
as in such other circumstances. Each Holder, other than a broker-dealer, must
acknowledge that it is not engaged in, and does not intend to engage in, a
distribution of such New Notes and has no arrangement or understanding to
participate in a distribution of 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 New Notes received 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. The Company had agreed
that, for a period of one year 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."
The Company will not receive any proceeds from the Exchange Offer. The
Company will pay all the expenses incident to the Exchange Offer. In the event
the Company terminates the Exchange Offer and does not accept for exchange any
Old Notes, the Company will promptly return the Old Notes to the Holders
thereof. See "The Exchange Offer."
There is no existing trading market for the New Notes, and there can be no
assurance regarding the future development of a market for the New Notes.
Lehman Brothers Inc. (the "Initial Purchaser") has advised the Company that it
currently intends to make a market in the New Notes. The Initial Purchaser is
not obligated to do so, however, and any market-making with respect to the New
Notes may be discontinued at any time without notice. The Company does not
intend to apply for listing or quotation of the New Notes on any securities
exchange or stock market.
----------
SEE "RISK FACTORS" BEGINNING ON PAGE 12 OF THIS PROSPECTUS FOR A DESCRIPTION
OF CERTAIN RISKS TO BE CONSIDERED BY HOLDERS WHO TENDER THEIR OLD NOTES 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
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the SEC a registration statement on Form S-4
(herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act with respect to the New
Notes offered hereby. This Prospectus, which forms a part of the Registration
Statement, does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules thereto, certain parts
of which are omitted in accordance with the rules and regulations of the SEC.
For further information with respect to the Company and the New Notes offered
hereby, reference is made to the Registration Statement. Any statements made
in this Prospectus concerning the provisions of certain documents are not
necessarily complete and, in each instance, reference is made to the copy of
such document filed as an exhibit to the Registration Statement otherwise
filed with the SEC.
As of the date of the effectiveness of the Registration Statement, the
Company will become subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith will file reports, proxy statements and other information
with the SEC. The Registration Statement, the exhibits forming a part thereof
and the reports, proxy statements and other information filed by the Company
with the SEC in accordance with the Exchange Act may be inspected, without
charge, at the Public Reference Section of the SEC located at 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the Regional Offices of the SEC
located at Seven World Trade Center, 13th Floor, New York, New York 10048 and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60601-
2511. Copies of all or any portion of the material may be obtained from the
Public Reference Section of the SEC upon payment of the prescribed fees. The
SEC also maintains a Web site at http://www.sec.gov that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the SEC.
The Company will furnish holders of the New Notes offered hereby with annual
reports containing, among other information, audited financial statements
certified by an independent public accounting firm and quarterly reports
containing unaudited financial information for the first three quarters of
each fiscal year. The Company will also furnish such other reports as it may
determine or as may be required by law. In addition, in the event that the
Company is not required to be subject to the reporting requirements of the
Exchange Act in the future, the Company will be required under the Indenture,
pursuant to which the Old Notes were, and the New Notes will be, issued, to
continue to file with the SEC, and to furnish Holders of the New Notes with,
the information, documents and other reports specified in Sections 13 and
15(d) of the Exchange Act.
------------------
THIS PROSPECTUS INCLUDES "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF
SECTION 27A OF THE SECURITIES ACT AND SECTION 21E OF THE SECURITIES EXCHANGE
ACT OF 1934, AS AMENDED (THE "EXCHANGE ACT"). ALL STATEMENTS (OTHER THAN
STATEMENTS OF HISTORICAL FACT) MADE IN THIS PROSPECTUS, INCLUDING, WITHOUT
LIMITATION, THE STATEMENTS UNDER "PROSPECTUS SUMMARY," "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" AND
"BUSINESS" AND LOCATED ELSEWHERE HEREIN REGARDING INDUSTRY PROSPECTS AND THE
COMPANY'S FINANCIAL POSITION, ARE FORWARD-LOOKING STATEMENTS. ALTHOUGH THE
COMPANY BELIEVES THAT THE EXPECTATIONS REFLECTED IN SUCH FORWARD-LOOKING
STATEMENTS ARE REASONABLE, IT CAN GIVE NO ASSURANCE THAT SUCH EXPECTATIONS
WILL PROVE TO HAVE BEEN CORRECT. IMPORTANT FACTORS THAT COULD CAUSE ACTUAL
RESULTS TO DIFFER MATERIALLY FROM THE COMPANY'S EXPECTATIONS ("CAUTIONARY
STATEMENTS") ARE DISCLOSED IN THIS PROSPECTUS, INCLUDING, WITHOUT LIMITATION,
THE FORWARD-LOOKING STATEMENTS IN THIS PROSPECTUS UNDER "RISK FACTORS."
CERTAIN FACTORS THAT MAY CAUSE SUCH MATERIAL DIFFERENCES INCLUDE, BUT ARE NOT
LIMITED TO: (1) INCREASED COMPETITION, (2) INCREASED COSTS, (3) INABILITY TO
CONSUMMATE ACQUISITIONS ON ATTRACTIVE TERMS, (4) INCREASES IN THE COMPANY'S
COST OF BORROWINGS OR UNAVAILABILITY OF ADDITIONAL DEBT OR EQUITY CAPITAL ON
TERMS CONSIDERED REASONABLE BY MANAGEMENT, (5) ADVERSE STATE, FEDERAL OR
FOREIGN LEGISLATION OR ECONOMIC CONDITIONS IN THE MARKETS IN WHICH THE COMPANY
MAY COMPETE AND (6) THE ABILITY TO IMPLEMENT THE OPERATING IMPROVEMENT PLAN
(AS DEFINED). MANY OF SUCH FACTORS WILL BE BEYOND THE CONTROL OF THE COMPANY
AND ITS MANAGEMENT. FOR FURTHER INFORMATION OR OTHER FACTORS THAT COULD AFFECT
THE FINANCIAL RESULTS OF THE COMPANY AND SUCH FORWARD-LOOKING STATEMENTS, SEE
"RISK FACTORS." ALL SUBSEQUENT WRITTEN AND ORAL FORWARD-LOOKING STATEMENTS
ATTRIBUTABLE TO THE COMPANY, OR PERSONS ACTING ON ITS BEHALF, ARE EXPRESSLY
QUALIFIED IN THEIR ENTIRETY BY THE CAUTIONARY STATEMENTS.
i
<PAGE>
PROSPECTUS SUMMARY
The following summary should be read with, and is qualified in its entirety
by, the more detailed information and financial statements (and notes thereto)
appearing elsewhere in this Prospectus. As used in this Prospectus, unless the
context requires otherwise, all references to either "NCI" or the "Company"
mean Nationwide Credit, Inc., a Georgia corporation, its predecessors and its
subsidiaries, after giving effect to the transactions described below under "--
The Transactions."
THE COMPANY
OVERVIEW
The Company is among the largest independent providers of accounts receivable
management services in the United States, as measured by the aggregate
principal value of consumer debt placed by credit grantors for collection
(i.e., "placement volume"). The Company offers contingent fee collection, pre-
chargeoff accounts receivable management and on-site collection management
services, primarily to financial institutions, government agencies,
telecommunications companies and healthcare providers. The Company provides
sophisticated, customized past-due account collection and accounts receivable
management services to its clients through a nationwide network of 15 call
centers. Pro forma for the Transactions (as defined), the Company had revenues
of $121.3 million and Adjusted EBITDA (as defined) of $22.4 million for the
year ended December 31, 1997 and actual revenue of $29.9 million and Adjusted
EBITDA of $6.7 million for the three months ended March 31, 1998. See
"Unaudited Condensed Consolidated Pro Forma Financial Information."
The Company has historically generated substantially all of its revenue from
contingent fees received for collection services provided to a wide variety of
credit grantors. Contingent fee services, which are the traditional services
provided in the accounts receivable management industry, involve collecting
delinquent consumer debt placed with the collection services provider in
exchange for a percentage of realized collections. The Company has a client
base that includes American Express, AT&T, BellSouth, the U.S. Department of
Education (the "DOE"), First Union, General Motors Acceptance Corporation
("GMAC"), the U.S. General Services Administration (the "GSA"), MCI, Mobil,
NationsBank, Novus (issuer of DISCOVER Card) and Texaco.
In order to provide more comprehensive collection solutions for its clients,
the Company has begun providing pre-chargeoff accounts receivable management
services, in which the Company contacts debtors earlier in the collection cycle
in an effort to bring the account current before the credit grantor formally
charges off the past-due balance. For these services, the Company is typically
paid a monthly fee for each account it manages and, in certain circumstances,
additional performance-based fees. The Company has also begun contracting with
credit grantors to provide on-site accounts receivable management, collections
personnel and related services. The Company believes that there is significant
growth potential in these service areas, primarily due to increased outsourcing
of accounts receivable management services by credit grantors.
In the first quarter of 1997, a new senior management team, led by Jerrold
Kaufman as President and Chief Executive Officer, implemented a business
strategy focused on increasing revenues with existing clients and developing
new relationships with other large credit grantors while improving the
Company's cost structure and customer service through an operating improvement
plan (the "Operating Improvement Plan"). The Operating Improvement Plan
includes (i) reducing the number of information systems utilized by the
Company, (ii) reducing overhead expense by reducing corporate staff headcount
through attrition and (iii) significantly reducing the number of unprofitable
and lower margin clients. In connection with the merger of NCI Merger
Corporation, a Georgia corporation ("Merger Sub") and a wholly owned subsidiary
of NCI Acquisition Corporation, a Delaware corporation ("NAC"), with and into
NCI, with NCI as the surviving entity (the "Merger"), on December 31, 1997,
management, along with the Investor Group (as defined) and NAC, approved a
modification to the Operating Improvement Plan to rationalize the Company's
operating facilities which will result in additional headcount reduction and
relocation of personnel.
1
<PAGE>
Through its demonstrated collection performance and improved customer
service, the Company has recently received new contracts with the DOE, MCI,
Chrysler and the GSA. In addition, the Company is experiencing growth in its
revenue from pre-chargeoff services. For example, the Company recently
successfully completed a pilot pre-chargeoff program for a significant client
that is being implemented on a larger scale in 1998 with the Company as a key
service provider.
The Company's principal executive offices are located at 6190 Powers Ferry
Road, 4th Floor, Atlanta, Georgia 30339, and its telephone number is (770) 644-
7452.
INDUSTRY TRENDS
The total amount of revenue generated by all contingent fee collection
companies grew approximately 10% in 1996 to approximately $5.5 billion,
according to M. Kaulkin & Associates, an industry advisory firm. The Company
believes that it will benefit from the following trends:
INCREASE IN CONSUMER DEBT AND DELINQUENCIES. Consumer debt has grown in the
United States from $3.8 trillion in 1991 to $5.4 trillion in 1996, representing
a compound annual growth rate of 7.3%. This increase in consumer debt has been
accompanied by higher levels of delinquencies. From 1991 to 1997, bank card
delinquency rates ranged from a low of 3.3% in 1994 to an estimated 4.9% in
1997. Largely as a result of these trends, placements to contingent fee
companies have grown from approximately $43.7 billion in 1990 to approximately
$122.3 billion in 1996, a compound annual growth rate of 18.7%, according to
the American Collectors Association ("ACA"), an industry trade association.
CORPORATE OUTSOURCING. Increasing numbers of companies are outsourcing non-
core functions that can be more efficiently conducted by specialized firms. By
outsourcing these functions, companies are able to focus on core revenue
generating activities and reducing costs, thereby improving productivity. In
particular, the Company believes many credit grantors are recognizing the
advantages of outsourcing accounts receivable management as a result of factors
including (i) the increasing complexity of such functions, (ii) rapid growth in
consumer debt levels and an increase in delinquencies, (iii) changing
regulations applicable to debt collection practices and (iv) the development of
sophisticated call management centers requiring substantial capital investment,
technical information systems capabilities and human resource commitments. The
Company believes that outsourcing these services provides value to clients
through lower delinquencies, improved customer relations and reduced
chargeoffs.
GOVERNMENT OUTSOURCING. Government agencies on the federal, state and local
levels are also increasing their use of private collection agencies. A 1995
study by the Mercer Group, an independent industry research firm, showed that
from 1985 to 1995 local governments had significantly increased their use of
private collection agencies. Similarly, an estimated 32 of the 52 federal
government agencies currently utilize private collection agencies to assist in
the collection of a portion of the approximately $200 billion of non-tax
related debt owed to the federal government. Private agencies have also
demonstrated a greater effectiveness in debt collection, as evidenced by a 1994
study by the General Accounting Office which found that the average collection
rate of private collection agencies was 45% higher than that of state
government agencies.
INDUSTRY CONSOLIDATION. The accounts receivable management industry is highly
fragmented, consisting of approximately 6,300 collection agencies as of 1997,
according to the ACA. According to M. Kaulkin & Associates, the ten largest
agencies accounted for approximately 17% and 20% of the total 1995 and 1996
contingent revenue, respectively, for the industry. The Company believes that
the industry is entering a period of consolidation driven by a number of
factors, including (i) the economies of scale available to larger operators,
(ii) new technology which facilitates the collection process, (iii) the ability
of large operators to provide services nationally and (iv) increased licensing
and regulatory requirements.
2
<PAGE>
CLIENT CONSOLIDATION. The largest credit-granting industries, including
financial services, telecommunications, healthcare and retail, are experiencing
continued consolidation. As a result, the operations of many credit grantors
are becoming increasingly complex and the Company believes such credit grantors
are shifting account placements to accounts receivable management companies
that have the ability to service a large volume of placements on a national
basis.
BUSINESS STRATEGY
The Company believes it has the following competitive strengths: (i)
reputation as an industry leader, (ii) collection performance, (iii) national
presence, (iv) strong executive and call center management and (v) a
distinguished client base. See "Business--Competitive Strengths." The Company's
senior management team has developed a business strategy emphasizing the
following key components:
FOCUS ON CORE COLLECTION ACTIVITIES. The Company believes it has a
competitive advantage in the marketplace based on its reputation and
performance as a leading collection services provider serving a wide range of
credit grantors. Due to favorable industry trends, the Company believes that
the contingent placement market will continue to experience attractive growth,
and the Company intends to rely on its strong collection performance to attract
a greater share of contingent placements from existing clients and to develop
new contingent placement relationships.
EXPAND PRE-CHARGEOFF SERVICES. The Company intends to further expand its pre-
chargeoff services to provide more comprehensive collection solutions for its
clients. In response to significantly higher delinquencies, credit grantors are
increasingly outsourcing their pre-chargeoff accounts receivable management
functions. Growth in the pre-chargeoff business is expected to complement and
diversify the Company's existing revenue base by creating a more predictable
revenue stream through the establishment of additional longer-term, fixed-fee
contracts.
IMPLEMENT OPERATING IMPROVEMENT PLAN. In the first quarter of 1997, the
Company's new management team began implementing its Operating Improvement Plan
designed to improve productivity, further integrate the Company's various
acquired businesses and reduce costs. This plan includes (i) reducing the
number of information systems utilized by the Company, (ii) reducing overhead
expense by reducing corporate staff headcount through attrition and (iii)
significantly reducing the number of unprofitable and lower margin clients. In
connection with the Merger on December 31, 1997, management, along with the
Investor Group and NAC, approved a modification to the Operating Improvement
Plan to rationalize the Company's operating facilities which will result in
additional headcount reduction and relocation of personnel.
LEVERAGE SIZE AND NATIONAL REACH. The Company believes that its national
presence, infrastructure and operating expertise allow it to provide superior
accounts receivable management for large national credit grantors, including
the federal government. The Company intends to capitalize on its ability to
manage large national placements by taking advantage of opportunities that
arise from consolidation among credit grantors and by extending its non-
traditional services to clients located throughout the United States.
UTILIZE TECHNOLOGY TO INCREASE COLLECTIONS. Since the beginning of 1994, the
Company has made capital expenditures of over $15 million in its
telecommunications equipment, software and computer systems. These investments
enable the Company to operate more efficiently and manage large accounts
receivable programs. The Company is able to customize procedures and reports to
meet the varying needs of its clients. The Company believes that these capital
expenditures and technological capabilities will continue to enhance its
competitive position.
GROW THROUGH ACQUISITIONS. The Company has completed acquisitions of other
collection service providers to expand its client base, acquire new service
capabilities and enter new market segments. For example,
3
<PAGE>
the Company acquired Consolidated Collection Co. ("Consolidated") in February
1997, to expand its telecommunications business. The Company intends to review
acquisition candidates on an ongoing basis and will seek to make opportunistic
acquisitions to further solidify its market position. The Company does not
currently have any agreements with respect to future acquisitions.
COMPANY HISTORY
On December 31, 1997, NAC, Merger Sub, the Company, First Data Corporation
("First Data") and its wholly owned subsidiary, First Financial Management
Corporation ("FFMC"), entered into an Agreement and Plan of Merger (the "Merger
Agreement") pursuant to which Merger Sub merged with and into the Company, with
the Company as the surviving corporation. The merger consideration consisted of
$155.2 million in cash and up to an additional $3.7 million, to be paid
pursuant to the terms of an earn-out agreement in the event the Company
achieves certain performance targets for the year ended December 31, 1998. The
Company believes that First Data and FFMC breached certain representations in
the Merger Agreement and that it is entitled to a purchase price adjustment and
indemnification and other payments from First Data and FFMC. The Company is
currently assessing its options with respect to these claims and has not
quantified the aggregate value of its claims against First Data and FFMC. In
the event the Company is unable to reach a negotiated settlement with First
Data and FFMC, it intends to enforce its rights under the Merger Agreement.
There can be no assurance that the Company will be successful in its efforts to
obtain a purchase price adjustment or indemnification or other payments from
First Data or FFMC in connection with the Company's claims.
The Merger and related fees were initially financed through borrowings of
$125.0 million against a $133.0 million senior credit facility (the
"Acquisition Facilities") provided by Lehman Commercial Paper Inc. and a
contribution of $40.2 million of equity capital. The Acquisition Facilities,
including the fees and expenses related thereto, were refinanced through (i)
$60.0 million of senior secured debt (the "Senior Credit Facilities"), of which
$25.0 million was drawn concurrent with the consummation of the Offering, (ii)
the proceeds of the Offering and (iii) cash on hand.
The Merger, the Acquisition Facilities, the Senior Credit Facilities and the
Offering, together with the application of the proceeds from the Acquisition
Facilities, the Senior Credit Facilities and the Offering, are collectively
referred to as the "Transactions."
THE EQUITY INVESTORS
NAC and Merger Sub were formed by affiliates of Centre Partners Management
LLC ("Centre Partners"), affiliates of Weiss, Peck & Greer, L.L.C. ("WPG") and
Avalon Investment Partners, LLC ("Avalon" and, together with Centre Partners
and WPG, the "Investor Group"). Centre Partners is a private investment firm
that manages the commitments and assets of Centre Capital Investors II, L.P.
and related entities. Centre Capital Investors II, L.P. is a $450 million
private equity fund raised in 1995. Since its inception in 1986, Centre
Partners and its predecessors have invested more than $1.6 billion in over 40
separate investments. Weiss, Peck & Greer, L.L.C. is an investment firm that
manages over $16 billion in public equity and fixed income securities for
institutional and individual investors. Since its inception in 1970, Weiss,
Peck & Greer, L.L.C. and its affiliates have managed 12 private equity and
venture capital funds with $1.2 billion in aggregate committed capital and more
than 240 investments. Avalon, formed in 1997, is a private investment firm
specializing in transactions in the financial services and related industries.
4
<PAGE>
THE EXCHANGE OFFER
On January 28, 1998, the Company issued $100.0 million principal amount of
Old Notes. The Old Notes were sold pursuant to exemptions from, or in
transactions not subject to, the registration requirements of the Securities
Act and applicable state securities laws. Lehman Brothers Inc. (the "Initial
Purchaser"), as a condition to its purchase of the Old Notes, required that the
Company agree to commence the Exchange Offer following the offering of the Old
Notes. The New Notes will evidence the same class of debt as the Old Notes and
will be issued pursuant to, and entitled to the benefits of the Indenture.
SECURITIES OFFERED.......... Up to $100.0 million aggregate principal amount
of the Company's 10 1/4% Series A Senior Notes
due 2008, which have been registered under the
Securities Act (the "New Notes"). The terms of
the New Notes and the Old Notes are identical in
all material respects, except for certain
transfer restrictions relating to the Old Notes.
THE EXCHANGE OFFER.......... The New Notes are being offered in exchange for a
like principal amount of Old Notes. The issuance
of the New Notes is intended to satisfy
obligations of the Company contained in the
Registration Rights Agreement, dated January 28,
1998, between the Company and the Initial
Purchaser (the "Registration Rights Agreement").
For procedures for tendering the Old Notes
pursuant to the Exchange Offer, see "The Exchange
Offer."
TENDERS, EXPIRATION DATE;
WITHDRAWAL.................
The Exchange Offer will expire at 5:00 P.M., New
York City time, on , 1998, or such later
date and time to which it is extended (as so
extended, the "Expiration Date"). A tender of Old
Notes pursuant to the Exchange Offer my be
withdrawn at any time prior to the Expiration
Date. Any Old Note 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.
FEDERAL INCOME TAX The exchange pursuant to the Exchange Offer
CONSEQUENCES................ should not result in any income, gain or loss to
the holders or the Company for federal income tax
purposes. See "Certain U.S. Income Tax
Consequences."
USE OF PROCEEDS............. There will be no proceeds to the Company from the
exchange pursuant to the Exchange Offer.
EXCHANGE AGENT.............. State Street Bank and Trust Company is serving as
the Exchange Agent in connection with the
Exchange Offer.
SHELF REGISTRATION Under certain circumstances described in the
STATEMENT................... Registration Rights Agreements, certain holders
of Notes (including holders who are not permitted
to participate in the Exchange Offer or who may
not freely resell New Notes received in the
Exchange Offer) may require the Company to file,
and use best efforts to cause to become
effective, a shelf registration statement under
the Securities Act, which would cover resales of
Notes by such holders. See "Description of New
Notes--Exchange Offer; Registration Rights."
5
<PAGE>
CONDITIONS TO THE EXCHANGE The Exchange Offer is not conditioned on any
OFFER....................... minimum principal amount of Old Notes being
tendered for exchange. The Exchange Offer is
subject to certain other customary conditions,
each of which may be waived by the Company. See
"The Exchange Offer--Conditions."
CONSEQUENCES OF FAILURE TO EXCHANGE OLD NOTES
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 in the legend thereon as a
consequence of the issuance of the Old Notes pursuant to exemptions from, or in
transactions not subject to, the registration requirements of the Securities
Act and applicable state securities laws. 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 Old Notes under the Securities Act. See "Description of
New Notes--Exchange Offer, Registration Rights." Based on interpretations by
the staff of the SEC, as 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 Old Notes may be offered for resale, resold or otherwise
transferred by holders thereof (other than any 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, other than broker-dealers,
have no arrangement with any person to participate in the distribution of such
New Notes. However, the SEC has not considered the Exchange Offer in the
context of a no-action letter and there can be no assurance that the staff of
the SEC would not make a similar determination with respect to the Exchange
Offer as in such other circumstances. Each Holder, other than a broker-dealer,
must acknowledge that it is not engaged in, and does not intend to engage in, a
distribution of such New Notes and has no arrangement or understanding to
participate in a distribution of New Notes. Each broker-dealer that receives
New Notes for its own account in exchange for Old Notes must acknowledge that
such Old Notes were acquired by such broker-dealer 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. See "Plan of Distribution." In
addition, to comply with the securities laws of certain jurisdictions, it may
be necessary to qualify for sale or register thereunder the New Notes prior to
offering or selling such New Notes. The Company has agreed, pursuant to the
Registration Rights Agreement, subject to certain limitations specified
therein, to register or qualify the New Notes for offer or sale under the
securities laws of such jurisdictions as any holder reasonably requests in
writing. Unless a holder so requests, the Company does not intend to register
or qualify the sale of the New Notes in any such jurisdictions. See "Risk
Factors-- Consequences of Failure to Exchange" and "The Exchange Offer--
Consequences of Exchanging Old Notes."
6
<PAGE>
SUMMARY DESCRIPTION OF NEW NOTES
The terms of the New Notes and the Old Notes are identical in all material
respects, except for certain transfer restrictions relating to the Old Notes.
The New Notes will bear interest from the most recent date to which interest
has been paid on the Old Notes or, if no interest has been paid on the Old
Notes, from January 28, 1998. Accordingly, registered holders of New Notes on
the relevant record date for the first interest payment date following the
consummation of the Exchange Offer will receive interest accruing from the most
recent date to which interest has been paid on the Old Notes or, if no interest
has been paid, from January 28, 1998. Old Notes accepted for exchange will
cease to accrue interest from after the date of consummation of the Exchange
Officer. Holders whose Old Notes are accepted for exchange will not receive any
payment in respect of interest on such Old Notes otherwise payable on any
interest payment date the record date for which occurs on or after consummation
of the Exchange Offer.
SECURITIES OFFERED.......... $100.0 million in aggregate principal amount of
10 1/4% Series A Senior Notes due 2008 of the
Company.
MATURITY DATE............... January 15, 2008.
INTEREST PAYMENT DATES...... January 15 and July 15, commencing July 15, 1998.
MANDATORY REDEMPTION........ The Company will not be required to make
mandatory redemption or sinking fund payments
with respect to the Notes.
OPTIONAL REDEMPTION......... The Notes will be redeemable at the option of the
Company, in whole or in part, at any time on or
after January 15, 2003 at the redemption prices
set forth herein, plus accrued and unpaid
interest and Liquidated Damages, if any, thereon
to the date of redemption. In addition, at any
time prior to January 15, 2001, the Company may,
at its option, redeem up to 35% of the aggregate
principal amount of the Notes at a redemption
price equal to 110.25% of the principal amount
thereof, plus accrued and unpaid interest and
Liquidated Damages, if any, thereon to the date
of redemption, with the net cash proceeds of an
initial public offering of common stock of the
Company or a capital contribution to the
Company's common equity of the net cash proceeds
of an initial public offering of the Company's
direct parent; provided that at least $50.0
million in aggregate principal amount of Notes
remains outstanding immediately after the
occurrence of such redemption. See "Description
of New Notes -- Optional Redemption."
CHANGE OF CONTROL........... Upon the occurrence of a Change of Control, each
holder of Notes will have the right to require
the Company to purchase all or any part of such
holder's Notes at an offer price in cash 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.
See "Description of New Notes--Repurchase at the
Option of Holders--Change of Control."
RANKING..................... The New Notes will be, and the Old Notes
currently are, general unsecured obligations of
the Company, will rank senior in right of payment
to all subordinated Indebtedness of the Company
and will
7
<PAGE>
rank pari passu in right of payment with all
current and future unsecured senior Indebtedness
of the Company, including all borrowings under
the Credit Agreement. However, all borrowings
under the Credit Agreement are secured by a first
priority Lien on substantially all of the assets
of the Company and its Domestic Subsidiaries. As
of March 31, 1998, approximately $24.9 million
was outstanding under the Credit Agreement. See
"Description of New Notes."
GUARANTEES.................. The Company currently has no Domestic
Subsidiaries; however, all of the Company's
future Domestic Subsidiaries, if any, will
jointly and severally guarantee (the "Subsidiary
Guarantees") the Company's payment obligations
under the Notes on a senior basis. The Subsidiary
Guarantees will rank senior to all existing and
future subordinated Indebtedness of the
Guarantors and pari passu with all other
unsecured senior Indebtedness of the Guarantors,
including the guarantees of Indebtedness under
the Credit Agreement. Any Guarantor's obligations
under the Credit Agreement, however, will be
secured by a first priority Lien on substantially
all of the assets of such Guarantor, and the
Indenture restricts, but does not prohibit, the
Guarantors from incurring additional secured
Indebtedness. Accordingly, such secured
Indebtedness will rank prior to the Subsidiary
Guarantees with respect to such assets. See "Risk
Factors--Effective Subordination" and
"Description of New Notes--Certain Covenants--
Subsidiary Guarantees."
CERTAIN COVENANTS........... The Indenture contains certain covenants that,
among other things, limit the ability of the
Company and its subsidiaries to (i) incur
additional Indebtedness and issue preferred
stock, (ii) pay dividends or make other
restricted payments, (iii) engage in sale and
leaseback transactions, (iv) create certain
liens, (v) enter into certain transactions with
affiliates, (vi) sell assets of the Company or
its subsidiaries or (vii) enter into certain
mergers and consolidations. In addition, under
certain circumstances, the Company will be
required to offer to purchase the Notes with the
net cash proceeds of certain sales and other
dispositions of assets at a price equal to 100%
of the principal amount of the Notes, plus
accrued and unpaid interest and Liquidated
Damages, if any, thereon to the date of purchase.
See "Description of New Notes--Certain
Covenants."
EXCHANGE OFFER; Pursuant to the Registration Rights Agreement,the
REGISTRATION RIGHTS......... Company agreed to file a registration statement
(the "Exchange Offer Registration Statement")
with respect to the Exchange Offer. The
Registration Statement of which this Prospectus
is a part constitutes the Exchange Offer
Registration Statement. If, among other things,
any holder of the Transfer Restricted Securities
(as defined) notifies the Company that such
holder (A) is prohibited by law or Commission
policy from participating in the Exchange Offer,
(B) may not resell the Exchange Notes acquired by
it in the Exchange Offer to the public without
delivering a prospectus, and the prospectus
contained
8
<PAGE>
in the Exchange Offer Registration Statement is
not appropriate or available for such resales, or
(C) is a broker-dealer and holds Notes acquired
directly from the Company or an affiliate of the
Company, then the Company will be required to
provide a shelf registration statement (the
"Shelf Registration Statement") to cover resales
of the Notes by the holders thereof. If the
Company fails to satisfy these registration
obligations, it will be required to pay
Liquidated Damages to the holders of the Notes
under certain circumstances. See "Description of
New Notes--Registration Rights; Liquidated
Damages."
SEE "RISK FACTORS" OF THIS PROSPECTUS FOR A DESCRIPTION OF CERTAIN RISKS TO
BE CONSIDERED BY HOLDERS WHO TENDER THEIR OLD NOTES IN THE EXCHANGE OFFER.
9
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL AND OTHER DATA
In the Transactions, the Company was acquired by NAC. The Company was
previously a wholly owned subsidiary of FFMC, a wholly owned subsidiary of
First Data. The Company was acquired in June 1990 by FFMC. First Data's October
1995 merger with FFMC, accounted for under the pooling of interests method,
resulted in the combination of First Data's accounts receivable management
company, ACB, with the Company. ACB was primarily the result of two businesses
purchased and combined by First Data in 1993. The following table presents
summary consolidated historical and unaudited consolidated pro forma financial
and other data of the Company, as of the dates and for the periods indicated.
The summary historical financial data should be read in conjunction with the
consolidated financial statements and related notes for these periods and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this Prospectus. The summary historical
financial information for each of the years ended December 31, 1995, 1996 and
1997 has been derived from the consolidated financial statements of the
Company, which have been audited by Ernst & Young LLP, independent auditors.
The summary historical financial information for each of the years ended
December 31, 1993 and 1994 and the three months ended March 31, 1997 and 1998
has been derived from unaudited consolidated financial statements of the
Company and, in the opinion of management, includes all adjustments (consisting
of normal, recurring, and other adjustments) necessary for a fair presentation
of financial position and results of operations and cash flows as of the dates
and for the periods indicated. Consolidated results of operations for interim
periods are not necessarily indicative of results to be expected for the full
year. The unaudited pro forma consolidated income statement data and other
operating data give effect to the Transactions and the acquisition of
Consolidated as if they had occurred at January 1, 1997. The consolidated pro
forma financial information is unaudited and does not purport to represent what
the Company's results of operations would actually have been if the
Transactions had occurred on January 1, 1997 and do not project the Company's
financial position or results of operations for any future periods. See
"Unaudited Condensed Consolidated Pro Forma Financial Information" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------------------------------ ---------------------
PRO FORMA PREDECESSOR SUCCESSOR
1993 1994 1995 1996 1997 1997(1)(2) 1997 1998
------- -------- -------- -------- -------- ----------- ----------- ---------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenue................. $91,672 $143,376 $154,506 $138,905 $119,013 $121,315 $30,788 $29,925
Expenses:
Salaries and benefits.. 49,824 74,353 81,114 73,636 66,376 67,038 18,023 17,039
Telecommunication...... 6,431 10,075 9,539 7,341 6,236 6,333 1,622 1,359
Occupancy.............. 3,473 4,959 5,148 4,602 5,014 5,061 1,153 1,158
Other operating and
administrative........ 17,531 22,963 27,102 26,586 22,516 23,969 5,864 3,712
Depreciation and
amortization.......... 7,467 10,002 11,893 12,021 14,364 24,749 3,198 6,130
Provision for merger
costs, employee
severance and office
closure (3)........... -- -- 13,562 4,323 679 679 679 --
Overhead charges from
First Data............ 917 1,434 1,545 1,389 1,190 -- 310 --
------- -------- -------- -------- -------- -------- ------- -------
Operating income
(loss)................. 6,029 19,590 4,603 9,007 2,638 (6,514) (61) 527
Interest expense, net.. 526 680 501 241 122 12,798 31 4,088
------- -------- -------- -------- -------- -------- ------- -------
Income (loss) before
income taxes and
extraordinary item..... 5,503 18,910 4,102 8,766 2,516 (19,312) (92) (3,561)
Provision (benefit) for
income taxes (4)....... 3,008 8,438 2,611 4,449 2,423 -- (50) --
------- -------- -------- -------- -------- -------- ------- -------
Income (loss) before
extraordinary item..... 2,495 10,472 1,491 4,317 93 (19,312) (42) (3,561)
Extraordinary loss on
debt extinguishment.... -- -- -- -- -- -- -- 869
------- -------- -------- -------- -------- -------- ------- -------
Net Income (loss)....... $ 2,495 $ 10,472 $ 1,491 $ 4,317 $ 93 $(19,312) $ (42) $(4,430)
======= ======== ======== ======== ======== ======== ======= =======
OTHER DATA:
Ratio of earnings to
fixed charges (5)...... 4.8x 10.2x 3.1x 6.2x 2.4x -- -- --
Adjusted EBITDA (6)..... $13,496 $ 29,592 $ 30,058 $ 25,351 $ 21,169 $ 22,402 $ 5,369 $ 6,657
Adjusted EBITDA margin
(6).................... 14.7% 20.6% 19.5% 18.3% 17.8% 18.5% 17.4% 22.2%
Net cash provided (used)
by:
Operating activities... N/A N/A 20,973 23,898 14,624 N/A 721 6,158
Investing activities... N/A N/A (7,748) (7,824) (29,626) N/A (27,080) (1,117)
Financing activities... N/A N/A (14,488) (18,197) 12,281 N/A 24,644 (63)
Capital expenditures.... N/A $ 5,800 $ 5,016 $ 7,005 5,465 5,465 2,919 1,117
Pro Forma ratio of
Adjusted EBITDA to cash
interest expense (7)... 1.8x
Pro Forma ratio of total
indebtedness to
Adjusted EBITDA........ 5.6x
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
PREDECESSOR SUCCESSOR
AS OF AS OF
DECEMBER 31, MARCH 31,
1997 1998
------------ ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash.................................................... $ 1,388 $ 6,366
Total assets............................................ 190,865 176,136
Total indebtedness (8).................................. 113,901 124,938
Stockholder's equity.................................... 63,879 34,545
</TABLE>
- --------
(1) Assumes the acquisition of Consolidated and the consummation of the
Transactions (see "Prospectus Summary--the Transactions") occurred on
January 1, 1997, and gives pro forma effect to the consummation of the
Transactions and the application of the estimated net proceeds therefrom as
if each had occurred on January 1, 1997.
(2) In February 1997, the Company acquired certain assets of Consolidated for
$23.3 million. The acquisition was accounted for under the purchase method
of accounting and, accordingly, the operating results of Consolidated are
included in the Company's consolidated financial statements from the date
of acquisition.
(3) The provision for merger costs, employee severance and office closure
represents charges incurred as a result of integrating the operations of
the Company and ACB, which resulted from First Data's 1995 merger with
FFMC.
(4) On a pro forma basis, the Company's assumed effective tax rate is 42%. The
Company has provided a valuation allowance on the entire pro forma tax
benefit, as it is not "more likely than not" that the benefit will be
realized by the Company.
(5) For purposes of the ratio of earnings to fixed charges, (i) earnings
include earnings before income taxes and fixed charges and (ii) fixed
charges consist of interest on all indebtedness, amortization of deferred
financing costs and that portion of rental expense (one-third) that the
Company believes to be representative of interest expense. On a pro forma
basis, the Company's earnings were insufficient to cover fixed charges by
$19.3 million for the year ended December 31, 1997 and, on an historical
basis, $0.1 million and $3.6 million for the three month periods ended
March 31, 1997 and 1998, respectively.
(6) Adjusted EBITDA is earnings before interest, taxes, depreciation,
amortization, provision for merger costs, employee severance and office
closure, a non-recurring contract settlement expense of approximately $1.6
million, a non-recurring settlement expense with the Federal Trade
Commission ("FTC") and a non-recurring expense related to DOE chargebacks
aggregating to approximately $1.9 million during the year ended December
31, 1997. Adjusted EBITDA does not represent cash flows as defined by
generally accepted accounting principles and does not necessarily indicate
that cash flows are sufficient to fund all of the Company's cash needs.
Adjusted EBITDA should not be considered in isolation or as a substitute
for net income (loss), cash flows from operating activities or other
measures of liquidity determined in accordance with generally accepted
accounting principles. The Adjusted EBITDA margin represents Adjusted
EBITDA as a percentage of revenue. Management believes that these ratios
should be reviewed by prospective investors because the Company uses them
as one means of analyzing its ability to service its debt, the Company's
lenders use them for the purpose of analyzing the Company's performance and
the Company understands that they are used by certain investors as one
measure of a company's historical ability to service its debt. Not all
companies calculate EBITDA in the same fashion and therefore these ratios
as presented may not be comparable to other similarly titled measures of
other companies.
(7) Cash interest expense includes an assumed commitment fee of 0.375% on the
unused portion of the Revolving Credit Facility and excludes approximately
$0.5 million of amortization of deferred financing charges for the year
ended December 31, 1997.
(8) Actual total indebtedness as of December 31, 1997 includes a $112.5 million
non-interest bearing note payable to First Data.
11
<PAGE>
RISK FACTORS
In addition to the other information contained in this Prospectus,
prospective investors should consider carefully the following risk factors
before purchasing the Notes offered hereby. Certain statements in this
Prospectus that are not factual constitute "forward-looking statements." Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors, many of which are beyond the Company's control, that may cause
the actual results of the Company to be materially different from results
expressed or implied by such forward-looking statements. Such risks,
uncertainties and other factors include, but are not limited to, the
following:
SUBSTANTIAL LEVERAGE; ABILITY TO SERVICE OUTSTANDING INDEBTEDNESS
The Company is highly leveraged. As of March 31, 1998, the Company's total
debt was approximately $124.9 million and its total stockholder's equity was
approximately $34.5 million. The Company's fixed charges for the year ended
December 31, 1997, on a pro forma basis after giving effect to the
Transactions, would have exceeded its earnings by approximately $19.3 million.
The Company's operating results will be affected by significant fixed charges
related to its debt. See "Capitalization" and "Unaudited Condensed
Consolidated Pro Forma Financial Information" and "Selected Historical
Financial Information and Other Data."
The Company's ability to make scheduled payments of the principal of, or to
pay the interest on, or to refinance, its debt (including the Notes) is
dependent upon its future performance, which, to a certain extent, is subject
to general economic, financial, competitive, legislative, regulatory and other
factors beyond its control. Management believes that, based on current levels
of operations and anticipated improvements in operating results, cash flows
from operations and borrowings available under the Senior Credit Facilities
will be adequate to allow for anticipated capital expenditures for the next
several years, to fund working capital requirements and to make required
payments of principal and interest on its debt for the next several years.
However, if the Company is unable to generate sufficient cash flows from
operations in the future, it may be necessary for the Company to refinance all
or a portion of its debt or to obtain additional financing, but there can be
no assurance that the Company will be able to effect such refinancing or
obtain additional financing on commercially reasonable terms or at all. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
The degree to which the Company is leveraged could have important
consequences to the Company and the holders of Notes, including, but not
limited to, the following: (i) the Company's ability to obtain additional
financing in the future for acquisitions, working capital, capital
expenditures, general corporate or other purposes may be impaired, (ii) a
substantial portion of the Company's cash flow from operations will be
dedicated to debt service and unavailable for other purposes, (iii) 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
and (iv) the Company is subject to a variety of restrictive covenants,
including, without limitation, significant financial and operating covenants
under the Senior Credit Facilities, the failure to comply with which could
result in events of default that, if not cured or waived, could restrict the
Company's ability to make payments of principal of, and interest on, the
Notes. See "Description of Senior Credit Facilities" and "Description of New
Notes."
EFFECTIVE SUBORDINATION
The New Notes will be, and the Old Notes are, general unsecured obligations
of the Company, rank senior in right of payment to all existing and future
subordinated Indebtedness of the Company and rank pari passu in right of
payment with all current and future unsecured senior Indebtedness of the
Company, including all borrowings under the Credit Agreement. The Company
currently has no Domestic Subsidiaries, however all of the Company's future
Domestic Subsidiaries, if any, will jointly and severally guarantee the Notes
on a senior unsecured basis. However, all borrowings under the Credit
Agreement are secured by a first priority lien on substantially all of the
assets of the Company and its Domestic Subsidiaries. The Subsidiary Guarantees
will
12
<PAGE>
rank senior to all existing and future subordinated Indebtedness of the
Guarantors and pari passu with all other unsecured senior Indebtedness of the
Guarantors, including guarantees of Indebtedness under the Credit Agreement.
Any Guarantor's obligations under the Credit Agreement, however, will be
secured by a lien on substantially all of the assets of such Guarantor, and
the Indenture restricts, but does not prohibit, the Guarantors from incurring
additional secured Indebtedness. The Credit Agreement is secured by
substantially all of the assets of the Company and its Domestic Subsidiaries.
Although the Notes constitute senior Indebtedness of the Company, the holders
of secured Senior Indebtedness would have a prior claim to the assets securing
such Indebtedness. In the event of any insolvency proceeding involving the
Company, the obligations of the Company under the Notes would be effectively
subordinated to any secured Senior Indebtedness of the Company. As of March
31, 1998, the aggregate principal amount of Indebtedness under the Credit
Agreement was approximately $24.9 million. See "Description of Senior Credit
Facilities."
RESTRICTIVE DEBT COVENANTS
The Indenture and the Senior Credit Facilities contain certain covenants
that restrict, among other things, the Company's ability to incur additional
Indebtedness, incur liens, pay dividends or make certain other restricted
payments, make investments, consummate certain asset sales, 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 Senior Credit Facilities contain certain other and more
restrictive covenants including restrictions on prepaying Indebtedness, such
as the Notes, and also require the Company to maintain specified financial
ratios and to satisfy certain financial condition tests. The Company's ability
to meet these financial ratio and financial condition tests can be affected by
events beyond its control 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 Senior Credit Facilities or the Indenture. If an event of default
under the Senior Credit Facilities should occur, the lenders thereunder could
elect to declare all amounts outstanding thereunder, together with accrued
interest, to be immediately due and payable. If the Company were unable to pay
those amounts, the lenders thereunder could proceed against the collateral
granted to them to secure that Indebtedness. Substantially all the assets of
the Company and its Domestic Subsidiaries will be pledged as collateral to
secure the Company's obligations under the Senior Credit Facilities. If the
indebtedness under the Senior Credit Facilities were to be accelerated, there
can be no assurance that the assets of the Company would be sufficient to
repay in full that Indebtedness and the other Indebtedness of the Company,
including the Notes. See "Description of New Notes--Certain Covenants" and
"Description of Senior Credit Facilities."
CLIENT CONCENTRATION
Revenue from American Express for the three months ended March 31, 1998 and
the years ended December 31, 1995, 1996 and 1997 accounted for approximately
31%, 27%, 30% and 28% of the Company's revenue, respectively. Revenue from the
DOE for three months ended March 31, 1998 and the years ended December 31,
1995, 1996 and 1997 accounted for approximately 18%, 26%, 23% and 17% of the
Company's revenue, respectively. In addition, the Company's ten largest
clients accounted for approximately 66% of the Company's revenue for the
fiscal year 1996, for approximately 63% of the Company's revenue for the year
ended December 31, 1997, and for approximately 69% of the Company's revenue
for the three months ended March 31, 1998. The loss of, significant
curtailment of placements by, or change in placement or compensation practices
of one or more of these clients could have a material adverse effect on the
Company. See "Business--Customers."
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 may have greater financial and operating flexibility.
See "Business--Competition." In addition, despite what the Company believes to
be a trend among credit grantors to outsource their accounts receivable
functions, many of the Company's clients and prospective clients internally
13
<PAGE>
satisfy varying portions of their accounts receivable management requirements.
Moreover, the Company has recently expanded its services to include pre-
chargeoff accounts receivable and on-site collection management services,
which certain of the Company's competitors have previously undertaken. There
can be no assurance that the Company's clients and potential clients will not
decide to increase their reliance on internal accounts receivable capabilities
or the Company's competitors to provide these services.
CONTRACT RISKS
The Company enters into contracts with most of its clients which define,
among other things, fee arrangements, scope of services and termination
provisions. Clients may usually terminate such contracts on 30 or 60 days
notice. Accordingly, there can be no assurance that existing clients will
continue to use the Company's services at the historical level, if at all.
Under the terms of these contracts, clients are not required to place accounts
receivable with the Company but do so on a discretionary basis. In addition,
substantially all of the Company's contracts are on a contingent fee basis in
which the Company recognizes revenue only as accounts receivable are
recovered. See "Business."
RATIONALIZATION OF OPERATIONS
The Company intends to improve its financial results through the
rationalization of operations pursuant to the Operating Improvement Plan. In
connection with the Operating Improvement Plan, the Company expects to reduce
operating expenses, close certain facilities and enlarge certain other
facilities. 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.
GOVERNMENT REGULATION
Certain of the Company's operations are subject to compliance with the
federal Fair Debt Collection Practices Act ("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. See "--Litigation."
CONTROL OF COMPANY
All of the capital stock of the Company is owned by NAC. As of May 31, 1998,
47.8% and 45.4% of NAC's Common Stock was beneficially owned by affiliates of
Centre Partners and WPG, respectively. The holders of a majority of NAC's
Common Stock can, indirectly, elect all of the directors of the Company and
approve or disapprove certain fundamental corporate transactions, including
mergers and the sale of substantially all of the Company's assets. By reason
of such stock ownership, Centre Partners and WPG, may have interests which
could be in conflict with the holders of the Notes. In addition, pursuant to a
Stockholders Agreement entered into on December 31, 1997, certain of NAC's
stockholders have veto rights over significant corporate transactions. See
"Management" and "Stock Ownership and Certain Transactions."
LITIGATION
Due to the nature of its operations, the Company is regularly a defendant in
various legal proceedings involving claims for damages. The Company is
currently a defendant in two class action lawsuits filed in the U.S. District
Court for the Northern District of Illinois, in which it is alleged that the
Company violated certain
14
<PAGE>
provisions of the FDCPA. The Company expects to settle one of these class
actions for an amount less than $150,000 and is continuing to defend the
remaining putative class action suit. The FDCPA sets the maximum liability for
such class action suits at the lesser of $0.5 million or 1% of the defendants'
net worth. 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 settlement
and judgments) have not historically had a material adverse effect on the
Company's financial condition. 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. In 1992, the
Company reached a settlement with the Federal Trade Commission (the "FTC") in
an action commenced by the FTC in which it alleged the Company had violated
the FDCPA. The matter was resolved with a Consent Decree, in which the
Company, without admitting any liability, agreed to take additional steps to
ensure compliance with the FDCPA and paid a penalty of $100,000. The FTC
recently completed an investigation regarding the Company's compliance with
the Consent Decree from January 1, 1994 to date. Without admitting liability
for any of the alleged violations of the FDCPA, the Company has proposed to
settle the matter by paying a civil penalty and implementing certain
procedures in connection with the operation of the business, consisting
primarily of disclosure to debtors of their rights and enhanced training and
compliance reporting requirements. In connection with the Merger, First Data
agreed to indemnify the Company for any monetary penalty and expenses incurred
in connection with the FTC investigation. The settlement proposal is subject
to approval by the FTC, the U.S. Department of Justice and the court in which
the matter was initiated. The Company believes that compliance by the Company
with the provisions of the Consent Decree, as well as with the additional
provisions related to the proposed settlement of the FTC investigation, will
not materially affect the Company's financial condition or ongoing operations.
See "Business--Litigation."
CHANGE OF CONTROL
Upon the occurrence of any Change of Control, the Company will be required
to make an offer to purchase all of the Notes issued and then outstanding
under the Indenture at a purchase price equal to 101% of the principal amount
thereof, plus accrued and unpaid interest and Liquidated Damages, if any, to
the date of purchase. However, there can be no assurance that sufficient funds
will be available to the Company to purchase any of the Notes tendered
pursuant to such a Change of Control offer. Moreover, restrictions in the
Senior Credit Facilities prohibit the Company from making such required
repurchases. Therefore, any such repurchases would constitute an event of
default under the Senior Credit Facilities. See "Description of Senior Credit
Facilities."
FRAUDULENT CONVEYANCE
Under applicable provisions of the United States Bankruptcy Code or
comparable provisions of state fraudulent transfer or conveyance laws, if the
Company, at the time it issues the Notes, (a) incurs such Indebtedness with
the intent to hinder, delay or defraud creditors, or (b)(i) receives less than
reasonably equivalent value or fair consideration for incurring such
Indebtedness and (ii)(A) is insolvent at the time of the incurrence, (B) is
rendered insolvent by reason of such incurrence (after the application of the
proceeds of the Offering), (C) is engaged or is about to engage in a business
or transaction for which the assets that will remain with the Company
constitute unreasonably small capital to carry on its business, or (D) intends
to incur, or believes that it will incur, debts beyond its ability to pay such
debts as they mature, then, in each such case, a court of competent
jurisdiction could avoid, in whole or in part, the Notes. The measure of
insolvency for purposes of the foregoing will vary depending upon the law
applied in such case. Generally, however, the Company would be considered
insolvent if the sum of its debts, including contingent liabilities, was
greater than all of its assets at fair valuation or if the present fair
saleable value of its assets was less than the amount that would be required
to pay the probable liability on its existing debts, including contingent
liabilities, as they become absolute and matured.
Based upon financial and other information currently available to it, the
Company believes that, for purposes of the United States Bankruptcy Code and
state fraudulent transfer or conveyance laws, (a) the Notes are being issued
without the intent to hinder, delay or defraud creditors and for proper
purposes and in good faith, (b) the Company has received reasonably equivalent
value or fair consideration for incurring such Indebtedness and (c) the
Company, after the issuance of the Notes and the application of the net
proceeds of the Notes, will be solvent,
15
<PAGE>
will have sufficient capital for carrying on its businesses and will be able
to pay its debts as they mature. There can be no assurance, however, that a
court passing on such questions would agree with the Company's view. See "--
Substantial Leverage; Ability to Service Outstanding Indebtedness,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Description of New Notes" and "Description of Senior Credit
Facilities."
LACK OF PUBLIC MARKET
The New Notes are being offered to the Holders of the Old Notes. The Old
Notes constitute a new class of securities with no established trading market.
The Old Notes are eligible for trading in the Private Offerings, Resales and
Trading through Automated Linkages ("PORTAL") market. To the extent that Old
Notes are tendered and accepted in the Exchange Offer, the trading market for
the remaining untendered Old Notes could be adversely affected. There is no
existing trading market for the New Notes, and there can be no assurance
regarding the future development of a market for the New Notes, or the ability
of Holders of the New Notes to sell their New Notes or the price at which such
Holders may be able to sell their New Notes. If such a market were to develop,
the New Notes could trade at prices that may be higher or lower than their
principal amount or purchase price, depending on many factors, including
prevailing interest rates, the Company's operating results and the market for
similar securities. The Initial Purchaser has advised the Company that it
currently intends to make a market in the New Notes. The Initial Purchaser is
not obligated to do so, however, and any market-making with respect to the New
Notes may be discontinued at any time without notice. Therefore, there can be
no assurance as to the liquidity of any trading market for the New Notes or
that an active public market for the New Notes will develop. The Company does
not intend to apply for listing or quotation of the New Notes on any
securities exchange or stock market.
Historically, the market for noninvestment grade debt has been subject to
disruptions that have caused substantial volatility in the prices of such
securities. There can be no assurance that the market for the New Notes will
not be subject to similar disruptions. Any such disruptions may have an
adverse effect on Holders of the New Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE OLD NOTES
Holders of Old Notes who do not exchange their Old Notes pursuant to the
Exchange Offer will continue to be subject to the provisions in the Indenture
regarding transfer and exchange of the Old Notes and the restrictions on
transfer of such Old Notes as set forth in the legend thereon as a consequence
of the issuance of the Old Notes pursuant to exemptions from, or in
transactions not subject to, the registration requirements of the Securities
Act and applicable state securities laws. In general, the Old Notes may not be
offered or sold, unless registered under the Securities Act and applicable
state securities laws. The Company does not currently anticipate that it will
register Old Notes under the Securities Act. See "Description of the Notes--
Exchange Offer, Registration Rights." Based on interpretations by the staff of
the SEC, as 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 Old Notes 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 or such holders' business and such holders, other than
broker-dealers, have no arrangement or understanding with any person to
participate in the distribution of such New Notes. However, the SEC has not
considered the Exchange Offer in the context of a no-action letter and there
can be no assurance that the staff of the SEC would make a similar
determination with respect to the Exchange Offer as in such other
circumstances. Each holder, other than a broker-dealer, must acknowledge that
it is not engaged in, and does not intend to engage in, a distribution of such
New Notes and has no arrangement or understanding to participate in a
distribution of New Notes. If any Holder is an affiliate of the Company or is
engaged in or intends to engage in or has any arrangement or understanding
with respect to the distribution of the New Notes to be acquired pursuant to
the Exchange Offer, such Holder (i) may not rely on the applicable
interpretations of the
16
<PAGE>
staff of the SEC and (ii) must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any resale of
such New Notes. Each broker-dealer that receives New Notes for its own account
in exchange for Old Notes pursuant to the Exchange Offer must acknowledge that
such Old Notes were acquired by such broker-dealer as a result of market-
making activities or other trading activities and that it will deliver a
prospectus in connection with any resale transaction. 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 New Notes received 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. 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." 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 qualified for sale in such jurisdictions
or an exemption from registration or qualification is available and is
complied with. The Company has agreed, pursuant to the Registration Rights
Agreement, subject to certain limitations specified therein, to register or
qualify the New Notes for offer or sale under the securities laws of such
jurisdiction as any holder reasonably requests in writing. Unless a holder so
requests, the Company does not currently intend to register or qualify the
sale of the New Notes in any such jurisdictions. See "The Exchange Offer."
17
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of March
31, 1998. This table should be read in conjunction with the consolidated
financial statements of the Company and notes thereto included elsewhere in
this Prospectus.
<TABLE>
<CAPTION>
MARCH 31, 1998
----------------------
(DOLLARS IN THOUSANDS)
<S> <C>
Cash..................................................... $ 6,366
=========
Total debt (including current maturities):
Senior Credit Facilities:
Term Loan............................................. $ 24,938
Revolving Credit Facility (1)......................... --
Notes.................................................. 100,000
---------
Total debt............................................... 124,938
Total stockholder's equity............................... 34,545
---------
Total capitalization..................................... $ 159,483
=========
</TABLE>
18
<PAGE>
SELECTED HISTORICAL FINANCIAL INFORMATION AND OTHER DATA
In the Transactions, the Company was acquired by NAC. The Company was
previously a wholly owned subsidiary of FFMC, a wholly owned subsidiary of
First Data. The Company was acquired in June 1990 by FFMC. First Data's
October 1995 merger with FFMC, accounted for under the pooling of interests
method, resulted in the combination of First Data's accounts receivable
management company, ACB, with the Company. ACB was primarily the result of two
businesses purchased and combined by First Data in 1993. The following table
presents selected historical consolidated financial information of the
Company, as of the dates and for the periods indicated. The selected
consolidated historical financial information should be read in conjunction
with the consolidated financial statements and notes thereto and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere in this Prospectus. The historical consolidated financial
information for each of the years ended December 31, 1995, 1996 and 1997, has
been derived from the consolidated financial statements of the Company which
have been audited by Ernst & Young LLP, independent auditors. The historical
consolidated financial information for each of the years ended December 31,
1993 and 1994 and the three months ended March 31, 1997 and 1998 has been
derived from unaudited consolidated financial statements of the Company and,
in the opinion of management, includes all adjustments (consisting of normal,
recurring, and other adjustments) necessary for a fair presentation of
financial position and results of operations and cash flows as of the dates
and for the periods indicated. Consolidated results of operations for interim
periods are not necessarily indicative of results to be expected for the full
year.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
----------------------------------------------- -----------------------------------
1993 1994 1995 1996 1997 1997 1998
------- -------- -------- -------- -------- ---------- ----------
(UNAUDITED) PREDECESSOR SUCCESSOR
(DOLLARS IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenue................. $91,672 $143,376 $154,506 $138,905 $119,013 $ 30,788 $ 29,925
Expenses
Salaries and benefits.. 49,824 74,353 81,114 73,636 66,376 18,023 17,039
Telecommunication...... 6,431 10,075 9,539 7,341 6,236 1,622 1,359
Occupancy.............. 3,473 4,959 5,148 4,602 5,014 1,153 1,158
Other operating and ad-
ministrative.......... 17,531 22,963 27,102 26,586 22,516 5,864 3,712
Depreciation and amor-
tization.............. 7,467 10,002 11,893 12,021 14,364q 3,198 6,130
Provision for merger
costs, employee sever-
ance and
office closure (2).... -- -- 13,562 4,323 679 679 --
Overhead charges from
First Data ........... 917 1,434 1,545 1,389 1,190 310 --
------- -------- -------- -------- -------- ---------- ----------
Operating income....... 6,029 19,590 4,603 9,007 2,638 (61) 527
Interest expense, net.. 526 680 501 241 122 31 4,088
------- -------- -------- -------- -------- ---------- ----------
Income (loss) before
income taxes and ex-
traordinary item...... 5,503 18,910 4,102 8,766 2,516 (92) (3,561)
Provision (benefit) for
income taxes.......... 3,008 8,438 2,611 4,449 2,423 (50) --
------- -------- -------- -------- -------- ---------- ----------
Income (loss) before
extraordinary item.... 2,495 10,472 1,491 4,317 93 (42) (3,561)
Extraordinary loss on
debt extinguishment... -- -- -- -- -- -- 869
------- -------- -------- -------- -------- ---------- ----------
Net income (loss)...... $ 2,495 $ 10,472 $ 1,491 $ 4,317 $ 93 $ (42) $ (4,430)
======= ======== ======== ======== ======== ========== ==========
OTHER DATA:
Ratio of earnings to
fixed charges (3)..... 4.8x 10.2x 3.1x 6.2x 2.4x -- --
Adjusted EBITDA (4).... $13,496 $ 29,592 $ 30,058 $ 25,351 $ 21,169 $ 5,369 $ 6,657
Adjusted EBITDA margin
(4)................... 14.7% 20.6% 19.5% 18.3% 17.8% 17.4% 22.2%
NET CASH PROVIDED (USED)
BY:
Operating activities... N/A N/A 20,973 23,898 14,624 721 6,158
Investing activities... N/A N/A (7,748) (7,824) (29,626) (27,080) (1,117)
Financing activities... N/A N/A (14,488) (18,197) 12,281 24,644 (63)
Capital expenditures... N/A $ 5,800 $ 5,016 $ 7,005 $ 5,465 2,919 1,117
BALANCE SHEET DATA:
Cash....................................................... $ 1,388 $ 2,394 $ 6,366
Total assets............................................... 190,865 190,590 176,136
Total indebtedness (5)..................................... 113,901 124,921 124,938
Stockholder's equity....................................... 63,879 46,561 34,545
</TABLE>
19
<PAGE>
(1) In February 1997, the Company acquired certain assets of Consolidated for
$23.3 million. The acquisition was accounted for under the purchase method
of accounting and, accordingly, the operating results of Consolidated are
included in the Company's consolidated financial statements from the date
of acquisition.
(2) The provision for merger costs, employee severance and office closure
represents charges incurred as a result of integrating the operations of
the Company and ACB, which resulted from First Data's 1995 merger with
FFMC.
(3) For purposes of the ratio of earnings to fixed charges, (i) earnings
include earnings before income taxes and fixed charges and (ii) fixed
charges consist of interest on all indebtedness, amortization of deferred
financing costs and that portion of rental expense (one-third) that the
Company believes to be representative of interest expense. The Company's
earnings were insufficient to cover fixed charges by $0.1 million and $3.6
million for the three months ended March 31, 1997 and 1998, respectively.
(4) Adjusted EBITDA is earnings before interest, taxes, depreciation,
amortization and provision for merger costs, employee severance and office
closure, a non-recurring contract settlement expense of approximately $1.6
million, a non-recurring settlement expense with the FTC and a non-
recurring expense related to DOE chargebacks aggregating to approximately
$1.9 million during the year ended December 31, 1997. Adjusted EBITDA does
not represent cash flows as defined by generally accepted accounting
principles and does not necessarily indicate that cash flows are
sufficient to fund all of the Company's cash needs. Adjusted EBITDA should
not be considered in isolation or as a substitute for net income (loss),
cash flows from operating activities or other measures of liquidity
determined in accordance with generally accepted accounting principles.
The Adjusted EBITDA margin represents Adjusted EBITDA as a percentage of
revenue. Management believes that these ratios should be reviewed by
prospective investors because the Company uses them as one means of
analyzing its ability to service its debt, the Company's lenders use them
for the purpose of analyzing the Company's performance and the Company
understands that they are used by certain investors as one measure of a
company's historical ability to service its debt. Not all companies
calculate EBITDA in the same fashion and therefore these ratios as
presented may not be comparable to other similarly titled measures of
other companies.
(5) Total indebtedness as of December 31, 1997 includes a $112.5 million non-
interest bearing payable to First Data.
20
<PAGE>
UNAUDITED CONDENSED CONSOLIDATED
PRO FORMA FINANCIAL INFORMATION
The following unaudited condensed consolidated pro forma statement of
operations for the year ended December 31, 1997 gives effect to the
Transactions and the acquisition of Consolidated Collection Co. (acquired
February 28, 1997) as though they had occurred on January 1, 1997.
The unaudited condensed consolidated pro forma statement of operations does
not purport to represent what the Company's results of operations would have
been if the events described above had occurred as of the date indicated or
what results will be for any future periods. The unaudited condensed
consolidated pro forma Statement of Operations is based upon the assumptions
that the Company believes are reasonable and should be read in conjunction
with the consolidated financial statements and accompanying notes thereto and
"Use of Proceeds" included elsewhere in this Prospectus.
The acquisition of the Company by NAC has been accounted for on a pro forma
basis by the purchase method of accounting, and accordingly the purchase price
of $157.2 million (including estimated fees and expenses of approximately $2.0
million) has been preliminarily allocated to the assets acquired and
liabilities assumed based upon the estimated fair values as of December 31,
1997. The final allocation of such purchase price, and the resulting
amortization expense in the accompanying unaudited condensed consolidated pro
forma statements of operations, may differ from the preliminary estimates
pending the completion of appraisal studies and management's evaluation of the
assets and liabilities of the Company. Management does not believe that either
adjustments to the preliminary allocation of the purchase price or the
resolution of any known contingencies will have a material impact on the
unaudited condensed consolidated pro forma financial information presented.
The excess of such purchase price over the estimated fair values of
identifiable tangible and intangible net assets has been recorded as goodwill,
which is amortized over 30 years on a straight-line basis.
21
<PAGE>
UNAUDITED CONDENSED CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS AND
OTHER DATA FOR THE YEAR ENDED DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
CONSOLIDATED PRO FORMA
HISTORICAL COLLECTION CO.(A) ADJUSTMENTS AS ADJUSTED
---------- ----------------- ----------- -----------
<S> <C> <C> <C> <C>
Revenue................. $119,013 $2,302 $ -- $121,315
Expenses:
Salaries and benefits.. 66,376 767 (105)(b) 67,038
Telecommunication...... 6,236 97 -- 6,333
Occupancy.............. 5,014 47 -- 5,061
Other operating and ad-
ministrative.......... 22,516 633 820 (c) 23,969
Depreciation and amor-
tization.............. 14,364 4 10,381 (d) 24,749
Provision for merger
costs, employee sever-
ance and office clo-
sure.................. 679 -- -- 679
Overhead charges from
First Data............ 1,190 -- (1,190)(e) --
-------- ------ -------- --------
Total expenses.......... 116,375 1,548 9,906 127,829
-------- ------ -------- --------
Operating income
(loss)................. 2,638 754 (9,906) (6,514)
Interest expense
(income)............... 122 (31) 12,707 (f) 12,798
-------- ------ -------- --------
Income (loss) before
income taxes........... 2,516 785 (22,613) (19,312)
Provision (benefit) for
income taxes........... 2,423 -- (2,423)(g) --
-------- ------ -------- --------
Net income (loss)....... $ 93 $ 785 $(20,190) $(19,312)
======== ====== ======== ========
OTHER DATA
Pro forma ratio of
earnings to fixed
charges (h)............ --
Pro forma Adjusted
EBITDA (i)............. $22,402
Pro forma ratio of
Adjusted EBITDA to cash
interest expense (j)... 1.8x
</TABLE>
22
<PAGE>
NOTES TO UNAUDITED CONDENSED CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS
AND OTHER DATA FOR THE YEAR ENDED DECEMBER 31, 1997
(a) Represents the unaudited historical results of operations of Consolidated
for the period from January 1, 1997 to February 28, 1997 (date of
acquisition).
(b) Represents the elimination of salaries and benefits paid to certain former
executives of Consolidated. Pursuant to the Consolidated purchase
agreement, these executives' employment agreements were cancelled at the
time of acquisition. The Company believes that the inclusion in the
unaudited condensed consolidated pro forma statement of operations of the
salaries paid under these agreements before termination would be
inappropriate since they represent expenses incurred which the Company
would not have incurred during the period had the Company acquired
Consolidated at the beginning of the period.
(c) Represents an increase in other operating and administrative expenses
based on the estimated current value of services required to replace those
activities included in "Overhead charges from First Data."
(d) Represents the increase in amortization and depreciation resulting from
the Transactions, as follows:
<TABLE>
<CAPTION>
Amortization
of covenant
not to com-
pete......... $ 1,425
Amortization
of the value
attributable
to future
revenue from
existing
placements at
the date of
acquisition,
less the di-
rect costs of
collection... 14,500
Amortization
of goodwill
attributable
to the acqui-
sition....... 4,100
Elimination of
existing
goodwill and
other intan-
gible amorti-
zation....... (9,644)
<S> <C>
-------
$10,381
=======
</TABLE>
(e) Represents the elimination of the overhead cost allocation from First
Data.
(f) To reflect interest expense (and amortization of deferred financing fees)
on a pro forma basis as if the Transactions had been completed on January
1, 1997. Interest expense assumes a weighted average interest rate of
9.75% on all outstanding indebtedness and amortization of deferred
financing charges.
(g) The Company's assumed effective tax rate is 42%. The Company has provided
a valuation allowance on the entire tax benefit, as it is not "more likely
than not" that the benefit will be realized by the Company.
(h) For purposes of the pro forma ratio of earnings to fixed charges, (i)
earnings include earnings before income taxes and fixed charges and (ii)
fixed charges consist of interest on all debt, amortization of deferred
financing costs and that portion of rental expense (one-third) that the
Company believes to be representative of interest. On a pro forma basis,
the Company's earnings were insufficient to cover fixed charges by $19.3
million.
(i) Adjusted EBITDA is defined as earnings before interest, taxes,
depreciation, amortization, and provision for merger costs, employee
severance and office closure, a non-recurring contract settlement expense
of approximately $1.6 million, a non-recurring settlement expense with the
FTC and a non-recurring expense related to DOE chargebacks aggregating to
approximately $1.9 million. Adjusted EBITDA does not represent cash flows
as defined by generally accepted accounting principles and does not
necessarily indicate that cash flows are sufficient to fund all of the
Company's cash needs. EBITDA should not be considered in isolation or as a
substitute for net income (loss), cash flows from operating activities or
other measures of liquidity determined in accordance with generally
accepted accounting principles. Management believes that these ratios
should be reviewed by prospective investors because the Company uses them
as one means of analyzing its ability to service its debt, the Company's
lenders use them for the purpose of analyzing the Company's performance
and the Company understands that they are used by certain investors as one
measure of a company's historical ability to service its debt. Not all
companies calculate EBITDA in the same fashion and therefore these ratios
as presented may not be comparable to other similarly titled measures of
other companies.
(j) Cash interest expense includes an assumed commitment fee of 0.375% on the
unused portion of the Revolving Credit Facility and excludes approximately
$0.5 million of amortization of deferred financing charges.
23
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion is based upon and should be read in conjunction
with "Selected Consolidated Financial Data" and the consolidated financial
statements of the Company, including the notes thereto, included elsewhere in
this Prospectus.
OVERVIEW
The Company was acquired from First Data by NAC on December 31, 1997, in
connection with the Transactions. The Company was previously a wholly owned
subsidiary of FFMC, which is a wholly owned subsidiary of First Data. The
Company was acquired in June 1990 by FFMC. First Data's October 1995 merger
with FFMC, accounted for under the pooling of interests method, resulted in
the combination of First Data's accounts receivable management company, ACB,
with the Company. ACB was primarily the result of two business combinations
consummated by First Data in 1993 accounted for under the purchase method of
accounting. The Company has historically relied on First Data for certain
general and administrative functions and cash management needs.
On February 28, 1997, the Company acquired certain assets of Consolidated, a
telecommunications accounts receivable management company based in Denver,
Colorado. The acquisition was accounted for under the purchase method of
accounting. The historical results of operations of the Company include the
revenue and expenses of Consolidated from the date of acquisition. Total
consideration for the purchase was $23.3 million. See "Unaudited Condensed
Consolidated Pro Forma Financial Information."
GENERAL
The Company is the among the largest independent providers of accounts
receivable management services in the United States, as measured by the
aggregate principal value of consumer debt placed by credit grantors for
collection. The Company offers contingent fee collection, pre-chargeoff
accounts receivable management and on-site collection management services,
primarily to financial institutions, government agencies, telecommunications
companies and healthcare providers. The Company provides sophisticated,
customized past-due account collection and accounts receivable management
services to its clients through a nationwide network of 15 call centers.
The Company has historically generated substantially all of its revenue from
the recovery of delinquent accounts receivable on a contingency fee basis. In
addition, the Company has begun providing pre-chargeoff accounts receivable
management services, in which the Company contacts debtors earlier in the
collection cycle in an effort to bring the account current before the credit
grantor formally charges off the past-due balance. Revenue is earned and
recognized upon collection of the accounts receivable for contingent fee
services and as work is performed for fixed fee services. The Company enters
into contracts with most of its clients which define, among other things, fee
arrangements, scope of services and termination provisions. Generally, the
contracts may be terminated by either party on 30 to 90 days' notice.
The Company's costs consist principally of payroll and related personnel
costs, telecommunication, occupancy and other operating and administrative
costs, and depreciation and amortization. Payroll and related personnel costs
consist of wages and salaries, commissions, bonuses and benefits. Other
operating and administrative costs include postage and mailing costs,
equipment maintenance, marketing, data processing and professional fees.
24
<PAGE>
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, THREE MONTHS ENDED MARCH 31,
-------------------------------------------- ----------------------------------
1997 1998
1995 % 1996 % 1997 % PREDECESSOR % SUCCESSOR %
-------- ----- -------- ----- -------- ----- ----------- ----- --------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue................. $154,506 100.0 $138,905 100.0 $119,013 100.0 $30,788 100.0 $29,925 100.0
Expenses:
Salaries and benefits.. 81,114 52.5 73,636 53.0 66,376 55.8 18,023 58.5 17,039 56.9
Telecommunication...... 9,539 6.2 7,341 5.3 6,236 5.2 1,622 5.3 1,359 4.5
Occupancy.............. 5,148 3.3 4,602 3.3 5,014 4.2 1,163 3.7 1,158 3.9
Other operating and ad-
ministrative.......... 27,102 17.5 26,586 19.1 22,516 18.9 5,864 19.0 3,712 12.4
Depreciation and amor-
tization.............. 11,893 7.7 12,021 8.7 14,364 12.1 3,198 10.4 6,130 20.5
Provision for merger
costs, employee
severance and office
closure............... 13,562 8.8 4,323 3.1 679 0.6 679 2.2 -- --
Overhead charges from
First Data............ 1,545 1.0 1,389 1.0 1,190 1.0 310 1.0 -- --
-------- ----- -------- ----- -------- ----- ------- ----- ------- -----
Total expenses.......... 149,903 97.0 129,898 93.5 116,375 97.8 30,849 100.1 29,398 98.2
-------- ----- -------- ----- -------- ----- ------- ----- ------- -----
Operating income
(loss)................. 4,603 3.0 9,007 6.5 2,638 2.2 (61) (0.2) 527 1.8
Interest expense, net... 501 0.3 241 0.2 122 0.1 31 (0.1) 4,088 13.7
-------- ----- -------- ----- -------- ----- ------- ----- ------- -----
Income before income
taxes and
extraordinary loss..... 4,102 2.7 8,766 6.3 2,516 2.1 (92) (0.3) (3,561) (11.9)
Provision (benefit) for
income taxes........... 2,611 1.7 4,449 3.2 2,423 2.0 (50) (0.2) -- --
-------- ----- -------- ----- -------- ----- ------- ----- ------- -----
Income (loss) before ex-
traordinary items...... 1,491 1.0 4,317 3.1 93 0.1 (42) (0.1) (3,561) (11.9)
Extraordinary loss on
debt
extinguishment......... -- -- -- -- -- -- -- -- 869 2.9
-------- ----- -------- ----- -------- ----- ------- ----- ------- -----
Net income (loss)....... $ 1,491 1.0 $ 4,317 3.1 $ 93 0.1 $ (42) (0.1) $(4,430) 14.8
======== ===== ======== ===== ======== ===== ======= ===== ======= =====
</TABLE>
Three Months ended March 31, 1998 Compared to Three Months ended March 31,
1997.
Revenue. Total revenue was $29.9 million for the three months ended March
31, 1998, as compared to $30.8 million for the three months ended March 31,
1997, a decrease of $0.9 million or 2.8%. The decline in revenue was primarily
the result of (i) a decrease in revenue earned from federal, state and local
government agencies of approximately $1.6 million, primarily caused by the
loss of United Student Aid Fund placements in 1997 and by delayed placements
by the GSA and the DOE under the new contract, which delays are also expected
to affect the Company's revenues and results of operations for the three
months ended June 30, 1998, (ii) a reduction in healthcare account placements
revenue of approximately $0.6 million primarily caused by a strategic shift
away from less profitable lines of business and (iii) an expense to increase
the Company's allowance for doubtful accounts of approximately $0.3 million.
Also during this period, one of the Company's clients announced the sale of
its credit card portfolio, which the Company expects will result in a
curtailment of placements for such accounts and a corresponding effect on
future revenues. This was partially offset by increased revenue of $1.5
million from telecommunications accounts, due primarily to the February 1997
acquisition of Consolidated, and $0.3 million from American Express. The
revenues generated for the three months ended March 31, 1998 from the
Consolidated business acquired in 1997 were also less than the historical
results of operations of Consolidated primarily due to a reduction in
placements by AT&T.
Expenses. Salaries and benefits expense was $17.0 million for the three
months ended March 31, 1998, as compared to $18.0 million, a decrease of $1.0
million or 5.5%. The decrease in salaries and benefits expense was primarily
the result of reduced corporate headcount.
Telecommunications expense was $1.4 million for the three months ended March
31, 1998, as compared to $1.6 million for the three months ended March 31,
1997, a decrease of $0.2 million or 16.2%. The decrease in telecommunications
expense was primarily the result of attaining additional operational
efficiencies and rate reductions.
Occupancy expense was unchanged at $1.2 million for the three months ended
March 31, 1998, as compared to the three months ended March 31, 1997.
25
<PAGE>
Other operating and administrative expenses were $3.7 million for the three
months ended March 31,1998, as compared to $5.9 million for the three months
ended March 31, 1997, a decrease of $2.2 million or 36.7%. The decrease in
other operating and administrative expenses was primarily the result of a $1.6
million contract settlement provision recorded in the three months ended March
31, 1997. The expenses in 1997 included $0.4 million for the out of balance
conditions described below under the heading "--Year Ended December 31, 1997
Compared to the Year Ended December 31, 1996--Expenses." There was no
equivalent expense in 1998.
There were no provisions for severance or office closures in the first
quarter of 1998, nor were there any overhead allocation charges from First
Data. These two items amounted to $1.0 million in 1997.
Depreciation and amortization expense was $6.1 million for the three months
ended March 31, 1998, as compared to $3.2 million for the three months ended
March 31, 1997, an increase of $2.9 million or 91.7%. This increase reflects
the amortization associated with the intangibles arising from the
Transactions.
Operating Income (Loss). Operating income was $0.5 million for the three
months ended March 31, 1998, as compared to a loss of $0.1 million for the
three months ended March 31, 1997, an improvement of $0.6 million. While the
decrease in revenue of $0.9 million was more than offset by savings in
operating expenses of $4.4 million, the increase in depreciation and
amortization expense of $2.9 million reduced operating income to $0.5 million.
Interest Expense. As a consequence of the form of financing of the
Transactions, interest expense for the three months ended March 31, 1998 was
$4.1 million, an increase of $4.1 million over the prior year. Previously the
Company was financed as part of First Data.
Extraordinary Loss. The extraordinary loss on debt extinguishment of $0.9
million represents the write- off of deferred debt issuance costs related to
the interim financing for the Merger.
Net Income (Loss). The Company incurred a net loss of $4.4 million for the
three months ended March 31, 1998, as compared to a loss of less than $0.1
million in the same period of 1997. The operating profit of $0.5 million was
more than offset by the increased interest and financing costs associated with
the Transactions.
Year Ended December 31, 1997 Compared to the Year Ended December 31, 1996.
Revenue. Total revenue was $119.0 million for the year ended December 31,
1997, as compared to $138.9 million for the year ended December 31, 1996, a
decrease of $19.9 million, or 14.3%. The decline in revenue was primarily the
result of (i) a decrease in the Company's revenue from federal, state and
local governmental agencies, caused primarily by (a) the DOE's decision in
June 1996 to reduce the contingency fee rates paid to all vendors, inducing
the Company, and (b) the DOE's decision in April 1997 to temporarily
discontinue placements while conducting a bidding process for new contracts,
both of which in turn caused revenue from the DOE to decrease from $31.6
million in the year ended December 31, 1996 to $20.7 million in the year ended
December 31, 1997, (ii) a decrease in the Company's revenue from American
Express from $41.8 million in the year ended December 31, 1996 to $33.7
million in the year ended December 31, 1997, caused primarily by a decline in
the contingency fee rates paid by American Express to all vendors, including
the Company, and a change in the composition of accounts receivable placed by
American Express with the Company and (iii) a strategic reduction in
healthcare account placements by the Company to eliminate a significant number
of unprofitable clients. The Company believes that these factors may continue
to affect revenues going forward. These decreases were partially offset by
revenue increases of approximately $10.2 million associated with the
acquisition of Consolidated in February 1997.
Expenses. Salaries and benefits expense was $66.4 million for the year ended
December 31, 1997 as compared to $73.6 million for the year ended December 31,
1996, a decrease of $7.2 million or 9.9%. Salaries
26
<PAGE>
and benefits expense, which largely comprises variable costs, decreased due to
the lower volume of account placements and lower contingency fee rates during
1997 as compared to 1996. Salaries and benefits expense, as a percent of
revenue, increased primarily due to the revenue decline associated with the
Company's contract with the DOE.
Telecommunications expense was $6.2 million for the year ended December 31,
1997 as compared to $7.3 million for the year ended December 31, 1996, a
decrease of $1.1 million or 15.1%. The decrease resulted from a lower volume
of account placements during 1997 as compared to 1996.
Occupancy expense was $5.0 million for the year ended December 31, 1997, as
compared to $4.6 million for the year ended December 1996, an increase of $0.4
million or 9.0%. The increase resulted primarily from the acquisition of
Consolidated in February 1997.
Other operating and administrative expense was $22.5 million for the year
ended December 31, 1997, as compared to $26.6 million for the year ended
December 31, 1996, a decrease of $4.1 million or 15.3%. The decrease resulted
primarily from operational costs incurred in 1996 associated with the
integration and consolidation of ACB and the Company and operational
improvements gained during 1997 as a result of certain efficiencies gained
from the merger of the Company and ACB, and cost savings resulting from the
Operating Improvement Plan. In addition, a significant portion of the decrease
relates to an expense provision to correct for certain out of balance
conditions that occurred during the 1996 integration of the ACB and Company
operations resulting from the October 1995 merger of First Data and FFMC. This
expense provision amounted to $3.0 million in 1996 and $0.9 million for the
first six months of 1997. These decreases were partially offset by (i) a non-
recurring contract settlement expense of approximately $1.6 million and (ii) a
non-recurring litigation settlement expense with the FTC and a non-recurring
expense related to DOE charge backs aggregating to approximately $1.9 million.
Other operating and administrative expenses included a $2.1 million charge for
the year ended December 31, 1997 for doubtful accounts, compared to a charge
of $2.4 million for the year ended December 31, 1996. During the course of
preparing the December 31, 1997 financial statements, management, as a
consequence of performing analyses and studies, concluded that, on average,
1.87% of its 1997 billings were not collectible. This situation is created by
a number of factors including, but not limited to, billing disputes which
arise when certain customers believe that the Company is not entitled to the
commission it has billed. The charge of $2.1 million was recorded in the year
ended December 31, 1997 to reflect the billings that the Company had
determined were not collectible. The Company believes that these disputes have
been recurring in nature and has instituted policies and procedures that it
believes will be adequate to resolve this issue.
Depreciation and amortization expense was $14.4 million for the year ended
December 31, 1997, as compared to $12.0 million for the year ended December,
1996, an increase of $2.4 million or 19.5%. The increase resulted primarily
from the amortization expense of the goodwill and other intangibles associated
with the Consolidated acquisition in February 1997.
The provision for merger costs, employee severance and office closure was
$0.7 million for the year ended December 31, 1997 as compared to $4.3 million
for the year ended December 31, 1996, a decrease of $3.6 million or 84.3%. The
charges resulted from the integration of the operations of the Company and ACB
and relate to employee severance and branch office closure costs.
Overhead charges from First Data were $1.2 million for the year ended
December 31, 1997, as compared to $1.4 million for the year ended December 31,
1996, a decrease of $0.2 million or 14.3%. First Data allocated general
corporate overhead based on 1.0% of the Company's revenue, therefore, the
decrease in overhead charges results from the decrease in revenue in 1997 as
compared to 1996. These overhead charges are not necessarily indicative of
actual or future costs. Management further believes that the incremental
general and administrative costs that will result from the Company being a
stand-alone entity will not exceed the 1% of revenue charge from First Data.
Operating Income. Operating income was $2.6 million for the year ended
December 31, 1997, as compared to $9.0 million for the year ended December 31,
1996. The decrease resulted primarily from lower revenues resulting in a
corresponding increase in operating expenses as a percentage of revenue and
certain non-
27
<PAGE>
recurring expenses related to contract and litigation settlements described
above, partially offset by a decrease in the provision for merger costs,
employee severance and office closures.
Year Ended December 31, 1996 Compared to the Year Ended December 31, 1995
Revenue. Total revenue was $138.9 million for the year ended December 31,
1996 as compared to $154.5 million for the year ended December 31, 1995, a
decrease of $15.6 million, or 10.1%. The decline in revenue resulted primarily
from the aforementioned decision by the DOE in June 1996 to reduce the
contingency fees paid to all vendors, including the Company, which in turn
caused the revenue from the DOE to decrease from $40.3 million for the year
ended December 31, 1995 to $31.6 million for the year ended December 31, 1996.
The remaining revenue decline resulted from a decrease in the volume of
account placements from clients within both the healthcare and financial
services industries.
Expenses. Salaries and benefits expense was $73.6 million for the year ended
December 31, 1996, as compared to $81.1 million for the year ended December
31, 1995, a decrease of $7.5 million or 9.2%. The decrease resulted primarily
from the reduction of employee headcount and related benefit costs as part of
the restructuring following the merger of First Data and FFMC and lower
commission payments resulting from decreased revenue.
Telecommunication expense was $7.3 million for the year ended December 31,
1996, as compared to $9.5 million for the year ended December 31, 1995, a
decrease of $2.2 million or 23.0%. The decrease resulted primarily from cost
reductions and improved operating efficiencies derived from the consolidation
of telecommunication systems associated with the 1995 merger of First Data and
FFMC. These efficiencies also contributed to the reduction in
telecommunication expense as a percentage of revenue from 1995 to 1996.
Occupancy expense was $4.6 million for the year ended December 31, 1996, as
compared to $5.1 million for the year ended December 31, 1995, a decrease of
$0.5 million or 10.6%. The decrease was attributable to lease cancellations
and office closings as part of the corporate restructuring during 1995.
Other operating and administrative expenses were $26.6 million for the year
ended December 31, 1996, as compared to $27.1 million for the year ended
December 31, 1995, a decrease of $0.5 million or 1.9%. The decrease resulted
primarily from certain operating efficiencies realized in 1996 with the
consolidation of operations of the Company and ACB in 1995. Offsetting this
efficiency related decrease was a $3.0 million provision in 1996 to correct
for certain system related out of balance conditions that occurred during the
1996 integration of the ACB and Company operations resulting from the October
1995 Merger of First Data and FFMC.
Depreciation and amortization expense was $12.0 million for the year ended
December 31, 1996 as compared to $11.9 million for the year ended December 31,
1995, an increase of $0.1 million or 1.1%. Amortization expense resulted
primarily from the amortization of the goodwill and other intangible assets
recognized in connection with the June 1990 acquisition of the Company by FFMC
and the acquisitions consummated by First Data in 1993 accounted for under the
purchase method of accounting.
The provision for merger costs was $4.3 million for the year ended December
31, 1996, as compared to $13.6 million for the year ended December 31, 1995, a
decrease of $9.3 million or 68.1%. The Company's 1995 provision included a
$5.9 million impairment charge related primarily to the write-off of the ACB
trade name and a $3.0 million charge related to an estimated payment to the
former owners of a business acquired by First Data in 1993.
Overhead charges from First Data were $1.4 million for the year ended
December 31, 1996, as compared to $1.5 million for the year ended December 31,
1995, a decrease of $0.1 million or 10.1%. First Data allocates general
corporate overhead based on 1.0% of the Company's revenues, therefore, the
decrease in overhead charges results from the decrease in revenue from 1995 to
1996. These overhead charges are not necessarily indicative of actual or
future costs. Management further believes that the incremental general and
administrative costs that would result from the Company being a stand-alone
entity would not exceed the 1% of revenue charge from First Data.
28
<PAGE>
Operating Income. Operating income was $9.0 million for the year ended
December 31, 1996, as compared to $4.6 million for the year ended December 31,
1995, an increase of $4.4 million, due primarily to a decrease in the
provision for merger costs, employee severance and office closures, partially
offset by a decrease in revenue.
LIQUIDITY AND CAPITAL RESOURCES
During the period of ownership by FFMC and subsequently First Data, the
Company's principal sources of cash were from operations and intercompany
borrowings from FFMC and First Data. Cash has been used for purchases of
property and equipment, investments in technology, acquisitions of accounts
receivable management companies, and repayment of intercompany debt. Cash
provided by operating activities was $14.6 million, $23.9 million and $21.0
million for the years ended December 31, 1997, 1996 and 1995, respectively.
The decrease in cash provided by operating activities for the year ended
December 31, 1997, versus the year ended December 31, 1996, was primarily due
to (i) a decrease in net income of $4.2 million and (ii) a decrease in working
capital items of $2.8 million in the year ended December 31, 1996 versus an
increase of $1.9 million in the year ended December 31, 1997.
Cash provided by operating activities was $6.2 million for the three months
ended March 31, 1998 as compared to $0.7 million for the three months ended
March 31, 1997. Net income before extraordinary items and after adding back
depreciation, amortization, taxes and interest (EBITDA) generated $6.7 million
in the 1998 period as compared to $5.4 million in the 1997 period. In addition
to the improvement in operating cash flows caused by the increase in EBITDA,
net working capital items decreased by $2.4 million in the three months ended
March 31, 1998 as compared to their increasing by $4.4 million in the three
months ended March 31, 1997. This change in working capital items was due, in
part, to accrued interest payable of $1.7 million at March 31, 1998.
Cash used in investing activities was $29.6 million, $7.8 million and $7.7
million for the years ended December 31, 1997, 1996 and 1995, respectively.
The increase was primarily due to the acquisition of Consolidated in February
1997 for $23.3 million. Cash provided by First Data was used to fund this
acquisition. Other than cash used for the Consolidated acquisition in February
1997, the Company's principal use of cash in investing activities has been for
capital expenditures primarily for new computer and telecommunication
equipment. As a result of the acquisition of the Company by NAC and the
implementation of the modified Operating Improvement Plan, the Company has
accrued estimated costs of approximately $4.0 million associated with closing
certain offices and call centers, severance payments to employees and
relocation costs. Of the $4.0 million, $1.6 million, is expected to be paid in
1998 and $2.4 million is expected to be paid over the following two years.
Cash used in investing activities for the three months ended March 31, 1998
amounted to $1.1 million, consisting entirely of equipment purchases, as
compared to $2.9 million of equipment purchases in the three months ended
March 31, 1997. Investing activities for the 1997 period also include $24.2
million related primarily to the February 1997 acquisition of Consolidated.
In connection with the Transactions, the Company implemented a financing
plan which includes the $133.0 million Acquisition Facilities, comprised of an
$8.0 million revolving credit facility and a $125.0 million term loan facility
and the net proceeds of $39.0 million from the sale of Common Stock by NAC,
which in turn had been contributed to the Company. The Acquisition Facilities
were refinanced through: (i) $60.0 million of senior secured facilities (the
"Senior Credit Facilities"), comprised of a $35.0 million six-year revolving
credit facility (the "Revolving Credit Facility"), and a $25.0 million seven-
year term loan facility (the "Term Loan Facility"), and (ii) the issuance of
the Notes.
Amounts outstanding under the Term Loan Facility and the Revolving Credit
Facility bear interest at the Company's option of either (A) the Base Rate
plus the Applicable Margin or (B) the Eurodollar Rate plus the Applicable
Margin. The Applicable Margin on loans under the Revolving Credit Facility
ranges from 0.375% to 2.00% and the Applicable Margin on the Term Loan
Facility ranges from 0.75% to 2.25%; provided, that the Applicable Margin on
loans under the Revolving Credit Facility was initially 1.875% for a
Eurodollar Loan and
29
<PAGE>
0.875% for a Base Rate Loan and the Applicable Margin on loans under the Term
Loan Facility was initially 2.125% for loans utilizing the Eurodollar Rate and
1.125% for loans utilizing the Base Rate. The Term Loan Facility is repayable
in quarterly installments in an aggregate annual principal amount of $0.25
million for each of the first six years and the remaining $23.5 million in the
last year of the facility. The Company has approximately $35.0 million of
unborrowed availability under the Revolving Credit Facility at March 31, 1998.
The Company and First Data have been negotiating with respect to adjustments
to the acquisition purchase price. With the exception of a $2.1 million
reduction in amounts payable to First Data, which management believes is
appropriate under the terms of the Merger Agreement, the Company has not
recorded any purchase price adjustments. Any such adjustments will be treated
as adjustments of goodwill.
Management believes that, based on current levels of operations and
anticipated improvements in operating results, cash flows from operations and
borrowings available under the Senior Credit Facilities will be adequate to
allow for anticipated capital expenditures for the next several years, to fund
working capital requirements and to make required payments of principal and
interest on its debt for the next several years. However, if the Company is
unable to generate sufficient cash flows from operations in the future, it may
be necessary for the Company to refinance all or a portion of its debt or to
obtain additional financing, but there can be no assurance that the Company
will be able to effect such refinancing or obtain additional financing on
commercially reasonable terms or at all. See "Risk Factors."
INCOME TAXES
The Company's effective tax rates for the years ended December 31, 1997,
1996 and 1995 were 96.3%, 50.8% and 63.7%, respectively. The effective rate
differed from the federal statutory rate of 35% due to state taxes and non-
deductible goodwill and a decrease in income before income taxes, without any
corresponding decrease in non-deductible goodwill. The 1996 effective tax rate
differs from the 1995 tax rate due to the increase in taxable income in 1996
without any corresponding increases in state taxes and non-deductible
goodwill. The Company has not recorded any tax benefit on its loss before
income taxes for the three months ended March 31, 1998 as it is not "more
likely than not" that the Company will be able to realize such benefits.
The Company's results of operations have been included in the consolidated
federal income tax returns of First Data. The Company's historical income tax
expense is presented as if the Company had not been eligible to be included in
the consolidated tax returns of First Data. Under the terms of the Merger
Agreement, all of the goodwill and other intangible assets recorded in
connection with the acquisition are expected to be deductible for federal
income tax purposes over fifteen years.
YEAR 2000
Until recently computer programs were written to store only two digits of
date-related information in order to more efficiently handle and store data.
Thus the programs were unable to properly distinguish between the year 1900
and the year 2000. This is frequently referred to as the "Year 2000 Problem."
In 1997, the Company initiated a company-wide Year 2000 project to address
this problem. Utilizing both internal and external resources, the Company is
in the process of defining, assessing and converting, or replacing, various
programs and hardware to make them Year 2000 compatible. The Year 2000 Problem
goes beyond the Company's internal computer systems and requires coordination
with clients, vendors, government entities and other third parties to assure
that their systems and related interface are compliant.
The total Year 2000 remediation cost is estimated at approximately $1.5
million, which includes $0.4 million for the purchase of new software that
will be capitalized and $1.1 million that will be expensed as incurred. To
date, the Company has incurred and expensed approximately $0.2 million,
primarily for assessment of the Year 2000 issue, the development of a
modification plan and programming costs.
The project is estimated to be completed by the end of 1998. The Company
believes that with modifications to existing software and conversions to new
software, the Year 2000 problem will not pose significant operational
30
<PAGE>
problems for its computer systems. However, if such modifications and
conversions are not made, or are not completed in a timely fashion, the Year
2000 problem could have a material impact on the operations and financial
results of the Company.
The costs of the project and the date on which the Company believes it will
complete the Year 2000 modifications are based on management's best estimates,
which were derived utilizing numerous assumptions of future events, including
the continued availability of certain resources and other factors. However,
there can be no guarantee that these estimates will be achieved and actual
results could differ materially from those anticipated.
SEASONALITY AND QUARTERLY FLUCTUATIONS
Historically, the Company's business tends to be slower in the third and
fourth quarter of the year due to the summer and the holiday seasons. However,
the Company could experience quarterly variations in revenue and operating
income as a result of many factors, including the timing of clients' referrals
of accounts, the timing of the hiring of personnel, the timing of operating
expenses incurred to support new business, and changes with certain contracts
as the Company could incur costs in periods prior to recognizing revenue under
those contracts.
IMPACT OF INFLATION
There was no significant impact on the Company's operations as a result of
inflation during the three months ended March 31, 1998 or the years ended
December 31, 1997, 1996 or 1995.
RECENT ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board (FASB) has issued Statement No.
129, "Disclosure of Information about Capital Structure," which is applicable
to all companies. Statement No. 129 consolidates the existing guidance in
authoritative literature relating to a company's capital structure. The
Statement is effective for financial statements for periods ending after
December 15, 1997. The Company does not believe the adoption of this standard
will have any impact on the Company's financial statements.
In June 1997, the FASB issued Statement No. 130, "Reporting Comprehensive
Income," and Statement No. 131, "Disclosures about Segments of an Enterprise
and Related Information." Both Statements become effective for fiscal periods
beginning after December 15, 1997, with early adoption permitted. The Company
is evaluating the additional disclosure requirements these Statements are
expected to have on the Company's financial statements.
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BUSINESS
INDUSTRY OVERVIEW
The accounts receivable management industry has experienced rapid growth
since 1990. According to the ACA, account placements to servicers increased
from $43.7 billion in 1990 to $122.3 billion in 1996, a compounded annual
growth rate of 19%. According to M. Kaulkin & Associates, an industry advisory
firm, the total amount of revenue generated by all contingent fee companies
was approximately $5.5 billion in 1996 versus approximately $5.0 billion in
1995.
Two significant trends in the consumer credit industry are primarily
responsible for this industry growth. First, consumer debt and delinquencies
(leading indicators of current and future business for accounts receivable
management companies) have increased in recent years. Second, in an effort to
focus on core activities and to take advantage of certain economies of scale,
better performance and a lower cost structure offered by accounts receivable
management companies, many credit grantors, including government agencies,
have chosen to outsource some or all aspects of the accounts receivable
management process. In addition, this outsourcing trend has been accelerated
by the rapid consolidation of certain credit granting industries, including
financial services, telecommunications and healthcare, as companies have
focused on core business activities. Such consolidation is creating larger
national clients seeking to place accounts with accounts receivable management
companies that offer national, rather than local or regional, services.
The Company believes the collections industry has attractive growth
potential. Industry volume is driven by the level of consumer debt and
consumer delinquency rates, outsourcing trends and industry consolidation. The
Company believes that the current outlook for these industry drivers suggests
that the collections industry will continue to demonstrate strong growth in
the coming years.
COLLECTION PROCESS. Contingent fee services are the traditional services
provided in the accounts receivable management industry. Creditors typically
place non-performing accounts with outside agencies, usually when the
receivable is 180 to 270 days past due. The contingent fee is generally based
on the estimated collectability of the receivable in terms of the costs that
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 making a recovery.
There are three main types of placements in the contingent fee business,
each representing a different stage in the cycle of accounts receivable
collection that are placed with outside agencies. Primary placements are
accounts, typically 180 to 270 days past due, that are placed with outside
agencies for the first time and usually result in a lower average contingency
fee rate. Secondary and tertiary placements are accounts receivable, typically
over 360 days past due, that have previously been placed with an outside
agency as a primary placement and are then reassigned to another agency for
further processing, including asset searches, obtaining judgments, and other
legal remedies, in an effort to obtain repayment. In addition, credit grantors
are increasingly placing accounts with accounts receivable management
companies earlier in the collection cycle, often prior to the 180 days past
due typical in primary placements, either on a contingent fee or fixed fee
basis.
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The following chart illustrates the collection process utilized by the
Company for bank credit card debt:
[CHART APPEARS HERE]
The most widely used fee arrangement utilized by credit grantors in
recovering charged off accounts receivable is contingency fee. Recently,
certain credit grantors have sought to reduce their portfolios of charged off
accounts receivable by selling such portfolios. These portfolios are comprised
of accounts often two to three years past due that previously have been placed
with an outside agency, but remain uncollected. The largest percentage of
purchased portfolios originate from credit card receivables. These portfolios
are typically purchased at a discount to the aggregate principal value of the
accounts, with an inverse correlation between the purchase price and the age of
the delinquent accounts. Traditional collection techniques are subsequently
employed to obtain payment of charged off accounts. As a result of the
Company's strategy of focusing on servicing clients earlier in the collection
cycle, the Company has no current intention to engage in material acquisitions
of debt portfolios.
The accounts receivable management industry has become increasingly efficient
with the implementation of new technology. Today, leading companies in this
industry use proprietary databases, automated power dialers, automatic call
distributors and computerized skiptracing capabilities to increase the number
of contacts with debtors. These technological advances contribute to industry
consolidation and facilitate the provision of related accounts receivable
management outsourcing services. The Company believes that firms with the most
efficient operating systems typically generate higher recovery rates at lower
cost.
INCREASE IN CONSUMER DEBT AND DELINQUENCIES. Consumer debt has grown in the
United States from $3.8 trillion in 1991 to $5.4 trillion in 1996, representing
a compound annual growth rate of 7.3%. This increase in consumer debt has been
accompanied by higher levels of delinquencies. From 1991 to 1997, bank card
delinquency rates ranged from a low of 3.3% in 1994 to a high of an estimated
4.9% for year end 1997. Largely as a result of these trends, placements to
contingent fee companies have grown from approximately $43.7 billion in 1990 to
approximately $122.3 billion in 1996, a compound annual growth rate of 18.7%,
according to the ACA, an industry trade association.
CORPORATE OUTSOURCING. Increasing numbers of companies are outsourcing non-
core functions that can be more efficiently conducted by specialized firms. By
outsourcing these functions, companies are able to focus on core revenue
generating activities and reducing costs, thereby improving productivity. In
particular, the Company
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believes many credit grantors are recognizing the advantages of outsourcing
accounts receivable management as a result of factors including (i) the
increasing complexity of such functions, (ii) rapid growth in consumer debt
levels and the increase in delinquencies, (iii) changing regulations
applicable to debt collection practices and (iv) the development of
sophisticated call management centers requiring substantial capital
investment, technical information systems capabilities and human resource
commitments. The Company believes that outsourcing these services provides
value to clients through lower delinquencies, improved customer relations and
reduced chargeoffs.
GOVERNMENT OUTSOURCING. Government agencies on the federal, state and local
levels are also increasing their use of private collection agencies. A 1995
study by the Mercer Group, an independent industry research firm, showed that
from 1985 to 1995 local governments had significantly increased their use of
private collection agencies. Similarly, an estimated 32 of the 52 federal
government agencies currently utilize private collection agencies to assist in
the collection of a portion of the approximately $200 billion of non-tax
related debt owed to the federal government. Private agencies have also
demonstrated a greater effectiveness in debt collection, as evidenced by a
1994 study by the General Accounting Office which found that the average
collection rate of private collection agencies was 45% higher than that of
state government agencies.
INDUSTRY CONSOLIDATION. The accounts receivable management industry is
highly fragmented, consisting of approximately 6,300 collection agencies as of
1996, according to ACA. According to M. Kaulkin & Associates, the ten largest
agencies accounted for approximately 17% and 20% of the total 1995 and 1996
contingent revenue, respectively, for the industry. The Company believes that
the industry is entering a period of consolidation driven by a number of
factors, including (i) the economies of scale available to larger operators,
(ii) new technology which facilitates the collection process, (iii) the
ability of large operators to provide services nationally and (iv) increased
licensing and regulatory burdens.
CLIENT CONSOLIDATION. The largest credit-granting industries, including fi-
nancial services, telecommunications, healthcare and retail, are experiencing
continued consolidation. As a result, the operations of many credit grantors
are becoming increasingly complex and the Company believes such credit grant-
ors are shifting account placements to accounts receivable management compa-
nies that have the ability to service a large volume of placements on a na-
tional basis.
COMPANY HISTORY
In the Merger, the Company was acquired from First Data by NAC on December
31, 1997. The Company was previously a wholly owned subsidiary of FFMC, which
is a wholly owned subsidiary of First Data. The Company was acquired in June
1990 by FFMC. First Data's October 1995 merger with FFMC, accounted for under
the pooling of interests method, resulted in the combination of First Data's
accounts receivable management company, ACB, with the Company. ACB was
primarily the result of two acquisitions consummated by First Data in 1993,
accounted for under the purchase method of accounting.
THE COMPANY
Overview
The Company is among the largest independent providers of accounts
receivable management services in the United States, as measured by the
aggregate principal value of placement volume. The Company offers contingent
fee collection, pre-chargeoff accounts receivable management and on-site
collection management services, primarily to financial institutions,
government agencies, telecommunications companies and healthcare providers.
The Company provides sophisticated, customized past-due account collection and
accounts receivable management services to its clients through a nationwide
network of 15 call centers.
The Company has historically generated substantially all of its revenue from
contingent fees received for collection services provided to a wide variety of
credit grantors. Contingent fee services, which are the traditional
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services provided in the accounts receivable management industry, involve
collecting delinquent consumer debt placed with the collection services
provider in exchange for a percentage of realized collections. The Company has
a client base that includes American Express, AT&T, BellSouth, the DOE, First
Union, GMAC, the GSA, MCI, Mobil, NationsBank, Novus (issuer of DISCOVER Card)
and Texaco.
In order to provide more comprehensive collection solution for its clients,
the Company has also begun providing pre-chargeoff accounts receivable
management services, in which the Company contacts debtors earlier in the
collection cycle in an attempt to bring the account current before the credit
grantor formally charges off the past-due balance. For these services, the
Company is typically paid a monthly fee for each account it manages and, in
certain circumstances, additional performance-based fees. The Company has also
begun contracting with credit grantors to provide on-site accounts receivable
management, collections personnel and related services. The Company believes
that there is significant growth potential in these service areas, primarily
due to increased outsourcing of accounts receivable management services by
credit grantors.
In the first quarter of 1997, a new senior management team, led by Jerrold
Kaufman as President and Chief Executive Officer, implemented a business
strategy focused on increasing revenues with existing clients and developing
new relationships with other large credit grantors while implementing the
Operating Improvement Plan. The Operating Improvement Plan includes (i)
reducing the number of information systems utilized by the Company, (ii)
reducing overhead expense by reducing corporate staff headcount through
attrition and (iii) significantly reducing the number of unprofitable and
lower margin clients. In connection with the Merger on December 31, 1997,
management, along with the Investor Group and NAC, approved a modification to
the Operating Improvement Plan to rationalize the Company's operating
facilities which will result in additional headcount reduction and relocation
of personnel.
Through its demonstrated collection performance and improved customer
service, the Company has recently received new contracts with the DOE, MCI,
Chrysler and the GSA. In addition, the Company is experiencing growth in its
revenue from pre-chargeoff services. For example, the Company recently
successfully completed a pilot pre-chargeoff program for a significant client
that is being implemented on a larger scale in 1998 with the Company as a key
service provider.
COMPETITIVE STRENGTHS
The Company believes that it has the following competitive strengths:
REPUTATION AS AN INDUSTRY LEADER. The Company has been in the accounts
receivable management business since 1947. The Company has grown to become
among the largest independent providers of accounts receivable management
services in the United States, as measured by placement volume and has long
standing relationships with many of its clients.
COLLECTION PERFORMANCE. Most clients utilize multiple accounts receivable
management providers and choose these providers based upon overall collection
results. The Company has developed a disciplined approach to collections that
effectively utilizes technology and personnel training programs in a way that
management believes is unique in the industry. As a result of its historical
collections performance, the Company is often one of the largest providers of
accounts receivable management services to its major clients.
NATIONAL PRESENCE. The Company operates in all 50 states through 15 call
centers and three corporate offices. The Company believes its ability to
collect nationally provides a competitive advantage when servicing large,
national credit grantors and positions it well to benefit from the industry's
ongoing consolidation.
STRONG MANAGEMENT. Beginning with the appointment of Jerrold Kaufman as
president and chief executive officer in September of 1996, the Company has
assembled an executive management team with
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extensive experience in the collections industry, call center management and
labor intensive operations. In addition, the Company has a very experienced
team of line managers at the call center level. These managers have worked an
average of over nine years with the Company.
DISTINGUISHED CLIENT BASE. The Company services a large and diverse client
base, and its more than 400 clients include American Express, AT&T, BellSouth,
the DOE, First Union, the GSA, GMAC, MCI, Mobil, NationsBank, Novus (issuer of
DISCOVER Card) and Texaco. Moreover, the Company (or its predecessors) has
been in the collection business since 1947 and has had relationships with some
of its clients for more than 25 years, including Texaco (47 years), Mobil (35
years) and American Express (27 years).
BUSINESS STRATEGY
The Company's experience, performance and market share contribute to its
success and position as an industry leader. In order to generate increased
revenue and reduce costs, the Company's senior management team has developed a
business strategy emphasizing the following key components:
FOCUS ON CORE COLLECTION ACTIVITIES. The Company believes it has a
competitive advantage in the marketplace based on its reputation and
performance as a leading collection services provider serving a wide range of
credit grantors. Due to favorable industry trends, the Company believes that
the contingent placement market will continue to experience attractive growth,
and the Company intends to rely on its strong collection performance to
attract a greater share of contingent placements from existing clients and to
develop new contingent placement relationships.
EXPAND PRE-CHARGEOFF SERVICES. The Company intends to further expand its
pre-chargeoff services to provide more comprehensive collection solutions for
its clients. In response to significantly higher delinquencies, credit
grantors are increasingly outsourcing their pre-chargeoff accounts receivable
management functions. Growth in the pre-chargeoff business is expected to
complement and diversify the Company's existing revenue base by creating a
more predictable revenue stream through the establishment of additional
longer-term fixed-fee contracts.
IMPLEMENT OPERATING IMPROVEMENT PLAN. In the first quarter of 1997, the
Company's new management team began implementing its Operating Improvement
Plan designed to improve productivity, further integrate the Company's various
acquired businesses and reduce costs. This plan includes (i) reducing the
number of information systems utilized by the Company, (ii) reducing overhead
expense by reducing corporate staff headcount through attrition and (iii)
significantly reducing the number of unprofitable and lower margin clients. In
connection with the Merger on December 31, 1997, management, along with the
Investor Group and NAC, approved a modification to the Operating Improvement
Plan to rationalize the Company's operating facilities which will result in
additional headcount reduction and relocation of personnel.
LEVERAGE SIZE AND NATIONAL REACH. The Company believes that its national
presence, infrastructure and operating expertise allow it to provide superior
accounts receivable management for large national credit grantors, including
the federal government. The Company intends to capitalize on its ability to
manage large national placements by taking advantage of opportunities that
arise from consolidation among credit grantors and by extending its non-
traditional services to clients located throughout the United States.
UTILIZE TECHNOLOGY TO INCREASE COLLECTIONS. Since the beginning of 1994, the
Company has made capital expenditures of over $15 million in its
telecommunications equipment, software and computer systems. These investments
enable the Company to operate more efficiently and manage large accounts
receivable programs. The Company is able to customize procedures and reports
to meet the varying needs of its clients. The Company believes that these
capital expenditures and technological capabilities will continue to enhance
its competitive position.
GROW THROUGH ACQUISITIONS. The Company has completed acquisitions of other
collection service providers to expand its client base, acquire new service
capabilities, and enter new market segments. For
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<PAGE>
example, the Company acquired Consolidated in February 1997, to expand its
telecommunications business. The Company intends to review acquisition
candidates on an ongoing basis and will seek to make opportunistic
acquisitions to further solidify its market position. The Company does not
currently have any agreements with respect to future acquisitions.
SERVICES
In order to achieve its objective of becoming the accounts receivables
manager of choice for its clients, the Company has developed specialized and
cost-effective services. The Company's wide range of programs and products
allows its clients to customize services received in ways that meet their
outsourcing objectives. These services range from traditional, post-chargeoff
contingency collection services to complete on-site management of all stages
of a client's accounts receivable process.
Following is a description of the services offered by the Company:
CONTINGENT FEE SERVICES. The Company is among the largest independent
providers of contingent fee services in the United States and offers a full
range of contingent fee collection services to consumer and commercial credit
grantors. The Company utilizes sophisticated management information systems to
leverage its experience with locating, contacting and effecting payment from
delinquent account holders. The Company specializes in servicing consumer
creditors but maintains a growing presence in the commercial collections
business. With 15 call centers in 14 states and approximately 2,050 employees,
the Company has the ability to service a large volume of accounts with
national coverage. The Company generated approximately 89%, 95% and 93% of its
revenue through contingent fee services for the three months ended March 31,
1998, the year ended December 31, 1996 and the year ended December 31, 1997,
respectively.
PRE-CHARGEOFF RECEIVABLE MANAGEMENT SERVICES. In addition to traditional
contingent fee services, the Company has developed pre-chargeoff programs. In
these programs, the Company receives accounts from credit grantors before
chargeoff and earns a fixed fee per account rather than a percentage of
realized collections. With its operational expertise in managing receivables,
the Company offers credit grantors a variety of pre-chargeoff outsourcing
options including (i) staff augmentation, (ii) inbound and outbound calling
programs, (iii) skiptracing and (iv) total outsource. Account follow-up is an
extension of the client's existing procedures utilizing experienced customer
service collection personnel to fully collect balances of delinquent accounts.
The Company believes that outsourcing these services allows credit grantors to
reduce collections costs while also achieving lower delinquencies, improved
customer retention and reduced chargeoffs.
ON-SITE MANAGEMENT SERVICES. The Company has expanded its services to
include on-site accounts receivable management for credit grantors whereby the
Company manages the client's internal collection efforts by providing
management, collection personnel and related services at the customer's
location. This program allows clients to outsource their accounts receivable
collection activities, while maintaining supervisor oversight. The Company's
management directs the efforts of the entire collection staff and, through its
expertise, provides efficient use of the customer's technology and creative
collection techniques. The Company expects to offer these services across all
of its markets in the future.
OPERATIONS
The Company provides collection services to credit grantors on a national
basis. Clients typically place accounts with the Company daily or weekly by
electronic data transfer. Account collection procedures are either specified
contractually by the credit grantor or designed by the Company to meet
performance and productivity goals. These procedures are designed to increase
recoveries based on the account's age and balance, the debtor's payment and
credit history and the effort required to locate the debtor.
The Company has developed sophisticated collection procedures for account
treatment. Automated processes allow collection representatives to access
personal and credit information necessary to make early contact with debtors.
After account preparation, the Company employs complex telephone and
correspondence strategies designed to initiate contact, perhaps the most
difficult task in the process. The Company seeks to
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<PAGE>
maximize collections and minimize expense through the use of automated dialing
programs as well as manual calling efforts. The Company has also designed
proprietary account flow processes whereby accounts are automatically
transferred to specialized branch locations at prescribed time periods. These
branch locations utilize targeted collection efforts to increase the chance of
recovery.
Upon contact with a debtor and in accordance with account collection
procedures agreed upon with the client, collection representatives attempt to
negotiate a settlement, which may include immediate payment in full, mutually
agreed upon payment terms or, in some cases, a reduction in principal. In some
instances, legal action is required to effect collection from delinquent
debtors. Once the Company receives permission from the creditor to pursue
legal action, the Company forwards the account to its independent network of
attorneys.
CUSTOMERS
The Company services a large and recognized client base which includes
American Express, AT&T, BellSouth, the DOE, First Union, the GSA, GMAC, MCI,
Mobil, NationsBank, Novus (issuer of DISCOVER card) and Texaco. Many of these
clients have used the Company or its predecessors for more than 25 years
including Texaco (47 years), Mobil (35 years), and American Express (27
years).
The Company categorizes its clients by industry. The Company's revenue from
the following industries for the three months ended March 31, 1998, are:
<TABLE>
<S> <C>
Financial Services.................... 41.3%
Institutional (1)..................... 20.1
Retail................................ 16.4
Telecommunication..................... 14.0
Healthcare............................ 7.6
Other................................. 0.6
-----
Total............................... 100.0%
=====
</TABLE>
- --------
(1) Institutional revenue consists primarily of revenue from local, state and
federal government entities.
SALES AND MARKETING
The Company's sales and marketing activities are coordinated by the
Company's President and managed by the senior vice president of sales,
supported by a sales force of five professionals. The President is directly
responsible for the Company's largest account, American Express. The Company's
marketing strategy is to (i) attract a greater share of placements by
strengthening relationships with targeted clients, (ii) expand the services it
provides to its existing clients by offering end-to-end receivable management
services and (iii) target new clients in high-growth markets.
In its sales efforts, the Company emphasizes its industry experience,
reputation, collection performance and national presence, which the Company
believes are the four key factors considered by large credit grantors when
selecting an accounts receivable service provider. The Company will
increasingly focus on cross-selling its full range of outsourcing services to
its existing clients and will use its product breadth as a selling point in
developing new business.
TECHNOLOGY
The Company utilizes a variety of management information and
telecommunication systems to enhance productivity in all areas of its
business. The Company has two primary software systems dedicated to its core
business. One system is a proprietary program developed and used primarily for
one of its largest clients. The
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other system was developed by a third party and the Company believes it to be
the most advanced commercially available collection software. Both systems
have been tailored to meet the specific needs of the Company's customers and,
in many cases, to integrate smoothly into their accounts receivable management
processes. These systems also interface with certain commercially available
data bases, which provide information used for debtor evaluation and contacts.
Both systems utilize a mainframe configuration and are designed to provide
maximum flexibility to the call centers while providing the centralized
controls necessary for effective management and for client interfaces. These
systems allow each collections facility to function independently.
In addition, the Company utilizes sophisticated telecommunications
equipment, including automated call distribution systems and power dialers,
which significantly increase account representative productivity over
conventional manual dialing. Since the beginning of 1994, the Company has made
capital expenditures of over $15 million in its telecommunications equipment,
software and computer systems. The Company is in the process of upgrading its
systems and hardware to allow for anticipated growth.
A key component of the Company's Operating Improvement Plan has been the
reduction of its collection operating system platforms from nine to three.
This reduction has resulted in significant cost savings due to reduced
personnel and other costs associated with programming, data processing and
other administrative functions.
FACILITIES
As of March 31, 1998, the Company operated 15 call centers and three
corporate offices in 14 states across the United States, all of which are
leased. The Company's facilities are strategically located to provide more
cost-effective services to its clients.
COMPETITION
The accounts receivable management industry is highly competitive. The
Company competes with approximately 6,300 providers, including national
corporations such as Equifax Inc., National Revenue Corp., NCO Group, Inc.,
Outsourcing Solutions Inc., The Union Corporation and many regional and local
firms. Most larger clients retain multiple accounts receivable management and
recovery providers and periodically evaluate collections performance. As a
result of its historical collections performance, the Company is often one of
the largest providers of accounts receivable management services to its major
clients.
EMPLOYEES AND TRAINING
As of March 31, 1998, the Company had a total of approximately 2,050
employees, of which approximately 1,550 were collectors. None of the Company's
employees is represented by a labor union. The Company believes that its
relations with its employees are good.
The Company's success in recruiting, hiring and training a large number of
employees is important to its ability to provide high quality accounts
receivable management and collections services to its clients. The Company
believes that the experience and depth of its call center management personnel
afford it a significant competitive advantage compared to other collection
agencies. These personnel have worked with the Company for an average of over
nine years. The Company recognizes the significant role these line managers
play in the Company's success and, to assist in their retention, the Company
compensates them at levels it believes to be
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above the industry standard. The Company does not limit hiring to those with
previous collection experience. Generally, the Company hires a mix of people
with previous experience in collections or accounts receivable management, as
well as people whom the Company believes possess the necessary skills to be
successful collectors.
All new employees are required to successfully complete the Company's
extensive training program. The Company designed its training program to
foster competency and proficiency in the employee's collection activities,
including negotiating skills and account procedures. The instructors for the
training program are all certified by the ACA. All collector training provides
full and in-depth coverage of compliance with the FDCPA and other laws
governing the industry. To the extent required, all collectors are licensed
and registered for states where their debtors reside. Only after licensing,
registration, and training are collectors assigned an account for collection.
LEGAL
The Company is a defendant in various legal proceedings involving claims for
damages, which constitute ordinary routine litigation incidental to its
business. The Company is currently a defendant in two class action lawsuits
filed in the U.S. District Court for the Northern District of Illinois, in
which it is alleged that the Company violated certain provisions of the FDCPA.
The Company expects to settle one of these class actions for an amount less
than $150,000 and is continuing to defend the remaining putative class action
suit. The FDCPA sets the maximum liability for such class action suits at the
lesser of $500,000 or 1% of the defendants' net worth. The Company believes
that it is in substantial compliance with the FDCPA and comparable state
statutes, although the Company reached a settlement in 1992 in an action
commenced by the FTC staff in which it alleged the Company had violated the
FDCPA. The matter was resolved with the Consent Decree, in which the Company
did not admit any liability. Pursuant to the Consent Decree, the Company
agreed to take additional steps to ensure compliance with the FDCPA and paid a
penalty of $100,000. The FTC staff recently completed an investigation
regarding the Company's compliance with the Consent Decree from January 1,
1994 to date. Without admitting liability for any of the alleged violations of
the FDCPA, the Company has proposed to settle the matter by paying a civil
penalty and by implementing certain procedures in connection with the
operation of the business, consisting primarily of disclosure to debtors of
their rights and enhanced training and compliance reporting requirements. In
connection with the Merger, First Data agreed to indemnify the Company for any
monetary penalty and expenses incurred in connection with the FTC
investigation. The proposed settlement is subject to final approval by FTC,
the U.S. Department of Justice and the court in which the matter was
initiated. The Company believes that compliance by the Company with the
provisions of the Consent Decree, as well as with the additional provisions
related to the proposed settlement of the FTC investigation, will not
materially affect the Company's financial condition or ongoing operations. See
"Risk Factors--Litigation."
GOVERNMENTAL REGULATION
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. The Company maintains licenses
in all jurisdictions in which its operations require it to be licensed. 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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Strict compliance with all of the relevant laws and regulations governing
the accounts receivable management industry is a top priority of the Company.
The Company is establishing new processes for complaint prevention and
resolution that are expected to be the standard for the debt collection
industry. The process will be administered in the field and monitored by the
general counsel's office and a special committee of the Board of Directors.
Any complaint against the Company or one of its employees is recorded and a
thorough investigation is initiated and appropriate corrective measures are
taken. The Company is extremely earnest in its efforts to avoid complaints.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Set forth below are the names, ages and positions of the respective
directors of the Company's board of directors (the "Board of Directors") and
the executive officers of the Company. All directors hold office until the
next annual meeting of stockholders of the Company and until their successors
are duly elected and qualified.
<TABLE>
<CAPTION>
NAME AGE POSITIONS
---- --- ---------
<S> <C> <C>
David B. Golub........... 36 Director, Chairman of the Board
Jerrold Kaufman.......... 58 Chief Executive Officer, President and Director
Nora E. Kerppola......... 33 Director
Loren F. Kranz........... 46 Chief Operating Officer, Executive Vice President,
Secretary and Director
Wesley W. Lang, Jr. ..... 40 Director, Vice Chairman of the Board
Lester Pollack........... 64 Director
Jeffrey A. Weiss......... 54 Director
Craig S. Whiting......... 41 Director
Paul J. Zepf............. 33 Director
Michael Lord............. 51 Chief Financial Officer and Treasurer
Daniel Sullivan.......... 48 Senior Vice President--Sales
Gregory Schubert......... 32 Senior Vice President--Operations
</TABLE>
DAVID B. GOLUB is a Managing Director of Centre Partners. He has worked at
Centre Partners and a predecessor fund, Corporate Advisors, L.P. ("Corporate
Advisors"), since 1988. Mr. Golub also serves as a director of The Burton
Corporation and Manorhouse Retirement Centers, Inc.
JERROLD KAUFMAN joined the Company in October 1994 as the Senior Vice
President of Sales and Marketing. In June 1996, Mr. Kaufman was named
Executive Vice President, Sales and Marketing and in September was named
President of the Company. Prior to joining the Company, Mr. Kaufman held
several executive positions in the accounts receivable collections industry.
From 1986 to 1992, Mr. Kaufman worked for American Creditors Bureau, where he
was Vice President of sales and marketing and served as a director. In 1992,
Mr. Kaufman started ABACUS Financial Management Services and served as its
Chairman and Chief Executive Officer until 1994.
NORA E. KERPPOLA is a Principal of Weiss, Peck & Greer, L.L.C., Inc. which
she joined in 1994 from Investor International (U.S.). Ms. Kerppola also
serves as a director of Dollar Financial Group, Inc. and Powell Plant Farms,
Inc.
LOREN F. KRANZ joined the Company in January 1997. Mr. Kranz has substantial
general management experience in highly labor intensive, customer-focused
business activities. He held numerous positions during his 23-year tenure with
General Electric Company ("General Electric"). In his most recent assignment
with General Electric, Mr. Kranz served as CEO of Advanced Services, Inc., a
wholly owned subsidiary of GE Appliances.
WESLEY W. LANG, JR. is a Managing Director and member of the Executive
Committee of Weiss, Peck & Greer, L.L.C, which he joined in 1985 from
Manufacturers Hanover Trust Company. Mr. Lang also serves as a director of
Chyron Corporation, Michael Alan Designs, Dollar Financial Group, Inc.,
Meridian Aggregates Company, Powell Plant Farms, Inc. and Tire Kingdom, Inc.
LESTER POLLACK is a Managing Director of Centre Partners, which he founded
in 1986. He has also been a Managing Director of Lazard Freres & Co. LLC since
1995 (prior thereto, a general partner). Mr. Pollack also serves as a director
of Parlex Corporation, Tidewater, Inc., LaSalle Re Holdings Limited, Firearms
Training Systems, Inc. and SunAmerica, Inc.
42
<PAGE>
JEFFREY A. WEISS has served as the Chairman, President, and Chief Executive
Officer of Dollar Financial Group, Inc. since 1990. Until 1992, Mr. Weiss was
also a Managing Director at Bear Stearns & Co. Inc. with primary
responsibility for the firm's investments in small to mid-sized companies, in
addition to serving as Chairman and Chief Executive Officer for several of
these companies. Mr. Weiss is the author of several popular financial guides.
CRAIG S. WHITING is a Managing Director of Weiss, Peck & Greer, L.L.C.,
which he joined in 1992. Previously he was a vice president at Credit Suisse
First Boston Corporation. Mr. Whiting also serves as a director of Color
Associates, Inc., Michael Alan Designs and Tire Kingdom, Inc.
PAUL J. ZEPF is a Managing Director of Centre Partners. He has worked at
Centre Partners and a predecessor fund, Corporate Advisors, since 1989. Mr.
Zepf also serves as a director of LaSalle Re Holdings Limited, Firearms
Training Systems, Inc. and The Learning Company.
MICHAEL LORD joined the Company in May 1998 after being retained as a
consultant in January 1998. Prior to joining the Company, Mr. Lord was a
managing director of The RDR Group, Inc., specializing in financial and
operational consulting since 1991.
DANIEL SULLIVAN joined the Company in May 1998. Prior to joining the
Company, Mr. Sullivan was a Vice President and General Manager for GE Capital,
Retailer Financial Services, Southern Business Group ("GE Capital") since
September 1995. From December 1991 to September 1995, Mr. Sullivan was an
Executive Director of Marketing for GE Capital.
GREGORY SCHUBERT joined the Company in March 1992. Previously, Mr. Schubert
held various management positions with Financial Collection Agencies, Inc. In
early 1996, Mr. Schubert was promoted to the position of Vice President-AMEX
and given the responsibility for managing the Company's largest client. Mr.
Schubert was promoted in October 1996 into his current position as Senior Vice
President--Operations. In this role, Mr. Schubert oversees all field
operations and recovery efforts in both the pre-chargeoff and post-chargeoff
categories. Mr. Schubert has over 13 years experience in the collection
industry.
COMPENSATION OF DIRECTORS
Officers who are also directors are not provided with any additional
compensation for their services on the Board of Directors other than the
reimbursement of expenses associated with attending meetings of the Board of
Directors or any committee thereof. Mr. Weiss will receive compensation of
$30,000 per year and all other directors will receive $15,000 per year for
their services, as well as reimbursement of expenses associated with attending
meetings of the Board of Directors or any committee thereof.
EXECUTIVE COMPENSATION
The executive officers of the Company did not receive any compensation from
the Company during the prior fiscal year. The Company has entered into
employment agreements with Messrs. Kaufman, Kranz, Lord and Schubert. The
compensation to be paid to the executive officers of the Company will be
determined by the terms of those agreements and the Board of Directors of the
Company.
EMPLOYMENT AGREEMENTS
JERROLD KAUFMAN EMPLOYMENT AGREEMENT. Mr. Kaufman entered into an employment
agreement with the Company as of December 31, 1997. Pursuant to his employment
agreement, Mr. Kaufman will serve as the Chief Executive Officer of the
Company through December 31, 2000, unless terminated earlier as provided
therein.
43
<PAGE>
The compensation provided to Mr. Kaufman under his employment agreement
includes an annual base salary of $260,000, with the potential to receive an
annual bonus based upon qualitative criteria and the attainment of
quantitative financial goals established annually by the Board of Directors.
For the year ending December 31, 1998, Mr. Kaufman will have the potential to
receive a bonus of up to $45,000, plus an additional bonus of up to $105,000
based on the Company's EBITDA (as defined therein) for the year. Mr. Kaufman
is also eligible to participate in all employee benefit programs of the
Company. In addition, Mr. Kaufman is entitled to reimbursement for reasonable
and necessary expenses made in furtherance of his employment.
Mr. Kaufman's employment agreement also provides that if Mr. Kaufman is
terminated without cause, he will be entitled to receive a severance benefit,
payable over a period of 12 months, in an amount equal to 12 months of his
then-existing base salary less the amount of compensation he receives from
another source during the last six months of the year during which his
severance benefit is payable under the terms of his employment agreement.
The employment agreement also provides that, without prior written consent
of the Board of Directors, Mr. Kaufman will not directly or indirectly (i)
engage, participate or invest in, be employed by or provide services to any
person or company in competition with the Company, (ii) solicit business of
the Company for another person or company, (iii) solicit employees of the
Company to terminate their employment with the Company, (iv) solicit companies
having business with the Company to curtail or cancel such business or (v)
authorize or assist any other person or company in taking such actions.
LOREN KRANZ EMPLOYMENT AGREEMENT. Mr. Kranz entered into an employment
agreement with the Company as of December 31, 1997. Pursuant to his employment
agreement, Mr. Kranz will serve as the Chief Operating Officer of the Company
through December 31, 2000, unless terminated earlier as provided therein.
The compensation provided to Mr. Kranz under his employment agreement
includes an annual base salary of $220,000, with the potential to receive an
annual bonus based upon qualitative criteria and the attainment of
quantitative financial goals established annually by the Board of Directors.
For the year ending December 31, 1998, Mr. Kranz will have the potential to
receive a bonus of up to $45,000, plus an additional bonus of up to $105,000
based on the Company's EBITDA (as defined therein) for the year. Mr. Kranz is
also eligible to participate in all employee benefit programs of the Company.
In addition, Mr. Kranz is entitled to reimbursement for reasonable and
necessary expenses made in furtherance of his employment.
Mr. Kranz's employment agreement also provides that if Mr. Kranz is
terminated without cause, he will be entitled to receive a severance benefit,
payable over a period of 12 months, in an amount equal to 12 months of his
then-existing base salary less the amount of compensation he receives from
another source during the last six months of the year during which his
severance benefit is payable under the terms of his employment agreement.
The employment agreement also provides that, without prior written consent
of the Board of Directors, Mr. Kranz will not directly or indirectly (i)
engage, participate or invest in, be employed by or provide services to any
person or company in competition with the Company, (ii) solicit business of
the Company for another person or company, (iii) solicit employees of the
Company to terminate their employment with the Company, (iv) solicit companies
having business with the Company to curtail or cancel such business or (v)
authorize or assist any other person or company in taking such actions.
MICHAEL LORD EMPLOYMENT AGREEMENT. Mr. Lord entered into an employment
agreement with the Company as of May 18, 1998. Pursuant to his employment
agreement, Mr. Lord will serve as the Chief Financial Officer of the Company
through May 18, 2001, unless terminated earlier as provided therein.
The compensation provided to Mr. Lord under his employment agreement
includes an annual base salary of $200,000, a bonus of $75,000 in 1998 and
$25,000 in 1999, with the potential to receive additional bonuses based upon
qualitative criteria and the attainment of quantitative financial goals
established annually by the Board of Directors. For the year ending December
31, 1998, Mr. Lord will have the potential to receive an additional bonus of
up to $21,000, plus an additional bonus of up to $49,000 based on the
Company's EBITDA
44
<PAGE>
(as defined therein) for the year. Mr. Lord is also eligible to participate in
all employee benefit programs of the Company. In addition, Mr. Lord is
entitled to reimbursement for reasonable and necessary expenses made in
furtherance of his employment.
Mr. Lord's employment agreement also provides that if Mr. Lord is terminated
without cause, he will be entitled to receive a severance benefit, payable
over a period of 12 months, in an amount equal to 12 months of his then-
existing base salary less the amount of compensation he receives from another
source during such 12 month period.
The employment agreement also provides that, without prior written consent
of the Board of Directors, Mr. Lord will not directly or indirectly (i)
engage, participate or invest in, be employed by or provide services to any
person or company in competition with the Company, (ii) solicit business of
the Company for another person or company, (iii) solicit employees of the
Company to terminate their employment with the Company, (iv) solicit companies
having business with the Company to curtail or cancel such business or (v)
authorize or assist any other person or company in taking such actions.
GREGORY SCHUBERT EMPLOYMENT AGREEMENT. Mr. Schubert entered into an
employment agreement with the Company as of December 31, 1997. Pursuant to his
employment agreement, Mr. Schubert will serve as the Senior Vice President--
Operations of the Company through December 31, 2000, unless terminated earlier
as provided therein.
The compensation provided to Mr. Schubert under his employment agreement
includes an annual base salary of $137,000, with the potential to receive an
annual bonus based upon qualitative criteria and the attainment of
quantitative financial goals established annually by the Board of Directors.
For the year ending December 31, 1998, Mr. Schubert will have the potential to
receive a bonus of up to $27,000, plus an additional bonus of up to $63,000
based on the Company's EBITDA (as defined therein) for the year. Mr. Schubert
is also eligible to participate in all employee benefit programs of the
Company. In addition, Mr. Schubert is entitled to reimbursement for reasonable
and necessary expenses made in furtherance of his employment.
Mr. Schubert's employment agreement also provides that if Mr. Schubert is
terminated without cause, he will be entitled to receive a severance benefit,
payable over a period of 12 months, in an amount equal to 12 months of his
then-existing base salary less the amount of compensation he receives from
another source during the last six months of the period during which his
severance benefit is payable under the terms of his employment agreement.
The employment agreement also provides that, without prior written consent
of the Board of Directors, Mr. Schubert will not directly or indirectly (i)
engage, participate or invest in, be employed by or provide services to any
person or company in competition with the Company, (ii) solicit business of
the Company for another person or company, (iii) solicit employees of the
Company to terminate their employment with the Company, (iv) solicit companies
having business with the Company to curtail or cancel such business or (v)
authorize or assist any other person or company in taking such actions.
MANAGEMENT PERFORMANCE OPTION PLAN
On December 31, 1997, NAC adopted its 1997 Management Performance Option
Plan (the "Option Plan"). A total of 57,665 shares of NAC Common Stock may be
granted under the Option Plan, of which 40,846 are divided equally between
Class A Options and Class B Options and 9,610 are allocated as Class C
Options, and 7,209 of which may be allocated as Class A Options, Class B
Options or Class C Options, as determined by the Board.
In connection with the consummation of the Merger, options were granted to
certain members of management at an exercise price of $100.00 per share, as
follows: Jerrold Kaufman received Class A Options to
45
<PAGE>
purchase 8,409 shares of NAC Common Stock, Class B Options to purchase 8,409
shares of NAC Common Stock and Class C Options to purchase 4,805 shares of NAC
Common Stock; Loren Kranz received Class A Options to purchase 7,208 shares of
NAC Common Stock, Class B Options to purchase 7,208 shares of NAC Common Stock
and Class C Options to purchase 4,805 shares of NAC Common Stock; and Greg
Schubert received Class A Options to purchase 1,802 shares of NAC Common Stock
and Class B Options to purchase 1,802 shares of NAC Common Stock. In
connection with his employment, Michael Lord received Class A Options to
purchase 2,403 shares of NAC Common Stock and Class B Options to purchase
2,403 shares of NAC Common Stock.
Class A Options vest 100% if the grantee is employed full time by the
Company on the third anniversary of such employee's employment, and at lesser
percentages if such grantee's employment is terminated without cause (as
defined in the Option Plan) prior to such time. Class B Options vest 100% if
either (i) the grantee is employed full time by the Company on the third
anniversary of such employee's employment and the Company performs such that
the Equity Investors realize varying rates of return on their investments or
(ii) the grantee is employed by the Company on the sixth anniversary of such
employee's employment. Class C Options vest 100% if either (i) the grantee is
employed full time by the Company on the third anniversary of such employee's
employment and the Company performs such that the Equity Investors realize an
internal rate of return on their investments of 40% (or such return is
realized within 180 days of such grantee's termination) or (ii) the grantee is
employed by the Company on the sixth anniversary of such employee's
employment. The vesting provisions of Class A Options and Class B Options
granted in the future may be altered by the Board of Directors of NAC. If a
grantee is terminated for cause, then 0% of options granted will vest. In
certain transfer events (as defined in the Option Plan), including certain
sales of substantially all of the assets of NAC or certain changes in the
beneficial ownership of a majority of the voting power of NAC, all options
granted will vest at such time.
Options granted under the Option Plan are non-transferable without the
consent of the Board of Directors of NAC, except by will or the laws of
descent and distribution or pursuant to a pledge of such options to NAC.
Options granted under the Option Plan expire until their exercise or in
accordance with their terms.
46
<PAGE>
STOCK OWNERSHIP AND CERTAIN TRANSACTIONS
STOCK OWNERSHIP
All issued and outstanding shares of common stock of the Company are held by
NAC. The following table sets forth certain information regarding the
beneficial ownership of the voting securities of NAC, by each person who
beneficially owns more than 5% of any class of NAC's voting securities and by
the directors and certain executive officers of NAC, individually, and by the
directors and executive officers of NAC as a group.
<TABLE>
<CAPTION>
NUMBER
OF PERCENT OF
5% STOCKHOLDERS: SHARES OUTSTANDING
- ---------------- ------- -----------
<S> <C> <C>
Centre Partners Group (1)................................. 200,000 47.8%
30 Rockefeller Plaza
Suite 5050
New York, New York 10020
Weiss, Peck & Greer Parties (2)........................... 190,000 45.4
One New York Plaza
New York, New York 10004
OFFICERS AND DIRECTORS:
David B. Golub (1)........................................ 200,000 47.8%
Jerrold Kaufman (3)....................................... 1,000 *
Nora E. Kerppola (2)...................................... 190,000 45.4
Loren F. Kranz (4)........................................ 1,000 *
Wesley W. Lang, Jr. (2)................................... 190,000 45.4
Lester Pollack (1)........................................ 200,000 47.8
Jeffrey A. Weiss (5)...................................... 15,416 3.7
Craig S. Whiting (2)...................................... 190,000 45.4
Paul J. Zepf (1).......................................... 200,000 47.8
Michael Lord (6).......................................... -- *
Gregory Schubert (7)...................................... 500 *
All directors and officers as a group (8) (12 persons).... 408,066 100.0%
</TABLE>
- --------
* Represents less than 1%.
(1) Includes (i) 61,213 shares owned of record by Centre Capital Investors II,
L.P. ("Investors II"), (ii) 19,919 shares owned of record by Centre
Capital Tax-Exempt Investors II, L.P. ("Tax-Exempt II"), (iii) 12,280
shares owned of record by Centre Capital Offshore Investors II, L.P.
("Offshore II"), (iv) 939 shares owned of record by Centre Parallel
Management Partners, L.P. ("Parallel"), (v) 12,691 shares owned of record
by Centre Partners Coinvestment, L.P. ("Coinvestment") and (vi) 92,958
shares owned of record by the State Board of Administration of Florida
(the "Florida Board"). Investors II, Tax-Exempt II and Offshore II are
limited partnerships, of which the general partner of each is Centre
Partners II, L.P. ("Partners II"), and of which Centre Partners Management
LLC ("Centre Management") is an attorney-in-fact. Parallel and
Coinvestment are also limited partnerships. In its capacity as manager of
certain investments for the Florida Board pursuant to a management
agreement, Centre Management is an attorney-in-fact of Parallel. Centre
Partners II LLC is the ultimate general partner of each of Investors II,
Tax-Exempt II, Offshore II, Parallel and Coinvestment. David B. Golub,
Lester Pollack and Paul J. Zepf are each Managing Directors of Centre
Management and Centre Partners II LLC and as such may be deemed to
beneficially own and share the power to vote or dispose of NAC Common
Stock held by Investors II, Tax-Exempt II, Offshore II, Parallel,
Coinvestment and the Florida Board. Each of Messrs. Golub, Pollack and
Zepf disclaims the beneficial ownership of such NAC Common Stock.
(2) Includes (i) 164,464 shares owned of record by WPG Corporate Development
Associates V, L.P. ("Development V") and (ii) 25,536 shares owned of
record by WPG Corporate Development Associates V (Overseas), L.P.
("Overseas V"). The general partner of Development V is WPG Private Equity
Partners II, LLC ("Equity Partners II") and the general partners of
Overseas V are WPG Private Equity Partners II
47
<PAGE>
(Overseas), LLC ("Equity Partners Overseas") and WPG CDA V (Overseas), Ltd.
("WPG CDA V"). Wesley W. Lang, Jr. is the Managing Principal of Equity
Partners II and a director of Equity Partners Overseas and as such he may
be deemed to beneficially own and share the power to vote or dispose of the
NAC Common Stock held by Development V and Overseas V. Mr. Lang disclaims
the beneficial ownership of such NAC Common Stock.
(3) Does not include 21,623 shares of NAC Common Stock issuable to Mr. Kaufman
upon exercise of options that are not currently exercisable. See
"Management--Management Performance Option Plan."
(4) Does not include 19,221 shares of NAC Common Stock issuable to Mr. Kranz
upon exercise of Options that are not currently exercisable. See
"Management--Management Performance Option Plan."
(5) Includes (i) 1,000 shares owned of record by Avalon Investment Partners,
LLC ("Avalon"), of which Mr. Weiss is a member and (ii) 14,416 shares of
NAC Common Stock issuable to Avalon upon exercise of Class I Options,
which are presently exercisable. Does not include 4,805 shares of NAC
Common Stock issuable to Avalon upon exercise of Class II Options that are
not currently exercisable. See "--Certain Transactions--Avalon Option
Agreement."
(6) Does not include 4,806 shares of NAC Common Stock issuable to Mr. Lord
upon exercise of options that are not currently exercisable. See
"Management--Management Performance Option Plan."
(7) Does not include 3,604 shares of NAC Common Stock issuable to Mr. Schubert
upon exercise of options that are not currently exercisable. See
"Management--Management Performance Option Plan."
(8) Does not include 55,260 shares of NAC Common Stock issuable upon exercise
of options that are not currently exercisable.
CERTAIN TRANSACTIONS
Stockholders' Agreement. Effective concurrent with the consummation of the
Merger, each investor in common stock of NAC entered into a stockholders'
agreement (the "Stockholders' Agreement"). The Stockholders' Agreement, among
other things, provides for: (i) the reimbursement of Centre Partners and WPG
for all reasonable expenses incurred by them in connection with the
Transactions; (ii) limits on the ability of stockholders to, directly or
indirectly, acquire beneficial ownerships of certain competitors of the
Company; (iii) limits on the ability of stockholders to amend NAC's bylaws
without certain approval of the Board of Directors; (iv) requirements that NAC
solicit offers from third parties to engage in acquisitions of NAC's stock or
assets following the fourth anniversary of the consummation date of the
Merger; (v) limits on the ability of stockholders to transfer any shares of
NAC's common stock without the approval of its Board of Directors, including
the granting to NAC, in the first instance, and Centre Partners and WPG, in
the second instance, of options to purchase shares in the event a stockholder
seeks to transfer such common stock to certain proposed transferees; (vi)
repurchase rights of NAC for shares of NAC common stock held by members of
management in the event of their termination or shares held by insolvent
stockholders; (vii) requirements regarding the delivery of operating budgets,
financial statements and other information to the stockholders and inspection
rights with respect to Centre Partners and WPG; and (viii) certain non-
disclosure obligations with respect to confidential information. The
Stockholders' Agreement also required these Board-approved provisions to be
set forth in the Company's charter and bylaws. All parties to the
Stockholders' Agreement also agree to take all action within their respective
power to cause the Board of Directors of NAC to at all times be comprised of
three designees of each of Centre Partners, WPG and the majority of directors
then in office; provided, however, that the initial three designees of the
Board were designated by a majority of the Class A Directors and Class B
Directors. The right of each of Centre Partners and WPG to designate three
directors shall be reduced to two designees in the event that their respective
ownership (as calculated therein) falls below 20%, further reduced to one
designee if such ownership falls below 10%, and terminated if such ownership
is less than 2% of the outstanding NAC common stock. The Stockholders'
Agreement also requires the presence of at least one Class A Director and one
Class B Director in order for there to be a quorum present at a meeting of the
Board of Directors. The Stockholders' Agreement also provides for the
selection of a Chairman of the Board and a Vice-Chairman of the Board from the
designees of each of Centre Partners and WPG for rotating 12-month terms. The
Stockholders' Agreement requires the approval of a majority of the Board,
which majority must include at least one Class A Director and one Class B
Director, to take certain actions, including without limitation, approval of
the annual operating budgets of NAC and its subsidiaries, including the
Company, making or committing to make capital expenditures or asset
acquisitions which individually exceed $0.5 million or in the aggregate exceed
$1.0 million,
48
<PAGE>
incur indebtedness in excess of $1.0 million, create liens or security
interests on any asset of NAC or its subsidiaries other than in the ordinary
course of business and settle claims or litigation for amounts in excess of
$0.5 million. In connection with the Stockholders' Agreement, the stockholders
also executed a registration rights agreement, which provides for demand and
incidental (or "piggyback") registration rights.
Avalon Fee Agreement. In connection with services rendered in connection
with the Transaction, the Company agreed to (i) pay Avalon an investment
banking fee of $750,000 less its investment of $100,000, (ii) grant options to
Avalon pursuant to a separate option agreement and (iii) pay the
representative of Avalon who serves as a director pursuant to the
Stockholders' Agreement an annual retainer for such period as such person
serves as a director.
Avalon Option Agreement. In connection with the Merger, on December 31, 1997
NAC and Avalon entered into the Avalon Option Agreement (the "Avalon Option
Agreement"). Pursuant to the Avalon Option Agreement, NAC granted to Avalon
Class I Options to acquire 14,416 shares of NAC common stock and Class II
Options to acquire 4,805 shares of NAC common stock, each for a purchase price
of $100.00 per share.
Class I Options vest fully and become exercisable upon the closing date of
the Merger. The Class I Options will expire on December 31, 2005. Class II
Options vest fully upon the closing date of the Merger and become exercisable
once certain stockholders have achieved a certain internal rate of return on
their investment. The Class II Options will expire on December 31, 2008.
Jerrold Kaufman Loans. Mr. Kaufman received two loans (the "Loans") on
December 31, 1997 (the "Loan Date") from the Company in the amount of $95,000
(the "2002 Loan") and in the amount of $5,000 (the "1998 Loan"). The 1998 Loan
has been paid in full. Interest on the 2002 Loan accrues on the unpaid
principal balance at the prime or corporate rate of interest per annum
published on the Loan Date by Citibank, N.A., and resets annually thereafter
to the prime or corporate rate at each anniversary of the Loan Date. The 2002
Loan is secured by a pledge by Mr. Kaufman of certain collateral (the "Pledged
Collateral") and the grant of a security interest in the Pledged Collateral.
The 2002 Loan will become due and payable upon the earliest to occur of (i)
any sale or transfer of the Pledged Collateral; (ii) within sixty (60) days
after the termination of employment of Mr. Kaufman due to his resignation or
for cause; and (iii) the dissolution or liquidation of Mr. Kaufman. In
addition, the Loans are subject to various voluntary and required prepayment
provisions.
Loren Kranz Loans. Mr. Kranz received two loans (the "Loans") on December
31, 1997 (the "Loan Date") from the Company in the amount of $45,000 (the
"2002 Loan") and in the amount of $55,000 (the "1998 Loan"). The 1998 Loan has
been paid in full. Interest on the 2002 Loan accrues on the unpaid principal
balance at the prime or corporate rate of interest per annum published on the
Loan Date by Citibank, N.A., and resets annually thereafter to the prime or
corporate rate at each anniversary of the Loan Date. The 2002 Loan is secured
by a pledge by Mr. Kranz of certain collateral (the "Pledged Collateral") and
the grant of a security interest in the Pledged Collateral.
The 2002 Loan will become due and payable upon the earliest to occur of (i)
any sale or transfer of the Pledged Collateral; (ii) within sixty (60) days
after the termination of employment of Mr. Kranz due to his resignation or for
cause; and (iii) the dissolution or liquidation of Mr. Kranz. In addition, the
Loans are subject to various voluntary and required prepayment provisions.
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<PAGE>
THE EXCHANGE OFFER
PURPOSE AND EFFECT
The Old Notes were issued under an Indenture, dated as of January 28, 1998,
which requires that the Company file a registration statement under the
Securities Act with respect to the New Notes and, upon the effectiveness of
such registration statement, offer to the holders of the Old Notes the
opportunity to exchange their Old Notes for a like principal amount of New
Notes, which will be issued without a restrictive legend and, except as set
forth below, may be reoffered and resold by the holder without registration
under the Securities Act. Upon the completion of the Exchange Offer, the
Company's obligations with respect to the registration of the Old Notes and
the New Notes will terminate, except as provided below. A copy of the
Indenture and the Registration Rights Agreement delivered in connection
therewith have been filed as exhibits to the Registration Statement of which
this Prospectus is a part. As a result of the filing and the effectiveness of
the Registration Statement, certain prospective increases in the interest rate
on the Old Notes provided for in the Registration Rights Agreement will not
occur. Following the completion of the Exchange Offer, holders of Old Notes
not tendered will not have any further registration rights, except as provided
below, and the Old Notes will continue to be subject to certain restrictions
on transfer. Accordingly, the liquidity of the market for the Old Notes could
be adversely affected upon completion of the Exchange Offer.
Based on an interpretation by the staff of 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 Old Notes may be offered
for resale, resold and otherwise transferred by a holder 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
holder represents to the Company that (i) such New Notes are acquired in the
ordinary course of business of such holder; (ii) such holder is not engaging
in and does not intend to engage in a distribution of such New Notes and (iii)
such holder 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 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. 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 meeting the requirements of the Securities Act in
connection with any resales of such New Notes. See "Plan of Distribution."
In the event that any holder of Old Notes would not receive freely tradeable
New Notes in the Exchange Offer or is not eligible to participate in the
Exchange Offer, such holder can elect, by so indicating on the Letter of
Transmittal and providing certain additional necessary information, to have
such holder's Old Notes registered in a "shelf" registration statement on an
appropriate form pursuant to Rule 415 under the Securities Act.
In the event that the Company is obligated to file a "shelf" registration
statement, it will be required to keep such "shelf" registration statement
effective for a period of three years or such shorter period that will
terminate when all of the Old Notes covered by such registration statement
have been sold pursuant thereto. Other than set forth in this paragraph, no
holder will have the right to require the Company to register such holder's
Notes under the Securities Act. See "--Procedures for Tendering Notes."
TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING OLD NOTES
Upon the terms and subject to the conditions set forth in this Prospectus
and in the accompanying Letter of Transmittal (which together constitute the
Exchange Offer), the Company will accept for exchange Old Notes which are
properly tendered on or prior to the Expiration Date and not withdrawn as
permitted below. As used herein, the term "Expiration Date" means 5:00 P.M.,
New York time, on April , 1998, provided, however, that if the Company, in its
sole discretion, has extended the period of time during which the Exchange
Offer is open, the term "Expiration Date" means the latest time and date to
which the Exchange Offer is extended.
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As of the date of this prospectus, $100,000,000 aggregate principal amount
of the Old Notes is outstanding. This Prospectus, together with the Letter of
Transmittal, is first being sent on or about March , 1998 to all Holders of
Old Notes known to the Company. The Company's obligation to accept Old Notes
for exchange pursuant to the Exchange Offer is subject to certain customary
conditions as set forth under "--Conditions to the Exchange Offer" below.
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 as described below.
During any such extension, 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.
Old Notes tendered in the Exchange Offer must be in denominations of
principal amount of $1,000 or any integral multiple thereof.
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 below under "--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 by means of a press
release or other public announcement no later than 9:00 a.m., New York City
time, on the next business day after the previously scheduled Expiration Date.
PROCEDURES FOR TENDERING OLD NOTES
Only a registered holder of Old Notes may tender such Old Notes in the
Exchange Offer. The tender to the Company of Old Notes by a Holder thereof as
set forth below and the acceptance thereof by the Company will constitute a
binding agreement between the tendering Holder and the Company upon the terms
and subject to the conditions set forth in this Prospectus and in the
accompanying Letter of Transmittal. Except as set forth below, a Holder who
wishes to tender Old Notes for exchange pursuant to the Exchange Offer must
transmit a properly completed and duly executed Letter of Transmittal,
including all other documents required by such Letter of Transmittal, to State
Street Bank and Trust Company (the "Exchange Agent") at one of the addresses
set forth below under "Exchange Agent" on or prior to the Expiration Date. In
addition, either (i) certificates for such Old Notes must be received by the
Exchange Agent along with the Letter of Transmittal, (ii) a timely
confirmation of a 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") pursuant
to the procedure for book-entry transfer described 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. THE METHOD OF
DELIVERY OF OLD NOTES, LETTERS OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS
IS AT THE ELECTION AND RISK OF THE HOLDERS. IF SUCH DELIVERY IS BY MAIL, IT IS
RECOMMENDED THAT HOLDERS USE AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL
CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY. NO LETTERS
OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO THE COMPANY. HOLDERS MAY REQUEST
THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES, OR
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 to tender on such beneficial owner's behalf. If such
beneficial owner wishes to tender on such owner's 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 beneficial owner's name or obtain a
properly completed bond power from the registered holder. The transfer of
registered ownership may take considerable time.
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Signatures on a Letter of Transmittal or a notice of withdrawal described
below (see "--Withdrawal Rights"), as the case may be, must be guaranteed (see
"--Guaranteed Delivery Procedures") unless the Old Notes surrendered for
exchange pursuant thereto are tendered (i) by a registered Holder of the Old
Notes 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 (as defined below). 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 guaranties must be by a financial
institution (including most banks, savings and loan associations and brokerage
houses) that is a participant in the Securities Transfer Agents Medallion
Program, the New York Stock Exchange Medallion Program or the Stock Exchanges
Medallion Program (collectively, "Eligible Institutions"). If Old Notes are
registered in the name of a person other than a signer of the Letter of
Transmittal, the Old Notes surrendered for exchange must be endorsed by or be
accompanied by a written instrument or instruments of transfer or exchange, in
a satisfactory form as determined by the Company in its sole discretion, duly
executed by the registered holder exactly as the name or names of the
registered holder or holders appear on the Old Notes with the signature
thereon guaranteed by an Eligible Institution.
If the Letter of Transmittal or any Old Notes or powers of attorney are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such person should so indicate when signing, and unless waived by
the Company, proper evidence satisfactory to the Company of their authority to
so act must be submitted with the Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Old Notes tendered for exchange will be determined
by the Company in its sole discretion, which determination shall be final and
binding. The Company reserves the absolute right to reject any and all tenders
of any particular Old Notes not properly tendered or not to accept any
particular Old Note which acceptance might, in the judgment of the Company or
its counsel, be unlawful. The Company also reserves the absolute right to
waive any defects or irregularities or conditions of the Exchange Offer as to
any particular Old Notes either before or after the Expiration Date (including
the right to waive the 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 as to any particular Old Notes either before or after
the Expiration Date (including the Letter of Transmittal and the instructions
thereto) by the Company shall be final and binding on all parties. Unless
waived, any defects or irregularities in connection with tenders of Old Notes
for exchange must be cured within such reasonable period of time as the
Company shall determine. None of the Company, the Exchange Agent or any other
person shall be under any duty to give notification of any defect or
irregularity with respect to any tender of Old Notes for exchange, nor shall
any of them incur any liability for failure to give such notification.
By tendering, each Holder will represent to the Company that, among other
things, the New Notes acquired pursuant to the Exchange Offer are being
obtained in the ordinary course of business of the person receiving such New
Notes, whether or not such person is the Holder, and that neither the Holder
nor such other person has any arrangement or understanding with any person to
participate in the distribution of the New Notes. If any Holder or any such
other person is an "affiliate," as defined under Rule 405 of the Securities
Act, of the Company or is engaged in or intends to engage in, or has an
arrangement or understanding with any person to participate in, a distribution
of such New Notes to be acquired pursuant to the Exchange Offer, such Holder
or any such other person (i) may not rely on the applicable interpretation of
staff of the SEC and (ii) must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any resale
transaction. 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." 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.
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
the Company will accept, promptly after the Expiration Date, all Old Notes
properly tendered and will issue the New Notes promptly after
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acceptance of the Old Notes. See "--Conditions to the Exchange Offer" below.
For purposes of the Exchange Offer, the Company will be deemed to have
accepted properly tendered Old Notes for exchange when, as and if the Company
has given oral or written notice thereof to the Exchange Agent.
For each Old Note accepted for exchange, the Holder of such Old Note will
receive as set forth below under "Description of the Notes--Book-Entry,
Delivery and Form" a New Note having a principal amount equal to that of the
surrendered Old Note. Accordingly, registered holders of New Notes on the
relevant record date for the first interest payment date following the
consummation of the Exchange Offer will receive interest accruing from the
most recent date to which interest has been paid on the Old Notes or, if no
interest has been paid, from January 28, 1998. Old Notes accepted for exchange
will cease to accrue interest from and after the date of consummation of the
Exchange Offer. Holders whose Old Notes are accepted for exchange will not
receive any payment in respect of accrued interest on such Old Notes otherwise
payable on any interest payment date the record date for which occurs on or
after consummation of the Exchange Offer.
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 certificates for such 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 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 transfer into the Exchange
Agent's account at the Book-Entry Transfer Facility pursuant to the book-entry
procedures described below, such non-exchanged Old 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 systems 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 Old Notes may be effected through book-entry transfer at the Book-
Entry Transfer Facility, the Letter of Transmittal or a 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 one of
the addresses set forth below under "--Exchange Agent" on or prior to the
Expiration Date or the guaranteed delivery procedures described below must be
complied with.
GUARANTEED DELIVERY PROCEDURES
If a registered holder of the Old Notes desires to tender such Old Notes and
the Old Notes are not immediately available, or time will not permit such
Holder's Old Notes or other required documents to reach the Exchange Agent
before the Expiration Date, or the procedure for book-entry transfer cannot be
completed on a timely basis, a tender may be effected if (i) the tender is
made through an Eligible Institution, (ii) on or prior to 5:00 P.M., New York
City time, on the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Letter of
Transmittal (or a facsimile thereof) and Notice of Guaranteed Delivery,
substantially in the form provided by the Company (by telegram, telex,
facsimile transmission, mail or hand delivery), setting forth the name and
address of the Holder of Old Notes and the amount of Old Notes tendered,
stating that the tender is being made thereby and guaranteeing that within
three New York Stock Exchange ("NYSE") trading days after the date of
execution of the Notice of Guaranteed Delivery, the certificates for all
physically tendered Old Notes, in proper form for transfer, 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 (iii) the certificates for all physically tendered
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Old Notes, in proper form for transfer, 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 within three NYSE trading days
after the date of execution of the Notice of Guaranteed Delivery.
WITHDRAWAL RIGHTS
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, a
written notice of withdrawal must be received by the Exchange Agent at one of
the addresses set forth below under "--Exchange Agent." Any such notice of
withdrawal must specify the 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 are
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 in which
case such guarantee will not be required. 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 will 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 Old Notes" above at any time on or prior to the Expiration Date.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provisions of the Exchange Offer, and subject to
its obligations pursuant to the Registration Rights Agreement, the Company
shall not be required to accept for exchange, or to issue New Notes in
exchange for, any Old Notes and may terminate or amend the Exchange Offer, if
at any time before the acceptance of such New Notes for exchange, any of the
following events shall occur:
(i) any injunction, order or decree shall have been issued by any court
or any governmental agency that would prohibit, prevent or otherwise
materially impair the ability of the Company to proceed with the Exchange
Offer; or
(ii) the Exchange Offer will violate any applicable law or any applicable
interpretation of the staff of the SEC.
The foregoing conditions are for the sole benefit of the Company and may be
asserted 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
such right shall be deemed an ongoing right which may be asserted at any time
and from time to time.
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 is threatened by the SEC or in effect with
respect to the Registration Statement of which this Prospectus is a part or
the qualification of the Indenture under the Trust Indenture Act of 1939, as
amended.
The Exchange Offer is not conditioned on any minimum principal amount of Old
Notes being tendered for exchange.
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EXCHANGE AGENT
State Street Bank and Trust Company has been appointed as the Exchange Agent
for the Exchange Offer. All executed Letters of Transmittal should be directed
to the Exchange Agent at the address set forth below. Questions and requests
for assistance, requests for additional copies of this Prospectus or of the
Letter of Transmittal and requests or Notices of Guaranteed Delivery should be
directed to the Exchange Agent addressed as follows.
State Street Bank and Trust Company, Exchange Agent
By Mail/Overnight Delivery
Attn: Kellie Mullen
Corporate Trust Department
4th Floor
Two International Place
Boston, MA 02110
By Facsimile:
(617) 664-5920
Confirm by Telephone:
(617) 664-5587
DELIVERY OF THE LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH
ABOVE DOES NOT CONSTITUTE A VALID DELIVERY OF SUCH LETTER OF TRANSMITTAL.
The Exchange Agent also acts as trustee under the Indenture.
FEES AND EXPENSES
The Company will not make any payment to brokers, dealers, or others
soliciting acceptances of the Exchange Offer.
The estimated 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
appoximately $200,000.
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 OLD NOTES
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 provisions
in the Indenture regarding transfer and exchange of the Old Notes and the
restrictions on transfer of such Old Notes as set forth in the legend thereon
as a consequence of the issuance of the Old Notes pursuant to exemptions from,
or in transactions not subject to, the registration requirements of the
Securities Act and applicable state securities laws. In general, the Old Notes
may not be offered or sold, unless registered under the Securities Act and
applicable state securities laws. The Company does not currently anticipate
that it will register Old Notes under the Securities Act. See "Description of
the Notes--Exchange Offer, Registration Rights." Based on interpretations by
the staff of the SEC, as 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 Old Notes 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,
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provided that such New Notes are acquired in the ordinary course or such
holders' business and such holders, broker-dealers, have no arrangement or
understanding with any person to participate in the distribution of such New
Notes. However, the SEC has not considered the Exchange Offer in the context
of a no-action letter and there can be no assurance that the staff of the SEC
would make a similar determination with respect to the Exchange Offer as in
such other circumstances. Each Holder, other than a broker-dealer, must
acknowledge that it is not engaged in, and does not intend to engage in, a
distribution of such New Notes and has no arrangement or understanding to
participate in a distribution of New Notes. If any Holder is an affiliate of
the Company or is engaged in or intends to engage in or has any arrangement or
understanding with respect to the distribution of the New Notes to be acquired
pursuant to the Exchange Offer, such Holder (i) may not rely on the applicable
interpretations of the staff of the SEC and (ii) must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. Each broker-dealer that receives New
Notes for its own account in exchange for Old Notes pursuant to the Exchange
Offer must acknowledge that such Old Notes were acquired by such broker-dealer
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.
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 New Notes received 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. The Company has agreed
that, for a period of one year 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." 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 qualified for sale in such
jurisdictions or an exemption from registration or qualification is available
and is complied with. The Company has agreed, pursuant to the Registration
Rights Agreement, subject to certain limitations specified therein, to
registered or qualify the New Notes for offer or sale under the securities
laws of such jurisdictions as any holder reasonably requests in writing.
Unless a holder so requests, the Company does not currently intend to register
or qualify the sale of the New Notes in any such jurisdictions. See "The
Exchange Offer."
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DESCRIPTION OF SENIOR CREDIT FACILITIES
The Credit Agreement (as defined) provides for (i) a seven-year term loan
facility, in the amount of $25.0 million (the "Term Loan"), and (ii) a six-
year revolving credit facility (the "Revolving Credit Facility") of $35.0
million. In connection with the Offering, all amounts outstanding under the
Acquisition Facilities were repaid utilizing the proceeds of the Offering, the
Term Loan and a portion of the Revolving Credit Facility. The Term Loan is be
repayable in quarterly installments in an aggregate principal amount of $0.25
million for each of the first six years and the remaining $23.5 million in the
last year of the facility.
Loans under the Senior Credit Facilities bear interest at an annual rate, at
the Company's option, equal to either (i) the Base Rate plus Applicable Margin
(as defined) or (ii) the Eurodollar Rate plus the Applicable Margin. "Base
Rate" means the highest of (i) the rate of interest publically announced by
Citibank, N.A. as its base or prime rate in effect at its principal office in
New York City (the "Prime Rate"), (ii) the secondary market rate for three-
month certificates of deposit (adjusted for statutory reserve requirements)
plus 1% and (iii) the federal funds effective rate from time to time plus
0.5%. "Eurodollar Rate" means the rate (adjusted for statutory requirements
for eurocurrency liabilities) at which eurodollar deposits for one, two, three
or six months (at the Company's option) are offered in the interbank
eurodollar market. "Applicable Margin" means a percentage based on the
performance of the Company, ranging from 0.375% to 2.00% for the Revolving
Credit Facility and 0.75% to 2.25% for the Term Loan; provided, that the
Applicable Margin on loans under the Revolving Credit Facility will initially
be 1.875% for a Eurodollar Loan and 0.875% for a Base Rate Loan and the Term
Loan will be initially be 2.125% for loans utilizing the Eurodollar Rate and
1.125% for loans utilizing the Base Rate. The Company is also required to pay
a quarterly commitment fee with respect to the Revolving Credit Facility,
ranging from 0.25% to 0.375%, calculated based on the average daily unused
portion of the Revolving Credit Facility. The rate will be determined based on
the Company's performance. The initial rate is 0.375%.
The Credit Agreement provides for first priority security interests in all
of the tangible and intangible assets (including, among other things, all of
the capital stock of the Company and each of its direct and indirect domestic
subsidiaries (excluding the Company's currently existing subsidiaries) and 65%
of the capital stock of first-tier foreign subsidiaries) of the Company and
its direct and indirect domestic subsidiaries (excluding the Company's
currently existing subsidiaries), except such assets as the Syndication Agent
determines in its sole discretion that costs of obtaining such a security
interest are excessive in relation to the value of the security to be
afforded. The Credit Agreement is guaranteed by the Company's future direct
and indirect domestic subsidiaries. Additionally, the Company is be required
to apply 100% of the net proceeds of any incurrence of certain indebtedness
after the date of the consummation of the Offering, 100% of the net proceeds
of any sale or other disposition by NAC, the Company or any of their
subsidiaries of any assets (except for the sale of inventory in the ordinary
course of business and certain other dispositions) and 75% of excess cash flow
(as defined in the Credit Agreement), provided that such percentage of excess
cash flow will be reduced if certain leverage ratios (as set forth in the
Credit Agreement) are attained.
The Credit Agreement contains certain financial and operating maintenance
covenants including (i) a minimum consolidated EBITDA amount, (ii) a
consolidated total debt ratio and (iii) a maximum consolidated interest
coverage ratio.
The operating covenants of the Credit Agreement include, among other things,
limitations on the ability of the Company to: (i) incur additional debt, other
than certain permitted debt, (ii) permit additional liens or encumbrances,
other than permitted liens, (iii) fundamentally change through certain mergers
or asset sales, (iv) pay certain dividends on capital stock, (v) make certain
capital expenditures, (vi) make certain investments, loans and advances, (vii)
make optional payments and modifications of subordinated and other debt
instruments, (viii) enter into certain transactions with affiliates (ix) alter
its fiscal year, (x) change its lines of business or (xi) enter into negative
pledge agreements.
If for any reason the Company is unable to comply with the terms of the
Credit Agreement, including the covenants included therein, such noncompliance
would result in an event of default under the Credit Agreement and could
result in acceleration of the payment of the debt outstanding under the Senior
Credit Facilities.
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DESCRIPTION OF NEW NOTES
GENERAL
The Old Notes were issued under an Indenture, dated as of January 28, 1998
(the "Indenture"), between the Company and State Street Bank and Trust
Company, as Trustee (the "Trustee"). The New Notes also will be issued under
the Indenture and the terms of the New Notes are identical in all material
respects to those of the Old Notes, except for certain transfer restrictions
relating to the Old Notes. The Old Notes and New Notes will be treated as a
single class of securities under the Indenture. Pursuant to the terms and
subject to the conditions of the Exchange Offer, the Company will accept the
Old Notes in exchange for the New Notes. See "The Exchange Offer."
The following is a summary of certain provisions of the Indenture and the
Notes, a copy of which Indenture and the form of Notes are filed as exhibits
to the Registration Statement of which this Prospectus is a part. The
following summary does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, all the provisions of the Indenture
and the Notes, including the definitions of certain terms therein and those
terms made a part thereof by the Trust Indenture Act of 1939, as amended. The
term "Notes" means the Old Notes and the New Notes, treated as single class.
The definitions of certain terms used in the following summary are set forth
below under "--Certain Definitions." For purposes of this summary, the term
"Company" refers only to Nationwide Credit, Inc. and not to any of its
Subsidiaries.
The New Notes will be, and the Old Notes are, general unsecured obligations
of the Company and rank pari passu in right of payment with all current and
future unsecured senior Indebtedness of the Company, including borrowings
under the Credit Agreement. However, all borrowings under the Credit Agreement
are secured by a first priority Lien on substantially all of the assets of the
Company and its Domestic Subsidiaries. As of March 31, 1998, approximately
$24.9 million was outstanding under the Credit Agreement. The Indenture
permits additional borrowings under the Credit Agreement in the future. See
"Risk Factors--Effective Subordination."
None of the Company's Subsidiaries are Domestic Subsidiaries. All of the
Company's future Domestic Subsidiaries, if any, will become Subsidiary
Guarantors hereunder. The Company's only Subsidiaries are NCI Recoveries
Limited, organized under the laws of the United Kingdom ("NCI Recoveries") and
Master Collectors of Dallas, Inc., a Texas corporation ("MCD"). The revenue
generated by these Subsidiaries are immaterial to the Company. On the date of
the Indenture, the Company's Board of Directors designated MCD as an
Unrestricted Subsidiary. All of the Company's future Subsidiaries will be
Restricted Subsidiaries. However, under certain circumstances, the Company
will be able to designate future Subsidiaries as Unrestricted Subsidiaries.
Unrestricted Subsidiaries will not be subject to many of the restrictive
covenants set forth in the Indenture.
PRINCIPAL, MATURITY AND INTEREST
The Notes are limited in aggregate principal amount to $125.0 million, of
which $100.0 million was issued in the Offering, and will mature on January
15, 2008. Interest on the Notes accrues at the rate of 10.25% per annum and is
payable semi-annually in arrears on January 15 and July 15, commencing on July
15, 1998, to Holders of record on the immediately preceding January 1 and July
1. Additional Notes may be issued from time to time, subject to the provisions
of the Indenture described below under the caption "--Certain Covenants--
Incurrence of Indebtedness and Issuance of Preferred Stock." Interest on the
Notes accrues 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, premium, if any, and interest and Liquidated Damages, 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 and Liquidated Damages, if any, 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 of
principal, premium, interest and Liquidated Damages with respect to Notes the
Holders of which have given wire transfer instructions to the Company will be
required to be made by wire transfer of immediately available funds to the
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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 denominations
of $1,000 and integral multiples thereof.
OPTIONAL REDEMPTION
Except as provided below, the Notes will not be redeemable at the Company's
option prior to January 15, 2003. Thereafter, the Notes will be subject to
redemption at any time at the option of the Company, in whole or in part, upon
not less than 30 nor more than 60 days' notice, at the redemption prices
(expressed as percentages of principal amount) set forth below plus accrued
and unpaid interest and Liquidated Damages, if any, thereon to the applicable
redemption date, if redeemed during the twelve-month period beginning on
January 15 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
<S> <C>
2003.......................................................... 105.125%
2004.......................................................... 103.417%
2005.......................................................... 101.708%
2006 and thereafter........................................... 100.000%
</TABLE>
Notwithstanding the foregoing, prior to January 15, 2001, the Company may
redeem up to 35% of the aggregate principal amount of Notes originally issued
under the Indenture at a redemption price of 110.25% of the principal amount
thereof, plus accrued and unpaid interest and Liquidated Damages thereon, if
any, to the redemption date, with the net cash proceeds of an initial public
offering of common stock of the Company or a capital contribution to the
Company's common equity of the net cash proceeds of an initial public offering
of the Company's direct parent; provided that at least $50.0 million in
aggregate principal amount of Notes remain outstanding immediately after the
occurrence of such redemption (excluding Notes held by the Company and its
Subsidiaries); and provided, further, that notice of such redemption shall be
given within 45 days of the date of the closing of such initial public
offering.
SELECTION AND NOTICE
If less than all of the Notes are to be redeemed at any time, selection of
Notes for redemption will be made by the Trustee 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 by such method as the Trustee shall deem fair and appropriate;
provided that no Notes of $1,000 or less shall be redeemed in part. Notices of
redemption shall be mailed by first class mail at least 30 but not more than
60 days before the redemption date to each Holder of Notes to be redeemed at
its registered address. Notices of redemption may not be conditional. If any
Note is to be redeemed in part only, the notice of redemption that relates to
such Note shall state the portion of the principal amount thereof to be
redeemed. A new Note in principal amount equal to the unredeemed portion
thereof will be issued in the name of the Holder thereof upon cancellation of
the original Note. Notes called for redemption become due on the date fixed
for redemption. On and after the redemption date, interest ceases to accrue on
Notes or portions of them called for redemption.
MANDATORY REDEMPTION
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 equal to 101%
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of the aggregate principal amount thereof plus accrued and unpaid interest and
Liquidated Damages thereon, if any, to the date of purchase (the "Change of
Control Payment"). 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 on the
date specified in such notice, which date shall be no earlier than 30 days and
no later than 60 days from the date such notice is mailed (the "Change of
Control Payment Date"), 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.
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 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 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 Credit Agreement contains prohibitions of certain events that would
constitute a Change of Control. In addition, the exercise by the Holders of
Notes of their right to require the Company to repurchase the Notes could
cause a default under the Credit Agreement, even if the Change of Control
itself does not, due to the financial effect of such repurchases on the
Company. Finally, the Company's ability to pay cash to the Holders of Notes
upon a repurchase may be limited by the Company's then existing financial
resources. See "Risk Factors--Change of Control."
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 definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of the Company and its Subsidiaries taken as a whole. Although
there is a developing body of case law interpreting the phrase "substantially
all," there is no precise established definition of the phrase under
applicable law. Accordingly, the ability of a Holder of Notes to require the
Company to repurchase such Notes as a result of a sale, lease, transfer,
conveyance or other disposition of less than all of the assets of the Company
and its Subsidiaries taken as a whole to another Person or group may be
uncertain.
ASSET SALES
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, consummate 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 75% of the
consideration therefor received by
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the Company or such Restricted Subsidiary is in the form of cash or long-term
assets that are used or useful in the same or similar line of business as the
Company and its Restricted Subsidiaries were engaged in on the date of such
Asset Sale; 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 and (y) any
securities, notes or other obligations received by the Company or any such
Restricted Subsidiary from such transferee that are converted by the Company
or such Restricted Subsidiary into cash within 30 days of receipt (to the
extent of the cash received), shall be deemed to be cash for purposes of this
provision.
Within 360 days after the receipt of any Net Proceeds from an Asset Sale,
the Company may apply such Net Proceeds at its option, (a) (i) to repay term
Indebtedness under the Credit Facilities or (ii) if no term Indebtedness
exists under the Credit Facilities, to reduce the revolving credit commitments
under the Credit Facilities or (b) to the acquisition of a majority of the
assets of, or a majority of the Voting Stock of, another business that is the
same or similar line of business as the Company and its Restricted
Subsidiaries were engaged in on the date of such Asset Sale, the making of a
capital expenditure or the acquisition of other long-term assets that are used
or useful in the same or similar line of business as the Company and its
Restricted Subsidiaries were engaged in on the date of such Asset Sale.
Pending the final application of any such Net Proceeds, the Company may
temporarily reduce revolving credit borrowings or otherwise invest such Net
Proceeds in any manner that is not prohibited by the Indenture. Any Net
Proceeds from Asset Sales that are not applied or invested as provided in the
first sentence of this paragraph will be deemed to constitute "Excess
Proceeds." When the aggregate amount of Excess Proceeds exceeds $5.0 million,
the Company will be required to make an offer to all Holders of Notes and all
holders of other Indebtedness containing provisions similar to those set forth
in the Indenture with respect to offers to purchase or redeem with the
proceeds of sales of assets (an "Asset Sale Offer") to purchase the maximum
principal amount of Notes and such other Indebtedness 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 thereon, if any, to the date of purchase, in accordance
with the procedures set forth in the Indenture and such other Indebtedness. To
the extent that any Excess Proceeds remain after consummation of an Asset Sale
Offer, the Company may use such Excess Proceeds for any purpose not otherwise
prohibited by the Indenture. If the aggregate principal amount of Notes
tendered into such Asset Sale Offer 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 such offer to purchase, the amount of
Excess Proceeds shall be reset at zero.
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 (including, without limitation, any payment in connection
with any merger or consolidation involving the Company or any of its
Restricted Subsidiaries) or to the direct or indirect holders of the Company's
Equity Interests in their capacity as such (other than dividends or
distributions payable in Equity Interests (other than Disqualified Stock) of
the Company or to the Company or a Restricted Subsidiary of the Company); (ii)
purchase, redeem or otherwise acquire or retire for value (including, without
limitation, in connection with any merger or consolidation involving the
Company) any Equity Interests of the Company or any direct or indirect parent
of the Company (other than any such Equity Interests owned by the Company or
any Wholly Owned Restricted Subsidiary of the Company); (iii) make any payment
on or with respect to, or purchase, redeem, defease or otherwise acquire or
retire for value any Indebtedness that is subordinated to the Notes, except a
payment of interest or principal at Stated 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:
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(a) no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof; and
(b) the Company would, at the time of such Restricted Payment and 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 covenant
described above under caption "--Incurrence of Indebtedness and Issuance of
Preferred Stock;" and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Company and its Restricted
Subsidiaries after the date of the Indenture (excluding Restricted Payments
permitted by clauses (ii), (iii) and (iv) of the next succeeding
paragraph), is less than the sum, without duplication, 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 since
the date of the Indenture as a contribution to its common equity capital or
from the issue or sale of Equity Interests of the Company (other than
Disqualified Stock) or from the issue or sale of Disqualified Stock or debt
securities of the Company that have been converted into such Equity
Interests (other than Equity Interests (or Disqualified Stock or
convertible debt securities) sold to a Subsidiary of the Company), plus
(iii) to the extent that any Restricted Investment that was made after the
date of the Indenture is sold for cash or otherwise liquidated or repaid
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 (iv) 50% of any
dividends received by the Company or a Wholly Owned Restricted Subsidiary
thereof from an Unrestricted Subsidiary of the Company representing Net
Income of such Unrestricted Subsidiary earned since the date of the
Indenture; provided that such dividends were not already included in
calculating Consolidated Net Income of the Company for such period.
The foregoing provisions will not prohibit (i) the payment of any dividend
within 60 days after the date of declaration thereof, if at said date of
declaration such payment would have complied with the provisions of the
Indenture; (ii) the redemption, repurchase, retirement, defeasance or other
acquisition of any subordinated Indebtedness or Equity Interests of the
Company in exchange for, or out of the net cash proceeds of the substantially
concurrent sale (other than to a Restricted Subsidiary of the Company) of,
other 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, defeasance or other acquisition
shall be excluded from clause (c)(ii) of the preceding paragraph; (iii) the
defeasance, redemption, repurchase or other acquisition of subordinated
Indebtedness with the net cash proceeds from an incurrence of Permitted
Refinancing Indebtedness; (iv) the payment of any dividend by a Restricted
Subsidiary of the Company to the holders of its common Equity Interests on a
pro rata basis; (v) the repurchase, redemption or other acquisition or
retirement for value of any Equity Interests of the Company or any Restricted
Subsidiary of the Company held by any member of the Company's (or any of its
Restricted Subsidiaries') management pursuant to any management equity
subscription agreement or stock option agreement in effect as of the date of
the Indenture; provided that the aggregate price paid for all such
repurchased, redeemed, acquired or retired Equity Interests shall not exceed
$500,000 in any twenty-four-month period, provided that the amount available
in any given twelve-month period shall be increased by the excess, if any, of
(A) $500,000 over (B) the amount used pursuant to this clause (v) in the
immediately preceding twelve-month period and no Default or Event of Default
shall have occurred and be continuing immediately after such transaction, (vi)
(A) as long as NAC has no Material Assets other than the stock of the Company,
the payment to NAC in respect of taxes of NAC, the Company and its
Subsidiaries which are payable by or owed by NAC, and (B) if on or after
January 1, 1998, NAC owns or acquires any Material Asset other than the stock
of the Company, the payment to NAC in respect of federal (and state) income
taxes for the tax periods for which a federal consolidated return (and state
combined return) is filed by NAC for a
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consolidated (or combined) group of which NAC is the parent and the Company
and its Subsidiaries are members in an amount equal to the amount of such
federal (and state) income taxes allocable to the Company and its Subsidiaries
in accordance with the principles of Treasury Regulations Section 1.1552-1 (a)
(2) (ii), as modified by the principles of Treasury Regulations Section
1.1502-33 (d) (2), in either case, to the extent that such payments are
actually used by NAC to pay such taxes; provided, however, that for purposes
of this subsection (vi) only, the term "Material Asset" means any asset with a
gross value in excess of $200,000, and (vii) payments or dividends to NAC to
allow NAC to pay reasonable legal, accounting, investment banking, financial
advisory, management, outside director or other professional and
administrative fees and expenses incurred by it in an aggregate amount
pursuant to this clause (vii) not to exceed $750,000 per year.
The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if such designation would not cause a Default. For
purposes of making such determination, all outstanding Investments by the
Company and its Restricted Subsidiaries (except to the extent repaid in cash)
in the Subsidiary so designated will be deemed to be Restricted Payments at
the time of such designation and will reduce the amount available for
Restricted Payments under the first paragraph of this covenant. All such
outstanding Investments will be deemed to constitute Investments in an amount
equal to the fair market value of such Investments at the time of such
designation. Such designation will only be permitted if such Restricted
Payment would be permitted at such time and if such Restricted Subsidiary
otherwise meets the definition of an Unrestricted Subsidiary.
The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or
securities proposed to be transferred or issued by the Company or such
Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment.
The fair market value of any non-cash Restricted Payment shall be determined
by the Board of Directors whose resolution with respect thereto shall be
delivered to the Trustee, such determination to be based upon an opinion or
appraisal issued by an accounting, appraisal or investment banking firm of
national standing if such fair market value exceeds $5.0 million. 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, together with a copy of any
fairness opinion or appraisal required by the Indenture.
INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED 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") 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's most recently ended four full fiscal quarters
for which internal financial statements are available immediately preceding
the date on which such additional Indebtedness is incurred or such
Disqualified Stock is issued would have been at least 2.0 to 1, 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, at the beginning of
such four-quarter period.
The Indenture also provides that the Company will not incur any Indebtedness
that is contractually subordinated in right of payment to any other
Indebtedness of the Company unless such Indebtedness is also contractually
subordinated in right of payment to the Notes on substantially identical
terms; provided, however, that no Indebtedness of the Company shall be deemed
to be contractually subordinated in right of payment to any other Indebtedness
of the Company solely by virtue of being unsecured.
The provisions of the first paragraph of this covenant will not apply to the
incurrence of any of the following items of Indebtedness (collectively,
"Permitted Debt"):
(i) the incurrence by the Company of term Indebtedness under Credit
Facilities; provided that the aggregate principal amount of all term
Indebtedness outstanding under all Credit Facilities after giving effect
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to such incurrence does not exceed an amount equal to $25.0 million less
the aggregate amount of all repayments, optional or mandatory, of the
principal of any term Indebtedness under a Credit Facility that have been
made since the date of the Indenture;
(ii) the incurrence by the Company of revolving credit Indebtedness and
letters of credit (with letters of credit being deemed to have a principal
amount equal to the maximum potential liability of the Company and its
Subsidiaries thereunder) under Credit Facilities; provided that the
aggregate principal amount of all revolving credit Indebtedness outstanding
under all Credit Facilities after giving effect to such incurrence does not
exceed an amount equal to $35.0 million less the aggregate amount of all
Net Proceeds of Asset Sales applied to reduce the revolving credit
commitments under a Credit Facility pursuant to the covenant described
above under the caption "--Asset Sales;"
(iii) the incurrence by the Company of Indebtedness represented by the
Notes issued pursuant to the Offering;
(iv) the incurrence by the Company or any of its Subsidiaries of
Indebtedness represented by Capital Lease Obligations, mortgage financings
or purchase money obligations, in each case incurred for the purpose of
financing all or any part of the purchase price or cost of construction or
improvement of property, plant or equipment used in the business of the
Company or such Subsidiary, in an aggregate principal amount not to exceed
$5.0 million at any time outstanding;
(v) the incurrence by the Company or any of its Subsidiaries of Permitted
Refinancing Indebtedness in exchange for, or the net proceeds of which are
used to refund, refinance or replace Indebtedness (other than intercompany
Indebtedness) that was permitted by the Indenture to be incurred (x)
pursuant to the Fixed Charge Coverage Ratio test set forth in the first
paragraph of this covenant or (y) pursuant to clause (iii) of this
covenant;
(vi) the incurrence by the Company or any of its Restricted Subsidiaries
of intercompany Indebtedness between or among the Company and any of its
Wholly Owned Restricted Subsidiaries; provided, however, that (i) if the
Company is the obligor on such Indebtedness, such Indebtedness is expressly
subordinated to the prior payment in full in cash of all Obligations with
respect to the Notes and (ii)(A) any subsequent issuance or transfer of
Equity Interests that results in any such Indebtedness being held by a
Person other than the Company or a Restricted Subsidiary thereof and (B)
any sale or other transfer of any such Indebtedness to a Person that is not
either the Company or a Wholly Owned Restricted Subsidiary thereof 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 was not
permitted by this clause (vi);
(vii) the incurrence by the Company of Hedging Obligations that are
incurred for the purpose of fixing or hedging interest rate risk with
respect to any floating rate Indebtedness that is permitted by the terms of
this Indenture to be outstanding;
(viii) the Guarantee by the Company or any of the Subsidiary Guarantors
of Indebtedness of the Company or a Restricted Subsidiary of the Company
that was permitted to be incurred by another provision of this covenant;
(ix) the incurrence by the Company or any of its Restricted Subsidiaries
of Earn-out Obligations in an aggregate amount not to exceed $5.0 million
at any time outstanding;
(x) 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 that was not permitted by this clause (x); and
(xi) the incurrence by the Company or any of its Restricted Subsidiaries
of additional Indebtedness in an aggregate principal amount (or accreted
value, as applicable) at any time outstanding not to exceed $10.0 million.
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For purposes of determining compliance with this covenant, in the event that
an item of Indebtedness meets the criteria of more than one of the categories
of Permitted Debt described in clauses (i) through (xi) above or is entitled
to be incurred pursuant to the first paragraph of this covenant, the Company
shall, in its sole discretion, classify such item of Indebtedness in any
manner that complies with this covenant. Accrual of interest and accretion or
amortization of original issue discount will not be deemed to be an incurrence
of Indebtedness for purposes of this covenant; provided, in each such case,
that the amount thereof is included in Fixed Charges of the Company as
accrued.
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 on any asset now owned or hereafter acquired, or
any income or profits therefrom or assign or convey any right to receive
income therefrom, except Permitted Liens.
DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING 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)
transfer any of its properties or assets to the Company or any of its
Restricted Subsidiaries. However, the foregoing restrictions will not apply to
encumbrances or restrictions existing under or by reason of (a) the Credit
Agreement as in effect as of the date of the Indenture and any amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings thereof, provided that such amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings are no more restrictive, taken as a whole, with
respect to such dividend and other payment restrictions than those contained
in the Credit Agreement as in effect on the date of the Indenture, (b) the
Indenture and the Notes, (c) applicable law, (d) any instrument governing
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, (e) customary non-assignment
provisions in leases, licenses or other agreements entered into in the
ordinary course of business and consistent with past practices, (f) 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, (g) any agreement for the sale of a Restricted
Subsidiary that restricts distributions by that Restricted Subsidiary pending
its sale, (h) Permitted Refinancing Indebtedness, provided that the
restrictions contained in the agreements governing such Permitted Refinancing
Indebtedness are no more restrictive, taken as a whole, than those contained
in the agreements governing the Indebtedness being refinanced, (i) secured
Indebtedness otherwise permitted to be incurred pursuant to the provisions of
the covenant described above under the caption "--Liens" that limits the right
of the debtor to dispose of the assets securing such Indebtedness, (j)
provisions with respect to the disposition or distribution of assets or
property in joint venture agreements and other similar agreements entered into
in the ordinary course of business and (k) restrictions on cash or other
deposits or net worth imposed by customers under contracts entered into in the
ordinary course of business.
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
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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 Registration Rights Agreement, 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 preceding 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 Preferred Stock."
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 transaction,
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 would 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
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 of related Affiliate
Transactions involving aggregate consideration in excess of $5.0 million, an
opinion as to the fairness to the Holders of such Affiliate Transaction from a
financial point of view issued by an accounting, appraisal or investment
banking firm of national standing. Notwithstanding the foregoing, the
following items shall not be deemed to be Affiliate Transactions: (i) any
employment agreement or other compensation plan or arrangement entered into by
the Company or any of its Restricted Subsidiaries in the ordinary course of
business and consistent with the past practice of the Company or such
Restricted Subsidiary, (ii) transactions between or among the Company and/or
its Restricted Subsidiaries, (iii) payment of reasonable directors fees or
customary indemnification or similar arrangements, (iv) Restricted Payments
that are permitted by the provisions of the Indenture described above under
the caption "--Restricted Payments," and (v) payments and transactions in
connection with the Transactions, including the payment of any fees and
expenses with respect thereto, in each case to the extent disclosed in the
Prospectus under the caption "Use of Proceeds."
SUBSIDIARY GUARANTEES
The Indenture provides that if the Company or any of its Domestic
Subsidiaries shall acquire or create another Domestic Subsidiary after the
date of the Indenture, then such newly acquired or created Domestic Subsidiary
shall execute a Subsidiary Guarantee and deliver an opinion of counsel, in
accordance with the terms of the Indenture, except for all Subsidiaries that
have properly been designated as Unrestricted Subsidiaries in accordance with
the Indenture for so long as they continue to constitute Unrestricted
Subsidiaries.
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PAYMENTS FOR CONSENT
The Indenture provides that neither the Company nor any of its Subsidiaries
will, directly or indirectly, pay or cause to be paid any consideration,
whether by way of interest, fee or otherwise, to any Holder of any Notes for
or as an inducement to any consent, waiver or amendment of any of the terms or
provisions of the Indenture or the Notes unless such consideration is offered
to be paid or is paid to all Holders of the Notes that consent, waive or agree
to amend in the time frame set forth in the solicitation documents relating to
such consent, waiver or agreement.
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" that
describes the financial condition and results of operations of the Company and
its consolidated Subsidiaries (showing in reasonable detail, the revenues and
EBITDA of the Company and its Restricted Subsidiaries separate from the
revenues and EBITDA of the Unrestricted Subsidiaries of the Company in the
event that either the revenue or the EBITDA of the Unrestricted Subsidiaries
for the accounting period covered thereby was greater than or equal to 10% of
the revenue or EBITDA of the Company and its consolidated Subsidiaries) 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 each case within the time periods specified
in the Commission's rules and regulations. In addition, following the
consummation of the exchange offer contemplated by the Registration Rights
Agreement, whether or not required by the rules and regulations of the
Commission, the Company will file a copy of all such information and reports
with the Commission for public availability within the time periods specified
in the Commission's rules and regulations (unless the Commission will not
accept such a filing) and make such information available to securities
analysts and prospective investors upon request. In addition, the Company has
agreed that, for so long as any Notes remain outstanding, it will furnish to
the Holders and to securities analysts and prospective investors, upon their
request, the information required to be delivered pursuant to Rule 144A(d)(4)
under the Securities Act.
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, or
Liquidated Damages with respect to, the Notes; (ii) default in payment when
due of the principal of or premium, if any, on the Notes; (iii) failure by the
Company or any of its Restricted Subsidiaries to comply with the provisions
described under the captions "--Change of Control," "--Asset Sales," "--
Restricted Payments" or "--Incurrence of Indebtedness and Issuance of
Preferred Stock;" (iv) failure by the Company or any of its Restricted
Subsidiaries for 60 days after notice 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 or the
maturity of which has been so accelerated, aggregates $5.0 million or more;
(vi) failure by the Company or any of its Restricted Subsidiaries to pay final
judgments aggregating in excess of $5.0 million, which judgments are not paid,
discharged or stayed for a period of 60 days; (vii) except as permitted by the
Indenture, any 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 or any Subsidiary Guarantor, or any Person acing on behalf of
any Subsidiary Guarantor, shall deny or disaffirm its obligations under its
Subsidiary Guarantee and (viii) certain events of bankruptcy or insolvency
with respect to the Company or any of its Subsidiaries.
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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. Notwithstanding the
foregoing, in the case of an Event of Default arising from certain events of
bankruptcy or insolvency, 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 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.
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
January 15, 2003 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 January 15, 2003, 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 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.
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,
as such, shall have any liability for any obligations of the Company under the
Notes, 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
and Liquidated Damages 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
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Defeasance occurs, certain events (not including non-payment, bankruptcy,
receivership, rehabilitation and insolvency events) described under "Events of
Default" will no longer constitute an Event of Default with respect to the
Notes.
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 and
Liquidated Damages, if any, 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 any 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 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.
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
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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, without limitation, consents obtained in connection with a
purchase of, or 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.
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 or sale of all or substantially all of the Company's
assets, 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.
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 of Notes, unless such Holder shall have
offered to the Trustee security and indemnity satisfactory to it against any
loss, liability or expense.
REGISTRATION RIGHTS; LIQUIDATED DAMAGES
The Company and the Initial Purchaser entered into the Registration Rights
Agreement on January 28, 1998. Pursuant to the Registration Rights Agreement,
the Company agreed to file with the Commission the Exchange Offer Registration
Statement on the appropriate form under the Securities Act with respect to the
New Notes. If any Holder of Transfer Restricted Securities notifies the
Company prior to the 20th day following consummation
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of the Exchange Offer that (A) it is prohibited by law or Commission policy
from participating in the Exchange Offer or (B) that it 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) that it is a
broker-dealer and owns 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 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 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 Note has
been 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 Act.
The Registration Rights Agreement provides that (i) the Company is to file
an Exchange Offer Registration Statement with the Commission on or prior to 60
days after the Closing Date, (ii) the Company is to use its best efforts to
have the Exchange Offer Registration Statement declared effective by the
Commission on or prior to 135 days after the Closing Date, (iii) unless the
Exchange Offer would not be permitted by applicable law or Commission policy,
the Company is to commence the Exchange Offer and use its best efforts to
issue on or prior to 30 business days after the date on which the Exchange
Offer Registration Statement was declared effective by the Commission, New
Notes in exchange for all Notes tendered prior thereto in the Exchange Offer
and (iv) if obligated to file the Shelf Registration Statement, the Company is
to use its best efforts to file the Shelf Registration Statement with the
Commission on or prior to 30 days after such filing obligation arises and to
cause the Shelf Registration to be declared effective by the Commission on or
prior to 90 days after such obligation arises. If (a) the Company fails to
file any of the Registration Statements required by the Registration Rights
Agreement on or before the date specified for such filing, (b) any 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"), or (c) the Company fails to consummate the Exchange Offer within 30
business days of the Effectiveness Target Date with respect to the Exchange
Offer Registration Statement, or (d) 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 the Company will pay Liquidated Damages to each
Holder of Notes, with respect to the first 90-day period immediately following
the occurrence of the first Registration Default in an amount equal to $.05
per week per $1,000 principal amount of Notes held by such Holder. The amount
of the Liquidated Damages will increase by an additional $.05 per week per
$1,000 principal amount of Notes with respect to each subsequent 90-day period
until all Registration Defaults have been cured, up to a maximum amount of
Liquidated Damages for all Registration Defaults of $.50 per week per $1,000
principal amount of Notes. All accrued Liquidated Damages will be paid by the
Company on each Damages Payment Date by wire transfer of immediately available
funds or by federal funds check and to Holders of Certificated Securities by
wire transfer to the accounts specified by them or by mailing checks to their
registered addresses if no such accounts have been specified. Following the
cure of all Registration Defaults, the accrual of Liquidated Damages will
cease.
Holders of 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 certain
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.
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GOVERNING LAW
The Indenture and the Notes are governed by, and will be construed in
accordance with, the laws of the State of New York.
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 becomes a 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
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"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 beneficial ownership of 10% or more of the Voting Stock of a
Person shall be deemed to be control.
"Asset Sale" means (i) the sale, lease, conveyance or other disposition of
any assets or rights (including, without limitation, by way of a sale and
leaseback) other than sales of inventory or accounts receivable in the
ordinary course of business consistent with past practices (provided that the
sale, lease, conveyance or other disposition of all or substantially all of
the assets of the Company and its Restricted Subsidiaries taken as a whole
will be governed by the provisions of the Indenture described above under the
caption "--Change of Control" and/or the provisions described above under the
caption "--Merger, Consolidation or Sale of Assets" and not by the provisions
of the Asset Sale covenant), and (ii) the issue or sale by the Company or any
of its Restricted Subsidiaries of Equity Interests of any of the Company's
Restricted Subsidiaries, in the case of either clause (i) or (ii), whether in
a single transaction or a series of related transactions (a) that have a fair
market value in excess of $2.0 million or (b) for net proceeds in excess of
$2.0 million. Notwithstanding the foregoing, the following items shall not be
deemed to be Asset Sales: (i) a transfer of assets by the Company to a Wholly
Owned Restricted Subsidiary or by a Wholly Owned Restricted Subsidiary to the
Company or to another Wholly Owned Restricted Subsidiary, (ii) an issuance of
Equity Interests by a Wholly Owned Restricted Subsidiary to the Company or to
another Wholly Owned Restricted Subsidiary, and (iii) a Restricted Payment
that is permitted by the covenant described above under the caption "--
Restricted Payments."
"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 or limited liability
company, partnership or membership 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) marketable direct obligations issued by, or
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; (ii)
certificates of deposit,
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time deposits, eurodollar time deposits or overnight bank deposits having
maturities of six months or less from the date of acquisition issued by any
Lender or by any commercial bank organized under the laws of the United States
or any state thereof having combined capital and surplus of not less than
$500.0 million; (iii) commercial paper of an issuer rated at least A-2 by
Standard & Poor's Ratings Services ("S&P") or P-2 by Moody's Investors
Service, Inc. ("Moody's"), or carrying an equivalent rating by a nationally
recognized rating agency, if both of the two named rating agencies cease
publishing ratings of commercial paper issuers generally, and maturing within
six months from the date of acquisition; (iv) repurchase obligations of any
Lender or of any commercial bank satisfying the requirements of clause (ii) of
this definition, having a term of not more than 30 days with respect to
securities issued or fully guaranteed or insured by the United States
government; (v) securities with maturities of one year or less from the date
of acquisition issued or fully guaranteed by any state, commonwealth or
territory of the United States, by any political subdivision or taxing
authority of any such state, commonwealth or territory or by any foreign
government, the securities of which state, commonwealth, territory, political
subdivision, taxing authority or foreign government (as the case may be) are
rated at least A by S&P or A by Moody's; (vi) securities with maturities of
six months or less from the date of acquisition backed by standby letters of
credit issued by any Lender or any commercial bank satisfying the requirements
of clause (ii) of this definition; or (vii) shares of money market mutual or
similar funds which invest exclusively in assets satisfying the requirements
of clauses (i) through (vi) of this definition.
"Change of Control" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, 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 a Principal or a Related Party of a
Principal (as defined below), (ii) the adoption of a plan relating to the
liquidation or dissolution of the Company, (iii) the consummation of any
transaction (including, without limitation, any merger or consolidation) the
result of which is that any "person" (as defined above), other than the
Principals and their Related Parties or any underwriters in connection with an
underwritten public offering becomes the "beneficial owner" (as such term is
defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that a
person shall be deemed to have "beneficial ownership" of all securities that
such person has the right to acquire, whether such right is currently
exercisable or is exercisable only upon the occurrence of a subsequent
condition), directly or indirectly, of more than 50% of the Voting Stock of
the Company (measured by voting power rather than number of shares), (iv) the
first day on which a majority of the members of the Board of Directors of the
Company are not Continuing Directors or (v) the Company consolidates with, or
merges with or into, any Person, or any Person consolidates with, or merges
with or into, the Company, in any such event pursuant to a transaction in
which any of the outstanding Voting Stock of the Company is converted into or
exchanged for cash, securities or other property, other than any such
transaction where the Voting Stock of the Company outstanding immediately
prior to such transaction is converted into or exchanged for Voting Stock
(other than Disqualified Stock) of the surviving or transferee Person
constituting a majority of the outstanding shares of such Voting Stock of such
surviving or transferee Person (immediately after giving effect to such
issuance).
"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
an Asset Sale (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 Subsidiaries for such period, to the extent
that such provision for taxes was included in computing such Consolidated Net
Income, plus (iii) consolidated interest expense of such Person and its
Subsidiaries for such period, whether paid or accrued and whether or not
capitalized (including, without limitation, amortization of debt issuance
costs and 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, 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) depreciation, amortization (including
amortization of goodwill and other intangibles but excluding amortization of
prepaid cash expenses that were paid in a prior period) and other non-
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cash expenses (including any charge relating to the write-off of deferred
financing fees as a result of the repayment of the Acquisition Facilities and
excluding any such non-cash expense to the extent that it represents an
accrual of or reserve for cash expenses in any future period or amortization
of a prepaid cash expense that was paid in a prior period) of such Person and
its Subsidiaries for such period to the extent that such depreciation,
amortization and other non-cash expenses were deducted in computing such
Consolidated Net Income, minus (v) non-cash items increasing such Consolidated
Net Income for such period, in each case, on a consolidated basis and
determined in accordance with GAAP. Notwithstanding the foregoing, the
provision for taxes on the income or profits of, and the depreciation and
amortization and other non-cash expenses of, a Subsidiary of the referent
Person shall be added to Consolidated Net Income to compute Consolidated Cash
Flow only to the extent that a corresponding amount would be permitted at the
date of determination to be dividended to the Company by such Subsidiary
without prior governmental approval (that has not been obtained), and without
direct or indirect restriction pursuant to the terms of its charter and all
agreements, instruments, judgments, decrees, orders, statutes, rules and
governmental regulations applicable to that Subsidiary or its stockholders.
"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 Net Income (but not loss) of any Unrestricted
Subsidiary shall be excluded, whether or not distributed to the Company or one
of its Subsidiaries and (v) the cumulative effect of a change in accounting
principles shall be excluded.
"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 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 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.
"Continuing Directors" means, as of any date of determination, any member of
the Board of Directors of the Company 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 the approval of a majority of the
Continuing Directors who were members of such Board at the time of such
nomination or election or was nominated or designated for election to the
Board by a Principal or its Related Party.
"Credit Agreement" means that certain Credit Agreement, to be dated as of
January 28, 1998, by and among the Company, Lehman Brothers Inc., as arranger,
Lehman Commercial Paper Inc., as syndication agent, and the lenders named
therein, providing for $25.0 million of term borrowings and up to $35.0
million of revolving credit borrowings, including any related notes,
guarantees, collateral documents, instruments and
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agreements executed in connection therewith, and in each case as amended,
supplemented, extended, restated, modified, renewed, refunded, replaced or
refinanced from time to time, including any appendices, exhibits or schedules
to any of the foregoing.
"Credit Facilities" means, with respect to the Company, one or more debt
facilities (including, without limitation, the Credit Agreement) or commercial
paper facilities with banks or other institutional lenders providing for
revolving credit loans, term loans, receivables financing (including through
the sale of receivables to such lenders or to special purpose entities formed
to borrow from such lenders against such receivables) or letters of credit.
"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, at the option of the holder thereof), 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; provided, however, that any Capital Stock that would
constitute Disqualified Stock solely because the holders thereof have the
right to require the Company to repurchase such Capital Stock upon the
occurrence of a Change of Control or an Asset Sale shall not constitute
Disqualified Stock if the terms of such Capital Stock provide that the Company
may not repurchase or redeem any such Capital Stock pursuant to such
provisions unless such repurchase or redemption complies with the covenant
described above under the caption "--Certain Covenants--Restricted Payments."
"Domestic Subsidiary" means (i) any Restricted Subsidiary of the Company
that is incorporated or domiciled in any state of the United States of America
or the District of Columbia or (ii) any Restricted Subsidiary of the Company
that has Guaranteed any Indebtedness of the Company or any Subsidiary
Guarantor.
"Earn-out Obligations" means contingent payment obligations of the Company
or any of its Restricted Subsidiaries incurred in connection with the
acquisition of assets or businesses, which obligations are payable based on
the performance of the assets or businesses so acquired; provided that the
amount of such obligations shall not exceed 25% of the total consideration
paid for such assets or businesses; and provided, further, that the amount of
such obligations outstanding at any time shall be measured by the maximum
amount potentially payable thereunder without regard to performance criteria,
the passage of time or other conditions.
"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).
"Fixed Charges" means, with respect to any Person for any period, the sum,
without duplication, 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 debt issuance costs and
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, 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 the non-cash interest expense incurred by the
Company in connection with the Acquisition Facilities in January of 1998) and
(ii) the consolidated interest 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 dividend payments, whether or not
in cash, on any series of preferred stock of such Person or any of its
Restricted Subsidiaries, other than dividend payments on Equity Interests
payable solely in Equity Interests of the Company (other than Disqualified
Stock) or to the Company or a Restricted Subsidiary of the
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Company, times (b) a fraction, the numerator of which is one and the
denominator of which is one minus the then current combined 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
referent Person or any of its Restricted Subsidiaries incurs, assumes,
Guarantees or redeems any Indebtedness (other than revolving credit
borrowings) or issues or redeems 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 (including any application of
proceeds therefrom), 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 to include the Consolidated Cash Flow of
the acquired entities (adjusted to exclude (x) the cost of any compensation,
remuneration or other benefit paid or provided to any employee, consultant,
Affiliate or equity owner of the acquired entities to the extent such costs
are eliminated and not replaced and (y) the amount of any reduction in
general, administrative or overhead costs of the acquired entities, in each
case, as determined in good faith by an officer of the Company) 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, 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 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.
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America, and the payment for which the
United States pledges its full faith and credit.
"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, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof), of all or any part of any Indebtedness.
"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and (ii) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates.
"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 or representing any Hedging Obligations,
except any such balance that constitutes an accrued expense or trade payable,
if and to the
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extent any of the foregoing (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 to the extent of such Lien
(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, except for Indebtedness arising from the
honoring by a bank or other financial institution of a check, draft or similar
instrument, drawn against insufficient funds, provided that such Indebtedness
is extinguished within five business days of the incurrence of such
Indebtedness. The amount of any Indebtedness outstanding as of any date shall
be (i) the accreted value thereof, in the case of any Indebtedness issued with
original issue discount, and (ii) the principal amount thereof, together with
any interest thereon that is more than 30 days past due, in the case of any
other Indebtedness.
"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 Restricted 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 Restricted 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 Restricted Subsidiary not sold or disposed of in an amount determined as
provided in the final paragraph of the covenant described above under the
caption "Certain Covenants--Restricted Payments."
"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 gain (but not loss),
together with any related provision for taxes on such extraordinary 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 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 Indebtedness under the Credit
Facilities) 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.
"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)
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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 of such Indebtedness 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, premium, if any, interest (including
interest accruing on or after the filing of any petition in bankruptcy or for
reorganization relating to the Company or its Subsidiaries whether or not a
claim for post-filing interest is allowed in such proceeding), penalties,
fees, charges, expenses, indemnifications, reimbursement obligations, damages
(including Liquidated Damages), guarantees and other liabilities or amounts
payable under the documentation governing any Indebtedness or in respect
thereof.
"Permitted Investments" means (a) any Investment in the Company or in a
Restricted Subsidiary of the Company; (b) any Investment in 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 (i) such Person becomes a
Restricted Subsidiary of the Company or (ii) such Person 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 Investment made as a result of
the receipt of non-cash consideration from (i) 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" or (ii) a
disposition of assets that does not constitute an asset sale; (e) any
acquisition of assets, Equity Interests or other securities solely in exchange
for the issuance of Equity Interests (other than Disqualified Stock) of the
Company; (f) any acquisition by the Company or any of its Restricted
Subsidiaries of Purchased Portfolios; and (g) other Investments in any Person
having an aggregate fair market value (measured on the date each such
Investment was made and without giving effect to subsequent changes in value),
when taken together with all other Investments made pursuant to this clause
(e) that are at the time outstanding, not to exceed $7.5 million.
"Permitted Liens" means (i) Liens securing Indebtedness under the Credit
Facilities that was permitted by the terms of the Indenture; (ii) Liens in
favor of the Company; (iii) Liens on property of a Person existing at the time
such Person is merged into or consolidated with the Company or any Restricted
Subsidiary of the Company; provided that such Liens were in existence prior to
the contemplation of such merger or consolidation and do not extend to any
assets other than those of the Person merged into or consolidated with the
Company; (iv) Liens on property existing at the time of acquisition thereof by
the Company or any Restricted Subsidiary of the Company, provided that such
Liens were in existence prior to the contemplation of such acquisition; (v)
Liens to secure the performance of statutory obligations, surety or appeal
bonds, performance bonds or other obligations of a like nature incurred in the
ordinary course of business; (v) Liens to secure Indebtedness (including
Capital Lease Obligations) permitted by clause (iv) of the second paragraph of
the covenant entitled "Incurrence of Indebtedness and Issuance of Preferred
Stock" covering only the assets acquired with such Indebtedness; (vi) Liens
existing on the date of the Indenture; (vii) Liens for taxes, assessments or
governmental charges or claims that are not yet delinquent or that are being
contested in good faith by appropriate proceedings promptly instituted and
diligently concluded, provided that any reserve or other appropriate provision
as shall be required in conformity with GAAP shall have been made therefor;
(viii) Liens on assets of Unrestricted Subsidiaries that secure Non-Recourse
Debt of Unrestricted Subsidiaries; (ix) Liens incurred in the ordinary course
of business of the Company or any Subsidiary of the Company with respect to
obligations that do not exceed $5.0 million at any one time outstanding and
that (a) are not incurred in connection with the borrowing of money or the
obtaining of advances or credit (other than trade credit in the ordinary
course of business) and (b) do not in the aggregate materially detract from
the value of the property or materially impair the use thereof in the
operation of business by the Company or such Subsidiary and (x) Liens securing
Permitted Refinancing Indebtedness provided that the Company was permitted to
incur Liens with respect to the Indebtedness so refinanced.
"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
(other than intercompany Indebtedness); provided that: (i) the principal
amount (or accreted value, if applicable) of such
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Permitted Refinancing Indebtedness does not exceed the principal amount of (or
accreted value, if applicable), plus accrued interest, premium and prepayment
penalties, if any, on, the Indebtedness so extended, refinanced, renewed,
replaced, defeased or refunded (plus the amount of 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.
"Principals" means Centre Partners Management, LLC and WPG Corporate
Development Associates V, L.P.
"Purchased Portfolios" means account receivables portfolios purchased by the
Company or any of its Restricted Subsidiaries.
"Related Party" with respect to any Principal means (A) any controlling
stockholder, 50% (or more) owned Subsidiary, or spouse or immediate family
member (in the case of an individual) of such Principal or (B) any trust,
corporation, partnership or other entity, the beneficiaries, stockholders,
partners, owners or Persons beneficially holding an 50% or more controlling
interest of which consist of such Principal and/or such other Persons referred
to in the immediately preceding clause (A).
"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 an Unrestricted Subsidiary.
"Significant Subsidiary" means any 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.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations
to repay, redeem or repurchase any such interest or principal prior to the
date originally scheduled for the payment thereof.
"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 Guarantee" shall mean the joint and several Guarantee by the
Domestic Subsidiaries of the Company's obligations under the Notes, in
substantially the form of such Subsidiary Guarantee attached as an exhibit to
the Indenture.
"Subsidiary Guarantors" means each Domestic Subsidiary that executes a
Subsidiary Guarantee in accordance with the provisions of the Indenture, and
their respective successors and assigns.
79
<PAGE>
"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 under the caption
"Incurrence of Indebtedness and Issuance of Preferred 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 permitted if (i) such Indebtedness is permitted under the covenant
described under the caption "Certain Covenants--Incurrence of Indebtedness and
Issuance of Preferred Stock," calculated on a pro forma basis as if such
designation had occurred at the beginning of the four-quarter reference
period, and (ii) no Default or Event of Default would be in existence
following such designation.
"Voting Stock" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"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" of any Person means a Restricted
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 Restricted
Subsidiaries of such Person and one or more Wholly Owned Restricted
Subsidiaries of such Person.
80
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is a summary of certain federal income tax
considerations relevant to the exchange of Old Notes for New Notes, but does
not purport to be a complete analysis of all potential tax effects. The
discussion is based upon the Internal Revenue Code of 1986, as amended,
Treasury regulations, Internal Revenue Service rulings and pronouncements, and
judicial decisions now in effect, all of which are subject to change at any
time by legislative, judicial or administrative action. Any such changes may
be applied retroactively in a manner that could adversely affect a holder of
the New Notes. The description does not consider the effect of any applicable
foreign, state, local or other tax laws or estate or gift tax considerations.
EACH HOLDER SHOULD CONSULT HIS OWN TAX ADVISOR AS TO THE PARTICULAR TAX
CONSEQUENCES TO IT OF EXCHANGING OLD NOTES FOR NEW NOTES, INCLUDING THE
APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS.
EXCHANGE OF OLD NOTES FOR NEW NOTES
The exchange of Old Notes for New Notes pursuant to the Exchange Offer
should not constitute a significant modification of the terms of the Old Notes
and, therefore, such exchange should not constitute an exchange for federal
income tax purposes. Accordingly, such exchange should have no federal income
tax consequences to holders of Old Notes.
81
<PAGE>
PLAN OF DISTRIBUTION
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. 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 New Notes received in exchange for Old Notes where
such Old Notes were acquired as a result of market-making activities or other
trading activities. The Company has agreed that, for a period of one year
after the Expiration Date, it will make this prospectus, as amended or
supplemented, available to any broker-dealer for use in connection with any
such resale.
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 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 commission 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.
For a period of one year after the Expiration Date, the Company will
promptly send additional copies of this Prospectus and any amendment or
Supplement to this Prospectus to any broker-dealer that requests such
documents in the Letter of Transmittal. The Company has agreed, pursuant to
the Registration Rights Agreement, to pay all expenses incident to the
Exchange Offer (including the expenses of one counsel for all the holders of
the Notes as a single class) other than commissions or concessions of any
brokers or dealers and will indemnify the holders of the Notes (including any
broker-dealers) against certain liabilities, including liabilities under the
Securities Act.
LEGAL MATTERS
The validity of the Notes offered hereby will be passed upon for the Company
by Weil, Gotshal & Manges LLP, New York, New York.
EXPERTS
The consolidated financial statements of Nationwide Credit, Inc. as of
December 31, 1997 and 1996 and for each of the three years in the period then
ended, appearing in this Prospectus and Registration Statement, have been
audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon appearing elsewhere herein, and are included in reliance upon
such report given upon the authority of such firm as experts in accounting and
auditing.
82
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
NATIONWIDE CREDIT, INC.
Unaudited consolidated balance sheet of Nationwide Credit, Inc. as of March 31, 1998
and the related consolidated statements of operations and cash flows for the three
months ended March 31, 1998 and 1997 with accompanying notes.................. F-2
Consolidated balance sheets of Nationwide Credit, Inc. as of December 31, 1997 and
1996 and the related consolidated statements of income, stockholder's equity and
cash flows for the years ended December 31, 1997, 1996 and 1995 with accompanying
notes and Report of Independent Auditors thereon.................................... F-8
Schedule of valuation and qualifying accounts for the years ended December 31, 1997,
1996 and 1995................................................................. II-1
</TABLE>
F-1
<PAGE>
NATIONWIDE CREDIT, INC.
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
MARCH 31,
1998
---------
UNAUDITED
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents.......................................... $ 6,366
Cash held for clients.............................................. 820
Accounts receivable, net of allowance of $2,791.................... 15,941
Prepaid expenses and other current assets.......................... 644
--------
Total current assets................................................ 23,771
Property and equipment.............................................. 12,708
Accumulated depreciation............................................ (1,131)
--------
11,577
Goodwill, less accumulated amortization of $1,005................... 119,873
Other intangible assets, less accumulated amortization of $3,994.... 16,344
Deferred financing costs, less accumulated amortization of $1,188... 4,380
Other assets........................................................ 191
--------
Total assets........................................................ $176,136
========
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Collections due to clients......................................... $ 820
Accrued compensation............................................... 4,652
Accounts payable................................................... 2,029
Accrued severance and office closure costs......................... 1,455
Other accrued liabilities.......................................... 5,297
Current maturities of long-term debt............................... 250
--------
Total current liabilities........................................... 14,503
Accrued severance and office closure costs.......................... 2,400
Long-term debt
Term loan facility................................................. 24,688
10.25% Senior notes due 2008....................................... 100,000
Stockholder's equity:
Common Stock, no par value
Authorized shares--10,000
Issued and outstanding shares--10 --
Additional paid-in capital......................................... 39,115
Notes receivable--stockholders..................................... (140)
Retained earnings (deficit)........................................ (4,430)
--------
Total stockholder's equity.......................................... 34,545
--------
Total liabilities and stockholder's equity.......................... $176,136
========
</TABLE>
See accompanying notes.
F-2
<PAGE>
NATIONWIDE CREDIT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31,
(IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR SUCCESSOR
1997 1998
----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Revenue.................................................. $30,788 $29,925
Expenses:
Salaries and benefits................................. 18,023 17,039
Telecommunication..................................... 1,622 1,359
Occupancy............................................. 1,153 1,158
Other operating and administrative.................... 5,864 3,712
Depreciation and amortization......................... 3,198 6,130
Provision for employee severance and office closure.... 679 --
Overhead charges from First Data Corporation.......... 310 --
------- -------
Total expenses........................................... 30,849 29,398
------- -------
Operating income (loss) ................................. (61) 527
Interest expense......................................... (31) (4,088)
------- -------
Loss before income taxes and extraordinary items......... (92) (3,561)
Income tax benefit....................................... (50) --
------- -------
Loss before extraordinary items.......................... (42) (3,561)
Extraordinary loss on debt extinguishment................ -- (869)
------- -------
Net loss................................................. $ (42) $(4,430)
======= =======
</TABLE>
See accompanying notes.
F-3
<PAGE>
NATIONWIDE CREDIT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31,
(IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR SUCCESSOR
1997 1998
----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
OPERATING ACTIVITIES
Net loss ............................................. $ (42) $ (4,430)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation....................................... 985 1,131
Amortization....................................... 2,212 4,999
Amortization of deferred financing costs........... -- 1,188
Extraordinary loss on debt extinguishment.......... -- 869
Deferred tax provision............................. 2,021 --
Changes in operating assets and liabilities:
Accounts receivable............................... (2,280) (3,070)
Prepaid expenses and other assets................. (206) 357
Accrued compensation.............................. (649) 1,156
Intercompany trade payables....................... 1,439 --
Accounts payable, other accrued liabilities and
other liabilities................................ (2,759) 3,958
-------- ---------
Net cash provided by operating activities............. 721 6,158
INVESTING ACTIVITIES
Acquisitions.......................................... (24,161) --
Purchases of equipment................................ (2,919) (1,117)
-------- ---------
Net cash used in investing activities................. (27,080) (1,117)
FINANCING ACTIVITIES
Proceeds from Acquisition Facilities.................. -- 125,000
Capital contribution from Parent...................... -- 38,975
Funding of acquisition purchase price................. -- (157,270)
Proceeds from long-term debt.......................... -- 25,000
Proceeds from 10.25% Notes due 2008................... -- 100,000
Repayment of Acquisition Facilities................... -- (125,000)
Repayment of long-term debt........................... -- (63)
Debt issuance costs................................... -- (6,437)
(To) from First Data Corporation...................... 24,644 --
Other................................................. -- (268)
-------- ---------
Net cash provided by (used in) financing activities... 24,644 (63)
-------- ---------
Increase in cash and cash equivalents................. (1,715) 4,978
Cash and cash equivalents at beginning of period...... 4,109 1,388
-------- ---------
Cash and cash equivalents at end of period............ $ 2,394 $ 6,366
======== =========
Supplemental disclosures of cash flow information
Interest paid......................................... $ 1,242
=========
</TABLE>
F-4
<PAGE>
NATIONWIDE CREDIT, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1997 AND 1998
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND WHERE INDICATED)
1. ORGANIZATION AND BASIS OF PRESENTATION
On December 31, 1997, NCI Acquisition Corporation (the "Buyer"), NCI Merger
Corporation ("Merger Sub"), Nationwide Credit Inc. (the "Company"), First Data
Corporation (the "Seller") and its wholly owned subsidiary, First Financial
Management Corporation ("FFMC"), entered into an Agreement and Plan of Merger
(the "Merger Agreement") pursuant to which Merger Sub merged with and into the
Company, with the Company as the surviving corporation and a wholly owned
subsidiary of the Buyer. The transaction was accounted for under the purchase
method of accounting with the consideration and related fees of the
acquisition allocated to the assets acquired and liabilities assumed based on
their estimated fair values at the date of the acquisition. The merger
consideration consisted of $155.2 million in cash (before transaction costs of
$2.1 million) and up to an additional $3.7 million, to be paid pursuant to the
terms of an earn-out agreement in the event the Company achieves certain
performance targets for the year ended December 31, 1998. The excess of cost
over the fair value of net assets acquired of $120.9 million is being
amortized on a straight-line basis over 30 years. Other identifiable
intangible assets are primarily comprised of the fair value of existing
account placements acquired of $14.5 million and non-competition agreements of
$5.7 million, which are being amortized over 1 and 4 years, respectively. The
Company periodically reviews goodwill and other intangibles to assess
recoverability. Impairment charges will be recognized in operations if the
expected future operating cash flow (undiscounted and without interest
charges) derived from such intangible assets is less than their carrying
value. The purchase price in the Merger Agreement is to be adjusted to reflect
the change in the Company's net worth, as defined in the Merger Agreement,
between November 30, 1997 and December 31, 1997. The Company believes that
Seller and FFMC breached certain representations made by them in the Merger
Agreement and that it is entitled to certain purchase price adjustments and
indemnification and certain other payments from Seller and FFMC. The Company
is currently assessing its remedies with respect to these claims and cannot
currently quantify the aggregate amount of its claims against Seller and FFMC.
In the event the Company is unable to reach a negotiated settlement with
Seller and FFMC, it intends to enforce vigorously its rights under the Merger
Agreement. There can be no assurance that the Company will be successful in
its efforts to obtain any purchase price adjustments or other payments from
Seller or FFMC in connection with the Company's claims. With the exception of
a $2.1 million reduction in amounts due to the Seller, which management of the
Company believes is appropriate under the terms of the Merger Agreement, the
accompanying financial statements do not reflect any anticipated purchase
price adjustments or indemnification payments. Any such adjustments or
payments will be treated as adjustments to goodwill.
The acquisition and related fees were intitially financed through borrowings
of $125.0 million against a $133.0 million senior credit facility (the
"Acquisition Facilities") provided by Lehman Commercial Paper Inc. and a
contribution of $40.4 million of equity capital (before related fees of $1.3
million).
2. SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited consolidated financial statements of 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 the
consolidation. Operating results for the three month period ended March 31,
1998 are not necessarily indicative of the results that may be expected for
the year ended December 31, 1998. The accompanying unaudited consolidated
financial statements should be read in conjunction with the audited
consolidated financial statements of the Company for the year ended December
31, 1997.
F-5
<PAGE>
NATIONWIDE CREDIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
THREE MONTHS ENDED MARCH 31, 1997, AND 1998
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND WHERE INDICATED)
Certain reclassifications have been made in the March 31, 1997 unaudited
consolidated financial statements to conform to the March 31, 1998
presentation.
3.LONG TERM DEBT
In January 1998, the Company implemented a financing plan which included the
issuance of $100 million 10 1/4% Senior Notes due 2008 ("Old Notes") in a
private placement (the "Offering"). The Company is in the process of
exchanging the Old Notes for $100 million 10.25% Series A senior notes due
2008 ("New Notes") which are being registered under the Securities Act of
1933, as amended.
As part of the financing plan, the Company also entered into a credit
agreement (the "Credit Agreement") which provides for (1) a seven-year term
loan facility in the amount of $25 million (the "Term Loan"), and (ii) a six-
year revolving credit facility (the "Revolving Credit Facility") of $35
million. In connection with the Offering, all amounts outstanding under the
Acquisition Facilities were repaid utilizing proceeds of the Offering and the
Term Loan. The interest rate of the Term Loan and the Revolving Credit
Facility is determined, at the Company's option, based upon the Eurodollar
Base Rate (as defined in the Credit Agreement) ("Eurodollar") plus 2.125% or
the Base Rate, as defined, plus 1.125%. Interest payments are made quarterly
for Base Rate loans. Interest payments on Eurodollar 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 .375% on the
unused portion of the Revolving Credit Facility. The Term Loan is repaid in
quarterly installments, which began March 31, 1998, in an aggregate annual
principal amount of $0.25 million for each of the first six years and the
remaining $23.5 million in the last year of the facility. Additionally, the
Company is required to make annual prepayments, beginning with the year ending
December 31, 1998, from Excess Cash Flow, as defined in the Credit Agreement.
Prepayments are also required in the event of an equity or debt issuance, or
upon certain dispositions of assets. Substantially all of the assets of the
Company 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 indebtedness, acquisitions
and capital expenditures.
The Credit Agreement provides for a first priority lien on substantially all
properties and assets (including, among other things, all of the capital stock
of the Company and each of its direct and indirect domestic subsidiaries, and
65% of the capital stock of first-tier foreign subsidiaries) of the Company
and its direct and indirect domestic subsidiaries (excluding the Company's
currently existing subsidiaries).
F-6
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Stockholder of Nationwide Credit, Inc.
We have audited the accompanying consolidated balance sheets of Nationwide
Credit, Inc. as of December 31, 1996 and 1997, and the related consolidated
statements of income, stockholder's equity, and cash flows for each of the
three years in the period ended December 31, 1997. Our audits also include the
financial statement schedule listed in the accompanying Index to Financial
Statements. These financial statements and schedule are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements and schedule 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 consolidated financial position
of Nationwide Credit, Inc. at December 31, 1996 and 1997, and the consolidated
results of its operations and its cash flows for each of the three years in
the period ended December 31, 1997, in conformity with generally accepted
accounting principles. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic financial statements taken
as a whole, presents fairly in all material respects the information set forth
therein.
/s/ Ernst & Young llp
Atlanta, Georgia
March 31, 1998; except for Note 13, as to which the date is May 18, 1998
F-7
<PAGE>
NATIONWIDE CREDIT, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1997
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................ $ 4,109 $ 1,388
Cash held for clients................................ 386 594
Accounts receivable, net of allowance of $3,203 and
$4,449, respectively................................ 12,137 12,871
Deferred tax assets.................................. 3,230 3,080
Prepaid expenses and other current assets............ 696 1,000
Intercompany trade receivables....................... 23 68
-------- --------
Total current assets.................................. 20,581 19,001
Property and equipment:
Computer equipment................................... 16,818 20,638
Furniture and equipment.............................. 3,369 3,726
Leasehold improvements............................... 1,958 3,243
-------- --------
22,145 27,607
Accumulated depreciation............................. (11,968) (16,017)
-------- --------
10,177 11,590
Goodwill and other intangible assets less accumulated
amortization of $30,617 and $40,261, respectively.... 145,500 159,999
Other assets.......................................... 958 275
-------- --------
Total assets.......................................... $177,216 $190,865
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Collections due to clients........................... $ 386 $ 594
Accrued compensation................................. 4,474 3,495
Accounts payable..................................... 2,427 1,652
Accrued severance and office closure costs........... 847 202
Other accrued liabilities............................ 1,267 3,410
Note payable--current................................ 1,500 1,451
Intercompany trade payables.......................... 1,333 2,344
-------- --------
Total current liabilities............................. 12,234 13,148
Payable to First Data Corporation..................... 98,669 112,450
Deferred tax liability................................ 1,297 1,388
Note payable--long term............................... 1,329 --
Commitments and contingencies
Stockholder's equity:
Common Stock, no par value
Authorized shares--10,000, issued and outstanding
shares--1,000...................................... -- --
Additional paid-in capital........................... 41,506 41,506
Retained earnings.................................... 22,682 22,775
Pension liability adjustment......................... (501) (402)
-------- --------
Total stockholder's equity............................ 63,687 63,879
-------- --------
Total liabilities and stockholder's equity............ $177,216 $190,865
======== ========
</TABLE>
See accompanying notes.
F-8
<PAGE>
NATIONWIDE CREDIT, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1995 1996 1997
-------- -------- --------
<S> <C> <C> <C>
Revenue........................................... $154,506 $138,905 $119,013
Expenses:
Salaries and benefits.......................... 81,114 73,636 66,376
Telecommunication.............................. 9,539 7,341 6,236
Occupancy...................................... 5,148 4,602 5,014
Other operating and administrative............. 27,102 26,586 22,516
Depreciation and amortization.................. 11,893 12,021 14,364
Provision for merger costs, employee severance
and office closure........................... 13,562 4,323 679
Overhead charges from First Data Corporation... 1,545 1,389 1,190
-------- -------- --------
Total expenses.................................... 149,903 129,898 116,375
Operating income ................................. 4,603 9,007 2,638
Interest expense.................................. (501) (241) (122)
-------- -------- --------
Income before income taxes........................ 4,102 8,766 2,516
Provision for income taxes........................ 2,611 4,449 2,423
-------- -------- --------
Net income (loss) ................................ $ 1,491 $ 4,317 $ 93
======== ======== ========
</TABLE>
See accompanying notes.
F-9
<PAGE>
NATIONWIDE CREDIT, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
------------- PAID-IN RETAINED PENSION
SHARES AMOUNT CAPITAL EARNINGS ADJUSTMENT TOTAL
------ ------ ------- -------- ---------- -----
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1,
1995................... 1,000 $-- $36,799 $16,874 $(283) $53,390
Pension adjustment.... -- -- -- -- (284) (284)
Capital contribution.. -- -- 4,707 -- -- 4,707
Net income............ -- -- -- 1,491 -- 1,491
----- ---- ------- ------- ----- -------
Balance at December 31,
1995................... 1,000 -- 41,506 18,365 (567) 59,304
Pension adjustment.... -- -- -- -- 66 66
Net income............ -- -- -- 4,317 -- 4,317
----- ---- ------- ------- ----- -------
Balance at December 31,
1996................... 1,000 -- 41,506 22,682 (501) 63,687
Pension adjustment.... -- -- -- -- 99 99
Net loss.............. -- -- -- 93 -- 93
----- ---- ------- ------- ----- -------
Balance at December 31,
1997................... 1,000 $-- $41,506 $22,775 $(402) $63,879
===== ==== ======= ======= ===== =======
</TABLE>
See accompanying notes.
F-10
<PAGE>
NATIONWIDE CREDIT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1995 1996 1997
-------- -------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) .............................. $ 1,491 $ 4,317 $ 93
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation................................. 3,645 3,689 4,720
Amortization................................. 8,248 8,332 9,644
Asset impairment............................. 5,912 -- --
Other non-cash charges....................... 309 2,784 1,842
Deferred tax (benefit) provision............. (2,096) 2,023 218
Changes in operating assets and liabilities
(net of effect of acquisitions):
Accounts receivable...................... (1,660) 9,778 (2,862)
Prepaid expenses and other assets........ (1,506) 113 48
Accrued compensation..................... (1,247) (18) (857)
Accounts payable, other accrued liabilities
and other liabilities...................... 7,785 (8,338) 812
Intercompany trade accounts.............. 92 1,218 966
-------- -------- --------
Net cash provided by operating activities....... 20,973 23,898 14,624
-------- -------- --------
INVESTING ACTIVITIES
Purchases of property and equipment............. (5,016) (7,005) (5,465)
Acquisitions.................................... (2,732) (819) (24,161)
-------- -------- --------
Net cash used in investing activities........... (7,748) (7,824) (29,626)
-------- -------- --------
FINANCING ACTIVITIES
(To) from First Data Corporation................ (13,421) (16,697) 13,781
Repayment of note payable....................... (1,067) (1,500) (1,500)
-------- -------- --------
Net cash (used in) provided by financing activi-
ties........................................... (14,488) (18,197) 12,281
Decrease in cash and cash equivalents........... (1,263) (2,123) (2,721)
Cash and cash equivalents at beginning of year.. 7,495 6,232 4,109
-------- -------- --------
Cash and cash equivalents at end of year........ $ 6,232 $ 4,109 $ 1,388
======== ======== ========
NON-CASH FINANCING ACTIVITY:
Repayment of note payable in 1995 with First Data common
stock of $2,904
</TABLE>
See accompanying notes.
F-11
<PAGE>
NATIONWIDE CREDIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND WHERE INDICATED)
1. ORGANIZATION, BASIS OF ACCOUNTING AND DESCRIPTION OF BUSINESS
Prior to its December 31, 1997 change in ownership as discussed in Note 14,
Nationwide Credit, Inc. ("NCI" or the "Company") was a wholly owned subsidiary
of First Financial Management Corporation ("FFMC"), which is a wholly owned
subsidiary of First Data Corporation ("First Data").
The Company was acquired in June 1990 by FFMC. First Data's October 1995
merger with FFMC (the "Merger"), accounted for under the pooling of interests
method, resulted in the combination of First Data's accounts receivable
management company, ACB Business Services, Inc. ("ACB"), with NCI. ACB was
primarily the result of two purchase business combinations consummated by
First Data in 1993. The accompanying financial statements reflect First Data's
and FFMC's basis in ACB and NCI, respectively.
The consolidated accounts of the Company include certain majority-owned
subsidiaries, the financial position and results of operations of which are
not material. Intercompany accounts and transactions have been eliminated in
consolidation.
The Company is a leading U.S. provider of accounts receivable management
services and its principal service is consumer debt collection on a
contingency fee basis. The Company derives a significant portion of its
revenue from American Express Company ("American Express") and the U.S.
Department of Education ("DOE") and serves other clients in a variety of
industries including healthcare, travel and entertainment card, retail,
banking, oil and gas and telecommunications as well as other government
agencies.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents. Cash held for clients,
representing collections not yet remitted to clients, is not considered a cash
equivalent.
Property and Equipment
Property and equipment are recorded at cost. Depreciation expense is
calculated over the estimated useful lives of the related assets (three to
eight years) using the straight-line method for financial reporting purposes.
Leasehold improvements are amortized over the term of the related lease.
Goodwill and Other Intangible Assets
Goodwill represents the excess of purchase price over the fair value of net
tangible and identifiable intangible assets acquired and is being amortized
using the straight-line method over 25 to 40 years. At December 31, 1996 and
1997, the Company had goodwill of $134.3 million and $147.2 million,
respectively. Other intangible assets consist primarily of software and non-
compete agreements related to these acquisitions and acquired contract costs.
These costs are amortized on a straight-line basis over the length of the
agreement or benefit period, ranging from 5 to 25 years. Goodwill and other
intangible assets are reviewed for impairment whenever events indicate that
their carrying amount may not be recoverable. In such reviews, estimated
undiscounted future cash flows associated with these assets are compared with
their carrying value to determine if a write-down to fair value (normally
measured by discounting estimated future cash flows) is required.
F-12
<PAGE>
NATIONWIDE CREDIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND WHERE INDICATED)
Revenue Recognition
The Company generates substantially all of its revenue from contingency fees
which are a percentage of debtor collections. Revenue is recognized upon
collection of funds on behalf of clients. Revenues that are not contingency
fee based are recognized as the services are performed.
Income Taxes
The Company accounts for income taxes under the liability method required by
Statement of Financial Accounting Standards ("SFAS") No. 109, Accounting for
Income Taxes, whereby deferred income taxes reflect the net tax effects of
temporary differences between the carrying amounts of assets and liabilities
for financial reporting and tax purposes.
The taxable income of the Company is included in the consolidated U.S.
federal income tax return of First Data. The Company's provision for income
taxes has been determined as if the Company were a separate tax-paying entity.
Effective January 1, 1996, current income taxes payable are included in the
Payable to First Data account.
Employee Stock Options
SFAS No. 123, Accounting for Stock-Based Compensation ("SFAS 123")
established accounting and reporting standards for stock based employee
compensation plans. As permitted by the standard, First Data and the Company
elected to continue to account for employee stock options under Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to Employees
("APB 25") and related interpretations. Accordingly, adoption of the standard
has not affected the Company's results of operations or financial position.
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 amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
3. ACQUISITIONS
On February 28, 1997, the Company acquired certain assets of Consolidated
Collection Co. ("CCC"), an accounts receivable management company based in
Denver, Colorado for approximately $12.2 million excluding acquisition related
costs of $1.4 million (of which $0.4 million remained unpaid at December 31,
1997). The acquisition was accounted for as a purchase which, prior to the
settlement outlined below, resulted in the recording of $8.6 million in
goodwill, which is being amortized over 25 years, and $5.4 million of other
intangibles related to a non-compete agreement. In September 1997, First Data
negotiated a final, additional payment of $11.0 million as consideration for
the elimination of the contingent consideration clause in the asset purchase
agreement. This First Data payment was recorded by the Company as goodwill
with a corresponding increase in the Payable to First Data account. First Data
further agreed to an additional contingent payment of up to $2 million if
First Data, or a then affiliate of First Data, enters into a definitive
agreement to provide debt collection services to a certain telecommunications
company prior to March 4, 1999. The pro forma impact of accounting for the CCC
acquisition as if it had occurred January 1, 1996 would not be material to the
Company's consolidated results of operations.
F-13
<PAGE>
NATIONWIDE CREDIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND WHERE INDICATED)
4. PROVISION FOR MERGER COSTS, EMPLOYEE SEVERANCE AND OFFICE CLOSURE
Primarily as a result of integrating the operations of NCI and ACB, the
Company has incurred charges relating to employee severance and branch office
closure costs as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------------
1995 1996 1997
------- ------ ----
<S> <C> <C> <C>
Asset impairment........................................... $ 5,912 $ -- $--
Employee severance......................................... 3,492 2,271 679
Merger costs............................................... 3,000 (750) --
Office closure............................................. 1,158 2,802 --
------- ------ ----
$13,562 $4,323 $679
======= ====== ====
</TABLE>
The asset impairment charge in 1995 is principally comprised of $4.5 million
attributable to the ACB trade name which was not to be utilized by the
combined Company. The $3.0 million provision for merger costs in 1995 related
to an estimated payment to the former owners of one of the two businesses
acquired by First Data in 1993. Were it not for the Merger, this payment would
not have been necessary as the acquired business was not performing at the
level necessary for it to be made. Accordingly, First Data included it as a
component of the merger, integration and impairment charge in its 1995
financial statements and this accounting has been pushed down to the Company's
financial statements. The $750 credit in 1996 represents the benefit First
Data realized from settling this issue at an amount less than the $3.0 million
estimate. Employee severance has involved giving notice of termination to 475,
200 and 78 employees during 1995, 1996 and 1997, respectively.
5. RELATED PARTY TRANSACTIONS
The Company has various transactions with First Data and its affiliates.
These transactions can be generally classified into the following categories:
. trade activities--this involves the Company deriving revenue for
collection activities on behalf of First Data affiliates and incurring
expenses from First Data affiliates for such services as obtaining
address information and document imaging. The following summarizes the
Company's trade transactions with First Data and affiliates:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1995 1996 1997
--------------- --------
<S> <C> <C> <C>
Trade revenue...................................... $ 291 $ 400 $ 347
Trade expenses..................................... 56 2,646 1,771
</TABLE>
. allocation of general and administrative costs--this is a general
allocation of First Data corporate overhead based on 1% of the Company's
revenue. Functions provided by First Data corporate include
administration of employee benefit programs, internal audit, financial
systems licensing and processing, taxes and other support services.
. direct charges--certain programs and activities are administered by First
Data on a consolidated basis. Examples are employee benefit plans, group
and other insurance programs and certain vendor agreements that are
negotiated by First Data on an enterprise wide basis. The costs of these
programs and activities are specifically identifiable to each
participating business unit and, for this reason, the costs are not
included in the table above.
F-14
<PAGE>
NATIONWIDE CREDIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND WHERE INDICATED)
Management believes that the overall amount of charges to and from First
Data are reasonable and that, except as described below, the accompanying
financial statements reflect all of the Company's costs of doing business.
Management further believes that the incremental general and administrative
costs that would result from the Company being a stand-alone entity would not
exceed the 1% of revenue charge from First Data.
First Data does not have any specific indebtedness related to the Company
and the accompanying financial statements do not reflect any allocations of
First Data interest expense. There are no formal financing arrangements with
First Data. However, cash not necessary for the Company's near term operating
requirements has been remitted to First Data which in turn has funded the
Company's operating, investing and financing activities as required.
Accordingly, the net change in the payable to First Data balance has been
reflected as a financing activity in the accompanying statement of cash flows.
The average balances in the payable to First Data balance were $119.1 million,
$105.8 million and $104.4 million for the years ended December 31, 1995, 1996
and 1997, respectively.
6. NOTE PAYABLE
Note payable represents the remaining balance of a non-interest bearing note
related to a 1993 business acquisition. The original note was for $7.5 million
and provided for five annual payments in May of each year of $1.5 million. A
portion of this note was contingent upon 1994 performance and the May 1995
payment on the note was reduced by $1,250. The note is carried in the
accompanying financial statements at its present value based upon an 8%
interest rate. The final $1.5 million installment is payable in May 1998.
7. SIGNIFICANT CLIENTS AND CONCENTRATIONS OF CREDIT RISK
The Company derives a significant portion of its revenue from American
Express and the DOE. The amounts of consolidated net revenue and accounts
receivable attributable to these clients are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
REVENUE:
American Express...................................... $42,061 $41,770 $33,665
DOE................................................... 40,339 31,551 20,711
DECEMBER 31,
ACCOUNTS RECEIVABLE: 1996 1997
------- -------
American Express...................................... $ 1,327 $ 1,235
DOE................................................... 3,431 4,606
</TABLE>
Additionally, in the aggregate, the Company had accounts receivable from
other departments and agencies of the U.S. Government amounting to $1.4
million and $0.7 million at December 31, 1996 and 1997, respectively. No other
single client accounted for more than 10% of the consolidated totals for the
periods indicated.
8. FINANCIAL INSTRUMENTS
The carrying amounts reported in the balance sheets for cash, accounts
receivable, accounts payable and notes payable, exclusive of non-interest
bearing amounts payable to First Data, approximate their estimated fair
values.
F-15
<PAGE>
NATIONWIDE CREDIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND WHERE INDICATED)
9. OPERATING LEASES
The Company leases certain office equipment and office space under
noncancellable lease agreements. Future minimum lease payments, on a calendar
year basis, under noncancellable operating leases, with initial lease terms of
at least one year at the time of inception, are as follows at December 31,
1997:
<TABLE>
<S> <C>
1998................................. $ 4,076
1999................................. 3,486
2000................................. 2,923
2001................................. 1,849
2002................................. 620
-------
Total minimum lease payments....... $12,954
=======
</TABLE>
Total rent expense for all operating leases was approximately $4,495,
$4,311, and $4,725 for the years ended December 31, 1995, 1996 and 1997,
respectively.
10. STOCK OPTION PLAN
The Company participates in a First Data plan that provides for the granting
of First Data stock options to key employees and other key individuals who
perform services for the Company. A total of 53.7 million shares of First Data
common stock have been reserved for issuance under First Data plans, of which
7.6 million shares remain available for future grant as of December 31, 1997.
The options have been issued at a price equivalent to First Data common
stock's fair market value at the date of grant, generally have ten year terms
and generally become exercisable in three or four equal annual increments
beginning 12 months after the date of grant.
In October 1996, First Data instituted an employee stock purchase plan for
which a total of six million shares have been reserved for issuance, of which
4.8 million shares remain available for future grant as of December 31, 1997.
Monies accumulated through payroll deductions elected by eligible employees
are used to effect quarterly purchases of First Data common stock at a 15%
discount from the lower of the market price at the beginning or end of the
quarter.
The Company has elected to follow APB 25 for First Data stock options
because, as discussed below, the alternative fair value accounting under SFAS
No. 123 requires use of option valuation models that were not developed for
use in valuing employee stock options. Under APB 25, because the exercise
price of the stock options equals the market price of the underlying First
Data stock on the date of grant, no compensation expense is recognized.
F-16
<PAGE>
NATIONWIDE CREDIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND WHERE INDICATED)
Pro forma information regarding net income and earnings per share is
required by SFAS No. 123, assuming the Company has accounted for its First
Data employee stock options granted subsequent to December 31, 1994 under the
fair value method of SFAS No. 123. The fair value for options was estimated at
the date of grant using a Black-Scholes option pricing model with the
following weighted average assumptions for the years ended December 31, 1995,
1996 and 1997:
<TABLE>
<CAPTION>
1995 1996 1997
------- ---------- ----------
<S> <C> <C> <C>
Risk-free interest rate--options............. 5.29% 6.28% 6.23%
Risk-free interest rate--employee stock
purchase rights............................. -- 5.04% 6.23%
Dividend yield............................... 0.22% 0.22% 0.22%
Volatility of First Data common stock........ 17.6% 16.9% 18.9%
Expected option life......................... 5 years 5 years 5 years
Expected employee stock purchase right life.. -- 0.25 years 0.25 years
Weighted-average fair value of options
granted..................................... $ 8 $11 $11
Weighted-average fair value of employee stock
purchase rights............................. $-- $ 7 $ 7
</TABLE>
The Company's pro forma net income (loss) after amortizing the fair value of
the options and the stock purchase rights over their vesting period is $1,382,
$4,071 and ($410) for the years ended December 31, 1995, 1996 and 1997,
respectively (because SFAS 123 is applicable only to options granted
subsequent to December 31, 1994, its pro forma effect will not be fully
reflected until 1999).
Because the Company's First Data employee stock options have characteristics
significantly different from those of traded options for which the Black-
Scholes model was developed, and because changes in the subjective input
assumptions can materially affect the fair value estimate, the existing
models, in management's opinion, do not necessarily provide a reliable single
measure of the fair value of its First Data employee stock options.
A summary of First Data stock option activity for the Company's employees is
as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------
1995 1996 1997
------------------ ------------------ -----------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
-------- -------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of period.............. 653,674 $17 583,200 $23 359,332 $28
Granted................. 302,222 29 163,742 38 76,000 40
Exercised............... (216,154) 13 (149,638) 21 (77,357) 17
Canceled................ (156,542) 22 (237,972) 28 (71,897) 32
-------- -------- -------
Outstanding at end of
period................. 583,200 $23 359,332 $28 286,078 $34
======== ======== =======
Exercisable............. 114,768 $15 87,325 $17 79,297 $28
======== ======== =======
</TABLE>
F-17
<PAGE>
NATIONWIDE CREDIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND WHERE INDICATED)
The following summarizes information about stock options outstanding.
<TABLE>
<S> <C> <C> <C> <C> <C>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- ----------------------------------------------- ---------------------
<CAPTION>
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
EXERCISE NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
PRICES OUTSTANDING LIFE PRICE EXERCISABLE PRICE
- -------- ----------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$11-$26 76,936 6.6 years $23 48,427 $22
$31-$44 209,142 8.7 years 38 30,870 36
------- ------
286,078 8.2 years 34 79,297 28
======= ======
</TABLE>
11. INCOME TAXES
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
----------------------
1995 1996 1997
------- ------ ------
<S> <C> <C> <C>
Federal.................................................. $ 2,214 $3,692 $2,091
State and local.......................................... 397 757 332
------- ------ ------
Total.................................................. $ 2,611 $4,449 $2,423
======= ====== ======
Deferred income taxes result from the recognition of temporary differences.
Temporary differences are differences between the tax bases of assets and
liabilities and their reported amounts in the financial statements that will
result in differences between income for tax purposes and income for financial
statement purposes in future years.
The provision for income taxes is comprised of the following:
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------------
1995 1996 1997
------- ------ ------
<S> <C> <C> <C>
Current.................................................. $ 4,707 $2,426 $2,205
Deferred................................................. (2,096) 2,023 218
------- ------ ------
Total.................................................. $ 2,611 $4,449 $2,423
======= ====== ======
</TABLE>
The Company's net deferred tax assets (liabilities) consist of the
following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1996 1997
------- -------
<S> <C> <C>
Deferred tax assets:
Accrued costs............................................... $ 1,699 $ 1,124
Minimum pension liability................................... 270 247
Accounts receivable allowance............................... 1,261 1,709
------- -------
Total deferred tax assets..................................... 3,230 3,080
Valuation allowance........................................... -- --
------- -------
Net deferred tax assets....................................... 3,230 3,080
Deferred tax liabilities:
Depreciation and amortization............................... (1,297) (1,388)
------- -------
Total deferred tax liabilities................................ (1,297) (1,388)
------- -------
Net deferred tax assets..................................... $ 1,933 $ 1,692
======= =======
</TABLE>
F-18
<PAGE>
NATIONWIDE CREDIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND WHERE INDICATED)
The reconciliation of income tax computed at the U.S. federal statutory tax
rate to income tax expense is:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
--------------------
1995 1996 1997
------ ------ ------
<S> <C> <C> <C>
Tax at U.S. statutory rate................................ $1,436 $3,068 $ 881
Increases in taxes from:
State and local taxes................................... 258 492 216
Non-deductible goodwill................................. 801 782 782
Other non-deductible.................................... -- -- 350
Other................................................... 116 107 194
------ ------ ------
Total................................................. $2,611 $4,449 $2,423
====== ====== ======
</TABLE>
12. RETIREMENT PLANS
Defined Benefit Plan
ACB has a defined benefit pension plan covering employees hired prior to May
1, 1993 when the Plan was frozen such that no new participants would be added
and existing participants would cease accruing additional benefits. Benefits
under the plan are based on years of service and annual compensation. Funding
of retirement costs complies with the minimum funding requirements specified
by the Employee Retirement Income Security Act of 1974, as amended. Plan
assets consist principally of mutual fund investments and fixed income
securities.
Net pension cost for the years ended December 31, 1995, 1996 and 1997
consisted of:
<TABLE>
<CAPTION>
1995 1996 1997
---- ----- -----
<S> <C> <C> <C>
Service cost--benefit earned during period.................. $-- $ -- $ --
Interest cost on projected benefit obligation............... 196 196 216
Actual return on plan assets................................ (70) (148) (542)
Net amortization and deferral............................... (74) 35 348
---- ----- -----
Net periodic pension cost................................... $ 52 $ 83 $ 22
==== ===== =====
</TABLE>
The following table sets forth the funded status and amounts recognized in
the balance sheet for the Company's plan at December 31, 1996 and 1997.
<TABLE>
<CAPTION>
1996 1997
-------- --------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested, Accumulated and Projected benefit obligation....... $ (2,689) $ (3,076)
Plan assets at fair value.................................... 2,406 2,904
-------- --------
Plan assets less than projected benefit obligations.......... (283) (172)
Unrecognized net loss........................................ 772 649
Minimum liability adjustment................................. (772) (649)
-------- --------
Pension liability included in the balance sheet.............. $ (283) $ (172)
======== ========
</TABLE>
F-19
<PAGE>
NATIONWIDE CREDIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND WHERE INDICATED)
In computing the foregoing, a discount rate of 8.0% in 1996 and 7.5% in 1997
was used. The expected long-term rate of return on assets of 9.5% was used for
1996 and 1997.
Defined Contribution Plan
First Data has an incentive savings plan which allows eligible employees of
First Data and its subsidiaries to contribute a percentage of their
compensation and provides for certain matching, service-related and other
contributions. The Company's matching and service-related contributions
associated with the plan were approximately $705, $453 and $584 for the years
ended December 31, 1995, 1996 and 1997, respectively.
13. CONTINGENCIES
In 1992, an action was commenced by the Federal Trade Commission ("FTC")
staff in which it alleged the Company had violated the Fair Debt Collection
Practices Act ("FDCPA"). The matter was resolved with a consent decree, in
which the Company did not admit any liability. Pursuant to the consent decree,
the Company agreed to take additional steps to ensure compliance with the
FDCPA and paid a penalty of $0.1 million. The FTC staff recently completed an
investigation regarding the Company's compliance with the consent decree. In
connection with the change in ownership discussed in Note 14, First Data has
agreed to indemnify the Company for any monetary penalty resulting from the
FTC staff investigation. On December 26, 1997, the Company received
correspondence indicating that the FTC will seek a monetary fine, as well as
certain injunctive relief in connection with the operations of the business.
Without admitting liability for any of the alleged violations of the FDCPA,
the Company has agreed to settle the matter with the payment of a civil
monetary penalty and has also agreed to certain injunctive relief in
connection with the operations of the business, consisting primarily of
disclosure to debtors of their rights and enhanced training and compliance
reporting requirements. The tentative settlement agreement reached between the
Company and the FTC staff on May 18, 1998 is subject to final approval by the
FTC, the United States Department of Justice and the court in which the action
was filed. The Company believes that its compliance with the provisions of
this tentative settlement relating to any injunctive relief sought by the FTC
staff will not materially affect the Company's financial condition or ongoing
operations.
In January 1998, management became aware, through chargebacks, that the DOE
intends to revise the amounts it previously paid to the Company during the
years ended December 31, 1994 through 1997.
Management's evaluation of the FTC and DOE issues has resulted in the
determination that losses are probable and estimable, accordingly, an
aggregate loss provision of approximately $1.9 million was recorded in the
fourth quarter of 1997.
The Company is involved in certain litigation arising in the ordinary course
of business. In the opinion of management, the ultimate resolution of these
matters will not have a material adverse effect on the Company's consolidated
financial position or results of operations.
14. CHANGE IN OWNERSHIP
On December 31, 1997, the Company entered into an Agreement and Plan of
Merger (the "Merger Agreement") along with NCI Acquisition Corporation
("NAC"), NCI Merger Corporation ("Mergerco"), First Data and FFMC. Upon the
consummation of the merger, the Company became a wholly owned subsidiary of
F-20
<PAGE>
NATIONWIDE CREDIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND WHERE INDICATED)
NAC. Consideration for the merger consisted of $155.2 million in cash and up
to an additional $3.7 million, to be paid pursuant to the terms of an earn-out
agreement in the event the Company achieves certain performance targets for
the year ended December 31, 1998. The accompanying financial statements
reflect the Company's historical financial position and results of operations
prior to consummation of any of the transactions contemplated under the Merger
Agreement. The purchase price in the Merger Agreement will be adjusted to
reflect the change in the Company's net worth, as defined in the Merger
Agreement, between November 30, 1997 and December 31, 1997.
In January 1998 the Company implemented a financing plan which included the
issuance of $100.0 million of 10 1/4% senior notes due 2008 ("Old Notes") in a
private placement (the "Offering"). The Company is in the process of
exchanging the senior notes for $100.0 million 10 1/4% Series A senior notes
due 2008 ("New Notes") which are being registered under the Securities Act of
1933, as amended.
As part of the financing plan, the Company also entered into a credit
agreement (the "Credit Agreement") which provides for (i) a seven-year term
loan facility, in the amount of $25.0 million (the "Term Loan"), and (ii) a
six-year revolving credit facility (the "Revolving Credit Facility") of $35.0
million. In connection with the Offering, all amounts outstanding under the
Acquisition Facilities were repaid utilizing proceeds of the Offering, the
Term Loan and a portion of the Revolving Credit Facility. The Term Loan is to
be repayable in quarterly installments in an aggregate principle amount of
$0.25 million for each of the first six years and the remaining $23.5 million
in the last year of the facility. The Credit Agreement provides for a first
priority lien on substantially all properties and assets (including, among
other things, all of the capital stock of the Company and each of its direct
and indirect domestic subsidiaries, and 65% of the capital stock of first-tier
foreign subsidiaries) of the Company and its direct and indirect domestic
subsidiaries (excluding the Company's currently existing subsidiaries).
The New Notes will be, and the Old Notes are, general unsecured obligations
of the Company and rank pari passu in right of payment with all current and
future unsecured senior indebtedness of the Company, including borrowings
under the Credit Agreement.
None of the Company's subsidiaries are subsidiary guarantors. All of the
Company's future domestic subsidiaries, if any, will become subsidiary
guarantors hereunder. The Company's only subsidiaries, are NCI Recoveries
Limited, organized under the laws of the United Kingdom ("NCI Recoveries") and
Master Collectors of Dallas, Inc., a Texas corporation ("MCD"). The assets of
and revenue and earnings generated by these subsidiaries are immaterial to the
Company. Separate financial statements of each subsidiary have not been
presented because management has determined that they would not be material to
investors.
F-21
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE-
SENTATIONS NOT IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COM-
PANY OR THE INITIAL PURCHASER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE
NOTES OFFERED HEREBY NOR DOES IT CONSTITUTE AN OFFER TO SELL, OR THE SOLICITA-
TION OF AN OFFER TO BUY, ANY OF THE NOTES TO ANY PERSON IN ANY JURISDICTION IN
WHICH IT WOULD BE UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION TO SUCH PER-
SON. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS NOT BEEN
ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR INCORPORATED BY REFER-
ENCE HEREIN OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
-----------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
Available Information..................................................... i
Prospectus Summary........................................................ 1
Risk Factors.............................................................. 12
Capitalization............................................................ 18
Selected Historical Financial Information and Other Data.................. 19
Unaudited Condensed Consolidated Pro Forma Financial Information.......... 21
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 24
Business.................................................................. 32
Management................................................................ 42
Stock Ownership and Certain Transactions.................................. 47
The Exchange Offer........................................................ 50
Description of Senior Credit Facilities................................... 57
Description of New Notes.................................................. 58
Certain Federal Income Tax Considerations ................................ 81
Plan of Distribution...................................................... 82
Legal Matters............................................................. 82
Experts................................................................... 82
Index to Financial Statements............................................. F-1
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
OFFER TO EXCHANGE
ALL OUTSTANDING
10 1/4 SENIOR NOTES DUE 2008
FOR
10 1/4 SERIES A SENIOR NOTES DUE 2008
OF
NATIONWIDE CREDIT, INC.
-----------------
PROSPECTUS
-----------------
, 1998
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 14-2-202(b)(4) of the Georgia Business Corporation Code (the
"Georgia Code") provides that a corporation's articles of incorporation may
include a provision that eliminates or limits the liability of directors for
monetary damages to the corporation or its shareholders for any action taken,
or failure to take any action, as directors; provided, however, that this
Section does not permit a corporation to eliminate or limit the liability of a
director (i) for appropriating, in violation of his or her duties, any
business opportunity of the corporation, (ii) for acts or omissions which
involve intentional misconduct or a knowing violation of law, (iii) for any
transaction from which the director obtained an improper personal benefit, or
(iv) for voting for or assenting to an unlawful distribution (whether as a
dividend, stock repurchase or redemption or otherwise) as provided in Section
14-2-832 of the Georgia Code. Section 14-2-202(b)(4) does not eliminate or
limit the rights of a corporation or any shareholder to seek an injunction or
other non-monetary relief in the event of a breach of a director's fiduciary
duty. In addition, this Section applies only to claims against a director
arising out of his role as a director and does not relieve a director from
liability arising from his role as an officer or in any other capacity. The
Company's Articles of Incorporation include a provision exonerating the
Company's directors from monetary liability to the extent described above and
provide further that the liability of directors of the Company shall be
limited to the fullest extent permitted by Georgia law, as the same may from
time to time be amended.
Sections 14-2-850 to 14-2-859, inclusive, of the Georgia Code govern the
indemnification of directors, officers, employees and agents. Subsection (a)
of Section 14-2-851 of the Georgia Code provides that a corporation may
indemnify or obligate itself to indemnify an individual made a party to a
proceeding because he or she is or was a director against liability incurred
in the proceeding if (1) such individual conducted himself or herself in good
faith; and (2) such individual reasonably believed (A) in the case of conduct
in his or her official capacity, that such conduct was in the best interests
of the corporation; (B) in all other cases, that such conduct was at least not
opposed to the best interests of the corporation; and (C) in the case of any
criminal proceeding, that the individual had no reasonable cause to believe
such conduct was unlawful. Subsection (d) of Section 14-2-851 of the Georgia
Code provides that a corporation may not indemnify a director (1) in
connection with a proceeding by or in the right of the corporation, except for
reasonable expenses incurred in connection with the proceeding if it is
determined that the director has met the relevant standard of conduct, or (2)
in connection with any proceeding with respect to conduct for which he or she
was adjudged liable on the basis that personal benefit was improperly received
by him or her, whether or not involving action in his or her official
capacity. Notwithstanding the foregoing, pursuant to Section 14-2-854 of the
Georgia Code, a court may order a corporation to indemnify a director if such
court determines, in view of all the relevant circumstances, that it is fair
and reasonable to indemnify the director even if the director has not met the
relevant standard of conduct set forth in subsections (a) and (b) of Section
14-2-851 of the Georgia Code or was adjudged liable in a proceeding referred
to in subsection (d) of Section 14-2-851 of the Georgia Code, but if the
director was adjudged so liable, the indemnification shall be limited to
reasonable expenses incurred in connection with the proceeding.
Section 14-2-852 of the Georgia Code provides that a corporation shall
indemnify a director who was wholly successful, on the merits or otherwise, in
the defense of any proceeding to which he or she was a party because he or she
was a director of the corporation against reasonable expenses incurred by the
director in connection with the proceeding.
Section 14-2-857 of the Georgia Code provides that a corporation may
indemnify an officer of the corporation who is a party to a proceeding because
he or she is an officer of the corporation to the same extent as a director.
If the officer is not a director (or if the officer is a director but the sole
basis on which he or she is made a party to the proceeding is an act or
omission solely as an officer), the corporation may indemnify such officer to
such further extent as may be provided by the articles of incorporation, the
bylaws, a resolution of the board of directors, or contract except for
liability arising out of conduct that constitutes (1) appropriation, in
II-1
<PAGE>
violation of his or her duties, of any business opportunity of the
corporation, (2) acts or omissions which involve intentional misconduct or a
knowing violation of law, (3) the types of liability set forth in Section 14-
2-832 of the Georgia Code, or (4) receipt of an improper personal benefit. An
officer of a corporation who is not a director is entitled to mandatory
indemnification under Section 14-2-852 of the Georgia Code and may apply to a
court under Section 14-2-854 of the Georgia Code for indemnification, in each
case to the same extent to which a director may be entitled to indemnification
under those provisions. Finally, a corporation may also indemnify an employee
or agent who is not a director to the extent, consistent with public policy,
that may be provided by its articles of incorporation, bylaws, general or
specific action by its board of directors, or contract.
Article Six of the Company's Bylaws provides that the Company shall
indemnify each director and officer of the Company to the full extent
permitted under Sections 14-2-851 and 14-2-852 (with respect to directors) and
Section 14-2-857 (with respect to non-director officers). In addition, the
Bylaws permit indemnification to the full extent permitted by Section 14-2-857
of an employee or agent of the Company, or a person serving at the request of
the Company as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise.
The determination of whether the required standard of conduct for
indemnification has been met will be made, in accordance with the provisions
of Section 14-2-855 of the Georgia Code, as follows: (i) by the majority vote
of all the disinterested directors of the board of directors (a majority of
whom shall constitute a quorum for such purpose), or by a majority of the
members of a committee of disinterested directors; (ii) by special legal
counsel; or (iii) by the shareholders, but in such event, shares owned by or
voted under the control of directors who are not disinterested may not be
voted.
Pursuant to Sections 14-2-853 and 14-2-857 of the Georgia Code and Article
Six of the Company's Bylaws, expenses incurred by a director, officer,
employee or agent of the Company in defending a proceeding may be paid by the
Company in advance of the final disposition of such proceeding, as authorized
in the specific case, if such person delivers to the Company (1) a written
affirmation of his or her good faith belief that he or she has met the
relevant standard of conduct set forth in the Georgia Code or, as to
directors, that the proceeding involves conduct for which liability has been
eliminated by a provision of the Company's Articles of Incorporation as
authorized by Section l4-2-202(b)(4) of the Georgia Code; and (2) a written
undertaking by such person to repay any funds advanced if it is ultimately
determined that the person is not entitled to indemnification by the Company.
Indemnification and advancement of expenses pursuant to Article Six of the
Company's Bylaws are not exclusive of any rights to which a director, officer,
employee or agent may be entitled under any law (common or statutory),
agreement, vote of shareholders or disinterested directors or otherwise, both
as to action in such person's official capacity and as to action in any other
capacity while holding office or while employed by or acting as agent for the
Company. In addition, the Company is specifically authorized to enter into
agreements which provide indemnification rights and procedures permitted by
the Georgia Code. All rights to indemnification under Article Six of the
Company's Bylaws 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.
The Company's Bylaws provide that the Company shall have the power to
purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the Company or who is or was serving
at the request of the Company as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against any liability asserted against such person and incurred by such person
in any such capacity, or arising out of such person's status as such, whether
or not the Company would have the power to indemnify such person against such
liability. Officers and directors of the Company are presently covered by
insurance maintained by the Company which (with certain exceptions and within
certain limitations) indemnifies them against any losses or liabilities
arising from any alleged "wrongful act" including any alleged breach of duty,
neglect, error, misstatement, misleading statement, omissions or other act.
II-2
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits:
<TABLE>
<CAPTION>
2 --Agreement and Plan of Merger, dated as of December 31, 1997, among
NCI Acquisition Corporation, NCI Merger Corporation, the Registrant,
First Financial Management Corporation and First Data Corporation.+
<C> <S>
3.1 --Certificate of Incorporation of the Registrant.+
3.2 --Bylaws of the Registrant.+
4.1 --Series A and Series B 10 1/4% Senior Notes due 2008 Indenture, dated
as of January 28, 1998, between the Registrant and State Street Bank
and Trust Company, as Trustee.+
4.2 --Form of Note (included in Exhibit 4.1, Exhibit A-1).+
4.3 --A/B Exchange Registration Rights Agreement, dated as of January 28,
1998, by and among the Registrant and Lehman Brothers Inc.+
5 --Opinion of Weil, Gotshal & Manges LLP.++
10.1 --Credit Agreement, dated as of January 28, 1998, among NCI Acquisition
Corporation, the Registrant, the Several Lenders from time to time
parties thereto, Lehman Brothers Inc., Lehman Commercial Paper Inc.,
Fleet Capital Corporation and BHF-Bank Aktiengesellschaft.+
10.2 --Purchase Agreement, dated as of January 23, 1998, by and between the
Registrant and Lehman Brothers Inc.+
10.3 --NCI Acquisition Corporation 1997 Management Performance Option Plan.+
10.4 --Stock Option Agreement, dated as of December 31, 1997, between NCI
Acquisition Corporation and Jerry Kaufman.+
10.5 --Stock Option Agreement, dated as of December 31, 1997, between NCI
Acquisition Corporation and Loren Kranz.+
10.6 --Stock Option Agreement, dated as of May 18, 1998, between NCI
Acquisition Corporation and Michael Lord.+
10.7 --Stock Option Agreement, dated as of December 31, 1997, between NCI
Acquisition Corporation and Greg Schubert.+
10.8 --Stock Option Agreement, dated as of December 31, 1997, between NCI
Acquisition Corporation and Avalon Investment Partners, LLC.+
10.9 --Employment Agreement, dated as of December 31, 1997, by and between
the Registrant and Jerry Kaufman.+
10.10 --Employment Agreement, dated as of December 31, 1997, by and between
the Registrant and Loren Kranz.+
10.11 --Employment Agreement, dated as of May 18, 1998, by and between the
Registrant and Michael Lord.+
10.12 --Employment Agreement, dated as of December 31, 1997, by and between
the Registrant and Gregory Schubert.+
10.13 --Stockholders' Agreement, dated as of December 31, 1997, by and among
NCI Acquisition Corporation, the State Board of Administration of
Florida, Centre Capital Investors II, L.P., Centre Capital Tax Exempt
Investors II, L.P., Centre Capital Offshore Investors II, L.P.,
Centre Parallel Management Partners, L.P., Centre Partners
Coinvestment, L.P., WPG Corporate Development Associates V, L.P., WPG
Corporate Development Associates V (Overseas), L.P., Weber Family
Trust, Lion Investments Limited, Westpool Investment Trust plc,
Avalon Investment Partners LLC, Jerrold Kaufman, Loren Kranz, Gregory
Schubert and Kevin Henry.+
12 --Statement of Computation of Earnings to Fixed Charges.+
21 --Subsidiaries of the Registrant.+
23.1 --Consent of Weil, Gotshal & Manges LLP.++
23.2 --Consent of Ernst & Young, independent auditors.+
24 --Power of Attorney (see signature page).+
</TABLE>
II-3
<PAGE>
<TABLE>
<C> <S>
25 --Statement of Eligibility and Qualification of State Street Bank and
Trust Company, as Trustee under the Indenture filed as Exhibit 4.1.+
27 --Financial Data Schedule.+
99.1 --Form of Letter of Transmittal.+
99.2 --Form of Notice of Guaranteed Delivery.+
</TABLE>
- --------
+Filed herewith.
++To be filed by amendment.
(b)Financial Statement Schedules:
Schedule II--Valuation and Qualifying Accounts
All other schedules have been omitted because they are not applicable or not
required or the required information is included in the financial statements
as notes thereto.
ITEM 22. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1)To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i)to include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii)to reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement; notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement; and
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
(2)That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at the time shall be deemed to be the initial bona
fide offering thereof.
(3)To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
(4)To respond to requests for information that is incorporated by reference
into the 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.
(5)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.
(h)See Item 20.
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 ATLANTA, STATE OF
GEORGIA, ON JUNE 18, 1998.
NATIONWIDE CREDIT, INC.
/s/JERROLD KAUFMAN
By: ________________________________
Jerrold Kaufman
Chief Executive Officer and
Director
EACH PERSON WHOSE SIGNATURE TO THIS REGISTRATION STATEMENT APPEARS BELOW
HEREBY APPOINTS JERROLD KAUFMAN AND MICHAEL LORD, AND EACH OF THEM
INDIVIDUALLY, ANY ONE OF WHOM MAY ACT WITHOUT THE JOINDER OF THE OTHER, AS HIS
AGENT AND ATTORNEY-IN-FACT TO SIGN ON HIS BEHALF INDIVIDUALLY AND IN THE
CAPACITY STATED BELOW AND TO FILE ALL PRE- AND POST-EFFECTIVE AMENDMENTS TO
THIS REGISTRATION STATEMENT, WHICH MAY MAKE SUCH CHANGES AND ADDITIONS TO THIS
REGISTRATION STATEMENT AS SUCH AGENT AND ATTORNEY-IN-FACT MAY DEEM NECESSARY
OR APPROPRIATE.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
/s/JERROLD KAUFMAN Chief Executive Officer June 18, 1998
- --------------------------------- (Principal Executive
Jerrold Kaufman Officer) and Director
/s/MICHAEL LORD Chief Financial Officer June 18, 1998
- --------------------------------- (Principal Accounting
Michael Lord and Financial Officer)
/s/LOREN F. KRANZ Chief Operating Officer, June 18, 1998
- --------------------------------- Executive Vice
Loren F. Kranz President, Secretary and
Director
/s/DAVID B. GOLUB Chairman of the Board of June 18, 1998
- --------------------------------- Directors and Director
David B. Golub
/s/WESLEY W. LANG, JR. Vice Chairman of the June 18, 1998
- --------------------------------- Board of Directors and
Wesley W. Lang, Jr. Director
/s/NORA E. KERPPOLA Director June 18, 1998
- ---------------------------------
Nora E. Kerppola
II-5
<PAGE>
/s/LESTER POLLACK Director June 18, 1998
- ---------------------------------
Lester Pollack
/s/JEFFREY A. WEISS Director June 18, 1998
- ---------------------------------
Jeffrey A. Weiss
/s/CRAIG S. WHITING Director June 18, 1998
- ---------------------------------
Craig S. Whiting
/s/PAUL J. ZEPF Director June 18, 1998
- ---------------------------------
Paul J. Zepf
II-6
<PAGE>
SCHEDULE II
NATIONWIDE CREDIT, INC.
VALUATION AND QUALIFYING ACCOUNTS
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
DESCRIPTION ADDITIONS
----------- -----------------
CHARGED
BALANCE AT TO COSTS CHARGED BALANCE AT
BEGINNING AND TO OTHER END OF
OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
---------- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1995
deducted from Receivables.. $ 471 $ 450 -- -- $ 921
Year ended December 31, 1996
deducted from Receivables.. 921 2,440 -- (158) 3,203
Year ended December 31, 1997
deducted from Receivables.. 3,203 2,128 -- (882) 4,449
</TABLE>
<PAGE>
EXHIBIT 2
AGREEMENT AND PLAN OF MERGER
AMONG
NCI ACQUISITION CORPORATION,
NCI MERGER CORPORATION,
NATIONWIDE CREDIT, INC.,
FIRST FINANCIAL MANAGEMENT CORPORATION
AND
FIRST DATA CORPORATION
DATED AS OF DECEMBER 31, 1997
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITIONS.............................................. 1
Section 1.1. Definitions....................................... 1
ARTICLE II THE MERGER............................................... 11
Section 2.1. Surviving Corporation............................. 11
Section 2.2. Effects of the Merger............................. 12
Section 2.3. Articles of Incorporation, By-Laws and Directors.. 12
ARTICLE III CONVERSION OF SHARES; DETERMINATION OF MERGER
CONSIDERATION........................................... 12
Section 3.1. Conversion Terms.................................. 12
Section 3.2. Merger Consideration.............................. 13
Section 3.3. Determination of Year-End Net Worth............... 13
Section 3.4. Adjustment........................................ 15
Section 3.5. Additional Performance-Based Consideration........ 15
ARTICLE IV SIGNING AND CLOSING...................................... 16
Section 4.1. Closing Date...................................... 16
Section 4.2. Filing Certificate of Merger and Effectiveness.... 16
Section 4.3. Payment on the Closing Date....................... 16
Section 4.4. Buyer's Signing Date Deliveries................... 17
Section 4.4. FFMC's Signing Date Deliveries.................... 18
Section 4.5. Closing Date Deliveries........................... 19
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE SELLERS.............20
Section 5.1. Organization of the Sellers....................... 20
Section 5.2. Organization; Capital Structure of the Company;
Power and Authority.............................. 20
Section 5.3. Subsidiaries and Investments...................... 21
Section 5.4. Authority of the Sellers; Conflicts............... 21
Section 5.5. Financial Statements.............................. 23
Section 5.6. Operations Since Financial Statement Date......... 23
Section 5.7. Taxes............................................. 25
Section 5.8. Governmental Permits.............................. 26
Section 5.9. Real Property..................................... 27
Section 5.10. Personal Property Leases.......................... 27
Section 5.11. Intellectual Property; Software................... 27
Section 5.12. Title to Property................................. 28
Section 5.13. No Litigation..................................... 29
Section 5.14. Contracts......................................... 29
i
<PAGE>
Page
----
Section 5.15. Status of Contracts............................... 30
Section 5.16. ERISA............................................. 31
Section 5.17. Environmental Compliance.......................... 32
Section 5.18. Employee Relations and Agreements................. 32
Section 5.19. No Brokers........................................ 33
Section 5.20. Insurance......................................... 33
Section 5.21. No Undisclosed Liabilities........................ 33
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF THE BUYER.............. 33
Section 6.1. Organization of the Buyer and Mergerco............ 33
Section 6.2. Authority of the Buyer; Conflicts................. 34
Section 6.3. No Litigation..................................... 35
Section 6.4. Investment Intent................................. 35
Section 6.5. HSR Act........................................... 35
ARTICLE VII ACTION PRIOR TO THE CLOSING DATE......................... 36
Section 7.1. Access to Information............................. 36
Section 7.2. Notifications..................................... 36
Section 7.3. Consents of Third Parties; Governmental Approvals. 36
Section 7.4. Operations Prior to the Closing Date.............. 37
Section 7.5. Notification by the Sellers of Certain Matters.... 41
Section 7.6. Termination of Certain Partnerships............... 41
ARTICLE VIII ADDITIONAL AGREEMENTS.................................... 41
Section 8.1. Use of Names...................................... 41
Section 8.2. Tax Matters....................................... 42
Section 8.3. Employee Matters.................................. 47
Section 8.4. [Intentionally Omitted]........................... 49
Section 8.5. Insurance: Risk of Loss........................... 49
Section 8.6. Exclusivity....................................... 50
Section 8.7. Covenant Not to Compete; Other Agreements......... 50
Section 8.8. Solicitation of Employees......................... 53
Section 8.9. Termination of Intercompany Debt.................. 54
Section 8.10. Powers of Attorney; Bank Accounts................. 54
Section 8.11. Capital Expenditures.............................. 54
Section 8.12. Obligations of Mergerco........................... 54
Section 8.13. Collection Receivables............................ 54
ARTICLE IX CONDITIONS PRECEDENT TO OBLIGATIONS OF THE BUYER......... 55
ii
<PAGE>
Page
----
Section 9.1. No Misrepresentation or Breach of Warranties and
Covenants........................................ 55
Section 9.2. No Restraint...................................... 55
Section 9.3 Licensing......................................... 55
ARTICLE X CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLERS........56
Section 10.1. No Misrepresentation or Breach of Warranties and
Covenants........................................ 56
Section 10.2. No Restraint...................................... 56
ARTICLE XI INDEMNIFICATION.......................................... 56
Section 11.1. Indemnification by the Sellers.................... 56
Section 11.2. Indemnification by the Buyer...................... 59
Section 11.3. Notice of Claims.................................. 60
Section 11.4. Determination of Amount........................... 61
Section 11.5. Third Person Claims............................... 61
Section 11.6. Limitations....................................... 64
ARTICLE XII TERMINATION.............................................. 65
Section 12.1. Termination....................................... 65
Section 12.2. Notice of Termination............................. 65
Section 12.3. Effect of Termination............................. 65
ARTICLE XIII GENERAL PROVISIONS....................................... 65
Section 13.1. Survival of Representations and Warranties........ 65
Section 13.2. Confidential Nature of Information................ 65
Section 13.3. No Public Announcement............................ 66
Section 13.4. Notices........................................... 66
Section 13.5. Successors and Assigns............................ 68
Section 13.6. Access to Records after Closing................... 68
Section 13.7. Entire Agreement; Amendments...................... 68
Section 13.8. Interpretation.................................... 69
Section 13.9. Waivers........................................... 69
Section 13.10. Expenses.......................................... 69
Section 13.11. Partial Invalidity................................ 69
Section 13.12. Execution in Counterparts......................... 69
Section 13.13. Further Assurances................................ 69
Section 13.14. Governing Law..................................... 69
Section 13.15. Disclaimer of Warranties.......................... 70
iii
<PAGE>
Page
----
Exhibits
--------
Exhibit A Form of Transition Services Agreement
Exhibit B Form of Certificate of Merger
Exhibit C Opinion of counsel to the Buyer and Mergerco
Exhibit D Opinion of counsel to the Sellers and the Company
Exhibit E Bill of Sale and Assignment (Collection Receivables)
Exhibit F Bill of Sale and Assignment (Assigned Contracts and the Assigned
Assets and Liabilities)
Exhibit G Power of Attorney
iv
<PAGE>
List of Schedules
-----------------
Schedules
- ---------
1.1 Agreed Accounting Principles
1.2 Assigned Contracts and Assigned Assets and Liabilities
1.3 Collection Receivables
1.4 Sellers' Payment Amount
5.2 Capital Structure
5.3 Subsidiaries and Investments
5.4 No Conflicts
5.5 Financial Statements
5.6 Operations Since Financial Statement Date
5.7 Taxes
5.8 Governmental Permits
5.9 Real Property
5.10 Personal Property Leases
5.11(a) List of Intellectual Property
5.11(b) Software
5.11(c) Right, Title and Interest in Intellectual Property
5.11(d) Registrations of Intellectual Property
5.11(e) Infringement of Intellectual Property
5.11(f) Challenge to Intellectual Property Rights
5.12 Title Exceptions
5.13 Litigation
5.14 Contracts
5.15 Status of Contracts
5.16(a) Welfare Plans and Pension Plans
5.16(c) Other Employee Benefits
5.17 Environmental Compliance
5.18 Employee Relations and Agreements
5.20 Insurance
5.21 Undisclosed Liabilities
6.3 Litigation
7.4 Operations Prior to Closing Date
8.3 Post-Closing Benefit Programs
8.11 Capital Expenditures
11.5 Additional Payment Amount
v
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of December 31, 1997, among
First Financial Management Corporation, a Georgia corporation ("FFMC"), First
----
Data Corporation, a Delaware corporation ("FDC" and, together with FFMC, the
---
"Sellers"), Nationwide Credit, Inc., a Georgia corporation (the "Company"), NCI
- -------- -------
Merger Corporation, a Georgia corporation ("Mergerco") and NCI Acquisition
--------
Corporation, a Delaware corporation (the "Buyer"), (Mergerco and the Company
-----
being hereinafter sometimes referred to as the "Constituent Corporations").
------------------------
W I T N E S S E T H:
-------------------
WHEREAS, the Company provides debt collection and accounts receivable
management services to third parties; and
WHEREAS, Mergerco is a Georgia corporation having an authorized
capital of 1,000 shares of common stock, par value $1.00 per share, all of which
are issued and outstanding and owned of record and beneficially by Buyer;
WHEREAS, the Company has an authorized capital of 10,000 shares of
common stock, par value $1.00 per share (the "Company Common Stock"), 1000
--------------------
shares (the "Shares") of which are issued and outstanding and owned of record
and beneficially by FFMC; and
WHEREAS, the respective Boards of Directors of the Constituent
Corporations have approved the merger (the "Merger") of Mergerco into the
------
Company pursuant to the terms and conditions of this Agreement and have directed
that this Agreement be submitted to their respective shareholder for adoption;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements hereinafter set forth, it is hereby agreed among the parties as
follows:
ARTICLE I
DEFINITIONS
-----------
SECTION 1.1. DEFINITIONS. In this Agreement, the following terms
-----------
have the meanings specified or referred to in this Section 1.1 and shall be
-----------
equally applicable to both the singular and plural forms. Any agreement
referred to below shall mean such agreement as amended, supplemented and
modified from time to time to the extent permitted by the applicable provisions
thereof and by this Agreement.
"ACCOUNTING REPORT" has the meaning specified in Section 3.3(d).
----------------- --------------
<PAGE>
"ACM PLAN" means ACM, Inc. Employee's Retirement Plan (successor to
--------
ACB Management Services, Inc. Employee's Retirement Plan).
"ACTION" has the meaning set forth in Section 5.13.
------ ------------
"AFFECTED EMPLOYEES" has the meaning specified in Section 8.3(b).
------------------ --------------
"AFFILIATE" means, with respect to any Person, any other Person which
---------
directly or indirectly controls, is controlled by or is under common control
with such Person.
"AGREED ACCOUNTING PRINCIPLES" means GAAP applied on a basis
----------------------------
consistent with those principles used in the preparation of the Financial
Statements (including the accounting methods and practices, to the extent
consistent with generally accepted accounting principles, used by the Company in
the preparation of such Financial Statements); provided, however, that the
-------- -------
Agreed Accounting Principles shall include the accounting policies and be
subject to the exceptions described in Schedule 1.1.
------------
"AGREED RATE" means the fluctuating prime or corporate base rate of
-----------
interest published by, and as in effect from time to time of, Citibank, N.A., or
if that rate is no longer published, the interest rate designated as the prime
rate as published from time to time in the "Money Rates" section of The Wall
--------
Street Journal.
- --------------
"ALLOCATION SCHEDULE" has the meaning set forth in Section 8.2(e).
------------------- --------------
"APPLICABLE DEDUCTIBLE" means, (i) during the period ending on the
---------------------
last day of the 15th month after the Closing, $750,000, (ii) during the 12 month
period ending on the last day of the 27th month after the Closing, an amount
equal to the sum of (A) $1,250,000 plus (B) the excess, if any, of the amount in
clause (i) over the aggregate Losses and Expenses as to which Claim Notices have
been presented during the period ending on the last day of the 15th month after
the Closing, and (iii) after the last day of the 27th month after the Closing,
an amount equal to the sum of (A) $1,000,000, plus (B) the excess, if any, of
the amount in clause (ii) over the aggregate Losses and Expenses as to which
Claim Notices have been presented during the 12 month period ending on the last
day of the 27th month after the Closing.
"ASSIGNED ASSETS AND LIABILITIES" means the assets and liabilities of
-------------------------------
the same type as are included in the Financial Statements associated with the
business conducted pursuant to the Assigned Contracts incurred in the ordinary
course of business prior to the Closing.
"ASSIGNED CONTRACTS" means the contracts listed on Schedule 1.2.
------------------ ------------
2
<PAGE>
"AUDITOR" means Ernst & Young LLP or such other national accounting
-------
firm acceptable to both the Buyer and FDC.
"BOSI" means Business Office Services, Inc., a Delaware corporation.
----
"BUSINESS" means the business and operations currently conducted by
--------
the Company and by the Subsidiaries, including the business conducted pursuant
to the Assigned Contracts.
"BUSINESS AGREEMENTS" has the meaning specified in Section 5.15.
------------------- ------------
"BUYER" has the meaning specified in the first sentence of this
-----
Agreement.
"BUYER ANCILLARY AGREEMENTS" means all agreements, instruments and
--------------------------
documents being or to be executed and delivered by the Buyer to the Sellers
pursuant to the terms of this Agreement.
"BUYER GROUP MEMBER" means the Buyer and its Affiliates (including,
------------------
after the Closing, the Surviving Corporation and the Subsidiaries) and their
respective directors, officers, employees and agents, and their respective
successors and assigns.
"CAPITAL EXPENDITURE AMOUNT" has the meaning specified in Section
-------------------------- -------
8.11.
- ----
"CAPITAL EXPENDITURE SHORTFALL" has the meaning specified in Section
----------------------------- -------
8.11.
- ----
"CLAIM NOTICE" has the meaning specified in Section 11.3.
------------ ------------
"CLOSING" means the closing of the Merger of Mergerco with and into
-------
the Company in accordance with Article IV.
----------
"CLOSING DATE" has the meaning specified in Section 4.1.
------------ -----------
"CODE" means the Internal Revenue Code of 1986, as amended.
----
"COLLECTION RECEIVABLES" means the accounts receivable listed on
----------------------
Schedule 1.3.
- ------------
"COMPANY" has the meaning specified in the first sentence of this
-------
Agreement.
"COMPANY'S 1998 EBITDA" means the EBITDA of the Company and/or the
---------------------
Surviving Corporation for the period beginning January 1, 1998 and ending
December 31, 1998.
3
<PAGE>
"CONSENT DECREE" means the Federal Trade Commission consent decree
--------------
dated June 4, 1992 to which the Company is subject.
"COPYRIGHTS" means United States registered copyrights, and pending
----------
applications to register the same.
"COURT ORDER" means any judgment, writ, injunction, ruling, order,
-----------
award or decree of any foreign, federal, state, local or other court, tribunal
or Governmental Body and any award in any arbitration proceeding.
"CURRENT FTC PROCEEDING" has the meaning specified in Section 11.1(a).
---------------------- ---------------
"DEBT COLLECTION LAWS" means any Requirements of Law regulating or
--------------------
governing the collection of debts or obligations as previously or now in effect
including, without limitation, the Fair Debt Collection Practices Act, 15 USC
Section 1692, as amended, and any regulations promulgated thereunder.
"EBITDA" means, with respect to any Person for any period, an amount
------
equal to (a) the consolidated net income of such Person for such period, minus
(b) the sum of (i) income tax credits, (ii) interest income, (iii) gain from
extraordinary items for such period, (iv) any aggregate net gain during such
period arising from the sale, exchange or other disposition of capital assets by
such Person (including any fixed assets, whether tangible or intangible, all
inventory sold in conjunction with the disposition of fixed assets and all
securities), and (v) any other non-cash gains which have been added in
determining consolidated net income, in each case to the extent included in the
calculation of consolidated net income of such Person for such period in
accordance with GAAP as in effect as at the last day of such period, but without
duplication, plus (c) the sums of (i) any provision for income Taxes, (ii)
interest expense, (iii) loss from extraordinary items for such period, (iv) the
amount of depreciation and amortization for such period, (v) amortized debt
discount for such period, (vi) the amount of any deduction to consolidated net
income as the result of any grant to any members of the management of such
person of any equity interest or any option relating thereto, and (vii) any
aggregate new loss during such period arising from the sale, exchange or other
disposition of capital assets by such Person (including any fixed assets,
whether tangible or intangible, all inventory sold in conjunction with the
disposition of fixed assets and all securities), in each case to the extent
included in the calculation of consolidated net income of such Person for such
period in accordance with GAAP as in effect as at the last day of such period,
but without duplication. For purposes of this definition, the following items
shall be excluded in determining consolidated net income of a Person: (1) the
income (or deficit) of any other Person acquired after the date hereof; (2) the
income (or deficit) of any other Person (other than a subsidiary) in which such
Person has an ownership interest, except to the extent any such income has
actually
4
<PAGE>
been received by such Person in the form of cash dividends or distributions; (3)
any restoration to income of any contingency reserve, except to the extent that
provision for such reserve was made out of income accrued during such period;
(4) any write-up of any asset; (5) any net gain from the collection of the
proceeds of life insurance policies; (6) any net gain arising from the
acquisition of any securities, or the extinguishment, under GAAP as in effect on
the last day of such period, of any indebtedness, of such Person; (7) in the
case of a successor to such Person by consolidation or merger or as a transferee
of its assets, any earnings of such successor prior to such consolidation,
merger or transfer of assets; (8) any deferred credit representing the excess of
equity in any subsidiary of such Person at the date of acquisition of such
subsidiary over the cost to such Person of the investment in such subsidiary;
(9) any amounts paid to the Buyer pursuant to Section 11.5(c) hereof; and (10)
-------
the undistributed earnings of a subsidiary to the extent that the declaration or
payment of dividends or similar distributions by such subsidiary is not at the
time permitted by the terms of any contractual obligation or Requirement of Law
applicable to such subsidiary. Notwithstanding the foregoing, any calculation
of the Company's or the Surviving Corporation's EBITDA shall not include (A) any
charges or reserves for acquisition related liabilities established after the
Closing, and (B) any increase or other effects on EBITDA related to any such
charge or reserves.
"ENCUMBRANCE" means any lien, claim, charge, security interest,
-----------
mortgage, pledge, easement, conditional sale or other title retention agreement,
defect in title, conflicting claim of ownership, right of first refusal, option,
restrictive covenant or any other encumbrance of any nature whatsoever.
"EFFECTIVE DATE" has the meaning specified in Section 4.2.
-------------- -----------
"EFFECTIVE TIME" has the meaning specified in Section 4.2.
-------------- -----------
"ENVIRONMENTAL LAW" means any Requirements of Law governing or
-----------------
regulating the protection of the environment as previously or now in effect and
all analogous foreign, state or local laws.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended, and the applicable regulations thereunder.
"ERISA AFFILIATE PLAN" has the meaning specified in Section 5.16.
-------------------- ------------
"ESCROWED CASH" has the meaning specified in Section 3.2.
------------- -----------
"EXCLUDED TAXES" has the meaning specified in Section 8.2(a)(i).
-------------- -----------------
5
<PAGE>
"EXPENSES" means any and all reasonable out-of-pocket costs, expenses
--------
and reasonable attorneys' fees incurred in connection with investigating,
defending or enforcing any claim, action, suit or proceeding in respect of any
matter indemnified against hereunder (including, without limitation, court
filing fees, court costs, arbitration fees or costs, witness fees and reasonable
fees of investigators, expert witnesses, accountants and other professionals
including any such costs, expenses and reasonable attorneys fees incurred in
enforcing any right of indemnification against any Indemnitor).
"FDC" has the meaning specified in the first sentence of this
---
Agreement.
"FDC STOCK" means the common stock of FDC.
---------
"FFMC" has the meaning specified in the first sentence of this
----
Agreement.
"FINANCIAL STATEMENTS means the audited consolidated balance sheet of
--------------------
the Company and the Subsidiaries as of the Financial Statement Date, and the
related statements of income, cash flows and stockholder's equity (including the
notes thereto) for the nine (9) months then ended, included in Schedule 5.5.
------------
"FINANCIAL STATEMENT DATE" means September 30, 1997.
------------------------
"FSA" has the meaning specified in the definition of "Subsidiaries."
---
"GAAP" means United States generally accepted accounting principles,
----
consistently applied, in effect at the date of the financial statement or for
such period, as applicable, to which it refers.
"GBCC" means the Georgia Business Corporation Code.
----
"GOVERNMENTAL BODY" means any federal, state, local, county or
-----------------
municipal government, governmental, regulatory or administrative agency,
department, commission, board, bureau or other governmental authority,
subdivision or instrumentality or regulatory body, domestic or foreign.
"GOVERNMENTAL PERMITS" has the meaning specified in Section 5.8.
-------------------- -----------
"HAZARDOUS MATERIAL" means any substance, material or waste which is
------------------
defined as a "hazardous waste," hazardous substance," "hazardous material,"
"restricted hazardous waste," "industrial waste," "solid waste," "contaminant,"
"pollutant," "toxic waste" or "toxic substance" under any provision of
Environmental Law, including, without limitation, petroleum and its by-products
and asbestos.
6
<PAGE>
"HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements Act of
-------
1976, as amended.
"INCOME TAXES" means Taxes imposed on, based on, or measured by net
------------
income (including, without limitation, state or local income or franchise
taxes).
"INDEMNIFIED PARTY" has the meaning specified in Section 11.3.
----------------- ------------
"INDEMNITOR" has the meaning specified in Section 11.3.
---------- ------------
"INTELLECTUAL PROPERTY" means Copyrights, Patent Rights, Trademarks
---------------------
and Trade Secrets.
"KNOWLEDGE OF THE BUYER" means, as to a particular matter, the actual
----------------------
knowledge of any executive officer of the Buyer.
"KNOWLEDGE OF THE SELLERS" means, as to a particular matter, the
------------------------
actual knowledge of the following persons: Charles T. Fote, Robert Myers,
Jerrold Kaufman, Loren Kranz, Irene Aronin, Greg Bartels and Greg Schubert.
"LABOR LAWS" means any Requirements of Law regulating, governing or
----------
pertaining to (i) the employment, termination of employment, or failure to
employ, any individual or (ii) the employment of labor, including, without
limitation, all such Requirements of Law relating to wages, hours, collective
bargaining, discrimination, civil rights, safety and health, workers'
compensation, and the collection and payment of withholding and/or Social
Security Taxes and similar Taxes.
"LOSSES" means, in respect of any obligation to indemnify any Person
------
pursuant to the terms of this Agreement, any and all losses, costs, settlement
payments, awards, judgments, fines, penalties, damages, expenses, deficiencies,
Taxes, offsets, interest or other charges, it being understood that Losses shall
not include consequential or opportunity cost damages of any kind or the loss of
anticipated or future business.
"MATERIAL ADVERSE CHANGE" has the meaning specified in Section 5.6.
----------------------- -----------
"MATERIAL ADVERSE EFFECT" means a material adverse effect on the
-----------------------
Business, Property, results of operations or financial condition of the Company
and the Subsidiaries taken as a whole.
"MCD" has the meaning specified in the definition of "Subsidiaries."
---
7
<PAGE>
"MERGER" has the meaning specified in the fourth recital.
------
"MERGER CONSIDERATION" has the meaning specified in Section 3.2.
-------------------- -----------
"MERGERCO" has the meaning specified in the first sentence of this
--------
Agreement.
"MULTIEMPLOYER PLANS" has the meaning specified in Section 5.16.
------------------- ------------
"MULTIPLE EMPLOYER PLAN" has the meaning specified in Section 5.16.
---------------------- ------------
"NCI RECOVERIES" has the meaning specified in the definition of
--------------
"Subsidiaries."
"NET WORTH" means stockholder's equity of the Company on a
---------
consolidated basis.
"NON-INCOME TAXES" means all Taxes other than Income Taxes.
----------------
"NON-U.S. SECTION 338 ELECTIONS" has the meaning set forth in Section
------------------------------ -------
8.2(f).
- ------
"NOVEMBER BALANCE SHEET" means a balance sheet prepared by adjusting
----------------------
the Preliminary November Balance Sheet in accordance with the provisions of
Section 3.3 to (i) reflect all assets or liabilities, the existence of which is
- -----------
known on the date the Auditor delivers the notice pursuant to Section 3.3(b) and
--------------
which, as of November 30, 1997, were assets or liabilities (as the case may be)
of the Company or any Subsidiary which were required to have been reflected on
the Preliminary November Balance Sheet by the Agreed Accounting Principles,
including any asset or liability which was not reflected on the Preliminary
November Balance Sheet because such asset or liability was not deemed to be
material, (ii) remove any asset or liability which should not have been
reflected on the Preliminary November Balance Sheet by the Agreed Accounting
Principles but was in fact reflected thereon irrespective of whether such asset
or liability is deemed not to be material, and (iii) give effect to any
adjustments required to be made pursuant to Section 3.3(c).
--------------
"NOVEMBER NET WORTH" means the amount reflected on the November
------------------
Balance Sheet as the Net Worth of the Company plus any Incomes Taxes that are
shown as a liability or reserve on the November Balance Sheet minus any Income
Taxes shown as an asset on the November Balance Sheet; provided, however, that
-------- -------
the November Net Worth shall exclude (i) any increase in shareholders' equity
resulting from the discharge of any of the Company's or any of the Subsidiaries'
liabilities, obligations or indebtedness contemplated by Section 8.9, and (ii)
-----------
any change in shareholders' equity as a result of pre-closing transfer of the
ACM Plan contemplated by Section 8.3(g).
--------------
8
<PAGE>
"PATENT RIGHTS" means United States patents, patent applications,
-------------
continuations, continuations-in-part, divisions or reissues.
"PENSION PLAN" means any pension plan, as defined in Section 3(2) of
------------
ERISA, without regard to Sections 4(b)(4) or 4(b)(5) thereof .
"PERMITTED ENCUMBRANCES" means (a) liens for Taxes and other
----------------------
governmental charges and assessments that are not yet due and payable and that
are in amounts which are immaterial or are the subject of reserves, (b) liens of
landlords and liens of carriers, warehousemen, mechanics and materialmen and
other like liens arising in the ordinary course of business for immaterial sums
not yet due and payable, (c) liens granted in connection with equipment leases
for equipment that is used in the Business and (d) other restrictions on
Property which do not materially detract from the value of, or materially impair
the existing use by the Company or any of its Subsidiaries of, the Property
affected by such restrictions.
"PERSON" means any individual, corporation, partnership, limited
------
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization or Governmental Body.
"POST-CLOSING BENEFIT PROGRAMS" has the meaning specified in Section
----------------------------- -------
8.3(a).
- ------
"PRE-CLOSING ESCROW AGENT" means the Escrow Agent contemplated by the
------------------------
Pre-Closing Escrow Agreement, or any successor pursuant to the Pre-Closing
Escrow Agreement.
"PRE-CLOSING ESCROW AGREEMENT" means the escrow agreement, dated as of
----------------------------
the date hereof, among the Buyer, FFMC and the Pre-Closing Escrow Agent..
"PRELIMINARY ACCOUNTING REPORT" has the meaning specified in Section
----------------------------- -------
3.3.
- ---
"PRELIMINARY BALANCE SHEETS" has the meaning specified in Section 3.3.
-------------------------- -----------
"PRELIMINARY NET WORTH AMOUNTS" has the meaning specified in Section
----------------------------- -------
3.3.
- ---
"PRELIMINARY NOVEMBER BALANCE SHEET" has the meaning specified in
----------------------------------
Section 3.3.
- -----------
"PRELIMINARY NOVEMBER NET WORTH" has the meaning specified in Section
------------------------------ -------
3.3.
- ---
"PRELIMINARY YEAR-END BALANCE SHEET" has the meaning specified in
----------------------------------
Section 3.3.
- -----------
9
<PAGE>
"PRELIMINARY YEAR-END NET WORTH" has the meaning specified in Section
------------------------------ -------
3.3.
- ---
"PROPERTY" shall refer to all property and assets of whatsoever nature
--------
(including, but not limited to, personal property), whether tangible or
intangible, and claims, rights and choses in action.
"REAL PROPERTY" has the meaning specified in Section 5.9.
------------- -----------
"REQUIREMENTS OF LAW" means (i) any foreign, federal, state and local
-------------------
laws, statutes, regulations, rules, codes or ordinances enacted, adopted, issued
or promulgated by any Governmental Body; (ii) any rule or regulation promulgated
or judgment entered by any Governmental Body or (iii) any Court Order,
including, without limitation, the Consent Decree, other than, in each case,
common law.
"SECTION 338(h)(10) ELECTIONS" has the meaning set forth in Section
---------------------------- -------
8.2(e).
- ------
"SECTION 338 TAXES" means any Income Taxes imposed as a result of the
-----------------
Section 338(h)(10) Election made in accordance with paragraph (e) of Section 8.2
-----------
(including from any election under state or local law which automatically
results or is deemed to result from the Section 338(h)(10) Election).
"SELECTED ACCOUNTING FIRM" means a major independent public accounting
------------------------
firm (other than the Auditor or Deloitte & Touche), which shall have been
selected by the joint decision of the Buyer and the Sellers.
"SELLER ANCILLARY AGREEMENTS" means all agreements, instruments and
---------------------------
documents being or to be executed and delivered by FDC, FFMC or Business Office
Services, Inc. to the Buyer or the Surviving Corporation pursuant to the terms
of this Agreement
"SELLER GROUP MEMBER" means FDC, FFMC, their Affiliates and their
-------------------
respective directors, officers, employees and agents and their respective
successors and assigns.
"SELLERS' PAYMENT AMOUNT" means the amount determined to be such
-----------------------
amount as provided in Schedule 1.4.
------------
"SELLER TAX GROUP" means the "affiliated group" (as defined in Section
----------------
1504(a) of the Code without regard to the limitations contained in Section
1504(b) of the Code) that includes FDC and FFMC.
"SELLER PLANS" has the meaning specified in Section 5.16.
------------ ------------
10
<PAGE>
"SELLERS" has the meaning specified in the first sentence of this
-------
Agreement.
"SHARES" has the meaning specified in the third recital.
------
"SIGNING DATE" means the date hereof.
------------
"SOFTWARE" means computer software programs and software systems,
--------
including, without limitation, all databases, compilations, tool sets,
compilers, higher level "proprietary" languages, related documentation and
materials, whether in source code, object code or human readable form.
"STRADDLE PERIOD" means any taxable year or period beginning before
---------------
and ending after the Closing Date.
"SUBSIDIARIES" means NCI Recoveries Limited, organized under the laws
------------
of the United Kingdom ("NCI Recoveries"), Master Collectors of Dallas, Inc., a
--------------
Texas corporation ("MCD") and, until (if ever) the exercise by the Sellers of
---
the right of termination provided in Section 7.6, Yanci Services Company, a
-----------
Georgia general partnership ("Yanci"), and Health Care Financial Services
-----
Associates, a Georgia joint venture ("FSA").
---
"SURVIVING CORPORATION" has the meaning specified in Section 2.1.
--------------------- -----------
"TAX" (and, with correlative meaning, "TAXES") means any federal,
--- -----
state, local or foreign income, gross receipts, property, sales, use, license,
excise, franchise, employment, payroll, withholding, alternative or add-on
minimum, ad valorem, transfer or excise tax, or any other tax, custom, duty,
governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest or penalty, imposed by any Governmental Body.
"TAX PACKAGE" has the meaning specified in Section 8.2(b)(iii).
----------- -------------------
"TAX RETURN" means any return, report or similar statement required to
----------
be filed with respect to any Tax (including any attached schedules), including,
without limitation, any information return, claim for refund, amended return or
declaration of estimated Tax.
"TOP 50 CUSTOMERS" has the meaning set forth in Section 5.14.
---------------- ------------
"TRADEMARKS" means registered foreign and United States federal and
----------
state trademarks, service marks and trade names, and pending applications to
register the foregoing.
"TRADE SECRETS" means any common law or statutory trade secrets,
-------------
including confidential ideas, know-how, concepts, methods, processes, formulae,
reports, data, customer
11
<PAGE>
lists, mailing lists, business plans, or other proprietary information that
provides the owner thereof with a competitive advantage.
"TRANSITION SERVICES AGREEMENT" means the Transition Services
-----------------------------
Agreement, dated as of the Closing Date, among the Sellers, the Surviving
Corporation and the Buyer substantially in the form attached hereto as Exhibit
-------
A.
- -
"VIOLATION OF LAW" means any violation, infraction of, or failure to
----------------
comply with, occurring on or prior to the date hereof, any Requirements of Law
binding on, applicable to, or enforceable against, the Company, any of its
Subsidiaries or any of their respective predecessors (including, without
limitation, any Debt Collection Law, any Environmental Law and any Labor Law).
"WELFARE PLAN" means any welfare plan, as defined in Section 3(1) of
------------
ERISA, without regard to Sections 4(b)(4) or 4(b)(5) thereof.
"YANCI" has the meaning specified in the definition of "Subsidiaries."
-----
"YEAR-END BALANCE SHEET" means a balance sheet prepared by adjusting
----------------------
the Preliminary Year-End Balance Sheet in accordance with the provisions of
Section 3.3 to (i) reflect all assets or liabilities, the existence of which is
- -----------
known on the date the Auditor delivers the notice pursuant to Section 3.3(b) and
---------------
which, as of December 31, 1997, were assets or liabilities (as the case may be)
of the Company or any Subsidiary which were required to have been reflected on
the Preliminary Year-End Balance Sheet by the Agreed Accounting Principles,
including any asset or liability which was not reflected on the Preliminary
Year-End Balance Sheet because such asset or liability was not deemed to be
material, (ii) remove any asset or liability which should not have been
reflected on the Preliminary Year-End Balance Sheet by the Agreed Accounting
Principles but was in fact reflected thereon irrespective of whether such asset
or liability is deemed not to be material, and (iii) give effect to any
adjustments required to be made pursuant to Section 3.3(c).
--------------
"YEAR-END NET WORTH" means the amount reflected on the Year-End
------------------
Balance Sheet as the Net Worth of the Company plus any Income Taxes that are
shown as a liability or reserve on the Year-End Balance Sheet minus any Income
Taxes shown as an asset on the Year-End Balance Sheet; provided, however, that
-------- -------
the Year-End Net Worth shall exclude (i) any increase in shareholders' equity
resulting from the discharge of any of the Company's or any of the Subsidiaries'
liabilities, obligations or indebtedness contemplated by Section 8.9, and (ii)
-----------
any change in shareholders' equity as a result of pre-closing transfer of the
ACM Plan contemplated by Section 8.3(g).
--------------
12
<PAGE>
ARTICLE II
THE MERGER
----------
2.1. SURVIVING CORPORATION. Subject to the conditions contained
---------------------
herein and in accordance with the provisions of this Agreement and the GBCC, at
the Effective Time (as hereinafter defined), Mergerco shall be merged with and
into the Company, which, as the corporation surviving in the Merger (the
"Surviving Corporation"), shall continue unaffected and unimpaired by the Merger
---------------------
to exist under and be governed by the laws of the State of Georgia. At the
Effective Time, the separate existence of Mergerco shall cease except to the
extent provided by law in the case of a corporation after its merger into
another corporation.
2.2. EFFECTS OF THE MERGER. The Merger shall have the effects set
---------------------
forth in Section 14-2-1106 of the GBCC.
2.3. ARTICLES OF INCORPORATION, BY-LAWS AND DIRECTORS. The Articles
------------------------------------------------
of Incorporation and By-Laws of the Company, as in effect immediately prior to
the Effective Time, shall continue in full force and effect as the Articles of
Incorporation and By-laws of the Surviving Corporation. The Board of Directors
of the Surviving Corporation shall consist of the directors of the Company, who
shall serve until their respective successors are duly elected and qualified
provided, however, that Greg Bartels and Irene Aronin shall resign from the
Board of Directors effective as of the Closing.
ARTICLE III
CONVERSION OF SHARES; DETERMINATION OF MERGER CONSIDERATION
-----------------------------------------------------------
3.1. CONVERSION TERMS. As of the Effective Time, by virtue of the
----------------
Merger and without any action on the part of the sole shareholder of the Company
or the sole shareholder of Mergerco:
(a) The shares of common stock of Mergerco issued and outstanding
immediately prior to the Effective Time shall, in the aggregate, be
converted into and become 10 fully paid and nonassessable shares of common
stock, par value $1.00 per share, of the Surviving Corporation.
(b) All shares of Company Common Stock that immediately prior to the
Effective Time are held in the treasury of the Company shall be cancelled
and revert to the status of authorized but unissued shares and no capital
stock of the Surviving
13
<PAGE>
Corporation, cash or other consideration shall be paid or delivered in
exchange therefor.
(c) All of the shares of Company Common Stock issued and outstanding
immediately prior to the Effective Time shall be cancelled and converted,
in the aggregate, into and become the right to receive the Merger
Consideration, at such time and in such form as provided in Section 3.2.
-----------
SECTION 3.2. MERGER CONSIDERATION. The aggregate Merger
--------------------
Consideration for the Shares shall consist of (a) One Hundred Fifty Six Million
___________ Dollars ($________) in cash (the "Escrowed Cash") released to FFMC
-------------
at the Effective Time pursuant to the Pre-Closing Escrow Agreement by wire
transfer of immediately available funds, subject to adjustment following the
Closing in accordance with Section 3.4, and (b) the amount, if any, due to FFMC
-----------
pursuant to Section 3.5. The Buyer shall deposit with the Pre-Closing Escrow
-----------
Agent, by wire transfer of immediately available funds, an amount equal to the
Escrowed Cash concurrently with the execution of this Agreement.
Notwithstanding anything to the contrary, in the event that the
Closing occurs concurrently with the execution of this Agreement, the Pre-
Closing Escrow Agreement shall not be executed and the Escrowed Cash shall not
be deposited with the Pre-Closing Escrow Agent. In lieu thereof, the Buyer
shall pay to FFMC the Escrowed Cash at the Effective Time by wire transfer of
immediately available funds to the account or accounts designated by FFMC at
least two business days prior to the Closing.
SECTION 3.3. DETERMINATION OF YEAR-END NET WORTH. (a) As promptly
-----------------------------------
as practicable (but not later than March 2, 1998), the Surviving Corporation
shall:
(i) prepare, in accordance with the Agreed Accounting Principles,
consolidated balance sheets of the Company and the Subsidiaries as of
December 31, 1997 and November 30, 1997, which shall fairly present the
consolidated financial position of the Company and the Subsidiaries as of
December 31, 1997 and November 30, 1997, respectively, in accordance with
the Agreed Accounting Principles (but shall disregard any modification or
adjustment which would reflect the Section 338(h)(10) Elections or relate
to the recording of the acquisition by the Buyer) (the "Preliminary Year-
----------------
End Balance Sheet" and the "Preliminary November Balance Sheet",
----------------- ----------------------------------
respectively, and collectively the "Preliminary Balance Sheets");
--------------------------
(ii) calculate the Year-End Net Worth and the November Net Worth in
accordance with the provisions of this Agreement and based on the
Preliminary Year-End Balance Sheet and the Preliminary November Balance
Sheet, respectively (the
14
<PAGE>
"Preliminary Year-End Net Worth" and the "Preliminary November Net Worth,"
------------------------------ ------------------------------
respectively and collectively, the "Preliminary Net Worth Amounts"); and
-----------------------------
(iii) deliver to the Buyer, the Sellers and the Auditor the
Preliminary Balance Sheets and a certificate setting forth the Preliminary
Net Worth Amounts (collectively, the "Preliminary Accounting Report").
-----------------------------
(b) Promptly following delivery of the Preliminary Accounting Report
to the Auditor, the Buyer and the Sellers shall cause the Auditor:
(i) to conduct a special audit of the Preliminary Balance Sheets and
the Preliminary Net Worth Amounts as promptly as reasonably practicable
(such audit to be completed not later than sixty (60) days after receipt of
the Preliminary Accounting Report), with such audit to be conducted in
accordance with generally accepted auditing standards; and
(ii) upon completion of such audit, to deliver written notice to the
Sellers and the Buyer setting forth a summary of any adjustments (including
all adjustments for immaterial misstatements that became known to the
Auditor during the course of such audit, regardless of the amount thereof)
proposed by the Auditors, to the Preliminary Balance Sheets and the
calculation of the Preliminary Net Worth Amounts necessary to permit the
Auditor to deliver the hereinafter described audit report.
(c) Both the Buyer and the Sellers (in consultation with their
respective accountants) shall have the opportunity to review the Preliminary
Balance Sheets (together with the Auditor's working papers, including any
portion thereof pertaining to any proposed adjustments) following their receipt
of the Auditor's proposed adjustments. Any dispute regarding the Preliminary
Balance Sheets, their preparation or the calculation of the Preliminary Net
Worth Amounts, in accordance with the terms of this Agreement, that the parties
hereto cannot resolve within sixty (60) days after their receipt of the
Auditor's proposed adjustments shall be determined by the Selected Accounting
Firm. Any determinations by the Selected Accounting Firm shall be final and
binding on the parties hereto. In the event of such a settlement proceeding,
the Buyer shall be responsible for all fees of its accountants and all expenses
incurred by such firm in connection with such proceeding. The Sellers shall be
responsible for all fees of their accountants and all expenses incurred by such
firm in connection with such proceeding, and the fees and expenses of the
Selected Accounting Firm incurred in connection with such settlement proceeding
shall be paid fifty percent (50%) by the Buyer and fifty percent (50%) by the
Sellers.
(d) Upon completion of such settlement proceeding, the Auditor shall
deliver (i) the Year-End Balance Sheet and the calculation of the Year-End Net
Worth, (ii) the November
15
<PAGE>
Balance Sheet and the calculation of the November Net Worth, and (iii) an audit
report stating (without qualification) that in the opinion of the Auditor (A)
each of the Year-End Balance Sheet and the November Balance Sheet has been
prepared in accordance with the Agreed Accounting Principles and presents fairly
the consolidated financial position of the Company and the Subsidiaries at
December 31, 1997 and November 30, 1997, respectively, and (B) each of the Year-
End Net Worth and the November Net Worth has been determined in accordance with
the provisions of this Agreement (such written notice and related summary and
audit report being herein called the "Accounting Report").
-----------------
(e) The Year-End Balance Sheet and the Year-End Net Worth delivered
by the Auditor pursuant to Section 3.3(d) above shall be final and binding as
--------------
the "Year-End Balance Sheet" and the "Year-End Net Worth," respectively, for
---------------------- ------------------
purposes of this Agreement. The November Balance Sheet and the November Net
Worth delivered by the Auditor pursuant to Section 3.3(d) above shall be final
--------------
and binding as the "November Balance Sheet" and the "November Net Worth,"
---------------------- ------------------
respectively, for purposes of this Agreement.
(f) The Buyer and the Sellers shall make available to one another,
the Auditor and the Selected Accounting Firm, as the case may be, such books,
records and other information (including work papers) as such Person may
reasonably request during the review of the Preliminary Balance Sheets or the
preparation of the Accounting Report. The reasonable fees and expenses of the
Auditor hereunder shall be paid fifty percent (50%) by the Buyer and fifty
percent (50%) by the Sellers.
SECTION 3.4. ADJUSTMENT. Promptly (but not later than five (5) days)
----------
after the determination of the Year-End Net Worth and the November Net Worth
pursuant to Section 3.3 which is final and binding as set forth therein, (i) if
-----------
the Year-End Net Worth is less than the November Net Worth then FDC shall cause
FFMC to pay to the Buyer, by wire transfer of immediately available funds, an
amount in cash equal to such difference, plus interest on such difference from
----
the date hereof to the date of payment thereof at the Agreed Rate, and (ii) if
the Year-End Net Worth is greater than the November Net Worth, then the Buyer
shall pay to FFMC, by wire transfer of immediately available funds, an amount in
cash equal to such difference, plus interest on such difference from the date
----
hereof to the date of payment thereof at the Agreed Rate.
SECTION 3.5 ADDITIONAL PERFORMANCE-BASED CONSIDERATION
------------------------------------------
(a) As partial consideration for the Shares converted in the Merger,
(i) if the Company's 1998 EBITDA is greater than $28,000,000, the Buyer shall
make a payment to FFMC in an amount equal to Sellers' Payment Amount together
with interest thereon from the date hereof to the date of payment at a per annum
rate of 5.3% and (ii) if the Company's 1998
16
<PAGE>
EBITDA is equal to or less than $28,000,000, no additional payment shall be made
to FFMC by the Buyer pursuant to this Section 3.5.
-----------
(b) After the end of the 1998 fiscal year, the Buyer shall cause the
Auditor to make a written determination of the Company's 1998 EBITDA based upon
an audit of the Company's and/or the Surviving Corporation's results of
operations for such fiscal year. The Buyer shall cause a copy of such written
determination (which shall be accompanied by the audited statements of
operations upon which such determination is based) to be furnished to the
Sellers no later than March 31, 1999. Such determination shall be final and
binding upon the parties hereto on the earlier to occur of (i) the date the
Sellers shall deliver a written notice to the Buyer stating that Sellers have
accepted such determination or (ii) sixty (60) days after receipt by the Sellers
of such determination unless the Sellers shall have notified the Buyer in
writing within such 60 day period of any objections to such determination. Any
notice of objection under this Section 3.5 shall specify in reasonable detail
-----------
the items which are being disputed and shall include a summary of the reasons
for such dispute. Any dispute relating to the determination of the Company's
1998 EBITDA which cannot be resolved by the Buyer and the Sellers within thirty
(30) days after receipt of any such notice of objections shall be referred for
decision to the Selected Accounting Firm. A decision of the Selected Accounting
Firm with respect to any matter or matters in dispute shall be final and binding
on the Buyer and the Sellers (absent fraud, bad faith, undue influence or
manifest error). The fees and expenses of the Selected Accounting Firm incurred
in connection with such settlement proceedings shall be paid fifty percent (50%)
by the Buyer and fifty percent (50%) by the Sellers.
(c) Any payment required to be made by the Buyer pursuant to Section
-------
3.5(a) shall be paid by the Buyer by wire transfer of immediately available
- ------
funds to an account designated by FFMC on the earlier to occur of (i) five (5)
days after the Sellers deliver a written notice to the Buyer stating that
Sellers have accepted the Auditor's determination of the Company's 1998 EBITDA
or (ii) seventy-five (75) days after receipt by the Sellers of the Auditor's
determination of the Company's 1998 EBITDA; provided, however, in the event that
-------- -------
the Sellers dispute such determination, then the Buyer shall pay any such amount
no later than five (5) business days following the resolution of such dispute by
the Buyer and the Sellers or, if applicable, the Selected Accounting Firm.
(d) The Buyer and the Sellers shall make available to one another and
the Selected Accounting Firm such books, records and other information
(including workpapers) as such Person may reasonably request during the review
of the Auditor's determination of the Company's 1998 EBITDA.
17
<PAGE>
ARTICLE IV
SIGNING AND CLOSING
-------------------
SECTION 4.1. CLOSING DATE. The Closing shall be consummated on the
------------
second business day after the conditions set forth in Articles IX and X have
----------- -
been satisfied, or at such other time as the parties shall agree upon, at the
offices of Weil, Gotshal & Manges LLP in New York, New York or such place as
shall be agreed upon by the Buyer and FFMC. The time and date on which the
Closing is actually held is referred to herein as the "Closing Date."
------------
SECTION 4.2. FILING CERTIFICATE OF MERGER AND EFFECTIVENESS. Subject
----------------------------------------------
to the fulfillment or, if permissible, waiver of the conditions to the
respective obligations of each of the parties set forth in Article IX or Article
---------- -------
X, as the case may be, at the Closing the parties shall cause the Merger to be
- -
consummated by filing the Certificate of Merger, substantially in the form
attached hereto as Exhibit B, executed and acknowledged in accordance with the
---------
laws of the State of Georgia, in the office of the Secretary of State of the
State of Georgia. The Merger shall become effective upon such filing as
provided by the GBCC. The date and time on such date of effectiveness of the
Merger are herein called, respectively, the "Effective Date" and the "Effective
-------------- ---------
Time."
- ----
SECTION 4.3. PAYMENT ON THE CLOSING DATE. Subject to fulfillment or
---------------------------
waiver (where permissible) of the conditions set forth in Article IX, at the
----------
Closing the Buyer and the Sellers shall jointly instruct the Pre-Closing Escrow
Agent to release the Escrowed Cash together with all earnings thereon to FFMC
pursuant to the Pre-Closing Escrow Agreement by wire transfer of immediately
available funds to the bank account or accounts specified by FFMC in writing to
the Buyer at least two (2) business days prior to the Closing.
Notwithstanding anything to the contrary, in the event that the
Closing occurs concurrently with the execution of this Agreement, the Pre-
Closing Escrow Agreement shall not be executed and the Escrowed Cash shall not
be deposited with the Pre-Closing Escrow Agent. In lieu thereof, the Buyer
shall pay to FFMC the Escrowed Cash at the Effective Time by wire transfer of
immediately available funds to the account or accounts designated by FFMC at
least two business days prior to the Closing.
SECTION 4.4. BUYER'S SIGNING DATE DELIVERIES. On the date hereof,
-------------------------------
the Buyer has delivered to FFMC all of the following:
(a) Copy of the Buyer's Amended and Restated Certificate of
Incorporation certified as of a recent date by the Secretary of State of
the State of Delaware;
18
<PAGE>
(b) Certificate of good standing of the Buyer issued as of a recent
date by the Secretary of State of the State of Delaware;
(c) Certificate of the Secretary or an assistant secretary of the
Buyer, dated as of the date hereof, in form and substance reasonably
satisfactory to FFMC, as to (i) the lack of amendments to the Certificate
of Incorporation of the Buyer since the date of the certificate specified
in clause (a) above; (ii) the by-laws of the Buyer; (iii) the resolutions
of the board of directors of the Buyer authorizing the execution and
performance of this Agreement, any Buyer Ancillary Agreement to which Buyer
is a party and the transactions contemplated hereby and thereby; and (iv)
incumbency and signatures of the officers of the Buyer executing this
Agreement and any other Buyer Ancillary Agreement to which the Buyer is a
party;
(d) Copy of Mergerco's Articles of Incorporation certified as of a
recent date by the Secretary of State of the State of Georgia;
(e) Certificate of good standing of Mergerco issued as of a recent
date by the Secretary of State of the State of Georgia;
(f) Certificate of the Secretary or an assistant secretary of
Mergerco, dated as of the date hereof, in form and substance reasonably
satisfactory to FFMC, as to (i) the lack of amendments to the Articles of
Incorporation of Mergerco since the date of the certificate specified in
clause (d) above; (ii) the by-laws of Mergerco; (iii) the resolutions of
the board of directors of Mergerco authorizing the execution and
performance of this Agreement, any Buyer Ancillary Agreement to which
Mergerco is a party and the transactions contemplated hereby and thereby;
and (iv) incumbency and signatures of the officers of Mergerco executing
this Agreement and any other Buyer Ancillary Agreement to which the Buyer
is a party; and
(g) Opinions of Weil, Gotshal & Manges LLP, counsel to the Buyer and
Mergerco, and of Troutman Sanders, Georgia counsel to the Buyer and
Mergerco to the effect set forth on Exhibit C.
---------
19
<PAGE>
SECTION 4.4. FFMC'S SIGNING DATE DELIVERIES. On the date hereof,
------------------------------
FFMC has delivered all of the following:
(a) Copy of the Restated Certificate of Incorporation of FDC certified
as of a recent date by the Secretary of State of the State of Delaware;
(b) Copy of the Articles of Incorporation of FFMC certified as of a
recent date by the Secretary of State of the State of Georgia;
(c) Certificates of good standing of FDC and FFMC issued as of a
recent date by the Secretary of State of the State of Delaware and the
Secretary of State of the State of Georgia, respectively;
(d) Certificate of the Secretary or an assistant secretary of FDC,
dated as of the date hereof, in form and substance reasonably satisfactory
to the Buyer, as to (i) the lack of amendments to the Restated Certificate
of Incorporation of FDC since the date of the certificate specified in
clause (a) above; (ii) the by-laws of FDC; (iii) the resolutions of the
board of directors of FDC authorizing the execution and performance of this
Agreement, any Seller Ancillary Agreement to which FDC is a party and the
transactions contemplated hereby and thereby; and (iv) incumbency and
signatures of the officers of FDC executing this Agreement and any Seller
Ancillary Agreement to which FDC is a party;
(e) Certificate of the Secretary or an assistant secretary of FFMC,
dated as of the date hereof, in form and substance reasonably satisfactory
to the Buyer, as to (i) the lack of amendments to the Articles of
Incorporation of FFMC since the date of the certificate specified in clause
(b) above; (ii) the by-laws of FFMC: (iii) any resolutions of the board of
directors of FFMC relating to the transactions contemplated by this
Agreement and any Seller Ancillary Agreement to which FFMC is a party; and
(iv) incumbency and signatures of the officers of FFMC executing this
Agreement and any Seller Ancillary Agreement to which FFMC is a party;
(f) Copy of the Articles of Incorporation of the Company certified as
of a recent date by the Secretary of State of the State of Georgia;
(g) Certificate of good standing of the Company issued as of a recent
date by the Secretary of State of the State of Georgia and any other
jurisdictions reasonably requested by the Buyer;
20
<PAGE>
(h) Copy of the Articles of Incorporation of MCD certified as of a
recent date by the Secretary of State of Texas;
(i) Certificate of good standing of MCD issued as of a recent date by
the Secretary of State of Texas;
(j) Copy of the partnership or joint venture agreements of Yanci and
FSA, certified by a secretary or an assistant secretary of the Company;
(k) Opinion of Wilde Sapte, as to the due incorporation and good
standing of NCI Recoveries;
(l) Certificate of the Secretary or an assistant secretary of the
Company and the Subsidiaries, dated as of the date hereof, in form and
substance reasonably satisfactory to the Buyer, as to (i) the lack of
amendments to the Articles of Incorporation or comparable organizational
documents of the Company and the Subsidiaries, since the date of the
certificate specified in clauses (f), (h) and (j) above; (ii) the by-laws
of the Company, NCI Recoveries and MCD; and (iii) any resolutions of the
board of directors of the Company or the boards of directors or comparable
governing body of any of the Subsidiaries relating to the transactions
contemplated by this Agreement and any Seller Ancillary Agreement to which
the Company is a party; and
(m) Opinion of counsel to the Sellers, to the effect set forth on
Exhibit D.
---------
SECTION 4.5. CLOSING DATE DELIVERIES. (a) Subject to fulfillment or
-----------------------
waiver (where permissible) of the conditions set forth in Article IX, at the
----------
Closing, the Buyer shall deliver to FFMC all of the following:
(i) Duly executed original counterparts of the Transition Services
Agreement executed on behalf of the Buyer and the Surviving Corporation;
(ii) Certificate of Merger; and
(iii) A wire transfer of immediately available funds in an amount
equal to the filing and licensing fees incurred by the Company and/or the
Sellers in connection with assisting the Buyer to obtain any required
Governmental Permits, to the extent reasonably satisfactory supporting documents
of such fees are provided to the Buyer.
21
<PAGE>
(b) Subject to fulfillment or waiver (where permissible) of the
conditions set forth in Article X, at the Closing, FFMC shall deliver to the
---------
Buyer all of the following:
(i) Certificate(s) representing all of the Shares;
(ii) Written resignations of the directors of each of MCD and NCI
Recoveries, as requested by the Buyer;
(iii) Duly executed bill of sale and assignment agreement in
substantially the form attached as Exhibit E; and
(iv ) Duly executed original counterparts of the bill of sale and
assignment agreement, in substantially the form attached as Exhibit F,
---------
executed on behalf of BOSI and the Company;
(v) Duly executed original counterpart to the Transition Services
Agreement signed by FDC;
(vi) Certificate contemplated by Section 8.11; and
------------
(vii) A wire transfer of immediately available funds in an amount
equal to the sum of (i) the Capital Expenditure Shortfall, plus (ii) up to
$100,000 of the legal fees and expenses of Weil, Gotshal & Manges LLP incurred
by the Buyer after November 29, 1997 and prior to the Closing Date in connection
with Governmental Permits held by the Company in connection with debt collection
activities upon presentation to the Sellers of an invoice for such legal fees
and expenses detailing the time and tasks undertaken in connection therewith.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
---------------------------------------------
As an inducement to the Buyer and Mergerco to enter into this
Agreement and to consummate the transactions contemplated hereby, the Sellers
jointly and severally represent and warrant to the Buyer as of the date hereof
as follows (it being understood that all the representations and warranties
herein are being made solely as of the date hereof and, in the event the Closing
occurs concurrently with the execution of this Agreement, as of the time
immediately prior to the Effective Time):
SECTION 5.1. ORGANIZATION OF THE SELLERS. FDC is a corporation duly
---------------------------
organized, validly existing and in good standing under the laws of the State of
Delaware.
22
<PAGE>
FFMC is a corporation duly organized, validly existing and in good standing
under the laws of the State of Georgia.
SECTION 5.2. ORGANIZATION; CAPITAL STRUCTURE OF THE COMPANY; POWER
-----------------------------------------------------
AND AUTHORITY. (a) The Company and each of the Subsidiaries is a corporation
- -------------
or partnership duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation or formation. The Company and
each of the Subsidiaries is duly qualified to transact business and is in good
standing in each jurisdiction where the character of its Properties owned or
held under lease or the nature of its activities makes such qualifications
necessary, except where the failure to be so qualified or in good standing would
not have a Material Adverse Effect. The Company and each of the Subsidiaries
has the corporate or partnership power and authority to own or lease and operate
its Properties and to carry on the Business in the manner that it was conducted
immediately prior to the date of this Agreement.
(b) The authorized capital stock of the Company consists of 10,000
shares of common stock, par value $1.00 per share, of which 1,000 shares are
issued and outstanding. There are no shares of the Company's capital stock held
in treasury. All of the outstanding shares of capital stock of the Company are
duly authorized, validly issued, fully paid, nonassessable, free of preemptive
rights and are owned of record and beneficially by FFMC free and clear of all
Encumbrances. Except for this Agreement, and except as set forth on Schedule
--------
5.2, there are no outstanding or authorized options, convertible or exchangeable
- ---
securities or instruments, warrants, rights, contracts, calls, puts, rights to
subscribe, conversion rights or other agreements or commitments to which the
Sellers, the Company or any Subsidiary is a party or which are binding on any of
them providing for the issuance, redemption, disposition or acquisition of any
capital stock of, or equity interest in, the Company or any Subsidiary. There
are no outstanding stock appreciation, phantom stock or similar rights with
respect to the Company or any Subsidiary. Except as set forth on Schedule 5.2,
------------
there are no voting trusts, proxies or other agreements or understandings with
respect to the voting of any capital stock of, or equity interest in, the
Company or any Subsidiary.
(c) Since December 31, 1996, neither the Company nor any Subsidiary
has: (i) directly or indirectly redeemed, purchased or otherwise acquired or
committed to acquire any shares of its capital stock or equity interests or (ii)
effected a split, modification or reclassification of any of its capital stock
or equity interests or a recapitalization. Neither the Company nor any
Subsidiary has sold any material assets or business outside of the ordinary
course of business, or any equity interests or capital stock therein in respect
of which the Company or the Subsidiaries have any continuing liability or
obligation.
(d) Except as set forth on Schedule 5.2, the minute books of the
------------
Company and each Subsidiary that is a corporation are accurate and complete in
all material respects and reflect all material actions taken by the
incorporators, stockholders and directors (including any
23
<PAGE>
committees of the board of directors) of such corporations since the respective
dates of their organization. Notwithstanding the foregoing, no representation
and warranty is made pursuant to this Section 5.2(d) with respect to any matter
--------------
that is specifically addressed by another representation and warranty contained
in this Article V.
---------
SECTION 5.3. SUBSIDIARIES AND INVESTMENTS. Except for ownership of
----------------------------
capital stock of the Subsidiaries or as set forth on Schedule 5.3, neither the
------------
Company nor the Subsidiaries, directly or indirectly, owns, of record or
beneficially, any outstanding capital stock of or equity interests or
participations in any Person, or otherwise controls (directly or indirectly) any
Person. Except as set forth on Schedule 5.3, the Company owns, beneficially and
------------
of record: (i) one hundred percent (100%) of the outstanding capital stock of
NCI Recoveries, (ii) sixty-six and eighth-tenths of one percent (66.8%) of the
outstanding capital stock of MCD, (iii) fifty percent (50%) of the equity
interest in FSA and (iv) eighty-five percent (85%) of the equity interest in
Yanci, in each case, free and clear of all Encumbrances. All such capital stock
and equity interests are duly authorized, validly issued and outstanding, fully
paid and nonassessable, free of preemptive rights and held of record and
beneficially owned by the Company. As of September 30, 1997, the capital
account of the Company in FSA was Two Hundred Twenty One Thousand Nine Hundred
Thirty-Two Dollars ($221,932), and the capital account of the Company in Yanci
was negative One Hundred Fifty-Five Thousand Nine Hundred Forty Dollars
(-$155,940).
SECTION 5.4. AUTHORITY OF THE SELLERS; CONFLICTS. (a) Each of the
-----------------------------------
Sellers has the corporate power and corporate authority to execute, deliver and
perform this Agreement and each of the Seller Ancillary Agreements to which it
is a party. The execution, delivery and performance of this Agreement and the
Seller Ancillary Agreements by the Sellers have been duly authorized and
approved by FDC's and FFMC's board of directors and do not require any further
authorization or consent of the Sellers or their respective stockholders. This
Agreement has been duly authorized, executed and delivered by the Sellers and
(assuming the valid authorization, execution and delivery of this Agreement by
the Buyer and Mergerco) is the legal, valid and binding obligation of the
Sellers enforceable in accordance with its terms, and each of the Seller
Ancillary Agreements has been duly authorized by FDC or FFMC, as the case may
be, and upon execution and delivery by FDC or FFMC, as the case may be, will be
(assuming the valid authorization, execution and delivery by the other party or
parties thereto) a legal, valid and binding obligation of FDC or FFMC, as the
case may be, enforceable in accordance with its terms, in each case subject to
bankruptcy, insolvency, reorganization, moratorium and similar laws of general
application relating to or affecting creditors' rights and to general equity
principles.
(b) The Company has the corporate power and corporate authority to
execute, deliver and perform this Agreement. The execution, delivery and
performance of this Agreement has been duly authorized and approved by the
Company's board of directors and
24
<PAGE>
sole shareholder and do not require any further authorization or consent of the
Company or its shareholders. This Agreement has been duly authorized, executed
and delivered by the Company and (assuming the valid authorization, execution
and delivery of this Agreement by the Buyer and Mergerco) is the legal, valid
and binding obligation of the Company enforceable in accordance with its terms
subject to bankruptcy, insolvency, reorganization, moratorium and similar laws
of general application relating to or affecting creditors' rights and to general
equity principles.
(c) Except as set forth in Schedule 5.4, none of (i) the execution and
------------
delivery of this Agreement or any of the Seller Ancillary Agreements, (ii) the
consummation of any of the transactions contemplated hereby or thereby or (iii)
the compliance with or fulfillment of the terms, conditions and provisions
hereof or thereof will:
(A) assuming the receipt of all necessary consents and approvals and
the filing of all necessary documents as described in clause (B) below,
result in a material breach of the terms, conditions or provisions of, or
constitute a material default or event of default or an event creating
rights of acceleration, termination or cancellation or a loss of rights
under, or result in the creation or imposition of any Encumbrance upon the
Shares or any of the Property of the Company or the Subsidiaries, under (1)
the charter or by-laws of the Sellers, the Company, MCD or NCI Recoveries,
the partnership agreement of Yanci or the joint venture agreement of FSA,
(2) any material agreement or contract (other than customer agreements and
contracts) to which the Sellers, the Company or any Subsidiary is a party
or to which the Sellers, the Company or any Subsidiary or any of their
respective Properties is subject, (3) any Court Order to which the Sellers,
the Company or any Subsidiary is a party or by which the Sellers, the
Company or any Subsidiary or any of their respective Properties is subject
or (4) any Requirements of Law affecting the Sellers, the Company or any
Subsidiary or any of their respective Properties, other than, in the case
of clauses (2), (3) and (4) above, any such conflicts, breaches, defaults,
rights or Encumbrances that arise as a result of the Merger, but which
would not have arisen had the acquisition of the Company been structured as
a purchase of the Shares by the Buyer, or
(B) require the Sellers, the Company or any Subsidiary to obtain any
Governmental Permit that is material to the Business or to take any act or
make any declaration, filing or registration with, any Person, other than
(1) as provided in Section 4.2, (2) in connection, or in compliance, with
-----------
the provisions of the HSR Act or Debt Collection Laws or (3) approvals,
consents, authorizations, licenses and permits that are required as a
result of the Merger,
25
<PAGE>
but which would not have been required if the acquisition of the Company
had been structured as a purchase of Shares by the Buyer.
SECTION 5.5. FINANCIAL STATEMENTS. (a) Schedule 5.5 contains (i)
-------------------- ------------
the audited consolidated balance sheet of the Company and the Subsidiaries as of
December 31, 1996 and the related consolidated statements of income, cash flows
and stockholder's equity of the Company and the Subsidiaries for the year ended
December 31, 1996 and (ii) the audited consolidated balance sheet of the Company
and the Subsidiaries as of September 30, 1997 and the related consolidated
statements of income, cash flows and stockholder's equity for the nine (9)
months then ended. Except as set forth therein and except as set forth in
Schedule 5.5, such balance sheets and statements of income, cash flows and
- ------------
stockholder's equity and the related notes thereto have been prepared in
conformity with GAAP as in effect on the respective dates of such balance sheets
and related statements of income, cash flows and stockholder's equity and the
related notes thereto, and such balance sheets and related statements of income,
cash flows and stockholder's equity present fairly in accordance with GAAP, as
in effect on the respective dates of such balance sheets and related statements
of income, cash flows and stockholder's equity and the related notes thereto,
the financial position and results of operations of the Company and the
Subsidiaries, as of their respective dates and for the respective periods
covered thereby.
(b) Neither the Company nor any Subsidiary has deposited or pledged,
or is obligated upon the occurrence of any condition or event to deposit or
pledge, any collateral (other than fiduciary funds) to any Person pursuant to
any interest rate cap, interest rate swap or other interest rate hedging
agreement or any other agreement, contract or commitment.
SECTION 5.6. OPERATIONS SINCE FINANCIAL STATEMENT DATE. (a) Except
-----------------------------------------
as set forth on Schedule 5.6, since September 30, 1997, (i) there has been no
------------
material adverse change in the Property, operations, Business, results of
operations or financial condition of the Company and the Subsidiaries taken as a
whole, other than changes relating to generally applicable economic conditions
or the Company's and the Subsidiaries' industry in general ("Material Adverse
----------------
Change") and (ii) there has been no damage, destruction or casualty loss to the
- ------
Property of the Company or any Subsidiary, whether or not covered by insurance,
condemnation or other taking affecting the Company, the Subsidiaries, or the
Business in excess of Fifty Thousand Dollars ($50,000) in the case of any
individual loss or One Hundred Thousand Dollars ($100,000) with respect to the
aggregate of all such losses.
(b) Except as set forth on Schedule 5.6, since the Financial
------------
Statement Date, Sellers and their Affiliates (other than the Company and the
Subsidiaries) have conducted their respective business relationships with the
Company and the Subsidiaries only in the ordinary and usual course. Except as
set forth on Schedule 5.6, since the Financial Statement Date, the Company and
------------
the Subsidiaries have conducted their respective businesses and operations only
26
<PAGE>
in the ordinary course consistent with past practice and have not, except in the
ordinary course of business, done any of the following:
(i) sold, leased (as lessor), transferred or otherwise disposed of
(including any transfers from the Company or any Subsidiary to the Sellers
or any of their Affiliates), or mortgaged or pledged, or imposed or
suffered to be imposed any Encumbrance (other than a Permitted Encumbrance)
on, any of the assets reflected on the Financial Statement or any assets
acquired by the Company after the Financial Statement Date;
(ii) canceled any debts or claims owed to the Company or any
Subsidiary or settled any litigation or claims arising from debt
obligations owed to the Company or waived any other rights thereunder;
(iii) paid any claims against, or liabilities or obligations of, the
Company or any Subsidiary in respect of any legal proceedings or any
threatened legal proceedings (including the settlement of any claims and
litigation against the Company or any Subsidiary), which involved the
payment by the Company or any Subsidiary in excess of Fifteen Thousand
Dollars ($15,000) in the case of any individual payment or One Hundred
Twenty Five Thousand Dollars ($125,000) with respect to the aggregate of
all such payments;
(iv) other than intercompany debt, created, incurred or assumed, or
agreed to create, incur or assume, any indebtedness for borrowed money or
entered into, as lessee, any capitalized lease obligations;
(v) delayed or accelerated collection of notes or accounts
receivable owed to the Company beyond or in advance of, as applicable,
their regular due dates or the dates when the same would have been
collected;
(vi) delayed or accelerated payment of any account payable or other
liability of the Company or any Subsidiary beyond or in advance of, as
applicable, its due date or the date when such account payable or liability
would have been paid;
(vii) acquired any interest in any real property;
(viii) other than the items contemplated by Schedule 8.11,
-------------
undertaken or committed to undertake capital expenditures exceeding One
Hundred Thousand Dollars ($100,000) in the aggregate;
27
<PAGE>
(ix) agreed to waive or committed to waive any rights that could
reasonably be expected to have a Material Adverse Effect;
(x) directly or indirectly in any way extended or otherwise
restructured the payment schedule, payment terms or any other material term
or condition of any Business Agreement (other than any contract or
agreement with any customer);
(xi) failed promptly to pay and discharge current liabilities,
except in the case of such liabilities that are disputed in good faith and
for which adequate reserves are maintained in accordance with GAAP, as in
effect on the Financial Statement Date;
(xii) made any change in the accounting principles and practices used
by the Company or any Subsidiary from those applied in the preparation of
the Financial Statements, except to the extent required by GAAP and set
forth on Schedule 5.6; or
------------
(xiii) entered into or become contractually bound to enter into any
other material transaction.
SECTION 5.7. TAXES. (a) FDC, FFMC and the Company are members of an
-----
"affiliated group" within the meaning of Section 1504(a) of the Code, and FDC is
the "common parent" of such affiliated group. Except as set forth on Schedule
--------
5.7, each of the Company and the Subsidiaries (or FDC or FFMC, on their behalf)
- ---
has (i) timely filed with the appropriate federal, state, local and other taxing
authorities all Tax Returns relating to Income Taxes, and all material Tax
Returns relating to Non-Income Taxes required to be filed by or on behalf of the
Company or the Subsidiaries, which Tax Returns are true, correct and complete in
all material respects, (ii) timely paid in full all Income Taxes and all
material Non-Income Taxes which are due with respect to the Company and the
Subsidiaries, (iii) made all required estimated Tax payments sufficient to avoid
any material underpayment penalties; and (iv) withheld and paid all Taxes
required by all applicable laws to be withheld or paid in connection with any
amounts paid or owing to any employee, creditor, independent contractor or other
third party.
(b) Except as set forth on Schedule 5.7, (i) the Tax Returns referred
------------
to in Section 5.7(a)(i) relating to federal income Taxes have been examined by
-----------------
the Internal Revenue Service or the period for assessment of the Taxes in
respect of which such Tax Returns were required to be filed has expired; (ii) no
issues that have been raised in writing by the relevant taxing authority in
connection with the audit, examination or other administrative or judicial
proceeding of, or with respect to, the Tax Returns referred to in Section
-------
5.7(a)(i) are currently pending; (iii) all deficiencies asserted or assessments
- ---------
made as a result of any audit, examination or other administrative or judicial
proceeding of, or with respect to, the Tax
28
<PAGE>
Returns referred to in Section 5.7(a)(i) by a taxing authority have been paid in
-----------------
full and (iv) no statute of limitations has been waived in writing or extended
in writing with respect to Taxes of the Company or any of the Subsidiaries which
waiver or extension is currently in effect.
(c) Except as set forth on Schedule 5.7, (i) no consent to the
------------
application of Section 341(f)(2) of the Code (or any predecessor provision) has
been made or filed by or with respect to the Company or any of the Subsidiaries;
(ii) none of the Company or any of the Subsidiaries has agreed in writing, by
reason of any change in any accounting method, to make any adjustment pursuant
to Section 481(a) of the Code (or any similar provision of state, local or
foreign law) which is currently being taken into account; (iii) there is no
application pending with any taxing authority requesting permission for any
changes in accounting method of the Company or any of the Subsidiaries; (iv)
none of the Properties of the Company or any of the Subsidiaries is required to
be treated as being owned by any Person (other than the Company or the
Subsidiaries) pursuant to the provisions of Section 168(f)(8) of the Internal
Revenue Code of 1954, as amended and in effect immediately before the enactment
of the Tax Reform Act of 1986; and (v) none of the Properties of the Company or
any of the Subsidiaries is required to be treated as being "tax-exempt use
property" within the meaning of Section 168(h)(i) of the Code.
(d) None of the Company or any of the Subsidiaries will, after the
Closing Date, have any obligation under any agreement governing the allocation
of, or liability for, Taxes determined for a combined, unitary or consolidated
group of corporations.
(e) Except as set forth on Schedule 5.7, there are no on-site audits
------------
or investigations by any taxing authority in progress with respect to the
Company or any of the Subsidiaries, and none of the Sellers, the Company or any
of the Subsidiaries has received any specific, written notice from any taxing
authority that it intends to conduct such an on-site audit or investigation. No
claim has been made in writing by a taxing authority in a jurisdiction where the
Company or any Subsidiary does not file Tax Returns that the Company or any
Subsidiary may be subject to taxation in that jurisdiction.
(f) None of the Sellers is a foreign person within the meaning of
Section 1445 of the Code.
(g) There is no contract, agreement, plan or arrangement covering any
Person that, individually or collectively, could give rise to the payment of any
amount that would not be deductible by the Company or any of the Subsidiaries by
reason of Section 280G of the Code.
(h) Schedule 5.7 sets forth all jurisdictions which have asserted in
------------
writing that the Company or any of the Subsidiaries is or may be failing to
impose or collect sales or
29
<PAGE>
use Taxes for which the Company or any Subsidiary is or may be responsible for
such collection or imposition.
SECTION 5.8. GOVERNMENTAL PERMITS.
--------------------
(a) Except as set forth in Schedule 5.8, the Company and the
------------
Subsidiaries own, hold or possess all licenses, franchises, permits, privileges,
immunities, approvals and other authorizations from a Governmental Body that are
necessary to entitle them to own or lease, operate and use their assets and to
carry on and conduct the Business substantially as conducted by the Company and
the Subsidiaries (herein collectively called "Governmental Permits"), except for
--------------------
such Governmental Permits that are not material to the conduct of the Business.
(b) Except as set forth on Schedule 5.8, none of the Company, or any
------------
of the Subsidiaries has received written notification of cancellation of a state
debt collection license or been the subject of any cease-and-desist order,
suspension, revocation, removal or non-renewal of any Governmental Permit to
engage in the Business or any proceeding therefor, and, to the Knowledge of the
Sellers, no notice of any proceedings therefor has been issued.
SECTION 5.9. REAL PROPERTY. Except as set forth on Schedule 5.9,
------------- ------------
none of the Company or any of the Subsidiaries owns any real property or holds
any option to acquire any real property. Schedule 5.9 sets forth a list of each
------------
lease or similar agreement under which the Company or any of the Subsidiaries is
lessee of, or holds or operates, any real property owned by any third Person
(the "Real Property") and except for the facilities described on Schedule 5.9,
------------- ------------
none of the Company or any of the Subsidiaries occupies or uses any other space
or facilities.
SECTION 5.10. PERSONAL PROPERTY LEASES. Schedule 5.10 contains a
------------------------ -------------
list of each lease or other agreement or right under which either the Company or
any of the Subsidiaries is lessee of, or holds or operates, any machinery,
equipment, vehicle or other tangible personal property owned by a third Person,
except those which are terminable by the Company or the Subsidiaries without
penalty on 60 days' or less notice or which provide for annual rental payments
of less than Twenty Five Thousand Dollars ($25,000). Except as set forth on
Schedule 5.10, each of the Company and the Subsidiaries owns or leases all
- -------------
material tangible personal Property required to conduct its business in the
ordinary and usual course of its respective businesses consistent with past
practices, including sufficient computer hardware to conduct its business as
presently conducted. Other than ordinary wear and tear, all such tangible
personal Property is in sufficient operating condition to continue, in all
material respects, the operations of the Company and the Subsidiaries in the
ordinary and usual course of their respective businesses consistent with past
practices. Except as set forth on Schedule 5.10, upon consummation of the
-------------
transactions contemplated by this Agreement, the Company and the Subsidiaries
will be entitled to continue to use in all material respects all tangible
30
<PAGE>
personal property that is currently employed by any of them in the conduct of
the Business as presently conducted. All leases of tangible personal Property
of which the Company or any Subsidiary is the lessee or obligor are in full
force and effect, and there are no outstanding payment or other material
defaults by the Company or any Subsidiary thereunder (nor to the Knowledge of
the Sellers are any of the other parties thereto in material default).
SECTION 5.11. INTELLECTUAL PROPERTY; SOFTWARE. (a) Schedule 5.11(a)
------------------------------- ----------------
sets forth a list of all Copyrights, Patent Rights, and Trademarks, and to the
Knowledge of the Sellers, Trade Secrets, owned by the Company or any of the
Subsidiaries that are material to the operation of the Business.
(b) Schedule 5.11(b) sets forth a list of Software (other than
----------------
commercially available or "shrink-wrapped" Software) used by the Company or any
of the Subsidiaries that is material to the operation of the Business.
(c) Except as disclosed in Schedule 5.11(c), to the Knowledge of
----------------
Sellers, the Company and the Subsidiaries either: (i) own the entire right,
title and interest in and to the Intellectual Property and Software listed in
Schedules 5.11(a) and 5.11(b) hereof, free and clear of any Encumbrance (other
- ----------------- -------
than Permitted Encumbrances); or (ii) have the right and license to use such
Intellectual Property or Software in the Business and such Intellectual Property
and Software will remain available to the Surviving Corporation and the
Subsidiaries after the Closing for the uses in which they are currently employed
by the Company and the Subsidiaries without the necessity of the Buyer, the
Company or the Surviving Corporation obtaining a consent or the Buyer, the
Company or the Surviving Corporation paying a fee, in each case, on account of
the change in ownership of the Company; it being understood that the Surviving
Corporation shall be responsible for the payment of maintenance fees, renewal
fees, use fees and similar recurring fees on account of the Software used in the
Business for the period following the Closing Date. Notwithstanding the Merger,
for the purpose of making the representation included in Section 5.11(c)(ii),
-------------------
the Buyer agrees that the Sellers are permitted to assume that the acquisition
of the Company is to be consummated as a purchase of the Shares by the Buyer and
not as a merger, and the Buyer shall be solely responsible for any consent, fee,
breach or default which arises because the acquisition of the Company is to be
consummated as a merger and not as a purchase of Shares by the Buyer.
(d) Except as disclosed in Schedule 5.11(d), to the Knowledge of
----------------
Sellers: (i) each item constituting part of the Intellectual Property disclosed
on Schedule 5.11(a) has been duly registered with, filed in or issued by, as the
----------------
case may be, the United States Patent and Trademark Office or such other
Governmental Bodies as are indicated in Schedule 5.11(a); (ii) all registrations
----------------
for Trademarks identified in Schedule 5.11(a) are valid and in force, and all
----------------
applications to register any unregistered Copyrights, Patent Rights and
Trademarks so identified are pending and in good standing, all without challenge
of any
31
<PAGE>
kind; (iii) the Intellectual Property disclosed on Schedule 5.11(a), and the
----------------
Software owned by the Company as disclosed on Schedule 5.11(b) are valid and
----------------
enforceable; (iv) the Company's licenses to use the Software not owned by the
Company as disclosed on Schedule 5.11(b) are valid and enforceable and (v) the
----------------
Intellectual Property and the Software disclosed on Schedules 5.11(a) and (b)),
-------------------------
constitute all the Intellectual Property and Software (other than commercially
available or "shrink-wrapped" Software) material to the conduct of the Business,
as currently conducted.
(e) Except as disclosed on Schedule 5.11(e), (i) no written claim of
----------------
any infringement of any Intellectual Property of any other Person has been made
or asserted in respect of the operations of the Business, and (ii) the Company
and the Subsidiaries have not had written notice of a claim against the Company
or the Subsidiaries that the operations, activities, products, Software,
equipment, machinery or processes of the Business infringe any Intellectual
Property of any other Person.
(f) Except as disclosed on Schedule 5.11(f), no proceedings are
----------------
pending or threatened in writing against the Company or the Subsidiaries that
challenge the validity or ownership of any Copyright, Patent Right, or Trademark
described on Schedule 5.11(a).
----------------
SECTION 5.12. TITLE TO PROPERTY. Except as set forth on Schedule
----------------- --------
5.12 and except for assets disposed of in the ordinary course of business since
- ----
the Financial Statement Date, the Company and the Subsidiaries have valid title
to each item of equipment and other personal property reflected on the Financial
Statement, free and clear of all Encumbrances, except for Permitted
Encumbrances.
SECTION 5.13. NO LITIGATION. Except as set forth in Schedule 5.13:
------------- -------------
(a) except in connection with alleged violations of Debt Collection
Laws, there are no material lawsuits or civil, criminal or administrative
actions or hearings ("Actions") pending or, to the Knowledge of the
-------
Sellers, any material lawsuit, proceedings or investigations threatened
against the Company or any of the Subsidiaries; and
(b) there is no action, suit or proceeding pending or, to the
Knowledge of the Sellers, threatened that questions the legality or
propriety of the transactions contemplated by this Agreement or any of the
Seller Ancillary Agreements (nor, to the Knowledge of the Sellers, is there
any basis for any of the same).
SECTION 5.14. CONTRACTS. Except as set forth on Schedule 5.14, none
--------- -------------
of the Company or any of the Subsidiaries is a party to or bound by:
32
<PAGE>
(i) any contract for the purchase or sale of real property;
(ii) any contract for the purchase by the Company or any of the
Subsidiaries of services, supplies, components or equipment (including
capital expenditures) which involved the payment of more than Fifty
Thousand Dollars ($50,000) in the twelve months ended September 30, 1997,
other than contracts terminable within sixty (60) days without penalty;
(iii) any indebtedness or contract to incur indebtedness of the
Company or of any Subsidiary for borrowed money owed to any Person other
than the Sellers or an Affiliate of the Sellers;
(iv) any agreement or contract to which the Company or any
Subsidiary is a party relating to the future disposition or acquisition of
the stock or substantially all of the assets of, or an interest in, any
Person;
(v) other than with respect to indebtedness, any binding guarantee
by the Company or any Subsidiary of the obligations of a third Person
running to any Person that involves, individually or in the aggregate, a
contingent liability of the Company or any Subsidiary of Fifty Thousand
Dollars ($50,000) or more;
(vi) any binding indemnification agreement by the Company or any
Subsidiary running to any Person that involves, individually or in the
aggregate, a contingent liability of the Company or any Subsidiary of Fifty
Thousand Dollars ($50,000) or more, other than in connection with customer
contracts, Business Agreements entered into in the ordinary course of
business, or with respect to directors or executive officers of the
Company;
(vii) any agreement or contract providing for the collection or
administration of accounts receivable by any Person (other than collection
attorneys) on behalf of the Company or any of the Subsidiaries;
(viii) any binding agreement or contract by the Company or any of the
Subsidiaries to buy accounts receivable or any interests or participation
therein;
(ix) any binding agreement or contract containing any covenant or
provision prohibiting the Company or any Subsidiary from engaging in any
line or type of business (except for such agreements or contracts which
shall not apply to the Company or any Subsidiary upon Closing) or competing
with any Person in the Business in any geographic area;
33
<PAGE>
(x) any agreement or contract limiting the right of the Company or
any Subsidiary to pay dividends or distributions to its shareholders;
(xi) any swap, hedge, derivative or interest rate protection
agreement;
(xii) any contract in which the Company or any Subsidiary
participates as a general partner or joint venturer or pursuant to which
the Company or any Subsidiary is subject to any mandatory capital call;
(xiii) any binding guarantee of indebtedness for borrowed money by
the Company or any Subsidiary running to any Person;
(xiv) any contract for the sale by the Company or of any of the
Subsidiaries of any services or products of the Business that involved the
payment to the Company or any of the Subsidiaries of more than Two Hundred
Fifty Thousand Dollars ($250,000) in any twelve (12) month period (other
than any contract or agreement with any customer); or
(xv) any other agreement which required the payment by or on behalf
of the Company or any of the Subsidiaries of more than Two Hundred Fifty
Thousand Dollars ($250,000) during the twelve months ended September 30,
1997 or, other than commercially available Software, which is material to
the Company and its Subsidiaries.
Schedule 5.14 sets forth a list of the fifty largest customers of the
-------------
Company by revenue for the year to date as of October 31, 1997 (the "Top 50
------
Customers").
- ---------
SECTION 5.15. STATUS OF CONTRACTS. Except as set forth in Schedule
------------------- --------
5.15, each of the leases, contracts, licenses and other agreements listed in
- ----
Schedules 5.9, 5.10, 5.11, and 5.14 (collectively, the "Business Agreements")
- ------------- ---- ---- ---- -------------------
is in full force and effect; provided, however, that no representation or
warranty is being made with respect to any contract or agreement with any
customer of the Company or its Subsidiaries. Except as set forth in Schedule
--------
5.15, none of the Company or any of the Subsidiaries is in, or, to the Knowledge
- ----
of the Sellers, alleged to be in, breach or default under any of the Business
Agreements (other than any contract or agreement with any customer), in any
material respect and no event has occurred that, with notice or lapse of time,
would constitute such a breach by the Company or any of the Subsidiaries of any
of the Business Agreements (other than any contract or agreement with any
customer). For the purpose of making the representations and warranties
contained in this Section 5.15, the Buyer agrees that the Sellers are permitted
------------
to assume that the acquisition of the Company is being made as a purchase of the
Shares by the Buyer and not as a Merger and the Buyer shall be solely
responsible for any authorizations, consents, fees, breaches or
34
<PAGE>
defaults in regard to the Business Agreements which arise because the
acquisition of the Company is to be consummated as a Merger and not as a
purchase of the Shares by the Buyer.
SECTION 5.16. ERISA. (a) Schedule 5.16(a) sets forth all "employee
----- ----------------
benefit plans," as defined in Section 3(3) of ERISA, and all other material
employee benefit arrangements or payroll practices, including, without
limitation, bonus plans, consulting or other compensation agreements, incentive,
equity or equity-based compensation, or deferred compensation arrangements,
stock purchase, severance pay, sick leave, vacation pay, salary continuation for
disability, hospitalization, medical insurance, life insurance, maintained by
the Sellers or the Company or any Subsidiary or to which the Sellers or the
Company or any Subsidiary contributed or is obligated to contribute thereunder
for current or former employees of the Company or its Subsidiaries (the
"Employees") (the "Seller Plans"). For purposes of this Agreement, "ERISA
- ---------- ------------
Affiliate" shall mean any trade or business (whether or not incorporated) which
is or has ever been under common control, or which is or has ever been treated
as a single employer, with the Sellers under Section 414(b), (c), (m) or (o) of
the Code. For purposes of this Agreement, "ERISA Affiliate Plan" shall mean any
--------------------
"employee pension plan," as defined in Section 3(2) of ERISA, other than a
Seller Plan but including the First Data Corporation Incentive Savings Plan,
which is maintained, contributed to or has ever been obligated to be contributed
to by Seller or an ERISA Affiliate. None of the Seller Plans is a
"multiemployer plan" as defined in Section 3(37) of ERISA ("Multiemployer
-------------
Plan"), or is or has been subject to Sections 4063 or 4064 of ERISA ("Multiple
--------
Employer Plans").
- --------------
(b) The Sellers, the Company, the Subsidiaries or an ERISA Affiliate
has received a favorable determination letter that each Seller Plan intended to
qualify under Section 401 of the Code, and the trust maintained pursuant thereto
does qualify under Section 401 and 501(a) of the Code, respectively. To the
Knowledge of the Sellers, nothing has occurred with respect to the operation of
the Seller Plans that could cause the loss of such qualification or exemption.
(c) True, correct and complete copies of the following documents with
respect to each of the Seller Plans have been made available to the Buyer by the
Sellers: (i) any plans and related trust documents, and amendments thereto, (ii)
the most recent Forms 5500, (iii) the last Internal Revenue Service
determination letter and (iv) summary plan descriptions.
(d) Except as disclosed in Schedule 5.16(d), none of the Sellers, the
----------------
Company or any Subsidiary maintains or has an obligation to contribute to
retiree life or retiree health plans that provide for continuing benefits or
coverage for current or former officers, directors or employees of the Company
or any of the Subsidiaries except (i) as may be required under Part 6 of Title I
of ERISA and to the extent permitted under applicable law
35
<PAGE>
at the sole expense of the participant or the participant's beneficiary or (ii)
a medical expense reimbursement account plan pursuant to Section 125 of the
Code.
(e) Except as disclosed in Schedule 5.16(e), neither the execution
----------------
and delivery of this Agreement nor the consummation of the transactions
contemplated hereby will (i) require the making of any payment to any employee
(current, former or retired) of the Company and the Subsidiaries, (ii) increase
any benefits under any Seller Plan or (iii) require the acceleration of the time
of payment of, vesting of or other rights with respect to any such benefits.
SECTION 5.17. ENVIRONMENTAL COMPLIANCE. Except as set forth in
------------------------
Schedule 5.17, to the Knowledge of the Sellers, the Properties do not contain
- -------------
any underground storage tanks. Since January 1, 1993, none of the Company or
any Subsidiary has received any written communication alleging that the Company,
any of the Subsidiaries or any of their predecessors in interest may be in
material violation of any applicable Environmental Law or may have any liability
under any applicable Environmental Law. Since November 1, 1995, none of the
Sellers, the Company or any of the Subsidiaries have commissioned or received
any environmental audits, reports, analyses or studies with respect to currently
or previously owned, leased or operated properties of the Company or any
Subsidiary. To the Knowledge of the Sellers, neither the Company nor any
Subsidiary has received written notice of investigations of the business,
operations, or leased Property of the Company or any of the Subsidiaries which
is reasonably likely to lead to the imposition of any material liability
pursuant to applicable Environmental Law.
SECTION 5.18. EMPLOYEE RELATIONS AND AGREEMENTS. (a) Schedule 5.18
--------------------------------- -------------
contains a true and complete listing of all employees of the Company and the
Subsidiaries as of a recent date, their annual salary and date of hire. Since
the Financial Statement Date, except as disclosed on Schedule 5.18 or as has
-------------
occurred in the ordinary course of business and consistent as to timing and
amount with past practices, none of the Company or any Subsidiary has: (i)
increased the compensation payable or to become payable to or for the benefit of
any of its employees, (ii) provided any of its employees with increased security
or tenure of employment, (iii) increased the amount payable to any of its
employees upon the termination of such persons' employment, or (iv) increased,
augmented or improved benefits granted to or for the benefit of its employees
under any bonus, profit sharing, pension, retirement, deferred compensation,
incentive, insurance, medical, hospital, disability, welfare or other direct or
indirect benefit plan or arrangement.
(b) Except as set forth in Schedule 5.18, none of the Company or any
-------------
Subsidiary is a party to any labor contract, collective bargaining agreement or
employment or consulting agreement. Except as disclosed in Schedule 5.18, no
-------------
labor organization or group of employees of the Company or any Subsidiary has
made a pending demand for union
36
<PAGE>
recognition or certification, and there are no representation or certification
proceedings or petitions seeking a representation proceeding presently pending
or threatened in writing to be brought or filed with the National Labor
Relations Board (the "NLRB") or any other labor relations tribunal or authority.
----
Except as disclosed in Schedule 5.18(b), there are no organizing activities
----------------
involving the Company or any Subsidiary pending with any labor organization or
group of employees of the Company or any Subsidiary.
(c) Except as disclosed on Schedule 5.18, there are no complaints,
-------------
charges or claims against the Company or any Subsidiary pending, or threatened
in writing to be brought or filed, with any Governmental Body based on, arising
out of, in connection with, or otherwise relating to the employment or
termination of employment or failure to employ by the Company or any Subsidiary,
of any individual.
(d) For purposes of the Workers Adjustment and Retraining Notification
Act ("WARN"), within the sixty (60) days prior to December 31, 1997, no more
than _____ (__) employees of the Company or any Subsidiary has suffered an
"employment loss" who could be part of a "mass layoff" or "plant closing" (as
such terms are defined WARN) with respect to the Company or such Subsidiary.
SECTION 5.19. NO BROKERS. Except for Salomon Smith Barney, the fees
----------
and expenses of which are payable by FDC, none of FDC, FFMC, the Company or any
Person acting on their behalf has paid or become obligated to pay any fee or
commission to any broker, finder or intermediary for or on account of the
transactions contemplated by this Agreement.
SECTION 5.20. INSURANCE. Set forth on Schedule 5.20 is a list and
--------- -------------
brief description of all liability, property, workers' compensation, directors
and officers' liability and other policies of insurance that insure the assets,
Business, Properties or operations of the Company and the Subsidiaries as of the
date hereof, all of which are in full force and effect.
SECTION 5.21. NO UNDISCLOSED LIABILITIES. Except (a) for
--------------------------
liabilities set forth in the consolidated balance sheet (including notes
thereto) of the Company included in the Financial Statements, (b) as set forth
in Schedule 5.21, (c) as will be reflected on the Year-End Balance Sheet or (d)
-------------
for liabilities that are subject to indemnification by the Sellers pursuant to
clauses (iii), (iv), (v), (vi) or (vii) of Section 11.1(a), neither the Company
----------------
nor any of its Subsidiaries is subject to any indebtedness, obligation or
liability that would be required to be reflected or reserved against in a
consolidated balance sheet (not taking into account the notes thereto) as of the
date hereof of the Company and its Subsidiaries prepared in accordance with
GAAP, as in effect on the Financial Statement Date. Notwithstanding the
foregoing, no representation and warranty is made pursuant to this Section 5.21
------------
with respect to any matter
37
<PAGE>
that is specifically addressed by another representation and warranty contained
in this Article V.
---------
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE BUYER
-------------------------------------------
As an inducement to the Sellers to enter into this Agreement and to
consummate the transactions contemplated hereby, the Buyer hereby represents and
warrants to the Sellers as of the date hereof (it being understood that all the
representations and warranties herein are being made solely as of the date
hereof and, in the event the Closing occurs concurrently with the execution of
this Agreement, as of the time immediately prior to the Effective Time):
SECTION 6.1. ORGANIZATION OF THE BUYER AND MERGERCO. The Buyer is a
--------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. The Buyer has the corporate power and corporate
authority to own or lease and operate its assets and to carry on its businesses
in the manner that they were conducted immediately prior to the date of this
Agreement. Mergerco is a corporation duly organized, validly existing and in
good standing under the laws of the State of Georgia.
SECTION 6.2. AUTHORITY OF THE BUYER; CONFLICTS. (a) The Buyer has
---------------------------------
the corporate power and corporate authority to execute, deliver and perform this
Agreement and each of the Buyer Ancillary Agreements. The execution, delivery
and performance of this Agreement and the Buyer Ancillary Agreements by the
Buyer have been duly authorized and approved by the Buyer's board of directors
and do not require any further authorization or consent of the Buyer or its
stockholders. This Agreement has been duly authorized, executed and delivered
by the Buyer and (assuming the valid authorization, execution and delivery of
this Agreement by the Sellers and the Company) is the legal, valid and binding
agreement of the Buyer enforceable in accordance with its terms, and each of the
Buyer Ancillary Agreements has been duly authorized by the Buyer and upon
execution and delivery by the Buyer will be (assuming the valid authorization,
execution and delivery by the other party or parties thereto) a legal, valid and
binding obligation of the Buyer enforceable in accordance with its terms, in
each case subject to bankruptcy, insolvency, reorganization, moratorium and
similar laws of general application relating to or affecting creditors' rights
and to general equity principles.
Mergerco has the corporate power and corporate authority to execute,
deliver and perform this Agreement. The execution, delivery and performance of
this Agreement by Mergerco have been duly authorized and approved by Mergerco's
board of directors and sole stockholder and do not require any further
authorization or consent of Mergerco or its
38
<PAGE>
stockholders. This Agreement has been duly authorized, executed and delivered
by Mergerco and (assuming the valid authorization, execution and delivery of
this Agreement by the Sellers and the Company) is the legal, valid and binding
agreement of Mergerco enforceable in accordance with its terms subject to
bankruptcy, insolvency, reorganization, moratorium and similar laws of general
application relating to or affecting creditors' rights and to general equity
principles.
(b) None of (i) the execution and delivery of this Agreement or any of
the Buyer Ancillary Agreements; (ii) the consummation of any of the transactions
contemplated hereby or thereby; or (iii) the compliance with or fulfillment of
the terms, conditions and provisions hereof or thereof will:
(A) assuming the receipt of all necessary consents and approvals and
the filing of all necessary documents as described in clause (B) below,
result in a breach of the terms, conditions or provisions of, or constitute
a default, an event of default or an event creating rights of acceleration,
termination or cancellation or a loss of rights under (1) the Certificate
of Incorporation or By-laws of the Buyer or the Articles of Incorporation
or By-laws of Mergerco, (2) any agreement or contract to which either the
Buyer or Mergerco is a party or any of their respective properties is
subject or by which either the Buyer or Mergerco is bound, (3) any Court
Order to which either the Buyer or Mergerco is a party or by which either
is bound or (4) any Requirements of Law affecting the Buyer or Mergerco,
other than, in the case of clauses (2), (3) and (4) above, any such
conflicts, breaches, defaults or rights that, individually or in the
aggregate, would not materially impair the ability of the Buyer or Mergerco
to perform their respective obligations hereunder or prevent the
consummation of any of the transactions contemplated hereby, or
(B) require the Buyer or Mergerco to obtain any Governmental Permit or
to take any act or make any declaration, filing or registration with, any
Person, other than (1) as provided in Section 4.2, (2) in connection, or in
-----------
compliance, with the provisions of the HSR Act or Debt Collection Laws and
(3) such approvals, consents, authorizations, declarations, filings or
registrations, the failure of which to be obtained or made would not
materially impair the ability of the Buyer or Mergerco to perform its
obligations hereunder or prevent the consummation of any of the
transactions contemplated hereby.
SECTION 6.3. NO LITIGATION. Except as set forth on Schedule 6.3:
------------- ------------
(i) as of the date hereof, there are no lawsuits, claims, suits,
proceedings or investigations pending or, to the Knowledge of the Buyer,
39
<PAGE>
threatened against the Buyer or its subsidiaries which are reasonably
expected to materially impair the ability of the Buyer to perform its
obligations hereunder or prevent the consummation of any of the
transactions contemplated hereby; and
(ii) as of the date hereof, there is no action, suit or proceeding
pending or, to the Knowledge of the Buyer, threatened that questions the
legality or propriety of the transactions contemplated by this Agreement or
any of the Buyer Ancillary Agreements (nor, to the Knowledge of the Buyer,
is there any basis for any of the same).
SECTION 6.4. HSR ACT. The Buyer is its own sole "ultimate parent
-------
entity" (as defined in 16 C.F.R. (S) 801.1(a)(3) (1997)). The Buyer, including
all entities (as defined in 16 C.F.R. (S)801.1(a)(2) (1997) within its "person"
(as defined in 16 C.F.R. (S) 801.1(a)(1) (1997) does not have "annual net sales"
(as defined in 16 C.F.R. (S) 801.11 (1977)) or "total assets" (as defined in 16
C.F.R. (S) 801.11 (1997)) of Ten Million Dollars ($10,000,000) or more.
SECTION 6.5. NO BROKERS. Except for Avalon Investment LLC, the fees
----------
and expenses of which are payable by the Buyer, none of the Buyer, Mergerco nor
any Person acting on their behalf has paid or become obligated to pay any fee or
commission to any broker, finder or intermediary for or on account of the
transactions contemplated by this Agreement.
ARTICLE VII
ACTION PRIOR TO THE CLOSING DATE
--------------------------------
The respective parties hereto covenant and agree to take the following
actions between the date hereof and the Closing Date:
SECTION 7.1. ACCESS TO INFORMATION. The Sellers shall afford to the
---------------------
officers, employees and authorized representatives of the Buyer (including,
without limitation, independent public accountants and attorneys) reasonable
access, upon reasonable advance notice, to the offices, properties, employees
and business and financial records (including computer files, retrieval programs
and similar documentation) of the Company and the Subsidiaries to the extent the
Buyer shall reasonably deem necessary or desirable and shall furnish to the
Buyer or its authorized representatives such additional information concerning
the Company and the Subsidiaries as shall be reasonably requested. The Buyer
agrees that such investigation shall be conducted in such a manner as not to
interfere unreasonably with the operations of the Company, the Subsidiaries, FDC
or FFMC.
40
<PAGE>
SECTION 7.2. NOTIFICATIONS. Each of the Buyer, Mergerco and the
-------------
Sellers shall promptly notify the other parties of any action, suit, claim,
proceeding or investigation of which it has Knowledge that shall be instituted
or threatened against such party to restrain, prohibit or otherwise challenge
the legality of any transaction contemplated by this Agreement or the
performance by the parties of their respective obligations hereunder.
SECTION 7.3. CONSENTS OF THIRD PARTIES; GOVERNMENTAL APPROVALS. (a)
-------------------------------------------------
As soon as practicable after the date hereof, each of the parties will use
diligent and reasonable efforts to secure, before the Closing Date, the
consent, approval or waiver, in form and substance reasonably satisfactory to
the other party, required to be obtained from any Person (other than a
Governmental Body and other than with respect to a customer contract) to
consummate the transactions contemplated by this Agreement; provided, however,
-------- -------
that none of the Sellers, the Company, the Buyer or Mergerco shall be required
to (i) pay or offer to pay any consideration in order to obtain any such
consents or approvals (other than license application fees to be paid by the
Buyer) or (ii) enter into any agreement or understanding affecting the assets or
business of the Sellers or the Company as a condition for obtaining any such
consents or waivers.
(b) Following the execution of this Agreement, the Buyer and the
Sellers shall use their respective reasonable best efforts to cooperate with
each other in attempting to secure any consents and approvals of any
Governmental Body with respect to the applicable Debt Collection Laws, and their
respective reasonable efforts to secure any other consents and approvals of any
Governmental Body required to be obtained by the Buyer in order to permit the
consummation of the transactions contemplated by this Agreement.
(c) Subject to the terms and conditions of this Agreement, each party
shall use its reasonable efforts to cause the Closing to occur.
SECTION 7.4. OPERATIONS PRIOR TO THE CLOSING DATE. (a) Each of the
------------------------------------
Sellers shall cause the Company and the Subsidiaries to operate and carry on the
Business in the ordinary course and substantially as operated immediately prior
to the date of this Agreement and maintain the Company's and each Subsidiary's
books, accounts and records in the usual, regular and ordinary manner until the
Closing Date. Consistent with the foregoing, the Sellers shall cause the
Company and the Subsidiaries to use its reasonable efforts consistent with good
business practice to preserve the Business and Properties of the Company and the
Subsidiaries and to preserve the goodwill of the suppliers, contractors,
licensors, employees, customers, distributors and others having business
relations with the Company and the Subsidiaries and to maintain the insurance
set forth on Schedule 5.20. Without limiting the foregoing, the Sellers shall
-------------
(i) continue to provide all services and other support to the Company and the
Subsidiaries as it provides to them as of the date of this Agreement, including
providing payroll, accounting, treasury operations and other administrative
operations and (ii) make any loans or
41
<PAGE>
advances consistent with past practices as may be necessary to permit the
Company and the Subsidiaries to operate and carry on the Business in the
ordinary course and substantially as operated by Sellers immediately prior to
the date of this Agreement. The Sellers shall, and shall cause their respective
Affiliates (other than the Company and the Subsidiaries) to conduct their
respective business relationships with the Company and the Subsidiaries only in
the ordinary and usual course of business consistent with past practices;
provided, however, that except as otherwise contemplated by this Agreement,
- -------- -------
without the prior written consent of the Buyer, in no event shall Sellers or any
of their respective Affiliates (other than the Company and the Subsidiaries)
enter into any contracts, commitments or arrangements with the Company or any of
the Subsidiaries other than on terms and provisions which could be obtained by
the Company or any such Subsidiary with respect to similar contracts,
commitments or arrangements with third parties.
(b) Notwithstanding Section 7.4(a), except as set forth on Schedule
-------------- --------
7.4, except as expressly contemplated by this Agreement or except with the
- ---
express written approval of the Buyer, the Sellers shall not and shall not
permit the Company or any of the Subsidiaries to:
(i) except in the ordinary and usual course of business consistent
with their past practices, make any change in the Business or its
operations, except such changes as may be required to comply with any
applicable Requirements of Law; provided, however, that Sellers shall
-------- -------
provide Buyer with written notice of such change at least three (3)
business days prior to making any material change in the Business;
provided, further, that if such change is made to comply with any
-------- -------
applicable Requirements of Law, prior notice shall only be required if
reasonably practical; or make any expenditure which shall exceed Two
Hundred Fifty Thousand Dollars ($250,000), other than as contemplated by
any Business Agreement;
(ii) except in the ordinary and usual course of business consistent
with their past practices, make any capital expenditure or enter into any
contract or commitment therefor in excess of One Hundred Thousand Dollars
($100,000);
(iii) acquire any interest in, or enter into any contract for the
purchase of real property;
(iv) except in the ordinary and usual course of business consistent
with their past practices, enter into any contract, agreement, undertaking
or commitment which would have been required to be set forth on Schedule
--------
5.10, 5.11(a) or 5.11(b) , 5.14, 5.16 or 5.18 if in effect on the date
---- ------- -------- ---- ---- ----
hereof, or enter into any contract which requires
42
<PAGE>
the consent or approval of any third party to consummate the transactions
contemplated by this Agreement;
(v) except in the ordinary and usual course of business consistent
with their past practices, sell, lease (as lessor), transfer or otherwise
dispose of any of their respective Properties or assets reflected on the
Financial Statement or assets acquired by the Company after the Financial
Statement Date;
(vi) except for trust fund accounts for customers imposed by
applicable Requirement of Law or contract, and except for liens in favor of
collection attorneys, mortgage, pledge, or impose or suffer to be imposed
any Encumbrance (other than a Permitted Encumbrance) on any of their
respective Properties or assets reflected on the Financial Statement or
assets acquired by the Company after the Financial Statement Date;
(vii) acquire or agree to acquire by merging or consolidating with,
or by purchasing a substantial portion of the assets of or equity in, or by
any other manner, any other Person or alter through merger, liquidation,
reorganization, restructuring or in any other fashion the corporate
structure or ownership of the Company or any of the Subsidiaries;
(viii) except in the ordinary and usual course of business consistent
with their past practices, cancel any debts or other financial obligations
owed to the Company or any of the Subsidiaries or settle any litigation
related to debts or other financial obligations owed the Company or any of
the Subsidiaries;
(ix) other than intercompany debt incurred in the ordinary and usual
course of business consistent with their past practices, create, incur or
assume, or agree to create, incur or assume, any indebtedness for borrowed
money;
(x) except in the ordinary and usual course of business consistent
with their past practices, agree to assume, guarantee, endorse or otherwise
become responsible for the debts, liabilities (whether accrued, absolute,
contingent or otherwise) or obligations of another Person or make any
advances to any other Person in an amount not to exceed One Hundred
Thousand ($100,000) in the aggregate;
(xi) enter into any capitalized lease obligation;
(xii) except in the ordinary and usual course of business consistent
with their past practices, accelerate or delay collection of any notes or
accounts receivable owed to the Company or any Subsidiary beyond their
regular due
43
<PAGE>
dates or the dates when the same would have been collected in the ordinary
course of business consistent with past practice;
(xiii) make any cash or other payment to FDC or any of its affiliates
(other than in connection with trade indebtedness or obligations) or
declare, set aside or pay any dividends on, or make any other actual,
constructive or deemed distributions in respect of, any of the capital
stock of, or equity interests in, the Company or any Subsidiary, other
than, in each case, cash dividends paid to FFMC on or prior to December 31,
1997;
(xiv) directly or indirectly redeem, purchase or otherwise acquire or
commit to acquire any shares of the capital stock of or equity interests
in, or effect a split, modification or reclassification of the capital
stock of, or equity interests in, the Company or any Subsidiary, or a
recapitalization of the Company or any Subsidiary;
(xv) establish, create or institute any material increase in any
profit-sharing, bonus, incentive, deferred compensation, insurance,
pension, retirement, medical, hospital, disability, welfare or other
employee benefit plan with respect to its employees, other than as required
by any such plan or Requirements of Law or such changes as are applicable
to FDC and its subsidiaries generally; provided, however, that the Sellers
-------- -------
shall provide the Buyer with written notice of such change at least three
(3) business days prior to establishing, creating or instituting any
material increase in any profit-sharing, bonus, incentive, deferred
compensation, insurance, pension, retirement, medical, hospital,
disability, welfare or other employee benefit plan with respect to
employees of the Company or any of the Subsidiaries; provided, further,
-------- -------
that if such change is made to comply with any applicable Requirements of
Law, prior notice shall only be required if reasonably practical;
(xvi) except in the ordinary and usual course of business consistent
with their past practices, make any material change in the compensation of
its employees or grant any severance or termination pay other than changes
made in accordance with normal compensation practices and consistent with
past compensation practices; provided, however, that Sellers shall provide
-------- -------
Buyer with written notice at least three (3) business days prior to making
any material change in the compensation of the employees of the Company or
any Subsidiary notwithstanding that such changes are made in accordance
with normal compensation practices and consistent with past compensation
practices;
(xvii) make any material change in the accounting policies applied in
the preparation of the Financial Statement contained in Schedule 5.5;
------------
44
<PAGE>
(xviii) make any change in the charter or by-laws of the Company or
any of the Subsidiaries;
(xix) except in the ordinary and usual course of business consistent
with their past practices, delay payment of any account payable or other
liability of the Company or any Subsidiary beyond its due date or the date
when such account payable or liability would have been paid in the ordinary
course of business consistent with past practice;
(xx) issue or grant any options, warrants or rights to subscribe
for or purchase or otherwise acquire, any shares of the capital stock of,
or equity interest in, the Company or any Subsidiary, or issue any
securities convertible into or exchangeable for shares of the capital stock
of, or equity interests in, the Company or any Subsidiary or commit to any
of the foregoing;
(xxi) make any Tax election or change any method of accounting for
Tax purposes, in each case except to the extent (x) required by law or (y)
any election or change is made by the Seller Tax Group;
(xxii) except in the ordinary and usual course of business consistent
with their past practices, exercise any option to extend a lease for real
property;
(xxiii) other than with respect to employees at will, enter into any
employment agreement, severance or consulting agreement with any Person to
the extent such agreement is related to the Company or any Subsidiary;
(xxiv) discharge or terminate any director, officer or senior manager
of the Company or any Subsidiary; provided, however, that Sellers may
-------- -------
terminate or discharge any such officer, director or senior manager for
cause after providing Buyer with written notice at least one (1) business
day prior thereto together with a description, in reasonable detail, of the
basis for such termination or discharge;
(xxv) pay any claims against, or liabilities or obligations of, the
Company or any Subsidiary in respect of any legal proceedings or any
threatened legal proceedings (including settlement of any claims and
litigation against the Company or any Subsidiary), which involves the
payment by the Company or any Subsidiary in excess of Fifteen Thousand
Dollars ($15,000) in the case of any individual payment or One Hundred
Twenty Five Thousand Dollars ($125,000) with respect to the aggregate of
all such payments;
45
<PAGE>
(xxvi) agree to waive or commit to waive any rights that could
reasonably be expected to have a Material Adverse Effect;
(xxvii) directly or indirectly in any way extend or otherwise
restructure the payment schedule, payment terms or any other material term
or condition of any Business Agreement (other than any contract or
agreement with any customer);
(xxviii) fail promptly to pay and discharge current liabilities,
except in the case of such liabilities that are disputed in good faith and
for which adequate reserves are maintained in accordance with GAAP, as in
effect on the Financial Statement Date;
(xxix) make any change in the accounting principles and practices
used by the Company or any Subsidiary from those applied in the preparation
of the Financial Statements, except to the extent required by GAAP and
disclosed in writing to the Buyer;
(xxx) except in the ordinary and usual course of business
consistent with their past practices with respect to those actions
permitted to be taken by this Section 7.4 in the ordinary and usual course
-----------
of business, enter into any agreement or contract to take any action
prohibited by this Section 7.4; or
-----------
(xxxi) enter into any contract, agreement, plan, arrangement or
waiver described in Section 5.7(d) or (g).
-------------- ---
SECTION 7.5. NOTIFICATION BY THE SELLERS OF CERTAIN MATTERS. The
----------------------------------------------
Sellers will, promptly after obtaining Knowledge thereof, advise the Buyer in
writing of (a) any Material Adverse Change occuring following the date hereof
and prior to the Closing, and (b) any notice or other communication from any
third Person alleging that the consent of such third Person is or may be
required in order to consummate the transactions contemplated by this Agreement
or any of the Buyer Ancillary Agreements or Seller Ancillary Agreements.
SECTION 7.6. TERMINATION OF CERTAIN PARTNERSHIPS. At any time prior
-----------------------------------
to the Closing, the Sellers shall have the right (but not the obligation) to
cause the dissolution of the Yanci and/or the FSA partnerships and the
termination of the related partnership or joint venture agreements. Upon any
such dissolution or termination, the definition of "Subsidiary" shall exclude
Yanci or FSA or both, as the case may be, for all purposes under this Agreement
(it being understood that such dissolution or termination shall not eliminate
the Sellers' representations and warranties relating to Yanci and FSA as
Subsidiaries for any purpose). Any cost incurred or obligations or liabilities
of any kind arising from, caused by or resulting from such termination shall be
borne by the Sellers; it being understood that termination costs shall not
include any settlement amount paid in respect of the termination of the license
dated
46
<PAGE>
as of May 1, 1996 by and between Yankee Alliance, Inc. and the Company or of the
sublease dated as of May 1, 1996 between Yankee Alliance Inc. and the Company.
Such termination shall not constitute a breach of any representation, warranty,
agreement or other provision of this Agreement.
ARTICLE VIII
ADDITIONAL AGREEMENTS
---------------------
SECTION 8.1. USE OF NAMES. The Sellers are not conveying ownership
------------
rights or granting the Buyer, the Surviving Corporation or any Subsidiary a
license to use any of the tradenames or trademarks of FDC or any Affiliate of
FDC (other than the Trademarks identified on Schedule 5.11(a)) and, after the
----------------
Closing, the Buyer shall use its best efforts not to permit the Surviving
Corporation or any Affiliate of the Surviving Corporation to use in any manner
the tradenames or trademarks of FDC or any Affiliate of FDC or any word that is
similar in sound or appearance to such tradenames or trademarks and any such use
shall, in no event, be permitted by the Buyer eight weeks following the Closing.
In the event the Buyer or any Affiliate of the Buyer violates any of its
obligations under this Section 8.1, FDC and its Affiliates may proceed against
-----------
it in law or in equity for such damages or other relief as a court may deem
appropriate. The Buyer acknowledges that a violation of this Section 8.1 may
-----------
cause FDC and its Affiliates irreparable harm which may not be adequately
compensated for by money damages. The Buyer therefore agrees that in the event
of any actual or threatened violation of this Section 8.1, FDC and any of its
-----------
Affiliates shall be entitled, in addition to other remedies that they may have,
to a temporary restraining order and to preliminary and final injunctive relief
against the Buyer or such Affiliate of the Buyer to prevent any violations of
this Section 8.1, without the necessity of posting a bond.
-----------
SECTION 8.2. TAX MATTERS. (a) Liability for Taxes. (i) The Sellers
----------- -------------------
shall be liable for and shall pay, and pursuant to Article XI (and subject to
----------
the limitations thereof) shall jointly and severally indemnify and hold harmless
each Buyer Group Member from and against all Losses and Expenses incurred by
such Buyer Group Member in connection with or arising from each of the
following: (A) all Taxes imposed on the Company or any Subsidiary (or any
predecessor) pursuant to Treas. Reg. (S) 1.1502-6 or similar provision of state,
local, or foreign law solely as a result of the Company or such Subsidiary
having been a member of the Seller Tax Group (or of any other consolidated,
combined or unitary group which included the Company or any Subsidiary (or any
predecessor) prior to the Closing Date), (B) all Taxes imposed on the Company or
any Subsidiary (or any predecessor), or for which the Company or any Subsidiary
may otherwise be liable, for any taxable year or period (or portion thereof)
that ends on or before the Closing Date and, with respect to any Straddle
Period, the portion of such Straddle Period ending on and including the Closing
Date (C) all Section 338 Taxes,
47
<PAGE>
(D) any breach by Sellers of any representation, warranty, covenant or agreement
contained in Section 5.7, Section 7.4(b)(xxi) or (xxxi) or Section 8.2 and (E)
----------- ------------------- ------ -----------
any power of attorney granted pursuant to Section 8.2(d)(vii); provided,
------------------- --------
however, that the Sellers shall not be liable for or pay and shall not indemnify
- -------
and hold harmless any Buyer Group Member from or against any Loss or Expense in
connection with or arising from: (I) any Taxes up to the amount of Non-Income
Taxes that are shown as a liability or reserve on the Year-End Balance Sheet,
and (II) any Taxes (other than Section 338 Taxes) that result from any actual or
deemed election under Section 338 of the Code or any similar provisions of state
or foreign law relating to the purchase of the Shares, or that result from the
Buyer, any Affiliate of the Buyer, the Company or any of the Subsidiaries
engaging in any activity or transaction that would cause the transactions
contemplated by this Agreement to be treated as a purchase or sale of assets of
the Company or any of the Subsidiaries for federal, state, local or foreign Tax
purposes (other than the Section 338(h)(10) Election), and (III) any Taxes
imposed on the Company or any Subsidiary or for which the Company or any
Subsidiary may otherwise be liable as a result of transactions occurring on the
Closing Date that are properly allocable (based on, among other relevant
factors, factors set forth in Treas. Reg. (S) 1.1502-76(b)(1)(ii)(B)) to periods
after the Closing Date (Taxes described in this proviso, hereinafter "Excluded
--------
Taxes"). The Buyer agrees that, with respect to any transaction described in
- -----
clause (III) of the preceding sentence, the Company and all Persons related to
the Company under Section 267(b) of the Code immediately after the Closing shall
treat the transaction for all federal income Tax purposes (in accordance with
Treas. Reg. (S) 1.1502-76(b)(1)(ii)(B)), and (to the extent permitted) for other
income Tax purposes, as occurring at the beginning of the day following the
Closing Date. The Sellers shall be entitled to any refund of (or credit for)
Taxes of the Company or any Subsidiary allocable to any taxable year or period
that ends on or before the Closing Date and, with respect to any Straddle
Period, the portion of such Straddle Period ending on and including the Closing
Date, including any refunds attributable to overpayments of estimated tax (in
all cases except to the extent any Non-Income Taxes are shown as an asset on the
Year-End Balance Sheet).
(ii) The Buyer shall be liable for and shall pay, and pursuant to
Article XI (and subject to the limitations thereof) shall indemnify and hold
- ----------
harmless each Seller Group Member from and against any and all Losses and
Expenses incurred by such Seller Group Member in connection with or arising
from: (A) all Taxes imposed on the Company or any Subsidiary, or for which the
Company or any Subsidiary may otherwise be liable, for any taxable year or
period that begins after the Closing Date and, with respect to any Straddle
Period, the portion of such Straddle Period beginning immediately after the
Closing Date and (B) Excluded Taxes. Except as otherwise provided herein, the
Buyer shall be entitled to (and, if received by any Seller Group Member, the
Sellers shall remit to the Buyer) any refund of (or credit for) Taxes allocable
to any taxable year or period that begins after the Closing Date and, with
respect to any Straddle Period, the portion of such Straddle Period beginning
after the Closing Date.
48
<PAGE>
(iii) For purposes of paragraphs (a)(i) and (a)(ii), whenever it is
necessary to determine the liability for Taxes of the Company or a Subsidiary
for a portion of any Straddle Period, the determination of the Taxes of the
Company or such Subsidiary for the portion of the Straddle Period ending on and
including, and the portion of the Straddle Period beginning after, the Closing
Date shall be determined by assuming that the Straddle Period consisted of two
taxable years or periods, one which ended at the close of the Closing Date and
the other which began at the beginning of the day immediately following the
Closing Date, and items of income, gain, deduction, loss or credit of the
Company or the Subsidiaries for the Straddle Period shall be allocated between
such two taxable years or periods by closing the books of the Company, or any
Subsidiary at the close of the month preceding the month in which the Closing
Date occurs and by the monthly ratable allocation method consistent with Treas.
Reg. (S)1.502-76(b)(2)(iii) for the month in which the Closing Date occurs;
provided, however, that (I) transactions occurring on the Closing Date that are
- -------- -------
properly allocable (based on, among other relevant factors, factors set forth in
Treas. Reg. (S) 1.1502-76(b)(1)(ii)(B)) to the portion of the Closing Date after
the Closing shall be allocated to the taxable year or period that is deemed to
begin at the beginning of the day immediately following the Closing Date, (II)
exemptions, allowances or deductions that are calculated on an annual basis,
such as the deduction for depreciation, shall be apportioned between such two
taxable years or periods on a daily basis and (III) Section 338 Taxes shall be
allocated to the portion of the Straddle Period that is deemed to end on and
include the Closing Date. Notwithstanding the foregoing provisions of this
paragraph (a)(iii), if the transactions contemplated by this Agreement result in
the reassessment of the value of any property owned by the Company or any
Subsidiary for property Tax purposes, or the imposition of any property Taxes at
a rate which is different than the rate that would have been imposed if such
transactions had not occurred, then (y) the portion of such property Taxes for
the portion of the Straddle Period ending on and including the Closing Date
shall be determined on a daily basis, using the assessed value and Tax rate that
would have applied had such transactions not occurred, and (z) the portion of
such property Taxes for the portion of such Straddle Period beginning after the
Closing Date shall be the total property Taxes for the Straddle Period minus the
amount described in clause (y) of this sentence.
(iv) Notwithstanding anything herein to the contrary, the Buyer shall
be liable for and shall pay, and pursuant to Article XI (and subject to the
----------
limitations thereof) shall indemnify and hold harmless each Seller Group Member
from and against any and all Losses and Expenses incurred by each Seller Group
Member in connection with or arising from, any real property transfer or gains
tax, stamp tax, stock transfer tax, or other similar tax imposed on the
transactions contemplated by this Agreement, together with any penalties or
interest with respect to such taxes.
(b) Tax Returns. (i) The Sellers shall file or cause to be filed when
-----------
due (taking into account all extensions properly obtained) all Tax Returns that
are required to be
49
<PAGE>
filed by or with respect to the Company or the Subsidiaries for taxable years or
periods ending on or before the Closing Date ("Seller Returns") and shall remit
--------------
any Taxes due in respect of such Tax Returns, and the Buyer shall file or cause
to be filed when due (taking into account all extensions properly obtained) all
Tax Returns that are required to be filed by or with respect to the Company or
the Subsidiaries for taxable years or periods ending after the Closing Date and
shall remit any Taxes due in respect of such Tax Returns. The Sellers shall
prepare all Seller Returns and submit any Seller Returns which require a
signature by an officer of the Company or any Subsidiary together with a
declaration signed by any officer of the Sellers that "Under penalties of
perjury, I declare that I have examined this return, including accompanying
schedules and statements, and to the best of my knowledge and belief, it is
true, correct and complete." The Buyer shall cause an officer of the Company or
Subsidiary to promptly sign and return to the Sellers all such Seller Returns.
The Sellers shall indemnify any signatory to any Seller Return from any and all
personal liability relating to signing such Seller Return including reasonable
attorneys' fees. Not later than 45 days prior to the due date (taking into
account extensions properly obtained) for filing any Tax Return in respect of
any Straddle Period, the Buyer shall submit a copy of such Tax Return to the
Sellers for Sellers' review and approval (which approval shall not be
unreasonably withheld). The Sellers or the Buyer shall reimburse the other
party for the Taxes for which the Sellers or the Buyer is liable pursuant to
paragraph (a) of this Section 8.2 but which are payable with Tax Returns to be
-----------
filed by the other party pursuant to the previous sentence upon the written
request of the party entitled to reimbursement, setting forth in detail the
computation of the amount owed by the Sellers or the Buyer, as the case may be,
but in no event earlier than 10 days prior to the due date for paying such
Taxes.
(ii) None of the Buyer or any Affiliate of the Buyer shall (or shall
cause or permit the Company or any of the Subsidiaries to) amend, refile or
otherwise modify (or grant an extension of any statute of limitation with
respect to) any Tax Return relating in whole or in part to the Company or any of
the Subsidiaries with respect to any taxable year or period ending on or before
the Closing Date (or with respect to any Straddle Period) without the prior
written consent of the Sellers, which consent may be withheld in the sole
discretion of the Sellers.
(iii) With respect to the period or periods beginning January 1, 1997
of the Company and the Subsidiaries ending on and prior to the Closing Date, the
Buyer shall promptly cause the Company and the Subsidiaries to prepare and
provide to FFMC a package of tax information materials, including, without
limitation, schedules and work papers (the "Tax Package"), required by the
-----------
Sellers to enable the Sellers to prepare and file all Tax Returns required to be
prepared and filed by them pursuant to paragraph (b)(i). The Tax Package shall
be completed in accordance with past practice including past practice as to
providing such information, and as to the method of computation of separate
taxable income or other relevant measure of income of the Company and the
Subsidiaries, provided that such
50
<PAGE>
computation for the taxable year or periods ending on or before the Closing Date
shall be made in a manner consistent with Section 8.2(a)(iii). The Buyer shall
-------------------
cause the Tax Package to be delivered to FFMC within 75 days after the Closing
Date. The Sellers shall promptly reimburse the Company for all reasonable out-
of-pocket costs incurred by the Company or any of the Subsidiaries in connection
with the preparation of the Tax Package; provided that such costs shall not
include overhead and provided further that Sellers shall not be obligated to pay
for the cost of any outside accountants, consultants or attorneys unless the
Buyer has obtained the Sellers' written consent (which consent shall not be
unreasonably withheld) prior to incurring any such costs.
(c) Contest Provisions. The Buyer shall promptly notify the Sellers
------------------
in writing upon receipt by the Buyer, any of its Affiliates, the Company or the
Subsidiaries of notice of any pending or threatened federal, state, local or
foreign Tax audits, examinations or assessments which may affect any Tax
liability for which the Sellers are liable pursuant to this Section 8.2. The
-----------
Sellers shall promptly notify the Buyer in writing upon receipt by the Sellers
or any of their Affiliates of written notice from a taxing authority of a
pending or threatened state, local or foreign Tax audit, examination or
assessment with respect to the Company or its Subsidiaries and shall inform the
Buyer as to the status of any such audit, examination or assessment.
The Sellers shall have the sole right to represent the Company's or
the Subsidiaries' interests in any Tax audit or administrative or court
proceeding relating to taxable periods ending on or before the Closing Date or
otherwise relating to Taxes for which the Sellers may be liable pursuant to this
Section 8.2, and to employ counsel of their choice at their expense. The
- -----------
Sellers shall have the sole right to settle, either administratively or after
the commencement of litigation, any proceeding relating to Taxes of the Company
or any Subsidiary for any taxable period ending on or before the Closing Date;
provided, however, that the Sellers shall not settle any proceeding with respect
- -------- -------
to such Taxes in a manner that would effect the validity of the Section
338(h)(10) Elections with respect to the Company or any Subsidiary without the
prior consent of the Buyer which consent will not be unreasonably withheld and
the Sellers shall use their best efforts to contest in good faith any proposed
adjustment to the Allocation Schedule that would materially adversely affect the
Company or any Subsidiary and shall not settle such proposed adjustment without
either (i) the prior consent of the Buyer which consent will not be unreasonably
withheld or (ii) an agreement or other settlement in which the Taxing Authority
agrees that such agreement or settlement is not prejudicial to the Company or
any subsidiary for any period after the Closing Date; provided that the Sellers
--------
shall have no liability under this Agreement arising from any audit, examination
or proceeding which results from the Buyer's failure to make the Section
338(h)(10) Elections as contemplated by Section 8.2 (e) or failure to file all
---------------
federal, state, local or foreign Tax Returns in accordance with the Allocation
Schedule. In the case of any Straddle Period, the Sellers shall be entitled to
participate at their expense in any Tax audit or
51
<PAGE>
administrative or court proceeding relating (in whole or in part) to Taxes
attributable to the portion of such Straddle Period ending on and including the
Closing Date and, with the written consent of the Buyer, and at the Sellers'
sole expense, may assume the entire control of such audit or proceeding. None
of the Buyer, any of its Affiliates, the Company or the Subsidiaries may agree
to settle any Tax claim which may be the subject of indemnification by the
Sellers under this Section 8.2 without the prior written consent of the Sellers,
-----------
which consent may be withheld in the sole discretion of the Sellers.
(d) Assistance and Cooperation. After the Closing Date, each of the
--------------------------
Sellers and the Buyer shall (and cause their respective Affiliates to):
(i) assist the other party in preparing any Tax Returns which such
other party is responsible for preparing and filing in accordance with
paragraph (b) of this Section 8.2;
-----------
(ii) cooperate fully in preparing for any audits of, or disputes with
taxing authorities regarding, any Tax Returns of the Company or the
Subsidiaries;
(iii) make available to the other and to any taxing authority as
reasonably requested all information, records, and documents relating to
Taxes of the Company or the Subsidiaries;
(iv) provide timely notice to the other in writing of any pending or
threatened Tax audits or assessments of the Company or the Subsidiaries for
taxable periods for which the other may have a liability under this Section
-------
8.2;
---
(v) furnish the other with copies of all correspondence received
from any taxing authority in connection with any Tax audit or information
request with respect to any such taxable period;
(vi) timely sign and deliver such certificates or forms as may be
necessary or appropriate to establish an exemption from (or otherwise
reduce), or file Tax Returns or other reports with respect to, Taxes
described in paragraph (a)(v) of this Section 8.2 (relating to sales,
-----------
transfer and similar Taxes); and
(vii) timely provide to the other powers of attorney or similar
authorizations necessary to carry out the purposes of this Section 8.2
-----------
(including, without limitation, powers of attorney enabling the Sellers to
obtain directly any refunds attributable to taxable years or periods ending
on or before the Closing
52
<PAGE>
Date). Prior to the Closing Date, the Sellers shall cause the Company and
the Subsidiaries to revoke all powers of attorney relating to Taxes and at
the Closing Date, the Buyer shall cause the Company and the Subsidiaries to
enter into a power of attorney substantially in the form of Exhibit G
---------
hereto (relating to audits, examinations or other proceedings in respect of
Seller Returns).
(e) Election Under Section 338(h)(10). (i) At the request of the
---------------------------------
Buyer, the Sellers and the Buyer shall make a joint election for the Company
under Section 338(h)(10) of the Code and under any applicable similar provisions
of state law with respect to the purchase of the Shares (collectively, the
"Section 338(h)(10) Elections"). If the Section 338(h)(10) Elections are made,
----------------------------
the Sellers and the Buyer shall within 30 days after the completion of the
Allocation Schedule, but in no event later than five days prior to the due date
for filing Internal Revenue Service Form 8023, exchange completed and executed
copies of Internal Revenue Service Form 8023, required schedules thereto, and
any similar state and foreign forms. If any changes are required in these forms
as a result of information which is first available after these forms are
prepared, the parties will promptly agree on such changes.
(ii) Within 60 days following the completion of the Year-End Balance
Sheet, the Buyer and the Sellers shall negotiate and draft a schedule (the
"Allocation Schedule") allocating the Modified Adjusted Deemed Sales Price,
-------------------
as defined in Treas. Reg. (S) 1.338(h)(10)-1(f), for the Company among the
assets of the Company. The Allocation Schedule shall be reasonable and
shall be prepared in accordance with Section 338(h)(10) of the Code and the
regulations thereunder. The Buyer and the Sellers each agrees that
promptly upon receiving said Allocation Schedule it shall return an
executed copy thereof to the other party. The Buyer and the Sellers each
agrees to file all federal, state, local and foreign Tax Returns in
accordance with the Section 338(h)(10) Elections and the Allocation
Schedule.
(f) The Sellers and the Buyer agree that the Buyer shall be
permitted, to the extent allowed by the Code and Treasury Regulations
thereunder, to make elections under Section 338 of the Code (but not under any
applicable similar provisions of foreign law) for NCI Recoveries (collectively,
the "Non-U.S. Section 338 Elections"). The Allocation Schedule described in
------------------------------
paragraph (e) shall include allocations among the assets of each non-U.S.
Subsidiary for which a Non-U.S. Section 338 Election is permitted.
(g) References to Company. References in this Section 8.2 to the
--------------------- -----------
Company shall mean, with respect to any period after the Effective Time, the
Surviving Corporation.
(h) Treatment of Transaction. FFMC and the Buyer shall, and shall
------------------------
cause their respective Affiliates to, treat the Merger for all Tax purposes as a
purchase by the Buyer
53
<PAGE>
from FFMC of a portion of the Company Common Stock and as a redemption by the
Company from FFMC of the remainder of the Company Common Stock.
SECTION 8.3. EMPLOYEE MATTERS.
----------------
(a) The Buyer and the Sellers shall jointly give notice to all
employees of the Company and the Subsidiaries on the Closing Date that all
benefits previously provided under the Sellers' Plans are, other than with
respect to welfare plans sponsored and maintained by the Company or the
Subsidiaries for its employees ("Company Plans"), discontinued on January 1,
-------------
1998 and will be replaced by the benefit programs as set forth on Schedule 8.3
------------
("Post-Closing Benefit Programs"). Except as otherwise expressly provided in
-----------------------------
this Section 8.3, in no event shall any employee of the Surviving Corporation or
-----------
any of the Subsidiaries be entitled to accrue any benefits under the Sellers'
Plans after the Closing.
(b) As of the close of business on the Closing Date, each of the
individuals identified on Schedule 8.3(b) will become employees of the Company.
---------------
For a period ending no earlier than the first anniversary of the Closing Date,
the Buyer agrees to provide all employees of the Surviving Corporation and the
Subsidiaries on the Closing Date (including the individuals on Schedule 8.3(b)
---------------
(collectively, the "Affected Employees") who remain employed with the Surviving
------------------
Corporation or a Subsidiary after the Closing Date with full participation in
the Post-Closing Benefit Programs. Such Affected Employees shall be credited
for their length of service with the Company, and Sellers and the Subsidiaries,
for all purposes under the Post-Closing Benefit Programs.
(c) The Company and the Subsidiaries shall terminate their
participation in all plans, other than Company Plans listed on Schedule 5.16(a)
----------------
and the Post-Closing Benefit Programs as of the Closing Date. The Sellers shall
retain the responsibility for payment of all covered medical and dental claims
or expenses incurred by any Affected Employee and their covered dependents on or
prior to the Closing Date, unless they are to be paid by a third party insurer
under a Company Plan. The Buyer shall remit to the Sellers all Affected
Employee premiums due for medical and dental benefit coverage attributable to
the period prior to the Closing Date, under a plan other than a Company Plan or
the Post-Closing Benefit Programs, but which, as of the Closing Date, had not
been collected and remitted to the Sellers. Any preexisting condition clause in
any of the health coverage (including medical, dental and disability coverage)
included in the Post-Closing Benefit Programs shall be waived for the Affected
Employees.
(d) For a period ending no earlier than the first anniversary of the
Closing Date, the Buyer agrees to provide, or cause the Surviving Corporation
and the Subsidiaries to provide the severance benefits described in the Post-
Closing Benefit Programs. The Buyer and the Surviving Corporation shall assume
all liability for severance pay and obligations
54
<PAGE>
payable to any Affected Employee who is terminated by the Buyer and the
Surviving Corporation after the Closing Date.
(e) After the Closing Date, the Buyer, the Surviving Corporation and
the Subsidiaries shall have the liability and obligation for, and neither the
Sellers nor any of their Affiliates shall have any liability or obligation for,
short-term disability benefits, long-term disability benefits, sick pay or
salary continuation (and any medical dental and health benefits or claims
incurred after the Closing Date) for those Affected Employees who are entitled
to such benefits for periods beginning on or after the Closing Date.
(f) Buyer shall be responsible for all liabilities or obligations
under the Worker Adjustment and Retraining Notification Act and similar state
and local rules, statutes and ordinances resulting from the Closing or from the
Buyer's actions following the Closing. Seller shall advise Buyer in writing of
the number of employee terminations at each facility of the Company and the
Subsidiaries that have occurred during the sixty day period prior to the
execution of this Agreement and the sixty day period prior to the Closing Date.
(g) Prior to the Closing Date, FDC will agree to assume sponsorship of
and be liable for the ACM Plan. Buyer shall or shall cause the Surviving
Corporation or the Subsidiaries to notify FDC in writing of the termination of
any employment of any individual who was an employee of the Company or a
Subsidiary on or prior to the Closing Date within fifteen business days of the
date Buyer, the Surviving Corporation, or the Subsidiaries knows the employee
has terminated employment.
(h) The Sellers hereby release the Buyer and the Surviving Corporation
from any claims that the Sellers may have against the officers and directors of
the Company for which such officers or directors are indemnified by the
Company's charter and bylaws or pursuant to any indemnification agreement
between such officers or directors and the Company existing on the date hereof.
(i) Effective as of January 1, 1998 or as soon as practicable
thereafter, Buyer shall establish or provide a tax-qualified 401(k) savings plan
("Buyer's 401(k) Plan") for the benefit of the Affected Employees. Buyer's
401(k) Plan shall expressly provide that Affected Employees who were
participants in Sellers' 401(k) plan immediately prior to the Closing Date shall
participate in Buyer's 401(k) Plan as of the effective date of such plan, and
that all Affected Employees will have their service with the Company and the
Subsidiaries recognized under Buyer's 401(k) Plan for eligibility, vesting and
any other purpose for which service is taken into account under Sellers' 401(k)
plan. As soon as practical after the effective date of Buyer's 401(k) Plan,
Sellers shall cause the accounts of each Affected Employee who participates in
Sellers' 401(k) plan to be valued. As of such valuation date, assets equal in
value to the amount credited to each such employee's account under Sellers'
55
<PAGE>
401(k) plan will be transferred to the trust maintained under Buyer's 401(k)
Plan. Such transferred assets shall be in cash or, to the extent mutually
agreed upon by Buyer and Sellers, in kind, and shall also include any promissory
notes evidencing outstanding loan balances of the Affected Employees. Prior to
any transfer of assets from Sellers' 401(k) Plan, Buyer shall provide Seller
with a copy of (i) an IRS determination letter evidencing the tax qualified
status of the Buyer's 401(k) Plan and the tax exempt status of the plan's trust,
or, if Buyer has not received such a determination letter as of the applicable
transfer date, then (ii) an opinion of counsel who is acceptable to Seller (such
acceptance not to be unreasonably withheld) stating that the Buyer's 401(k) Plan
and its trust constitute a tax qualified plan under Section 401(a) of the Code
and a tax exempt trust under Section 501(c) of the Code. As of the transfer
date, Buyer shall be liable for the payment of the benefits accrued by and
transferred in respect of the Affected Employees under Sellers' 401(k) plan;
provided, however, that the Buyer assumes no liability for the valuation of the
- -------- -------
accounts of the Affected Employees under Sellers' 401(k) plan.
(j) The Surviving Corporation shall pay, on or prior to March 31,
1998, management bonuses in the aggregate amount of $475,000 to the persons and
in the individual amounhs designated by FDC; provided, however, that such
-----------------
bonuses shall include the individuals and the amounts set forth on Schedule
--------
8.7(j).
- -------
SECTION 8.4. [INTENTIONALLY OMITTED].
SECTION 8.5. INSURANCE: RISK OF LOSS. (a) The Buyer shall become
-----------------------
solely responsible for all insurance coverage (including, without limitation,
workers compensation policies) and related risk of loss based on events
occurring after the Closing Date with respect to the Surviving Corporation, the
Subsidiaries and their respective businesses, Properties and employees. The
Sellers are and shall remain solely responsible for all insurance coverage
(including, without limitation, workers compensation policies) and related risk
of loss based on events occurring on or prior to the Closing Date (whether or
not a claim has been filed prior to the Closing Date) with respect to the
Surviving Corporation, the Subsidiaries and their respective businesses
(including the business associated with the Assigned Contracts), Properties and
current or former employees (including the employees associated with the
business of the Assigned Contracts). If the errors and omissions insurance
policies currently maintained by the Company or the Subsidiaries covering their
respective businesses, Properties and current or former employees, as the case
may be, provides insurance coverage for events occuring prior to or during the
time period for which the insurance policy has been most recently renewed, the
Surviving Corporation shall keep such current errors and omissions policies, or
purchase policies with coverages, deductibles and limitations that are no less
favorable than those in effect on the date hereof, for at least 42 months
following the Closing Date. To the extent that after the Closing any party
hereto requires any information regarding claim data, payroll or other
information in order to make filing with insurance carriers or self
56
<PAGE>
insurance regulators from another party hereto, the other party will promptly
supply such information. To the extent that any insurance policies owned or
controlled by the Sellers or any of their Affiliates ("Sellers' Insurance
------------------
Policies") cover any loss, liability, claim, damage or expense relating to the
- --------
Company or any Subsidiary ("Subject Company Liabilities") and relating to or
---------------------------
arising out of events or occurrences prior to the Closing, the Sellers shall
cooperate and cause their Affiliates to cooperate with the Buyer, the Surviving
Corporation or any Subsidiary, as applicable, in submitting and pursuing any
Subject Company Liabilities relating to or arising out of events occurring prior
to the Closing on behalf of the Buyer, the Surviving Corporation or any
Subsidiary, as applicable, under the Sellers' Insurance Policies. The Sellers
acknowledge and agree that they have no claims, rights or recourse against the
Surviving Corporation or any Subsidiary for any premiums or other costs relating
to any Sellers' Insurance Policies.
(b) In the event that (i) the Buyer or the Surviving Corporation files
a claim under any Sellers' Insurance Policy with respect to a Subject Company
Liability relating to or arising out of events or occurrences prior to the
Closing and (ii) all or a portion of such Subject Company Liability is subject
to a "deductible", "self insurance retention" or other similar risk retention
element included in the applicable Sellers' Insurance Policy, the Sellers are
and shall remain responsible for, shall indemnify the Buyer or the Surviving
Corporation, as the case may be, against, any amounts not reimbursed under a
Sellers' Insurance Policy pursuant to clause (ii) above.
(c) The Sellers agree to be solely responsible for any claim by any
Affected Employee for workers compensation benefits made after the Closing but
which relates to an injury or illness originating prior to the Closing.
SECTION 8.6. EXCLUSIVITY. From the date hereof and until January 31,
-----------
1998, the Sellers will not, and will cause the Company, the Subsidiaries and
their Affiliates, directors, officers, employees, representatives and agents not
to directly or indirectly, solicit or accept or in any way facilitate any
proposals or offers, or initiate or enter into discussions or transactions with,
or encourage, or provide any information to any Person (other than the Buyer)
concerning any sale of all or any portion of the Shares of the Company or all or
a portion of the stock of any Subsidiary, any merger of a Company or a
Subsidiary or a sale of securities or a sale or other disposition of any assets
(however affected) of the Company or any Subsidiary other than, solely with
respect to a sale of assets, in the ordinary course of business.
SECTION 8.7. COVENANT NOT TO COMPETE; OTHER AGREEMENTS. (a) Except
-----------------------------------------
as provided in (b), (c), (d), (e) and (f) below, FDC covenants and agrees that,
beginning on the Closing Date and for a period ending on the fourth anniversary
of the Closing Date, neither FDC nor any of its Affiliates will directly or
indirectly own, manage, operate, control or
57
<PAGE>
otherwise carry on Collection Services anywhere in the United States or in the
member countries of the Europen Community, including, but not limited to,
Collection Services for creditors for which FDC or its Affiliates have provided
First Party Collection Services or other services, provided, however, that with
respect to the application of this Section 8.7(a) outside of the United States,
--------------
FDC and its Affiliates will be permitted to perform any contract relating to
Collection Services existing on the date hereof. "Collection Services" means
-------------------
outbound telephone calls and written communications to a debtor in the name of a
Person other than the creditor the primary purpose of which is to seek
collection of amounts in connection with an account which is in default.
Collection Services, and First Party Collection Services to American Express
Company and its subsidiaries and its Affiliates, shall not be deemed to include
any processing, supportive or ancillary services provided to a Person (including
a creditor or Person engaged in Collection Services) in connection with such
Person's collection of an account, including, but not limited to, the following
types of services: (i) the preparation and mailing of billing statements or
invoices; (ii) the provision of messaging services, including the preparation,
printing, facsimile or electronic transmission and/or mailing of letters or
other communications; (iii) the transmission of money from a Person to another
Person; and (iv) the provision of telephone check drafting or electronic funds
transfer services and the enrollment, authorization and confirmation services
provided in connection therewith. Until the third anniversary of the Closing,
neither FDC nor its Affiliates shall provide First Party Collection Services to
American Express Company and its subsidiaries and its Affiliates. "First Party
-----------
Collection Services" means outbound telephone calls and written communications
- -------------------
to a debtor in the name of a creditor the primary purpose of which is to seek
collection of amounts owed to the creditor by such debtor.
(b) Nothing in this Agreement, including without limitation, Section
-------
8.7(a), but subject to the penultimate sentence of Section 8.7(a), shall prevent
- ------ --------------
FDC or any of its Affiliates from:
(i) making outbound telephone calls and written communications to a
debtor in FDC's or its Affiliate's name rather than the name of the
creditor when the debtors to be contacted are located in states that have
statutes, regulations or interpretative rulings that, in the reasonable
opinion of FDC, do not allow FDC or its Affiliate to make such outbound
telephone calls and written communications to a debtor in the name of the
creditor, provided such telephone calls and written communications are
limited to the types of telephone calls and written communications that FDC
or any of its Affiliates is permitted to make in other states as part of
its First Party Collection Services;
(ii) providing any services, including Collection Services, in
connection with receivables, debts or other items owned by FDC or an
Affiliate or in which FDC or an Affiliate has a material economic interest;
58
<PAGE>
(iii) providing First Party Collection Services;
(iv) providing any services in connection with: (1) unpaid checks,
drafts, electronic funds transfers or debits drawn or charged on a bank or
financial institution; (2) amounts related to charged-off demand deposit
account balances held at a bank or a financial institution; or (3) debts
incurred by a debtor whose principal residence is outside of the United
States; or
(v) providing to a debtor any materials which advertise the
commercial availability of FDC's or its Affiliate's services or any other
solicitations or communications which are not targeted at a specific debtor
for the purpose of collecting a specific debt.
(c) Nothing in this Agreement, including without limitation, Section
-------
8.7(a), shall prevent FDC or any of its Affiliates from:
- ------
(i) owning less than 5% of the voting or common stock of a publicly
traded company engaged in Collection Services; or
(ii) acquiring, and following such acquisition, actively engaging in,
any business that has a subsidiary, division, group, franchise or segment
that is engaged in Collection Services, so long as on the date of such
purchase: (A) not more than 25% of the consolidated revenues of such
business are derived from Collection Services and (B) such business divests
itself of such subsidiary, division, group, franchise or segment as soon as
practicable after the date of such acquisition; provided that, with respect
to any acquisition intended to be accounted for as a pooling of interests
under GAAP or treated for federal income tax purposes as a tax-free
reorganization, no such divestiture shall be required until, in the
reasonable opinion of FDC, such divestiture would no longer endanger the
accounting of such acquisition as a pooling of interests under GAAP or the
treatment for federal income tax purposes of such acquisition as a tax-free
reorganization. In the event that a business is required to be divested
pursuant to clause (ii)(B), FDC shall provide notice of such intended
divestiture to the Surviving Corporation, which shall be given the first
opportunity to make a written offer for the business to be divested.
During the 45 day period following the date of the notice, the Surviving
Corporation shall have the exclusive opportunity to present such written
offer. Neither FDC nor any of its Affiliates shall be under any obligation
to accept such offer or negotiate with the Surviving Corporation regarding
any such offer.
(d) Nothing in this Agreement, including without limitation, Section
-------
8.7(a), shall prevent any Affiliate of FDC from engaging in Collection Services
- ------
after such Affiliate ceases to be an Affiliate of FDC.
59
<PAGE>
(e) Nothing in this Agreement, including without limitation, Section
-------
8.7(a), shall prevent FDC or any of its Affiliates from offering to its
- ------
customers "integrated solutions" which include Collection Services that FDC or
any of its Affiliates would otherwise be prohibited by Section 8.7(a) from
--------------
offering (it being understood that neither FDC, its Affiliates nor any Person in
which FDC or any of its subsidiaries has a materal; economic or voting control
interest may perform such Collection Services) provided, however, until the
fourth anniversary of the Closing, if FDC or any of its Affiliates proposes to
offer such "integrated solutions" to a customer that include Collection Services
that FDC or any of its Affiliates would otherwise be prohibited by Section
-------
8.7(a) from offering, FDC or its Affiliates will permit the Surviving
- ------
Corporation to make an offer or proposal to provide such Collection Services on
the same terms and conditions as other collection agencies unless such customer
notifies FDC or its Affiliates in writing that it desires another Person to
provide such Collection Services. The Surviving Corporation shall be given a
copy of any such customer notice. Neither FDC nor any of its Affiliates nor any
customer shall have any obligation to accept any proposal received from the
Surviving Corporation or to negotiate with the Surviving Corporation regarding
any such proposal. For purposes of this subsection, the term "integrated
solutions" means a service proposal which contemplates that FDC or any of its
Affiliates will perform or provide Collection Services in addition to other
products or services to a customer.
(f) Nothing in this Agreement, including without limitation, Section
-------
8.7(a), shall prevent FDC or any of its Affiliates from performing or providing
- ------
Collection Services for Union Oil Company of California ("Unocal") or Mobil Oil
------
Credit Corporation ("Mobil") to the extent that FDC or any of its Affiliates has
-----
agreed to perform or provide Collection Services for Unocal or Mobil as part of
the overall services provided by FDC or its Affiliates to such customers under
the existing processing agreements (which agreements are listed on Schedule 8.7
------------
it being understood that neither FDC, its Affiliates nor any Person in which FDC
or any of its subsidiaries has a material economic or voting control interest
may perform such Collection Services); provided, however, during the remaining
term of such processing agreements, FDC or any of it Affiliates will not refer,
assign or subcontract such Collection Services to any Person other than the
Surviving Corporation unless such customer notifies FDC or any of its Affiliates
that it desires another Person to provide such Collection Services. The
Surviving Corporation shall be given a copy of any such customer notice.
(g) In the event that any party violates any of its obligations under
this Section 8.7, the other party may proceed against such person in law or in
-----------
equity for such damages or other relief as a court may deem appropriate. Each
party acknowledges that a violation of this Section 8.7 may cause the other
-----------
parties or their Affiliates irreparable harm which may not be adequately
compensated for by money damages. Each party therefore agrees that, in the
event of any actual or threatened violation of this Section 8.7, the other
-----------
parties or their Affiliates shall be entitled, in addition to other remedies
that it may have, to a
60
<PAGE>
temporary restraining order and to preliminary and final injunctive relief
against such party to prevent any violations of this Section 8.7, without the
-----------
necessity of posting a bond. The prevailing party in any action commenced under
this Section 8.7 shall also be entitled to receive reasonable attorneys' fees
-----------
and court costs.
(h) The Buyer, Mergerco, the Surviving Corporation, the Company, the
Subsidiaries and the Sellers agree that each of them is a commercially
sophisticated party and that the terms of this Section 8.7 are reasonable. It
-----------
is the intent and understanding of each party hereto that if, in any action
before any Governmental Body legally empowered to enforce this Section 8.7, any
-----------
term, restriction, covenant or promise in this Section 8.7 is found to be
-----------
unreasonable and for that reason unenforceable, then such term, restriction,
covenant or promise shall be deemed modified to the extent necessary to make it
enforceable by such Governmental Body.
SECTION 8.8. SOLICITATION OF EMPLOYEES. The Sellers agree that,
-------------------------
prior to the first anniversary of the Closing, without the consent of the
Company, none of the Sellers or any of their controlled Affiliates shall solicit
or seek to hire any employee of the Company or any Subsidiary; provided,
--------
however, that the foregoing shall not prevent the Sellers or any of their
- -------
controlled Affiliates from hiring any such person (i) who contacts the Sellers
or their Affiliates on his or her own initiative without solicitation from any
of the Sellers or their Affiliates, (ii) in connection with general employment
advertisements published in magazines, journals, newspapers and other
publications that are not targeted at the Company or any of the Company's
employees or (iii) who has been discharged by the Company prior to any such
solicitation.
SECTION 8.9. TERMINATION OF DEBT. At or prior to the Closing, the
-------------------
Sellers shall cause the Company to repay any non-trade indebtedness to any
Person (other than the Sellers or their Affiliates) except for (i) any earn-out
payments due under the Ingram Non-Compete and (ii) for any indebtdness incurred
in connection with the Buyer's acquisition of the Company and (iii) the letter
of credit described in Schedule 5.14, and shall release, cancel and terminate
-------------
all non-trade intercompany indebtedness owed by the Company or any Subsidiary to
the Sellers or any of their respective Affiliates as of December 31, 1997,
(including, without limitation, all obligations of the Company or any Subsidiary
under any agreement described in Section 5.7(d), which obligations shall be
--------------
released, cancelled and terminated effective on the Closing Date).
SECTION 8.10. POWERS OF ATTORNEY. The Sellers shall cause to be
------------------
prepared and provided to the Buyer at the Closing a schedule setting forth a
list, as of the Closing, of the names and addresses of all Persons holding a
power-of-attorney on behalf of the Company or any Subsidiary, other than state
regulatory authorities holding a power of attorney with respect to surety bonds
required to be held under applicable Debt Collection Laws.
61
<PAGE>
SECTION 8.11. CAPITAL EXPENDITURES. With respect to the capital
--------------------
expenditure projects of the Company identified on Schedule 8.11, the Sellers
-------------
shall deliver to the Buyer at Closing a certificate executed by a duly
authorized officer, setting forth the dollar amount of capital expenditures
funded since the Financial Statement Date and prior to the Closing Date (the
"Capital Expenditure Amount"). The Sellers shall pay to the Surviving
- ---------------------------
Corporation, by wire transfer to the Surviving Corporation on the Closing Date
of immediately available funds, the positive difference, if any, between (i)
$2,200,000 minus (ii) the Capital Expenditure Amount (the "Capital Expenditure
-------------------
Shortfall"). It is acknowledged and agreed that the foregoing is intended to
- ---------
shift the financial responsibility (up to $2,200,000) of such capital
expenditures to the Sellers from the Company and that the Year End Net Worth
shall not be determined in a manner that is inconsistent with the foregoing.
SECTION 8.12. OBLIGATIONS OF MERGERCO. The Buyer unconditionally and
-----------------------
irrevocably guarantees the performance by Mergerco of all of Mergerco's
obligations under this Agreement required to be performed at any time.
SECTION 8.13. COLLECTION RECEIVABLES. On the Closing Date, the
----------------------
Surviving Corporation shall assign the Collection Receivables to FDC or an
Affiliate of FDC pursuant to the bill of sale and assignment attached as Exhibit
-------
E. FDC agrees to appoint the Surviving Corporation as its agent for the
- -
collection of Collection Receivables during the ninety day period beginning on
the Closing Date (the "Collections Period"). The Surviving Corporation shall
------------------
promptly remit any payments made to the Surviving Corporation on account of the
Collection Receivables during the Collections Period, and shall be entitled to
retain twenty percent (20%) of any such payments received during the
Collections Period as commission. Following the Collections Period, FDC shall
have the sole right to collect payments in respect of the remaining uncollected
portion of the collection Receivables (it being understood that, after the
Collections Period, FDC shall have the right to exercise any legal or equitable
remedy available to it as the holder of such Collection Receivables).
ARTICLE IX
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE BUYER
------------------------------------------------
The obligations of the Buyer and Mergerco under this Agreement shall,
at the option of the Buyer and Mergerco (to the extent permissible under
applicable law), be subject to the satisfaction, on or prior to the Closing
Date, of the following conditions:
62
<PAGE>
SECTION 9.1. NO MISREPRESENTATION OR BREACH OF WARRANTIES OR
-----------------------------------------------
COVENANTS. Each of the representations and warranties of the Sellers contained
- ---------
in this Agreement shall have been true and correct in all material respects as
of the date hereof and the Company and Sellers shall have performed and complied
in all material respects with all obligations and covenants required by this
Agreement to be performed or complied with by them on or prior to the Closing
Date.
SECTION 9.2. NO RESTRAINT. No action or proceeding shall have been
------------
instituted and, at what would otherwise have been the Closing Date, remain
pending before a court or other Governmental Body (domestic or foreign) to
restrain, prohibit or otherwise challenge the transactions contemplated by this
Agreement, nor shall any Governmental Body have notified either party to this
Agreement in writing that the consummation of the transactions contemplated
hereby would constitute a violation of the laws of the United States or the laws
of any State thereof or the laws of the jurisdiction to which such Governmental
Body is subject and that it intends to commence proceedings to restrain the
consummation of such transactions, to force divestiture if the same are
consummated or to materially modify the terms or results of such transactions,
unless such agency or body shall have subsequently withdrawn such notice or has
otherwise indicated in writing that it will not take any such action prior to
what would otherwise have been the Closing Date.
SECTION 9.3. LICENSING. The Buyer or the Company, as applicable,
---------
shall have received temporary authorization to conduct business under the
applicable Debt Collection Laws of the states of Illinois, Minnesota and
Michigan, and a registration to conduct business (after giving effect to the
Merger) under the applicable Debt Collection Laws in the state of Florida.
Prior to receiving the foregoing authorizations, no state shall have revoked the
Company's license to conduct business under the applicable Debt Collection Laws
or denied the Company's right to conduct its business in such state under the
applicable Debt Collection Laws as a result of the change of ownership of the
Company, it being understood that no such denial shall be deemed to have
occurred for so long as the Company's application with such state is pending.
ARTICLE X
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLERS
--------------------------------------------------
The obligations of the Sellers and the Company under this Agreement
shall, at the option of the Sellers and the Company (to the extent permissible
under applicable law), be subject to the satisfaction, on or prior to the
Closing Date, of the following conditions:
63
<PAGE>
SECTION 10.1. NO MISREPRESENTATION OR BREACH OF WARRANTIES OR
-----------------------------------------------
COVENANTS. Each of the representations and warranties of the Buyer or Mergerco
- ---------
contained in this Agreement shall have been true and correct in all material
respects as of the date hereof, and the Buyer and Mergerco shall have performed
and complied in all material respects with all obligations and covenants
required by this Agreement to be performed or complied with by them on or prior
to the Closing Date.
SECTION 10.2. NO RESTRAINT. No action or proceeding shall have been
------------
instituted and, at what would otherwise have been the Closing Date, remain
pending before a court or other Governmental Body (domestic or foreign) to
restrain, prohibit or otherwise challenge the transactions contemplated by this
Agreement, nor shall any Governmental Body have notified either party to this
Agreement in writing that the consummation of the transactions contemplated
hereby would constitute a violation of the laws of the United States or the laws
of any State thereof or the laws of the jurisdiction to which such Governmental
Body is subject and that it intends to commence proceedings to restrain the
consummation of such transactions, to force divestiture if the same are
consummated or to materially modify the terms or results of such transactions,
unless such agency or body shall have subsequently withdrawn such notice or has
otherwise indicated in writing that it will not take any such action prior to
what would otherwise have been the Closing Date.
ARTICLE XI
INDEMNIFICATION
---------------
SECTION 11.1. INDEMNIFICATION BY THE SELLERS. (a) Subject to the
------------------------------
other provisions of this Article XI, from and after the Closing, the Sellers
----------
jointly and severally agree to indemnify and hold harmless each Buyer Group
Member from and against any and all Losses and Expenses incurred by such Buyer
Group Member in connection with or arising from:
(i) any breach of any warranty or the inaccuracy of any
representation of the Sellers contained or referred to in this Agreement,
or any Seller Ancillary Agreement (other than with respect to (A) Section
-------
5.13 as it relates to Actions involving a Violation of Law and (B) Section
-------
5.8)
---
(ii) any breach by the Sellers of, or failure by the Sellers to
perform, their covenants or obligations contained in this Agreement or any
Seller Ancillary Agreement;
64
<PAGE>
(iii) any Seller Plan, including the ACM Plan, and ERISA
Affiliate Plan, Multiemployer Plan or any other "employee benefit plan"
(within the meaning of Section 3(3) of ERISA) maintained by, contributed to
or obligated to contribute to, at any time, by the Sellers or any ERISA
Affiliate, including any liability to the PBGC under Title IV of ERISA,
other than any employee benefit plan sponsored or maintained by the Company
or any Subsidiary on or after January 1, 1998; provided, however, that with
-------- -------
respect to a participant (or a beneficiary of a participant) who terminated
employment with the Company or any Subsidiary prior to the Closing Date and
who is receiving continuation coverage pursuant to COBRA under a plan or
plans maintained by the Company or any Subsidiary, Sellers shall be
responsible for any direct or indirect expenses under such plan in excess
of the COBRA premiums paid with respect to such participant or beneficiary,
provided, that the Company and each Subsidiary charge each person receiving
such continuation coverage the maximum amount permitted under law;
(iv) (A) any monetary fines, penalties or sanctions levied against
the Surviving Corporation or any of its predecessors or Affiliates by the
Federal Trade Commission pursuant to its currently pending investigation
relating to the Company, the Subsidiaries and their respective predecessors
and Affiliates (the "Current FTC Proceeding") and any payment made by the
----------------------
Company or any of the Subsidiaries to the Federal Trade Commission in
connection with the Current FTC Proceeding and (B) any Expenses incurred by
the Company in connection with the Current FTC Proceeding;
(v) any (Violation of Law (including, without limitation, any civil,
criminal or administrative action, suit, claim, hearing, investigation or
proceeding (including, but not limited to, any counterclaims or
crossclaims), relating to the Company, any of its Subsidiaries or any of
their predecessors, whether or not pending or threatened on the date
hereof or at the Closing, and whether brought, made or instigated by any
Governmental Body or any private Person resulting from, arising out of,
based on or relating to, any Violation of Law) but, other than matters
covered by clause (iv) hereof);
(vi) liabilities to third parties from any act or failure to act
which occurred on or prior to the date which is eight months after the
Closing Date by any Person (other than an employee or temporary employee of
the Company or its Subsidiaries) in connection with such Person providing
legal collection services (including, without limitation, litigation or
litigation preparation) to, on behalf of or at the request of, the Company,
any of its Subsidiaries or any of their respective predecessors, if such
act or failure to act relates to [matters] referred to such Persons prior
to the Closing Date (other than liabilities to any such Persons in respect
of commissions or compensation
65
<PAGE>
earned thereby or ordinary expenses subject, in any case, to payment or
reimbursement by the Company or any of its Subsidiaries); and
(vii) any earn-out payments, contingent consideration or non-compete
payments arising from or in connection with transactions occurring prior to
the date hereof (including, without limitation, any amounts due pursuant to
[Ingram]).
(b) The indemnification provided for in Section 11.1(a) shall
---------------
terminate twenty-seven months following the Closing Date (and no claims shall be
made by any Buyer Group Member under Section 11.1(a) thereafter), except that
---------------
the indemnification by the Sellers shall continue as to:
(i) the covenants of the Sellers set forth in Section 13.6, which
------------
shall survive for the period of time set forth therein;
(ii) the covenant set forth in Section 8.7 as to which the
-----------
indemnification provided in this Section 11.1 shall terminate 30 days after
------------
the expiration of the four-year non-competition period provided for
therein;
(iii) the indemnification set forth in clause (v) or clause (vi) of
Section 11.1(a), as to which the indemnification set forth in this Section
--------------- -------
11.1(a) shall terminate 42 months following the Closing Date;
-------
(iv) the indemnification in respect of matters referred to in clauses
(I) and (II) of the fourth sentence of Section 11.1(c), shall survive
---------------
until it is no longer possible in law or in fact for an Indemnified Party
to suffer any Losses or Expenses as a result of such matters and for so
long thereafter as such Indemnified Party may assert a claim with respect
thereto;
(v) any Losses or Expenses of which any Buyer Group Member has
notified the Sellers in accordance with the requirements of Section 11.3 on
------------
or prior to the date such indemnification would otherwise terminate in
accordance with this Section 11.1, as to which the obligation of the
------------
Sellers shall continue until the liability of the Sellers shall have been
determined pursuant to this Article XI, and the Sellers shall have
----------
reimbursed all Buyer Group Members for the full amount of such Losses and
Expenses that are payable in accordance with this Article XI; and
----------
(vi) the covenants of the Sellers set forth in Section 8.2, which
-----------
shall survive until it is no longer possible in law or in fact for an
Indemnified Party to suffer any
66
<PAGE>
Losses or Expenses as a result of such breach and for so long thereafter as
such indemnified party may assert a claim with respect thereto.
(c) The obligations of the Sellers to indemnify and hold harmless
Buyer Group Members pursuant to Section 11.1(a) are limited by the express terms
---------------
of this Section 11.1(c). The Sellers shall be required to indemnify and hold
---------------
harmless Buyer Group Members:
(x) in respect of any individual matter for which indemnification is
being sought under clause (v) or (vi) of Section 11.1(a) to the extent the
---------------
amount of Losses and Expenses relating to such individual matter exceeds
$15,000 (it being intended that such $15,000 shall constitute a
"deductible" for which the Sellers bear no indemnification responsibility)
and
(y) pursuant to Section 11.1(a) only to the extent the aggregate
---------------
Losses and Expenses incurred by the Buyer Group Members (other than Losses
and Expenses excluded by clause (x) above and Losses and Expenses not
subject to this clause (y) by reason of clause (I) or (II) of the second
following sentence) exceeds the Applicable Deductible (it being intended
that the Applicable Deductible shall constitute a "deductible" for which
the Sellers bear no indemnification responsibility).
The aggregate amount required to be paid by the Sellers pursuant to
Section 11.1(a) (other than in respect of matters set forth in clause (I) of the
- ---------------
immediately following sentence) shall not in any event exceed $45,000,000.
Notwithstanding anything to the contrary herein, the limitations contained in
clause (y) shall not apply to:
(I) any Loss or Expense (i) incurred by any Buyer Group Member in
connection with, arising from, based on or relating to any breach of any
representation or warranty in Sections 5.2(b), 5.3, 5.7, 5.16, 5.17 or
--------------- --- --- ---- ----
5.19; (ii) subject to indemnification pursuant to clause (iii) or (vii) of
----
Section 11.1(a); (iii) in connection with, arising from, based on or
---------------
relating to a breach by the Sellers of, or failure by the Sellers to
perform, any of their covenants or obligations contained in this Agreement
or in any Seller Ancillary Agreement; or (iv) incurred by any Buyer Group
Member which is required to be indemnified by the Sellers pursuant to
Section 8.2; or
-----------
(II) any Loss or Expense subject to indemnification pursuant to clause
(iv) of Section 11.1(a).
---------------
(d) Notwithstanding anything to the contrary herein, Losses and
Expenses shall not include: (i) amounts required to be expended to make
remedial changes to the
67
<PAGE>
operations of the Business; or (ii) payments or costs incurred to retain a
business relationship with any customer.
SECTION 11.2. INDEMNIFICATION BY THE BUYER. (a) The Buyer agrees to
----------------------------
indemnify and hold harmless each Seller Group Member from and against any and
all Losses and Expenses incurred by such Seller Group Member in connection with
or arising from (i) any breach of any warranty or the inaccuracy of any
representation of the Buyer or Mergerco contained or referred to in this
Agreement or in any certificate delivered by or on behalf of the Buyer or
Mergerco, respectively, pursuant hereto, (ii) any breach by the Buyer or
Mergerco of, or failure by the Buyer or Mergerco to perform, any of their
respective covenants and obligations contained in this Agreement or (iii) the
conduct of the Business and the operations of the Surviving Corporation and the
Subsidiaries following the Closing Date.
(b) The indemnification provided for in Section 11.2(a) shall
---------------
terminate 27 months after the Closing Date (and no claims shall be made by any
Seller Group Member under Section 11.2(a) thereafter), except that the
---------------
indemnification by the Buyer shall continue as to:
(i) the covenants of the Buyer and/or the Surviving Corporation set
forth in Section 13.6 which shall survive for the period of time set forth
------------
therein;
(ii) the covenants of the Buyer set forth in Section 8.2, which shall
-----------
survive until it is no longer possible in law or in fact for an indemnified
party to suffer any Losses or Expenses as a result of such breach and for
so long thereafter as such indemnified party may assert a claim with
respect thereto; and
(iii) any Losses or Expenses of which any Seller Group Member has
notified the Buyer in accordance with the requirements of Section 11.3 on
------------
or prior to the date such indemnification would otherwise terminate in
accordance with this Section 11.2, as to which the obligation of the Buyer
------------
shall continue until the liability of the Buyer shall have been determined
pursuant to this Article XI, and the Buyer shall have reimbursed all Seller
----------
Group Members for the full amount of such Losses and Expenses that are
payable in accordance with this Article XI.
----------
(c) The obligations of the Buyer to indemnify and hold harmless
Seller Group Members pursuant to Section 11.2(a) are limited by the express
---------------
terms of this Section 11.2(c). The Buyer shall be required to indemnify and
---------------
hold harmless Seller Group Members: (x) pursuant to Section 11.2(a), only to the
---------------
extent the aggregate Losses and Expenses incurred by the Seller Group Members
(other than Losses and Expenses (i) in connection with, arising
68
<PAGE>
from, based on or relating to a breach by the Buyer of, or failure by the Buyer
to perform, any of its covenants or obligations contained in this Agreement or
in any Buyer Ancillary Agreement or (ii) incurred by any Seller Group Member
which is required to be indemnified by the Buyer pursuant to Section 8.2)
-----------
exceeds the Applicable Deductible (it being intended that the Applicable
Deductible shall constitute a "deductible" for which the Buyer bears no
indemnification responsibility). The aggregate amount required to be paid by
the Buyer pursuant to Section 11.2(a) shall not in any event exceed $45,000,000
---------------
(other than Losses and Expenses in connection with, arising from, based on or
relating to a breach by the Buyer of, or failure by the Buyer to perform, any of
its covenants or obligations contained in this Agreement or in any Buyer
Ancillary Agreement).
SECTION 11.3. NOTICE OF CLAIMS. Any Buyer Group Member or Seller
----------------
Group Member seeking indemnification hereunder (the "Indemnified Party") shall
-----------------
give promptly after discovery by such Indemnified Party of any event or
circumstance giving rise to a claim for indemnification hereunder) to the party
obligated to provide indemnification to such Indemnified Party (the
"Indemnitor") a notice (a "Claim Notice") describing in reasonable detail the
---------- ------------
materials facts then known to such Indemnified Party that gave rise to the claim
for indemnification and shall include in such Claim Notice (if then known) the
amount or the method of computation of the amount of such claim; provided,
--------
however, that the Sellers are deemed to have been provided notice of an
- -------
indemnification claim by the Buyer in connection with the FTC Investigation,
[the Ingram earn-out] and the pending or threatened lawsuits, proceedings or
investigations identified on Schedule 5.13. Notwithstanding the foregoing, it
---------------
is understood and agreed that (a) any failure by the Indemnified Party to
provide any notice to any Indemnitor shall not affect such Indemnified Party's
right to indemnification hereunder, except to the extent such failure materially
impairs the ability of the Indemnitor to defend the claim made by such
Indemnified Party and (b) subject to the time limitations set forth in Section
-------
11.1(b) and 11.2(b), no Indemnified Party shall be required to give notice to
- ------- -------
the Indemnitor of (i) any Violation of Law by the Company, any of its
Subsidiaries or any of their respective predecessors other than any claim
involving the violation of a criminal law or (ii) claims pursuant to clause (vi)
of Section 11.1(a), until such time as such Indemnified Party elects to assert a
---------------
claim against the Sellers in respect of such Violation of Law or pursuant to
clause (vi) of Section 11.1(a).
---------------
SECTION 11.4. DETERMINATION OF AMOUNT. (a) In calculating any Loss
-----------------------
or Expense there shall be deducted any insurance recovery actually received in
respect thereof (and no right of subrogation shall accrue hereunder to any
insurer). The Buyer and the Sellers agree that, for purposes of computing the
amount of any indemnification payment under this Section 11.4, any such
------------
indemnification payment shall be treated as an adjustment to the Final Purchase
Price for all Tax purposes. [The Buyer and the Surviving Corporation agree that
they will promptly file any claims and provide any required notice pursuant to
the Surviving Corporation's applicable insurance policies in connection with any
Loss or Expense
69
<PAGE>
indemnifiable hereunder.] If the Sellers are required to indemnify a Buyer
Group Member pursuant to the provisions of Section 11.1, and the cost, expense
------------
or liability for which the indemnification is sought under Section 11.1 has
------------
provided any Buyer Group Member with a net Tax benefit which is actually
realized, the amount of such actually realized net Tax benefit shall reduce the
Sellers' liability to indemnify a Buyer Group Member under Section 11.1. The
------------
Buyer shall repay to the Sellers the amount of any net Tax benefit realized from
time to time and not later than 30 days after the filing of the Tax Return for
each taxable year the Buyer shall provide the Sellers with a certificate signed
by the Buyer's tax director or any other officer of any Buyer Group Member or a
letter signed by the Buyer's independent public accountant stating whether any
Buyer Group Member has realized a net Tax benefit and the computation thereof.
If the Buyer is required to indemnify a Seller Group Member pursuant to the
provisions of Section 11.2, and the cost, expense or liability for which the
------------
indemnification is sought under Section 11.2 has provided any Seller Group
------------
Member with a Tax benefit, the amount of such Tax benefit (computed assuming
such Seller Group Member is subject to federal income tax at the highest
marginal rate applicable to corporations and to state tax at 5.9992%) shall
reduce the Buyer's liability to indemnify a Seller Group Member under Section
-------
11.2. If the amount of such net Tax benefit taken into account in reducing an
- ----
indemnity payment is subsequently disallowed by a foreign, federal, state or
local taxing authority, then the Indemnitor shall repay to the Indemnified Party
the amount of such disallowed net Tax benefit.
(b) After the giving of any Claim Notice pursuant to Section 11.3, the
------------
amount of indemnification to which an Indemnified Party shall be entitled under
this Article XI shall be determined: (i) by the written agreement between the
----------
Indemnified Party and the Indemnitor; (ii) by a final judgment or decree of any
court of competent jurisdiction; or (iii) by any other means to which the
Indemnified Party and the Indemnitor shall agree. The judgment or decree of a
court shall be deemed final when the time for appeal, if any, shall have expired
and no appeal shall have been taken or when all appeals taken shall have been
finally determined. The Indemnified Party shall have the burden of proof in
establishing the amount of Losses and Expenses suffered by it.
SECTION 11.5. THIRD PERSON CLAIMS. (a) In order for a party to be
-------------------
entitled to any indemnification provided for under this Agreement in respect of,
arising out of or involving a claim or demand made by any third Person against
the Indemnified Party, such Indemnified Party must notify the Indemnitor
promptly in writing, and in reasonable detail, of the third Person claim after
receipt by such Indemnified Party of written notice of the third Person claim.
Thereafter, the Indemnified Party shall deliver promptly to the Indemnitor,
after the Indemnified Party's receipt thereof, copies of all notices and
documents (including court papers) received by the Indemnitor relating to the
third Person claim. Notwithstanding the foregoing, it is understood and agreed
that (i) any failure by the Indemnified Party to provide any notice or documents
to any Indemnitor shall not affect such Indemnified Party's right to
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<PAGE>
indemnification hereunder, except to the extent such failure materially impairs
the ability of the Indemnitor to defend against the claim or demand and (ii)
subject to the limitations of time set forth in Sections 11.1(b) and 11.2(b), no
---------------- -------
Indemnified Party shall be required to give notice to any Indemnitor of (A) any
Violation of Law by the Company, any of its Subsidiaries or any of their
respective predecessors other than claims involving the violation of a criminal
law or (B) claims pursuant to clause (vi) of Section 11.1(a), until such time as
---------------
such Indemnified Party elects to assert a claim against the Sellers in respect
of such Violation of Law or pursuant to clause (vi) of Section 11.1(a).
---------------
(b) In the event any legal proceeding shall be threatened in writing
or any claim or demand shall be asserted in writing by any Person in respect of
which payment may be sought by one party hereto from the other party under the
provisions of this Article XI (other than threatened or asserted Violations of
----------
Law by the Company, any of its Subsidiaries or any of their respective
predecessors not involving a violation of criminal law), the Indemnified Party
shall promptly cause written notice of the assertion of any such claim of which
its chief executive officer, the chief financial officer, the chief operating
officer, the chief legal or compliance officer (if any) or individuals with
substantially similar positions has knowledge which is covered by this indemnity
to be forwarded to the Indemnitor. Notwithstanding the foregoing, it is
understood and agreed that (i) any failure by the Indemnified Party to provide
any such notice to any Indemnitor shall not affect such Indemnified Party's
right to indemnification hereunder (except to the extent the Indemnitor has been
materially prejudiced thereby) and (ii) subject to the limitations of time set
forth in Sections 11.1(b) and 11.2(b), no Indemnified Party shall be required to
---------------- -------
give notice to any Indemnitor of (i) any threatened or asserted Violation of Law
by the Company, any of its Subsidiaries or any of their respective predecessor
other than claims involving the violation of a criminal law or (ii) threatened
or asserted claims pursuant to clause (vi) of Section 11.1(a), until such time
as such Indemnified Party elects to assert a claim against the Sellers in
respect of such Violation of Law or pursuant to clause (vi) of Section 11.1(a).
---------------
(i) With respect to (A) any legal proceeding, claim or demand against
the Indemnified Party by a third Person which does not relate to the Current FTC
Proceeding or clause (v) or (vi) of Section 11.1(a), or if such legal
---------------
proceeding, claim or demand relates to the Current FTC Proceeding or clause (v)
or (vi) of Section 11.1(a) and involves the violation of a criminal law or (B)
---------------
claims identified on Schedule 11.5, then, in each case, the Indemnitor shall
-------------
have the sole and absolute right, subject to the first proviso hereto, after the
receipt of notice, at its option and at its own expense, to be represented by
counsel of its choice and to control, defend against, negotiate, settle or
otherwise deal with such proceeding, claim, or demand; provided, however, that
-------- -------
the Indemnitor shall not be entitled to settle such proceeding, claim or demand
unless Indemnitor has (x) admitted its liability to any applicable Indemnified
Parties in writing or (y) obtained the written consent of the applicable
Indemnified Parties, whose consent shall not be unreasonably withheld or
delayed; provided, further, that the
-------- -------
71
<PAGE>
Indemnified Party may participate in any such proceeding with counsel of its
choice and at its expense. The parties hereto agree to cooperate fully with
each other in connection with the defense, negotiation or settlement of any such
legal proceeding, claim or demand. To the extent the Indemnitor does not notify
the Indemnified Party within 30 days after receiving a Claim Notice from the
Indemnified Party that the Indemnitor will defend such proceeding, claim or
demand, and the Indemnified Party defends against or otherwise deals with any
such proceeding, claim or demand, the Indemnified Party may retain counsel of
its choice, at the expense of the Indemnitor, and control the defense,
negotiation, settlement or other disposition of such proceeding. If the
Indemnitor can settle any such proceeding with the payment of an amount that,
along with the Expenses of such proceeding, claim or demand that are borne by
the Indemnitor, is equal to or less than the Applicable Deductible then
available, the Indemnitor shall not be entitled to settle any such proceeding,
claim or demand without the consent of the Indemnified Party, such consent not
to be unreasonably withheld or delayed. No consent of the Indemnified Party
shall be required if such proceeding, claim or demand is settled for an amount
of money, along with the Expenses of such proceeding, claim, or demand, that are
borne by the Indemnitor is in excess of the Applicable Deductible then
available; provided, however, if the Indemnitor settles any such proceeding,
-------- -------
claim or demand without the consent of the Indemnified Party, such consent not
to be unreasonably withheld or delayed, the Indemnitor shall be deemed to have
waived any right to contest the Indemnitor's indemnification obligations under
this Article XI. Notwithstanding the foregoing, no party can agree to any
----------
settlement that obligates another party to take or refrain from taking any
action, perform obligations or admit liability.
(ii) With respect to any legal proceeding, claim or demand against the
Indemnified Party by a third Person relating to clause (v) or (vi) of Section
-------
11.1(a), if such legal proceeding, claim or demand does not involve the
- -------
violation of a criminal law, the Buyer Group Member that is the Indemnified
Party with respect to such legal proceeding, claim or demand shall have the sole
and absolute right after delivery of the Claim Notice, at the expense of the
Sellers, to be represented by counsel of its choice and to control, defend
against, negotiate, settle or otherwise deal with such proceeding, claim, or
demand. The Buyer Group Member that is the Indemnified Party with respect to
such legal proceeding, claim or demand may not settle any such proceeding, claim
or demand with a payment of money in an amount that, along with the Expenses of
such proceeding, claim or demand borne by the Sellers in connection therewith,
is in excess of the Applicable Deductible then available without the consent of
the Sellers, such consent not to be unreasonably withheld or delayed
(c) Notwithstanding anything to the contrary herein, with respect to
the indemnity set forth in Section 11.1(a)(iv), the Buyer shall have the sole
-------------------
and absolute right after the Closing, at the expense of the Sellers, to be
represented by counsel of the Buyer's choice and to control, defend against,
negotiate, settle or otherwise deal with the Current FTC Proceeding; provided,
---------
however, that the Buyer may not settle the Current FTC Proceeding if
- -------
72
<PAGE>
the settlement requires a payment of money which, together with all other
amounts (including without limitation, the Expenses of the Current FTC
Proceeding) subject to indemnification pursuant to Section 11.1(a)(iv), exceeds
------------------
$2,000,000, without the consent of the Sellers, such consent not to be
unreasonably withheld or delayed. If the Current FTC Proceeding is finally
resolved by the Surviving Corporation on terms that require a payment of an
amount of money which, together with all other amounts (including, without
limitation, the Expenses of the Current FTC Proceeding) subject to
indemnification pursuant to Section 11.1(a)(iv), is less than $2,000,000, the
-------------------
Sellers shall make an additional payment to the Buyer in an amount calculated
pursuant to Schedule 11.5(c) within 30 days of the final resolution of the
----------------
Current FTC Proceeding. If the final resolution of the Current FTC Proceeding
has not occurred by January 1, 2000, the Sellers' indemnification obligation
shall terminate hereunder upon payment to the Buyer of the full amount of the
monetary fine included in a bona fide settlement offer delivered to the Company
by the Federal Trade Commission (whether or not Sellers and the Buyer agree to
accept such settlement offer), and, upon such payment, the Buyer thereafter
shall be entitled to control, defend against, negotiate, settle or otherwise
deal with such matter as determined in its sole discretion, but shall have no
further recourse pursuant to Article XI against the Sellers on account of such
----------
matter for the indemnification of any Loss or Expense in excess of such payment
to the Buyer.
(d) The Buyer Group Members, the Seller Group Members and their
respective representatives and agents shall have access to the premises, books,
personnel and records of the other party and their Affiliates to the extent
reasonably necessary to assist the Buyer Group Members or the Seller Group
Members, as the case may be, in defending or settling any proceeding, claim or
demand relating to Section 11.1(a) or Section 11.2(a) if the party seeking such
--------------- ---------------
access has the right to control such proceeding, claim or demand pursuant to
Section 11.5; provided, however, that such access shall be at the expense of the
- ------------ -------- -------
party seeking such access (subject to any indemnification provided herein) and
shall be conducted in such manner as not to interfere unreasonably with the
operation of the business of the other party or their Affiliates.
(e) To the extent of any inconsistency between this Section 11.5 and
------------
Section 8.2(c) (relating to tax contests), the provisions of Section 8.2(c)
- ------------- -------------
shall control.
SECTION 11.6. LIMITATIONS. (a) In any case where an Indemnified
-----------
Party recovers from third Persons any amount in respect of a matter with respect
to which an Indemnitor has indemnified such Indemnified Party pursuant to this
Article XI, such Indemnified Party shall promptly pay over to the Indemnitor the
- ----------
amount so recovered (after deducting therefrom the full amount of the Expenses
incurred by it in procuring such recovery and after taking into account any Tax
benefit or cost) (in the case of the Buyer, any Net Tax benefit actually
realized), but not in excess of the sum of (i) any amount previously so paid by
the Indemnitor to or on behalf of the Indemnified Party in respect of such
matter and (ii) any
73
<PAGE>
amount expended by the Indemnitor in pursuing or defending any claim arising out
of such matter.
(b) Except for remedies that cannot be waived as a matter of law and
injunctive and provisional relief, if the Closing occurs, this Article XI shall
----------
be the exclusive remedy for breaches of this Agreement (including any covenant,
obligation, representation or warranty contained in this Agreement or in any
certificate delivered pursuant to this Agreement) or otherwise in respect of the
Merger.
ARTICLE XII
TERMINATION
-----------
SECTION 12.1. TERMINATION. Anything contained in this Agreement to
-----------
the contrary notwithstanding, this Agreement may be terminated at any time prior
to the Closing Date:
(a) by the mutual consent of the Buyer, FDC and FFMC;
(b) by the Buyer or FDC or FFMC if any court of competent jurisdiction
in the United States or other United States Governmental Body shall have
issued a final and non-appealable order, decree or ruling permanently
restraining, enjoining or otherwise prohibiting the consummation of the
transactions contemplated hereby; or
(c) by the Buyer, FDC or FFMC if the Closing shall not have occurred
on or before January 31, 1998 (or such later date as may be agreed in
writing by the Buyer, FDC and FFMC).
SECTION 12.2. NOTICE OF TERMINATION. Any party desiring to terminate
---------------------
this Agreement pursuant to Section 12.1 shall give written notice of such
------------
termination to the other party to this Agreement.
SECTION 12.3. EFFECT OF TERMINATION. In the event that this
---------------------
Agreement shall be terminated pursuant to this Article XII, all further
-----------
obligations of the parties under this Agreement (other than Sections 13.2 and
-------------
13.10) shall be terminated without further liability of any party to the other;
- -----
provided, however, that nothing herein shall relieve any party from liability
- -------- -------
for its willful breach of this Agreement. If any of the conditions specified in
Article IX have not been satisfied, the Buyer may nevertheless at its election
- ----------
waive such conditions and proceed with the transactions contemplated hereby,
and, if any of the conditions specified
74
<PAGE>
in Article X have not been satisfied, the Sellers may nevertheless at their
---------
election waive such conditions and proceed with the transactions contemplated
hereby. Any such election to proceed shall be evidenced by a certificate
executed on behalf of the electing party by its Chief Executive Officer,
Chairman, Vice Chairman, President or one of its Vice Presidents.
ARTICLE XIII
GENERAL PROVISIONS
------------------
SECTION 13.1. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
------------------------------------------
representa tions and warranties contained in this Agreement shall survive the
consummation of the transactions contemplated by this Agreement through the
period during which claims for indemnification may be made pursuant to Article
-------
XI.
- --
SECTION 13.2. CONFIDENTIAL NATURE OF INFORMATION. Each party agrees
----------------------------------
that it will treat in confidence all documents, materials and other information
which it shall have obtained regarding the other party during the course of the
negotiations leading to the consummation of the transactions contemplated hereby
(whether obtained before or after the date of this Agreement), the investigation
provided for herein and the preparation of this Agreement and other related
documents. Such documents, materials and information shall not be communicated
to any third Person (other than, in the case of the Buyer, to its counsel,
accountants, financial advisors, potential investors or lenders, and in the case
of the Sellers, to its counsel, accountants or financial advisors). No other
party shall use any confidential information in any manner whatsoever except
solely for the purpose of evaluating the proposed Merger. In the event the
transactions contemplated hereby shall not be consummated, each party will
return to the other party all copies of nonpublic documents and materials that
have been furnished in connection therewith. The obligation of each party to
treat such documents, materials and other information in confidence shall not
apply to any information which (i) is or becomes available to such party from a
source other than such party, (ii) is or becomes available to the public other
than as a result of disclosure by such party or its agents, (iii) is required to
be disclosed under applicable law or judicial process, but only to the extent it
must be disclosed, or (iv) such party reasonably deems necessary to disclose to
obtain any of the consents or approvals contemplated hereby.
SECTION 13.3. NO PUBLIC ANNOUNCEMENT. Prior to the Closing Date,
----------------------
none of the parties shall, without the approval of the other parties, make any
press release or other public announcement concerning the transactions
contemplated by this Agreement, except as and to the extent that any such party
shall be so obligated by law, in which case the other party shall be advised and
the parties shall use their reasonable efforts to cause a mutually agreeable
release or announcement to be issued; provided, however, that the foregoing
-------- -------
shall not preclude
75
<PAGE>
communications or disclosures necessary to implement the provisions of this
Agreement or to comply with the accounting and Securities Exchange Commission
disclosure obligations or the rules of any stock exchange.
SECTION 13.4. NOTICES. All notices or other communications required
-------
or permitted hereunder shall be in writing and shall be deemed to have been
given or delivered when delivered personally or when sent by registered or
certified mail or by private courier addressed as follows:
If to the Buyer, Mergerco or the Surviving Corporation, to:
NCI Acquisition Corporation
1436 Lancaster Avenue
Suite 210
Berwyn, Pennsylvania 19312
Attention: Jeffrey Weiss
and
Nationwide Credit, Inc.
2253 Northwest Parkway
Marietta, Georgia 30067
Attention: Jerrold Kaufmann
with copies to:
Weiss, Peck & Greer
One New York Plaza
30th Floor
New York, NY 10004
Attention: Craig S. Whiting
and
Centre Partners Management LLC
30 Rockefeller Plaza
Suite 3050
New York, NY 10020
Attention: Paul Zepf
76
<PAGE>
and
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attention: Jane McDonald
If to the Surviving Corporation, to:
If to FDC or FFMC, to:
First Data Corporation
6200 South Quebec Street
Englewood, Colorado 80111
Attention: Charles T. Fote,
Executive Vice President
with copies to:
First Data Corporation
6200 South Quebec Street
Englewood, Colorado 80111
Attention: General Counsel
Integrated Services Division
and
Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
Attention: Paul L. Choi and
Frederick C. Lowinger
or to such other address as such party may indicate by a notice delivered to the
other party hereto.
SECTION 13.5. SUCCESSORS AND ASSIGNS. (a) The rights of either
----------------------
party under this Agreement shall not be assignable by such party hereto prior to
the Closing without the written consent of the other party.
77
<PAGE>
(b) This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their successors and permitted assigns. Nothing in this
Agreement, expressed or implied, is intended or shall be construed to confer
upon any Person other than the parties and successors and assigns permitted by
this Section 13.5.
------------
SECTION 13.6. ACCESS TO RECORDS AFTER CLOSING. (a) The Sellers and
-------------------------------
the Buyer agree that each of them shall preserve and keep the records held by it
relating to the Business for a period of six (6) years from the Closing Date.
(b) For a period of six years after the Closing Date, the Sellers and
their representatives shall have reasonable access to all of the books and
records of the Surviving Corporation and the Subsidiaries to the extent that
such access may reasonably be required by the Sellers in connection with matters
relating to or affected by the operations of the Company and the Subsidiaries
prior to the Closing Date. Such access shall be afforded by the Buyer upon
receipt of reasonable advance notice and during normal business hours. The
Sellers shall be solely responsible for any costs or expenses incurred by it
pursuant to this Section 13.6(b). If the Buyer, the Surviving Corporation or
---------------
the Subsidiaries shall desire to dispose of any of such books and records prior
to the expiration of such six-year period, the Buyer shall, prior to such
disposition, give the Sellers a reasonable opportunity, at the Sellers' expense,
to segregate and remove such books and records as the Sellers may select.
(c) For a period of six (6) years after the Closing Date, the Buyer
and its representatives shall have reasonable access to all of the books and
records of the Sellers or any of their Affiliates relating to the Company and
the Subsidiaries. Such access shall be afforded by the Sellers and their
Affiliates upon receipt of reasonable advance notice and during normal business
hours. The Buyer shall be solely responsible for any costs and expenses
incurred by it pursuant to this Section 13.6(c). If the Sellers or any of their
---------------
Affiliates shall desire to dispose of any of such books and records prior to the
expiration of such six-year period, the Sellers shall, prior to such
disposition, give the Buyer a reasonable opportunity, at the Buyer's expense, to
segregate and remove such books and records as the Buyer may select.
SECTION 13.7. ENTIRE AGREEMENT; AMENDMENTS. This Agreement, the
----------------------------
Exhibits and Schedules referred to herein and the documents delivered pursuant
hereto contain the entire understanding of the parties hereto with regard to the
subject matter contained herein or therein, and supersede all other prior
representations, warranties, agreements, understandings or letters of intent
between or among any of the parties hereto. This Agreement shall not be
amended, modified or supplemented except by a written instrument signed by an
authorized representative of each of the parties hereto.
SECTION 13.8. INTERPRETATION. Articles, titles and headings to
--------------
sections herein are inserted for convenience of reference only and are not
intended to be a part of or to affect
78
<PAGE>
the meaning or interpretation of this Agreement. The Schedules and Exhibits
referred to herein shall be construed with and as an integral part of this
Agreement to the same extent as if they were set forth verbatim herein.
SECTION 13.9. WAIVERS. Any term or provision of this Agreement may
-------
be waived, or the time for its performance may be extended, by the party or
parties entitled to the benefit thereof. Any such waiver shall be validly and
sufficiently authorized for the purposes of this Agreement if, as to any party,
it is authorized in writing by an authorized representative of such party. The
failure of any party hereto to enforce at any time any provision of this
Agreement shall not be construed to be a waiver of such provision, nor in any
way to affect the validity of this Agreement or any part hereof or the right of
any party thereafter to enforce each and every such provision. No waiver of any
breach of this Agreement shall be held to constitute a waiver of any other or
subsequent breach.
SECTION 13.10. EXPENSES. Except as expressly set forth herein,
--------
including, without limitation, Section 4.5(a)(vi) hereof each party hereto will
------------------
pay all costs and expenses incident to its negotiation and preparation of this
Agreement and to its performance and compliance with all agreements and
conditions contained herein on its part to be performed or complied with,
including the fees, expenses and disbursements of its counsel and independent
public accountants.
SECTION 13.11. PARTIAL INVALIDITY. Wherever possible, each provision
------------------
hereof shall be interpreted in such manner as to be effective and valid under
applicable law, but in case any one or more of the provisions contained herein
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such provision shall be ineffective to the extent, but only to the
extent, of such invalidity, illegality or unenforceability without invalidating
the remainder of such invalid, illegal or unenforceable provision or provisions
or any other provisions hereof, unless such a construction would be
unreasonable.
SECTION 13.12. EXECUTION IN COUNTERPARTS. This Agreement may be
-------------------------
executed in one or more counterparts, each of which shall be considered an
original instrument, but all of which shall be considered one and the same
agreement, and shall become binding when one or more counterparts have been
signed by each of the parties hereto and delivered to the Sellers and the Buyer.
SECTION 13.13. FURTHER ASSURANCES. On and after the Closing Date
------------------
each party hereto shall take such other actions and execute such other documents
and instruments of conveyance and transfer as may be reasonably requested by the
other party hereto from time to time to effectuate or confirm the transfer of
the Shares to the Buyer in accordance with the terms of this Agreement.
79
<PAGE>
SECTION 13.14. GOVERNING LAW. This Agreement shall be governed by and
-------------
construed in accordance with the laws, without regard to the principles
regarding choice of law of the State of New York.
SECTION 13.15. DISCLAIMER OF WARRANTIES. The Sellers make no
------------------------
representations or warranties with respect to any projections, forecasts or
forward-looking information provided to the Buyer or Mergerco. There is no
assurance that any projected or forecasted results will be achieved. EXCEPT AS
TO THOSE MATTERS EXPRESSLY COVERED BY THE REPRESENTATIONS AND WARRANTIES IN THIS
AGREEMENT, OR IN ANY SELLER ANCILLARY AGREEMENT, THE SELLERS DISCLAIM ALL OTHER
WARRANTIES, REPRESENTATIONS AND GUARANTIES WHETHER EXPRESS OR IMPLIED.
80
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the day and year first above written.
NCI ACQUISITION CORPORATION
By: /s/ PAUL J. ZEPF
----------------------------
Name: Paul J. Zepf
Title: Director
NCI MERGER CORPORATION
By: /s/ PAUL J. ZEPF
----------------------------
Name: Paul J. Zepf
Title: Director
NATIONWIDE CREDIT, INC.
By: /s/ JERROLD KAUFMAN
----------------------------
Name: Jerrold Kaufman
Title: President and Chief Executive
Officer
FIRST FINANCIAL MANAGEMENT CORPORATION
By: /s/ CHARLES FOTE
----------------------------
Name:
Title: President
81
<PAGE>
FIRST DATA CORPORATION
By: /s/ CHARLES FOTE
----------------------------
Name: Charles Fote
Title: Executive Vice President
82
<PAGE>
EXHIBIT 3.1
ARTICLES OF INCORPORATION
OF
NATIONAWIDE ACQUISITION CORP.
ARTICLE I
The name of the Corporation is "Nationwide Acquisition Corp."
ARTICLE II
The street address and county of the initial registered office of the
corporation is 3 Corporate Square, Suite 700, Atlanta, DeKalb County, Georgia
30329 and the initial registered agent of the corporation at such address is
Stephen D. Kane.
ARTICLE III
The Corporation shall have the authority to issue a single class of 10,000
common shares that together have unlimited voting rights and are entitled to
receive the net assets of the corporation upon dissolution.
ARTICLE IV
The mailing address of the initial principal office of the corporation will
be:
3 Corporate Square, Suite 700
Atlanta, Georgia 30329
ARTICLE V
The name and address of the sole incorporator is:
Monica M. Gaudiosi
999 Peachtree Street, N.E.
Atlanta, Georgia 30309-3996
ARTICLE VI
The initial Board of Directors shall consist of one director. The name and
address of the director is as follows:
1
<PAGE>
Patrick H. Thomas
3 Corporate Square, Suite 700
Atlanta, Georgia 30329
ARTICLE VII
A director of this corporation shall not be personally liable to the
corporation or its shareholders for monetary damages for breach of duty or care
or other duty as a director, except: (a) for any appropriation, in violation of
his or her duties, of any business opportunity of the corporation, (b) for acts
or omissions which involve intentional misconduct or a knowing violation of law,
(c) for the types of liability set forth in section 14-2-832 of the Official
Code of Georgia Annotated ("OCGA"), or (d) for any transaction from which the
director received an improper personal benefit. If the OCGA is amended after
the execution of these Articles of Incorporation to eliminate or limit the
personal liability of directors, including, but not limited to, changes in OCGA
section 14-2-202(b)(4), then the liability of a director of the corporation
shall be eliminated or limited to the fullest extent permitted by the OCGA, as
so amended. Any repeal or modification of the foregoing provisions of this
Article VII by the shareholders of the corporation shall not adversely affect
any right or protection of a director of the corporation existing at the time of
such repeal or modification.
IN WITNESS WHEREOF, the undersigned incorporator has executed these
Articles of Incorporation on this 23rd day of May, 1990.
/s/ Monica M. Gaudiosi
------------------------------------
Monica M. Gaudiosi
2
<PAGE>
EXHIBIT 3.2
BYLAWS
OF
NATIONWIDE CREDIT, INC.
Adopted May 23, 1990
(As restated to reflect name change from
Nationwide Acquisition Corp. resulting
from merger effective June 22, 1990)
<PAGE>
Table of Contents
-----------------
Page
----
ARTICLE I: SHARE CERTIFICATES............................................ 1
1.1 Share Certificates.............................................. 1
1.2 List of Shareholders............................................ 1
1.3 Transfers of Shares............................................. 1
1.4 Lost Certificates............................................... 1
ARTICLE II: SHAREHOLDERS' MEETINGS....................................... 2
2.1 Annual Meetings of Shareholders................................. 2
2.2 Special Meetings of Shareholders................................ 2
2.3 Notice.......................................................... 2
2.4 Voting; Presiding Officer....................................... 2
2.5 Quorum; Adjournment............................................. 3
2.6 Written Consent of Shareholders................................. 3
ARTICLE III: DIRECTORS................................................... 3
3.1 Powers of Board of Directors.................................... 3
3.2 Number of Directors; Conduct of Meetings of Board of Directors.. 3
3.3 Director Vacancies.............................................. 4
3.4 Meetings of Board of Directors; Notice.......................... 4
3.5 Written Consent of Directors.................................... 5
3.6 Telephonic Meetings of Board of Directors....................... 5
3.7 Removal of Directors............................................ 5
ARTICLE IV: OFFICERS..................................................... 5
4.1 Officers; Election.............................................. 5
4.2 Chairman of the Board........................................... 5
4.3 President....................................................... 6
4.4 Secretary....................................................... 6
4.5 Treasurer....................................................... 6
4.6 Vice Presidents................................................. 6
4.7 Appointment of Officers and Agents.............................. 6
4.8 Removal of Officers and Agents.................................. 7
4.9 Vacancies....................................................... 7
ARTICLE V: SEAL.......................................................... 7
(i)
<PAGE>
ARTICLE VI: INDEMNIFICATION AND INSURANCE................................ 7
6.1 Indemnification................................................. 7
6.2 Insurance....................................................... 10
ARTICLE VII: AMENDMENT................................................... 10
(ii)
<PAGE>
BYLAWS
OF
NATIONWIDE CREDIT, INC.
ARTICLE I
SHARE CERTIFICATES
1.1 Share Certificates. Share certificates shall be issued in
------------------
consecutive order and shall be numbered in the order in which they are issued.
They shall be signed by the Chairman of the Board, the President or a Vice
President and the Secretary or an Assistant Secretary, and the seal of the
Corporation or a facsimile thereof shall be affixed thereto. On the stub of
each share certificate, which stubs shall be kept in the share records of the
Corporation, shall be entered the name and address of the owner of the shares,
the number of shares, and the date of issue. Each share certificate exchanged
or returned shall be cancelled and placed with its stub in the share records of
the Corporation.
1.2 List of Shareholders. The Corporation shall maintain at its
--------------------
principal place of business or registered office a record of the names and
addresses of its shareholders and the number of shares held by each, which shall
be maintained and made available in accordance with Georgia law.
1.3 Transfers of Shares. Transfers of shares of the Corporation
-------------------
shall be made in the share records of the Corporation upon surrender of the
certificate for such shares signed by the person in whose name the certificate
is registered or on his behalf by a person legally authorized to so sign (or
accompanied by a separate stock transfer power so signed) and otherwise in
accordance with and subject to the applicable provisions of the Uniform
Commercial Code as in effect in the State of Georgia, and subject to such other
reasonable and lawful conditions and requirements as may be imposed by the
Corporation or the Bylaws.
1.4 Lost Certificates. The Chairman of the Board, or the President
-----------------
may issue a new share certificate in place of any certificate previously issued
by the Corporation and alleged to have been lost or destroyed upon the making of
an affidavit of that fact by the person claiming the certificate to be lost or
destroyed and, if he in his sole discretion deems it appropriate, the delivery
of a commercial indemnity bond issued by a company approved by him in such sum
as he may direct as indemnity against any claim that may be made against the
Corporation with respect to the certificate alleged to have been lost or
destroyed.
1
<PAGE>
ARTICLE II
SHAREHOLDERS' MEETINGS
2.1 Annual Meetings of Shareholders. The annual meeting of
-------------------------------
shareholders of the Corporation shall be held during the first four months after
the end of each fiscal year of the Corporation at such time and place, within or
without the State of Georgia, as may from time to time be fixed by the Board of
Directors. The failure to hold the annual meeting shall not work a forfeiture
or otherwise affect valid corporate acts.
2.2 Special Meetings of Shareholders. Special meetings of the
--------------------------------
shareholders may be called at any time by the Board of Directors, the Chairman
of the Board, or the President, or by the Corporation upon the written request
of the holder or holders of at least 25 percent of the outstanding shares of the
Corporation. Special meetings of the shareholders shall be held at such time
and place, within or without the State of Georgia, as may be determined by the
person or persons calling the meeting.
2.3 Notice. The Secretary or an Assistant Secretary or the officer
------
or persons calling the meeting shall deliver a written notice of the place, day
and time of each meeting of the shareholders, not less than 10 nor more than 60
days before the date of the meeting, either personally or by first class mail,
to each shareholder of record entitled to vote at such meeting. If mailed, such
notice shall be deemed to be delivered when deposited in the United States mail
with first class postage thereon prepaid, addressed to the shareholder at his
address as it appears on the share records of the Corporation. The notice of a
special meeting of shareholders shall state the purpose or purposes for which
the meeting is called. Notice of a meeting of shareholders need not be given to
any shareholder who signs a waiver of notice, either before or after the
meeting. Attendance of a shareholder at a meeting, either in person or by
proxy, shall of itself constitute waiver of notice of such meeting and waiver of
any and all objections to the place of the meeting, the time of the meeting, and
the manner in which it has been called or convened, except when a shareholder
attends the meeting solely for the purpose of stating, at the beginning of the
meeting, any such objection or objections to the transaction of business.
2.4 Voting; Presiding Officer. Except as otherwise required by
-------------------------
statute, by the Articles of Incorporation and any amendment to them, by filings
with the Georgia Secretary of State fixing and determining the voting rights of
shares of the Corporation, or by these Bylaws, at any meeting of the
shareholders, each shareholder of the Corporation entitled to vote at such
meeting shall have one vote, in person or by proxy, for each share having voting
rights held by him and registered in his name on the books of the corporation at
the
2
<PAGE>
record date fixed or otherwise determined for such meeting. The Chairman of the
Board shall preside at meetings of the shareholders or if the Chairman of the
Board is absent, the President shall preside at meetings of the shareholders;
provided, however, that the Chairman of the Board or the President may delegate
his authority to preside at shareholders' meetings pursuant to section 4.2 or
4.3 of the Bylaws.
2.5 Quorum; Adjournment. At all meetings of shareholders, a majority
-------------------
of the outstanding shares of the Corporation entitled to vote, represented in
person or by proxy, shall constitute a quorum for the transaction of business,
and, if a quorum exists, action on a matter is approved if the votes cast
favoring the action exceed the votes cast opposing the action, unless the
Articles of Incorporation, a bylaw adopted by the shareholders under Section 14-
2-1021 of the Georgia Business Corporation Code or any successor provision of
Georgia law, or the Georgia Business Corporation Code requires a greater number
of affirmative votes. The holders of a majority of the shares represented at a
meeting, whether or not a quorum is present, may adjourn such meeting from time
to time.
2.6 Written Consent of Shareholders. Any action required to be taken
-------------------------------
at a meeting of the shareholders of the Corporation, or any action that may be
taken at a meeting of the shareholders, may be taken without a meeting if a
consent in writing setting forth the action so taken shall be signed by all of
the shareholders entitled to vote with respect to the subject matter thereof.
ARTICLE III
DIRECTORS
3.1 Powers of Board of Directors. Subject to the Bylaws or any
----------------------------
lawful agreement between or among the shareholders, the business and affairs of
the Corporation shall be managed by the Board of Directors.
3.2 Number of Directors; Conduct of Meetings of Board of Directors.
--------------------------------------------------------------
The Board of Directors shall consist of between one and five directors, which
number may be fixed or changed from time to time by the shareholders or the
Board of Directors; however, the initial Board of Directors shall consist of one
director. Each director shall be elected at an annual meeting of the
shareholders or otherwise as provided by these Bylaws or applicable law, to
serve until the next succeeding annual meeting and until his successor is
elected and qualified, or until his earlier death, resignation or removal. If
there are three or more directors, a majority of the directors shall constitute
a quorum for the transaction of business; if there are less than three
directors, all of the directors shall constitute a quorum for the
3
<PAGE>
transaction of business. Except as otherwise provided in the Bylaws, all
resolutions adopted and all business transacted by the Board of Directors shall
require the affirmative vote of a majority of the directors present at a meeting
at which a quorum is present. The Chairman of the Board or, if the President is
a director, the President shall preside at all meetings of the Board of
Directors; provided, however, that each of the Chairman of the Board or the
President may delegate his authority to preside at Board of Directors meetings
pursuant to section 4.2 or 4.3, respectively, of the Bylaws. If the Chairman of
the Board is not present and if the President is not a director, the Board of
Directors shall select a director as chairman for each meeting.
3.3 Director Vacancies. Except as otherwise provided in this section
------------------
3.3, any vacancy occurring in the Board of Directors may be filled by the
affirmative vote of a majority of the remaining directors though less than a
quorum of the Board of Directors, or by the sole remaining director, as the case
may be, or, if the vacancy is not so filled, or if no director remains, by the
shareholders. Any vacancy arising as a result of the removal of a director by
the shareholders may be filled by the shareholders or, if the shareholders so
authorize, by the remaining director or directors, but only for the unexpired
term of his predecessor in office. The Board of Directors may fill a vacancy
created by an increase in the number of directors as provided for in section
3.2, but only for a term of office continuing until the next annual election of
directors by the shareholders and the election and qualification of his
successor.
3.4 Meetings of Board of Directors; Notice. The Board of Directors
--------------------------------------
shall meet annually immediately following the annual meeting of the
shareholders; provided that the failure to hold the annual meeting shall not
work a forfeiture or otherwise affect valid corporate acts. A special meeting
of the Board of Directors may be called at any time by the President, the
Chairman of the Board, or by any two directors, on at least two days' notice,
which may be given orally or by personal delivery, or by first class mail,
telegram, cablegram, facsimile transmission or private carrier. The notice
shall be deemed given (a) five days after its deposit in the mail, with first
class postage prepaid and correctly addressed, (b) when received, or (c) when
delivered in writing to the director at his last known principal place of
business or residence. Notice of a special meeting may be waived by an
instrument in writing. Attendance of a director at a meeting shall constitute a
waiver of notice of the meeting and waiver of any and all objections to the
place of the meeting, the time of the meeting and the manner in which it has
been called or convened, except when a director states, at the beginning of the
meeting, any such objection or objections to the transaction of business. Any
meeting of the Board of Directors may be held within or without the State of
Georgia at such place as may be determined by the person or persons calling the
meeting.
4
<PAGE>
3.5 Written Consent of Directors. Any action required to be taken at
----------------------------
a meeting of the Board of Directors, or any action that may be taken at a
meeting of the Board of Directors, may be taken without a meeting if a consent
in writing setting forth the action taken shall be signed by all the directors
and shall be filed with the minutes of the proceedings of the directors.
3.6 Telephonic Meetings of Board of Directors. Any action required
-----------------------------------------
to be taken at a meeting of the Board of Directors, or any action that may be
taken at a meeting of the Board of Directors, may be taken at a meeting held by
means of conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other.
Participation in such a meeting shall constitute presence in person at such
meeting. In all other respects the provisions of Article Three of the Bylaws
with respect to meetings of the Board of Directors shall apply to such a
meeting.
3.7 Removal of Directors. At any shareholders' meeting with respect
--------------------
to which notice of such purpose has been given, the entire Board of Directors or
any individual director may be removed, with or without cause, by the
affirmative vote of the holders of a majority of the shares of the Corporation.
ARTICLE IV
OFFICERS
4.1 Officers; Election. The Board of Directors shall elect a
------------------
President, a Secretary and a Treasurer and may elect a Chairman of the Board
(who shall be a member of the Board of Directors), one or more Vice Presidents,
and any other officers. Any two or more offices may be held by the same person.
4.2 Chairman of the Board. The Chairman of the Board shall have
---------------------
general supervision of the affairs of the Corporation. He shall preside at all
meetings of the shareholders and of the Board of Directors and may delegate such
authority to any other director or to an officer of the Corporation. He shall
have the power to enter into and execute contracts on behalf of the Corporation
and to sign certificates, contracts or other instruments on behalf of the
Corporation, and shall have and exercise all such other duties and powers as are
incident to this office or properly prescribed by the Board of Directors. The
Chairman of the Board may exercise any powers, authorities or functions granted
or designated to be performed by the President under the Bylaws or by law.
5
<PAGE>
4.3 President. The President shall be the chief executive officer of
---------
the Corporation, and shall be responsible f or the administration of the
Corporation, including general and active management of the financial affairs of
the Corporation and supervision and direction of the actions of the other
officers of the Corporation. He shall have the authority to execute bonds,
mortgages or other contracts, agreements or instruments on behalf of the
Corporation.
4.4 Secretary. The Secretary shall keep minutes of all meetings of
---------
the shareholders and Board of Directors, shall have charge of the minute books,
share records and seal of the Corporation, shall have the authority to certify
as to the corporate books and records, and shall perform such other duties and
have such other powers as may from time to time be delegated to him by the
President or the Board of Directors.
4.5 Treasurer. The Treasurer shall be charged with the management of
---------
the financial affairs of the Corporation. He shall in general perform all of
the duties incident to the office of treasurer and such other duties as from
time to time may be assigned to him by the President or the Board of Directors.
4.6 Vice Presidents. The Vice Presidents, if any, shall perform such
---------------
duties and exercise such powers as the President or the Board of Directors shall
request or delegate and, unless the Board of Directors or the President
otherwise provides, shall perform such other duties as are generally performed
by vice presidents with equivalent restrictions, if any, on title. In the
absence of the President or in the event of his death or inability to act, the
Vice Presidents shall perform the duties of the President, and when so acting,
shall have all the powers of and be subject to all the restrictions upon the
President; provided, however, that if there is more than one Vice President, any
Vice President shall have the authority to execute bonds, mortgages or other
contracts or agreements on behalf of the Corporation, subject to all the
restrictions upon the President relating to such functions, but all other duties
of the President shall be performed by the Vice President designated to perform
such duties at the time of his election, or in the absence of any designation,
then by the Vice President with the most seniority in office (or if more than
one Vice President is elected at the same meeting, by the Vice President first
listed in the resolution electing them), and when so acting shall have all the
powers of and be subject to all the restrictions upon the President.
4.7 Appointment of Officers and Agents. The Board of Directors,the
----------------------------------
Chairman of the Board or the President may appoint one or more Vice Presidents
and such other officers, assistant officers and agents as the Board of
Directors, the Chairman of the Board or the President may determine. Any such
officers, assistant officers or agents so appointed shall perform such duties as
are set f orth in the Bylaws and as the action appointing him provides, and,
unless such action otherwise provides, such appointed officers and assistant
6
<PAGE>
officers shall perform such duties as are generally performed by elected
officers or assistant officers having the same title.
4.8 Removal of Officers and Agents. Any officer, assistant officer
------------------------------
or agent elected or appointed by the Board of Directors may be removed by the
Board whenever in its judgment the best interests of the Corporation will be
served thereby. Any officer, assistant officer or agent appointed by the
Chairman of the Board or the President may be removed by the Chairman of the
Board or the President, as the case may be, or by the Board of Directors
whenever in his or its judgment the best interests of the Corporation will be
served thereby.
4.9 Vacancies. Any vacancy, however occurring, in any office may be
---------
filled by the Board of Directors.
ARTICLE V
SEAL
The seal of the Corporation shall be in such form as the Board of
Directors may from time to time determine. In the event it is inconvenient to
use such a seal at any time, the words "Corporate Seal" or the word "Seal"
accompanying the signature of an officer signing for and on behalf of the
Corporation shall be the seal of the Corporation. The seal shall be in the
custody of the Secretary and affixed by him on the share certificates and such
other papers as may be directed by law, by the Bylaws or by the Board of
Directors.
ARTICLE VI
INDEMNIFICATION AND INSURANCE
6.1 Indemnification.
---------------
(a) General. The Corporation shall indemnify each person who is
-------
or was a director or officer of the Corporation (including the heirs, executors,
administrators or estate of such person) and is permitted to indemnify each
person who is or was an employee or agent of the Corporation (including the
heirs, executors, administrators or estate of such person) or is or was serving
at the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise to
the full extent permitted under sections 14-2-851 and 852 (with respect to
directors) and section 14-2-857 (with respect to non-director officers,
employees and agents) of the Georgia
7
<PAGE>
Business Corporation Code (the "Code") or any successor provisions of the laws
of the State of Georgia, including without limitation the payment of fees and
expenses of defense as incurred as provided in subsection (b) of this section
6.1.
(b) Interim Payment of Expenses. Expenses incurred by a person
---------------------------
who is or was a director, officer, employee or agent of the Corporation
(including the heirs, executors, administrators or estate of such person) or is
or was serving at the request of the Corporation as a director, officer,
employer or agent of another corporation, partnership, joint venture, trust or
other enterprise 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, to the full extent permitted by and in accordance
with section 14-2-853 (with respect to directors) and 14-2-857 (with respect to
non-director officers, employees or agents) of the Code or any successor
provisions of the laws of the State of Georgia.
(c) Procedure. If indemnification is requested by a director
---------
pursuant to paragraph (a) of this section 6.1 under the authority granted by
section 14-2-851(a) of the Code, the Board of Directors shall cause a
determination to be made in one of the manners prescribed in section 14-2-855(b)
of the Code or any successor provision of the laws of the State of Georgia as to
whether indemnification of the director requesting such indemnification is
permissible in the circumstances because he has met the standard of conduct set
forth in section 14-2-851(a) of the Code or any successor provision of the laws
of the State of Georgia. Upon any such determination that such indemnification
is proper, or upon mandatory indemnification pursuant to section 14-2-852, the
corporation, if authorized pursuant to section 14-2-855(c) of the Code or any
successor provision of the laws of the State of Georgia, shall make
indemnification payments to the maximum extent permitted by section 14-2-851 or
852 of the Code, as the case may be, or any successor provision of the laws of
the State of Georgia. If indemnification is requested by a non-director officer
pursuant to paragraph (a) of this Section 6.1 under the authority granted by
section 14-2-857 of the Code, the Board of Directors shall determine whether
indemnification of the non-director officer requesting such indemnification is
permissible in the circumstances under section 14-2-857 of the Code or any
successor provision of the laws of the State of Georgia. If indemnification is
requested by an employee or agent pursuant to paragraph (a) of this section 6.1
under the authority granted by section 14-2-857 of the Code, the Board of
Directors shall determine (i) whether the Corporation will indemnify the
employee or agent and (ii) whether indemnification of the employee or agent
requesting indemnification is permissible in the circumstances under section 14-
2-857 of the Code or any successor provision of the laws of the State of
Georgia. Upon the determination by the Board of Directors that Indemnification
of any such non-director officer, employee or agent is proper, or upon mandatory
indemnification pursuant to section 14-2-852 of the Code, the Corporation shall
make indemnification payments (i) in the case of non-director officers, to
8
<PAGE>
the maximum extent permitted by section 14-2-852 or 14-2-857 of the Code, as the
case may be, and (ii) in the case of employees or agents, to the extent directed
by the Board of Directors, subject to the limitations imposed by section 14-2-
857 of the Code.
(d) Subsequent Amendment. No amendment, termination or repeal of
--------------------
this Article Six or of relevant provisions of the Code or any other applicable
laws shall affect or diminish in any way the rights to indemnification under
this Article Six with respect to any action, suit or proceeding arising out of,
or relating to, any actions, transactions or facts occurring prior to the final
adoption of such amendment, termination or repeal.
(e) Other Rights. The indemnification and advancement of
------------
expenses provided by, or granted pursuant to, other subsections of this section
6.1 shall not be deemed exclusive of any other rights to which a director,
officer, employee or agent seeking indemnification or advancement of expenses
may be entitled under any law (common or statutory), agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in any other capacity while holding office or
while employed by or acting as agent for the Corporation. Indemnification of
directors shall not be permitted (i) for any appropriation, in violation of the
director's duties, of any business opportunity of the Corporation, (ii) for acts
or omissions which involve intentional misconduct or a knowing violation of law,
(iii) for the types of liability set forth in section 14-2-831 of the Code, or
(iv) for any transaction from which he received an improper personal benefit;
and indemnification of officers, employees and agents shall not be permitted if
inconsistent with public policy. Nothing contained in this Article Six shall be
deemed to prohibit, and the Corporation is specifically authorized to enter
into, agreements which provide indemnification rights and procedures permitted
by the Code.
(f) Continuation of Right to Indemnification. All rights to
----------------------------------------
indemnification under this Article Six (including without limitation those
arising pursuant to subsection (e) above) shall continue as to a person who has
ceased to be a director, officer, employee or agent, shall inure to the benefit
of the estate, heirs, executors and administrators of such person, and shall be
deemed to be a contract between the Corporation and each such person or entity.
This Article Six shall be binding upon any successor corporation to the
Corporation, whether by way of acquisition, merger, consolidation or otherwise.
(g) Savings Clause. If this Article Six or any portion hereof
--------------
shall be invalidated on any ground by any court of competent jurisdiction, then
the Corporation shall nevertheless indemnify persons or entities specified in
this Article Six to the full extent permitted by any applicable portion of this
Article Six that shall not have been invalidated and to the full extent
permitted by applicable law.
9
<PAGE>
6.2 Insurance. The Corporation may purchase and maintain insurance
---------
at its expense, to protect itself and any person described in subsection (a) of
this section 6.1 against any such liability, cost, payment or expense whether or
not the Corporation would have the power to indemnify such person against such
liability.
ARTICLE VII
AMENDMENT
Subject to the Articles of Incorporation and the Code, the Bylaws may
be amended at any meeting of the shareholders at which a quorum exists if the
votes in favor of the amendment exceed the votes opposed to the amendment, or at
any meeting of the Board of Directors of the Corporation by an affirmative vote
of a majority of the number of directors fixed in or pursuant to the Bylaws.
The shareholders may prescribe that any bylaws adopted by them shall not be
altered, amended or repealed by the Board of Directors.
* * *
10
<PAGE>
EXHIBIT 4.1
NATIONWIDE CREDIT, INC.
SERIES A AND SERIES B
10 1/4% SENIOR NOTES DUE 2008
INDENTURE
DATED AS OF JANUARY 28, 1998
________________________
STATE STREET
BANK AND TRUST COMPANY
TRUSTEE
______________
<PAGE>
CROSS-REFERENCE TABLE*
(a) 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
(i)(b)............................................................7.10
(ii)(c)...........................................................N.A.
311(a)............................................................7.11
(b)...............................................................7.11
(iii(c)...........................................................N.A.
312 (a)...........................................................2.05
(b)...............................................................10.03
(iv)(c)...........................................................10.03
313(a)............................................................7.06
(b)(2)............................................................7.07
(v)(c)............................................................7.06;
10.02
(vi)(d)...........................................................7.06
314(a)............................................................4.03;
10.02
(c)(1)............................................................10.04
(c)(2)............................................................10.04
(c)(3)............................................................N.A.
(vii)(e).........................................................10.05
(f)...............................................................NA
315 (a)...........................................................7.01
(b)...............................................................7.05,
10.02
(A)(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
(B)(c)............................................................2.12
317 (a)(1)........................................................6.08
(a)(2)............................................................6.09
(b)...............................................................2.04
318 (a)...........................................................10.01
<PAGE>
(b)...............................................................N.A.
(c)...............................................................10.01
N.A. means not applicable.
*This Cross-Reference Table is not part of the Indenture.
2
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE........................1
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........................................................16
Section 2.01. Form and Dating............................................16
Section 2.02. Execution and Authentication...............................17
Section 2.03. Registrar and Paying Agent.................................18
Section 2.04. Paying Agent to Hold Money in Trust........................18
Section 2.05. Holder Lists...............................................18
Section 2.06. Transfer and Exchange......................................19
Section 2.07. Replacement Notes..........................................30
Section 2.08. Outstanding Notes..........................................30
Section 2.09. Treasury Notes.............................................30
Section 2.10. Temporary Notes............................................30
Section 2.11. Cancellation...............................................31
Section 2.12. Defaulted Interest.........................................31
ARTICLE 3. REDEMPTION AND PREPAYMENT........................................31
Section 3.01. Notices to Trustee.........................................31
Section 3.02. Selection of Notes to Be Redeemed..........................31
Section 3.03. Notice of Redemption.......................................32
Section 3.04. Effect of Notice of Redemption.............................32
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Section 3.05. Deposit of Redemption Price................................33
Section 3.06. Notes Redeemed in Part.....................................33
Section 3.07. Optional Redemption........................................33
Section 3.08. Mandatory Redemption.......................................34
Section 3.09. Offer to Purchase by Application
of Excess Proceeds.......................................................34
ARTICLE 4. COVENANTS........................................................35
Section 4.01. Payment of Notes...........................................35
Section 4.02. Maintenance of Office or Agency............................36
Section 4.03. Reports....................................................36
Section 4.04. Compliance Certificate.....................................37
Section 4.05. Taxes......................................................37
Section 4.06. Stay, Extension and Usury Laws.............................38
Section 4.07. Restricted Payments........................................38
Section 4.08. Dividend and Other Payment
Restrictions Affecting Subsidiaries......................................40
Section 4.09. Incurrence of Indebtedness
and Issuance of Preferred Stock..........................................41
Section 4.10. Asset Sales................................................42
Section 4.11. Transactions with Affiliates...............................43
Section 4.12. Liens......................................................44
Section 4.13. Corporate Existence........................................44
Section 4.14. Subsidiary Guarantees......................................44
Section 4.15. Offer to Repurchase Upon Change
of Control...............................................................44
Section 4.16 Payments for Consent........................................45
ARTICLE 5. SUCCESSORS.......................................................46
Section 5.01. Merger, Consolidation, or Sale of Assets...................46
Section 5.02. Successor Corporation Substituted..........................46
ARTICLE 6. DEFAULTS AND REMEDIES............................................47
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Section 6.01. Events of Default..........................................47
Section 6.02. Acceleration...............................................48
Section 6.03. Other Remedies.............................................49
Section 6.04. Waiver of Past Defaults....................................49
Section 6.05. Control by Majority........................................49
Section 6.06. Limitation on Suits........................................49
Section 6.07. Rights of Holders of Notes to
Receive Payment..........................................................50
Section 6.08. Collection Suit by Trustee.................................50
Section 6.09. Trustee May File Proofs of Claim...........................50
Section 6.10. Priorities.................................................51
Section 6.11. Undertaking for Costs......................................51
ARTICLE 7. TRUSTEE..........................................................51
Section 7.01. Duties of Trustee..........................................51
Section 7.02. Rights of Trustee..........................................52
Section 7.03. Individual Rights of Trustee...............................53
Section 7.04. Trustee's Disclaimer.......................................53
Section 7.05. Notice of Defaults.........................................53
Section 7.06. Reports by Trustee to Holders of
the Notes................................................................53
Section 7.07. Compensation and Indemnity.................................54
Section 7.08. Replacement of Trustee.....................................54
Section 7.09. Successor Trustee by Merger, etc...........................55
Section 7.10. Eligibility; Disqualification..............................55
Section 7.11. Preferential Collection of Claims
Against Company..........................................................56
ARTICLE 8. LEGAL DEFEASANCE AND COVENANT DEFEASANCE.........................56
Section 8.01. Option to Effect Legal Defeasance or
Covenant Defeasance......................................................56
Section 8.02. Legal Defeasance and Discharge.............................56
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Section 8.03. Covenant Defeasance........................................56
Section 8.04. Conditions to Legal or Covenant Defeasance.................57
Section 8.05. Deposited Money and Government Securities
to be Held in Trust; Other Miscellaneous Provisions......................58
Section 8.06. Repayment to Company.......................................58
Section 8.07. Reinstatement..............................................59
ARTICLE 9. AMENDMENT, SUPPLEMENT AND WAIVER.................................59
Section 9.01. Without Consent of Holders of Notes........................59
Section 9.02. With Consent of Holders of Notes...........................60
Section 9.03. Compliance with Trust Indenture Act........................61
Section 9.04. Revocation and Effect of Consents..........................61
Section 9.05. Notation on or Exchange of Notes...........................61
Section 9.06. Trustee to Sign Amendments, etc............................62
ARTICLE 10. MISCELLANEOUS...................................................62
Section 10.01. Trust Indenture Act Controls..............................62
Section 10.02. Notices...................................................62
Section 10.03. Communication by Holders of Notes
with Other Holders of Notes..............................................63
Section 10.04. Certificate and Opinion as to
Conditions Precedent.....................................................63
Section 10.05. Statements Required in Certificate
or Opinion...............................................................63
Section 10.06. Rules by Trustee and Agents...............................64
Section 10.07. No Personal Liability of Directors,
Officers, Employees and Stockholders.....................................64
Section 10.08. Governing Law.............................................64
Section 10.09. No Adverse Interpretation of Other Agreements.............64
Section 10.10. Successors................................................64
Section 10.11. Severability..............................................64
Section 10.12. Counterpart Originals.....................................65
Section 10.13. Table of Contents, Headings, etc..........................65
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EXHIBITS
Exhibit A-1 FORM OF NOTE
Exhibit A-2 FORM OF REGULATION S TEMPORARY GLOBAL NOTE
Exhibit B FORM OF CERTIFICATE OF TRANSFER
Exhibit C FORM OF CERTIFICATE OF EXCHANGE
Exhibit D FORM SUBSIDIARY GUARANTEE
Exhibit E FORM OF SUPPLEMENTAL INDENTURE
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INDENTURE dated as of January 28, 1998 between Nationwide Credit,
Inc., a Georgia corporation (the "Company"), and State Street Bank and Trust
Company, as trustee (the "Trustee").
The Company and the Trustee agree as follows for the benefit of each
other and for the equal and ratable benefit of the Holders of the 10 1/4% Series
A Senior Notes due 2008 (the "Series A Notes") and the 10 1/4% Series B Senior
Notes due 2008 (the "Series B Notes" and, together with the Series A Notes, the
"Notes"):
ARTICLE 1.
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. DEFINITIONS.
"144A Global Note" means a global note in the form of Exhibit A-1
hereto bearing the Global Note Legend and the Private Placement Legend and
deposited with or on behalf of, and registered in the name of, the Depositary or
its nominee that will be issued in a denomination equal to the outstanding
principal amount of the Notes sold in reliance on Rule 144A.
"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 becomes a 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
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any assets acquired by such specified Person.
"Additional Notes" means up to $25.0 million in aggregate principal
amount of Notes (other than the Initial Notes) issued under this Indenture in
accordance with Sections 2.02 and 4.09 hereof.
"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, however,
that beneficial ownership of 10% or more of the Voting Stock of a Person shall
be deemed to be control.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Applicable Procedures" means, with respect to any transfer or
exchange of or for beneficial interests in any Global Note, the rules and
procedures of the Depositary, Euroclear and Cedel that apply to such transfer or
exchange.
"Asset Sale" means (i) the sale, lease, conveyance or other
disposition of any assets or rights (including, without limitation, by way of a
sale and leaseback) other than sales of inventory or accounts receivable in the
ordinary course of business consistent with past practices (provided that the
sale, lease, conveyance or other disposition of all or substantially all of the
assets of the Company and its Restricted Subsidiaries taken as a whole will be
governed by Section 4.15 and/or Section 5.01 hereof and not by Section 4.10
hereof, and (ii) the issue or sale by the Company or any of its Restricted
Subsidiaries of Equity Interests of any of the Company's Restricted
Subsidiaries, in the case of either clause (i) or (ii),
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whether in a single transaction or a series of related transactions (a) that
have a fair market value in excess of $2.0 million or (b) for net proceeds in
excess of $2.0 million. Notwithstanding the foregoing, the following items shall
not be deemed to be Asset Sales: (i) a transfer of assets by the Company to a
Wholly Owned Restricted Subsidiary or by a Wholly Owned Restricted Subsidiary to
the Company or to another Wholly Owned Restricted Subsidiary, (ii) an issuance
of Equity Interests by a Wholly Owned Restricted Subsidiary to the Company or to
another Wholly Owned Restricted Subsidiary, and (iii) a Restricted Payment that
is permitted by Section 4.07 hereof.
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal or
state law for the relief of debtors.
"Board of Directors" means the Board of Directors of the Company, or
any authorized committee of the Board of Directors.
"Broker Dealer" has the meaning set forth in the Registration Rights
Agreement.
"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 or limited
liability company, partnership or membership 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) marketable direct obligations issued by,
or 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; (ii)
certificates of deposit, time deposits, eurodollar time deposits or overnight
bank deposits having maturities of six months or less from the date of
acquisition issued by any Lender (as defined in the Credit Agreement) or by any
commercial bank organized under the laws of the United States or any state
thereof having combined capital and surplus of not less that $500.0 million;
(iii) commercial paper of an issuer rated at least A-2 by Standard & Poor's
Rating Services ("S&P") or P-2 by Moody's Investors Service, Inc. ("Moody's"),
or carrying an equivalent rating by a nationally recognized rating agency, if
both of the two named rating agencies cease publishing ratings of commercial
paper issuers generally, and maturing within six months from the date of
acquisition; (iv) repurchase obligations of any Lender (as defined in the Credit
Agreement) or of any commercial bank satisfying the requirements of clause (ii)
of this definition, having a term of not more than 30 days with respect to
securities issued or fully guaranteed or insured by the United States
government; (v) securities with maturities of one year or less from the date of
acquisition issued or fully guaranteed by any state, commonwealth or territory
of the United States, by any political subdivision or taxing authority of any
such state, commonwealth or territory or by any foreign government, the
securities of which state, commonwealth, territory, political subdivision,
taxing authority or foreign government (as the case may be) are rated at least A
by S&P or A by Moody's; (vi) securities with maturities of six months or less
from the date of acquisition backed by standby letters of credit issued by any
Lender (as defined in the Credit Agreement) or any commercial bank satisfying
the requirements of
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clause (ii) of this definition; or (vii) shares of money market mutual or
similar funds which invest exclusively in assets satisfying the requirements of
clauses (i) through (vi) of this definition.
"Cedel" means Cedel Bank, SA.
"Change of Control" means the occurrence of any of the following: (i)
the sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, 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 a Principal or a Related Party of a Principal (as
defined below), (ii) the adoption of a plan relating to the liquidation or
dissolution of the Company, (iii) the consummation of any transaction
(including, without limitation, any merger or consolidation) the result of which
is that any "person" (as defined above), other than the Principals and their
Related Parties or any underwriters in connection with an underwritten public
offering becomes the "beneficial owner" (as such term is defined in Rule 13d-3
and Rule 13d-5 under the Exchange Act, except that a person shall be deemed to
have "beneficial ownership" of all securities that such person has the right to
acquire, whether such right is currently exercisable or is exercisable only upon
the occurrence of a subsequent condition), directly or indirectly, of more than
50% of the Voting Stock of the Company (measured by voting power rather than
number of shares), (iv) the first day on which a majority of the members of the
Board of Directors of the Company are not Continuing Directors or (v) the
Company consolidates with, or merges with or into, any Person, or any Person
consolidates with, or merges with or into, the Company, in any such event
pursuant to a transaction in which any of the outstanding Voting Stock of the
Company is converted into or exchanged for cash, securities or other property,
other than any such transaction where the Voting Stock of the Company
outstanding immediately prior to such transaction is converted into or exchanged
for Voting Stock (other than Disqualified Stock) of the surviving or transferee
Person constituting a majority of the outstanding shares of such Voting Stock of
such surviving or transferee Person (immediately after giving effect to such
issuance).
"Company" means Nationwide Credit, Inc., a Georgia corporation, and
any and all successors thereto.
"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 an Asset Sale (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 Subsidiaries for such period, to the extent that
such provision for taxes was included in computing such Consolidated Net Income,
plus (iii) consolidated interest expense of such Person and its Subsidiaries for
such period, whether paid or accrued and whether or not capitalized (including,
without limitation, amortization of debt issuance costs and 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, 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)
depreciation, amortization (including amortization of goodwill and other
intangibles but excluding amortization of prepaid cash expenses that were paid
in a prior period) and other non-cash expenses (including any charge relating to
the write-off of deferred financing fees as a result of the repayment of the
Acquisition Facilities and excluding any such non-cash expense to the extent
that it represents an accrual of or reserve for cash expenses in any future
period or amortization of a prepaid cash expense that was paid in a prior
period) of such Person and its Subsidiaries for such period to the extent
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that such depreciation, amortization and other non-cash expenses were deducted
in computing such Consolidated Net Income, minus (v) non-cash items increasing
such Consolidated Net Income for such period, in each case, on a consolidated
basis and determined in accordance with GAAP. Notwithstanding the foregoing, the
provision for taxes on the income or profits of, and the depreciation and
amortization and other non-cash expenses of, a Subsidiary of the referent Person
shall be added to Consolidated Net Income to compute Consolidated Cash Flow only
to the extent that a corresponding amount would be permitted at the date of
determination to be dividended to the Company by such Subsidiary without prior
governmental approval (that has not been obtained), and without direct or
indirect restriction pursuant to the terms of its charter and all agreements,
instruments, judgments, decrees, orders, statutes, rules and governmental
regulations applicable to that Subsidiary or its stockholders.
"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 Net Income (but not loss) of any Unrestricted Subsidiary
shall be excluded, whether or not distributed to the Company or one of its
Subsidiaries and (v) the cumulative effect of a change in accounting principles
shall be excluded.
"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 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 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.
"Continuing Directors" means, as of any date of determination, any
member of the Board of Directors of the Company 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 the approval of a majority
of the Continuing Directors who were members of such Board at the time of such
nomination or election or was nominated or designated for election to the Board
of Directors by a Principal or its Related Party.
"Corporate Trust Office of the Trustee" shall be at the address of the
Trustee specified in Section 10.02 hereof or such other address as to which the
Trustee may give notice to the Company.
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"Credit Agreement" means that certain Credit Agreement, dated as of
January 28, 1998, by and among the Company, Lehman Brothers Inc., as arranger,
Lehman Commercial Paper Inc., as syndication agent, and the lenders named
therein, providing for $25.0 million of term borrowings and up to $35.0 million
of revolving credit borrowings, including any related notes, guarantees,
collateral documents, instruments and agreements executed in connection
therewith, and in each case as amended, supplemented, extended, restated,
modified, renewed, refunded, replaced or refinanced from time to time, including
any appendices, exhibits or schedules to any of the foregoing.
"Credit Facilities" means, with respect to the Company, one or more
debt facilities (including, without limitation, the Credit Agreement) or
commercial paper facilities with banks or other institutional lenders providing
for revolving credit loans, term loans, receivables financing (including through
the sale of receivables to such lenders or to special purpose entities formed to
borrow from such lenders against such receivables) or letters of credit.
"Custodian" means the Trustee, as custodian with respect to the Notes
in global form, or any successor entity thereto.
"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 Note" means a certificated Note registered in the name of
the Holder thereof and issued in accordance with Section 2.06 hereof, in the
form of Exhibit A-1 hereto except that such Note shall not bear the Global Note
Legend and shall not have the "Schedule of Exchanges of Interests in the Global
Note" attached thereto.
"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, and any and all successors thereto
appointed as depositary hereunder and having become such pursuant to the
applicable provision of this Indenture.
"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, at the option of the holder thereof), 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; provided, however, that any Capital Stock that would
constitute Disqualified Stock solely because the holders thereof have the right
to require the Company to repurchase such Capital Stock upon the occurrence of a
Change of Control or an Asset Sale shall not constitute Disqualified Stock if
the terms of such Capital Stock provide that the Company may not repurchase or
redeem any such Capital Stock pursuant to such provisions unless such repurchase
or redemption complies with the covenant described in Section 4.07 hereof.
"Domestic Subsidiary" means (i) any Restricted Subsidiary of the
Company that is incorporated or domiciled in any state of the United States of
America or the District of Columbia or (ii) any Restricted Subsidiary of the
Company that has Guaranteed any Indebtedness of the Company or any Subsidiary
Guarantor.
"Earn-out Obligations" means contingent payment obligations of the
Company or any of its Restricted Subsidiaries incurred in connection with the
acquisition of assets or businesses, which obligations are payable based on the
performance of the assets or businesses so acquired; provided that the
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amount of such obligations shall not exceed 25% of the total consideration paid
for such assets or businesses; and provided, further, that the amount of such
obligations outstanding at any time shall be measured by the maximum amount
potentially payable thereunder without regard to performance criteria, the
passage of time or other conditions.
"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).
"Euroclear" means Morgan Guaranty Trust Company of New York, Brussels
office, as operator of the Euroclear system.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Notes" means the Notes issued in the Exchange Offer pursuant
to Section 2.06(f) hereof.
"Exchange Offer" has the meaning set forth in the Registration Rights
Agreement.
"Exchange Offer Registration Statement" has the meaning set forth in
the Registration Rights Agreement.
"Fixed Charges" means, with respect to any Person for any period, the
sum, without duplication, 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 debt issuance costs and 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, 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 the non-cash interest expense incurred by the Company in connection
with the Acquisition Facilities in January of 1998) and (ii) the consolidated
interest 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 dividend payments, whether or not in cash, on any series of
preferred stock of such Person or any of its Restricted Subsidiaries, other than
dividend payments on Equity Interests payable solely in Equity Interests of the
Company (other than Disqualified Stock) or to the Company or a Restricted
Subsidiary of the Company, times (b) a fraction, the numerator of which is one
and the denominator of which is one minus the then current combined 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
referent Person or any of its Restricted Subsidiaries incurs, assumes,
Guarantees or redeems any Indebtedness (other than revolving credit borrowings)
or issues or redeems 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
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Indebtedness, or such issuance or redemption of preferred stock (including any
application of proceeds therefrom), 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 to include the Consolidated Cash Flow of
the acquired entities (adjusted to exclude (x) the cost of any compensation,
remuneration or other benefit paid or provided to any employee, consultant,
Affiliate or equity owner of the acquired entities to the extent such costs are
eliminated and not replaced and (y) the amount of any reduction in general,
administrative or overhead costs of the acquired entities, in each case, as
determined in good faith by an officer of the Company) 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, 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 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, each of the
Restricted Global Notes and the Unrestricted Global Notes, in the form of
Exhibit A-1 and A-2 hereto issued in accordance with Section 2.01, 2.06(b)(iv),
2.06(d)(ii) or 2.06(f) hereof.
"Global Note Legend" means the legend set forth in Section
2.06(g)(ii), which is required to be placed on all Global Notes issued under
this Indenture.
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America, and the payment for which the
United States pledges its full faith and credit.
"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, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof), of all or any part of any Indebtedness.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements and (ii) other
agreements or arrangements designed to protect such Person against fluctuations
in interest rates.
"Holder" means a Person in whose name a Note is registered.
"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
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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 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
(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 to the extent of such Lien (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, except for Indebtedness arising
from the honoring by a bank or other financial institution of a check, draft or
similar instrument, drawn against insufficient funds; provided that such
Indebtedness is extinguished within five business days of the incurrence of such
Indebtedness. The amount of any Indebtedness outstanding as of any date shall be
(i) the accreted value thereof, in the case of any Indebtedness issued with
original issue discount, and (ii) the principal amount thereof, together with
any interest thereon that is more than 30 days past due, in the case of any
other Indebtedness.
"Indenture" means this Indenture, as amended or supplemented from time
to time.
"Indirect Participant" means a Person who holds a beneficial interest
in a Global Note through a Participant.
"Initial Notes" means $100.0 million in aggregate principal amount of
Notes issued under this Indenture on the date hereof.
"Initial Purchaser" means Lehman Brothers Inc.
"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 Restricted 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 Restricted 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
Restricted Subsidiary not sold or disposed of in an amount determined as
provided in the final paragraph of the covenant described in Section 4.07.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York or Hartford, Connecticut 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 on such payment for the intervening period.
"Letter of Transmittal" means the letter of transmittal to be prepared
by the Company and sent to all Holders of the Notes for use by such Holders in
connection with the Exchange Offer.
"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
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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.
"NAC" means NCI Acquisition Corp., a Delaware corporation and parent
of the Company and any and all successors thereto.
"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 gain (but not loss),
together with any related provision for taxes on such extraordinary 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 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 Indebtedness under Credit Facilities)
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.
"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 of such Indebtedness 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.
"Non-U.S. Person" means a Person who is not a U.S. Person.
"Notes" has the meaning assigned to it in the preamble to this
Indenture.
"Obligations" means any principal, premium, if any, interest
(including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the Company or its Subsidiaries
whether or not a claim for post-filing interest is allowed in such proceeding),
penalties, fees,
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charges, expenses, indemnifications, reimbursement obligations, damages
(including Liquidated Damages), guarantees and other liabilities or amounts
payable under the documentation governing any Indebtedness or in respect
thereof.
"Offering" means the offering of the Notes by the Company pursuant to
an Offering Memorandum dated January 23, 1998.
"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 any Assistant Secretary, or any Vice-President of such
Person.
"Officers' Certificate" means a certificate signed on behalf of the
Company by two Officers of the Company, one of whom must be the principal
executive officer, the principal financial officer, the treasurer or the
principal accounting officer of the Company, that meets the requirements of
Sections 10.04 and 10.05 hereof.
"Offering Memorandum" means the offering memorandum of the Company,
dated January 23, 1998, relating to the Notes.
"Opinion of Counsel" means an opinion from legal counsel who is
reasonably acceptable to the Trustee, that meets the requirements of Sections
10.04 and 10.05 hereof. The counsel may be an employee of or counsel to the
Company, any Subsidiary of the Company or the Trustee.
"Participant" means, with respect to the Depositary, Euroclear or
Cedel, a Person who has an account with the Depositary, Euroclear or Cedel,
respectively (and, with respect to The Depository Trust Company, shall include
Euroclear and Cedel).
"Permitted Investments" means (a) any Investment in the Company or in
a Restricted Subsidiary of the Company; (b) any Investment in 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 (i) such Person becomes a Restricted
Subsidiary of the Company or (ii) such Person 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 Investment made as a result of the receipt of non-cash
consideration from (i) an Asset Sale that was made pursuant to and in compliance
with Section 4.10 hereof or (ii) a disposition of assets that does not
constitute an asset sale; (e) any acquisition of assets, Equity Interests or
other securities solely in exchange for the issuance of Equity Interests (other
than Disqualified Stock) of the Company; (f) any acquisition by the Company or
any of its Restricted Subsidiaries of Purchased Portfolios; and (g) other
Investments in any Person having an aggregate fair market value (measured on the
date each such Investment was made and without giving effect to subsequent
changes in value), when taken together with all other Investments made pursuant
to this clause (g) that are at the time outstanding, not to exceed $7.5 million.
"Permitted Liens" means (i) Liens securing Indebtedness under the
Credit Facilities that was permitted to be incurred pursuant to Section 4.09
hereof; (ii) Liens in favor of the Company; (iii) Liens on property of a Person
existing at the time such Person is merged into or consolidated with the Company
or any Restricted Subsidiary of the Company; provided that such Liens were in
existence prior to the contemplation of such merger or consolidation and do not
extend to any assets other than those of the Person merged into or consolidated
with the Company; (iv) Liens on property existing at the time of
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acquisition thereof by the Company or any Restricted Subsidiary of the Company,
provided that such Liens were in existence prior to the contemplation of such
acquisition; (v) Liens to secure the performance of statutory obligations,
surety or appeal bonds, performance bonds or other obligations of a like nature
incurred in the ordinary course of business; (v) Liens to secure Indebtedness
(including Capital Lease Obligations) permitted by clause (iv) of the second
paragraph of Section 4.09 hereof covering only the assets acquired with such
Indebtedness; (vi) Liens existing on the date of the Indenture; (vii) Liens for
taxes, assessments or governmental charges or claims that are not yet delinquent
or that are being contested in good faith by appropriate proceedings promptly
instituted and diligently concluded, provided that any reserve or other
appropriate provision as shall be required in conformity with GAAP shall have
been made therefor; (viii) Liens on assets of Unrestricted Subsidiaries that
secure Non-Recourse Debt of Unrestricted Subsidiaries; (ix) Liens incurred in
the ordinary course of business of the Company or any Subsidiary of the Company
with respect to obligations that do not exceed $5.0 million at any one time
outstanding and that (a) are not incurred in connection with the borrowing of
money or the obtaining of advances or credit (other than trade credit in the
ordinary course of business) and (b) do not in the aggregate materially detract
from the value of the property or materially impair the use thereof in the
operation of business by the Company or such Subsidiary and (x) Liens securing
Permitted Refinancing Indebtedness provided that the Company was permitted to
incur Liens with respect to the Indebtedness so refinanced.
"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
(other than intercompany Indebtedness); provided that: (i) the principal amount
(or accreted value, if applicable) of such Permitted Refinancing Indebtedness
does not exceed the principal amount of (or accreted value, if applicable), plus
accrued interest, premium and prepayment penalties, if any, on, the Indebtedness
so extended, refinanced, renewed, replaced, defeased or refunded (plus the
amount of 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 or
government or agency or political subdivision thereof (including any subdivision
or ongoing business of any such entity or substantially all of the assets of any
such entity, subdivision or business).
"Principals" means Centre Partners Management, LLC and WPG Corporate
Development Associates V, L.P.
"Private Placement Legend" means the legend set forth in Section
2.06(g)(i) to be placed on all Notes issued under this Indenture except where
otherwise permitted by the provisions of this Indenture.
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"Purchased Portfolios" means account receivables portfolios purchased
by the Company or any of its Restricted Subsidiaries.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of January 28, 1998, by and among the Company and the
Initial Purchaser, as such agreement may be amended, modified or supplemented
from time to time and, with respect to any Additional Notes, one or more
registration rights agreements between the Company and the other parties
thereto, as such agreement(s) may be amended, modified or supplemented from time
to time, relating to rights given by the Company to the purchasers of Additional
Notes to register such Additional Notes under the Securities Act.
"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 in
the form of Exhibit A-1 hereto bearing the Global Note Legend and the Private
Placement Legend and deposited with or on behalf of and registered in the name
of the Depositary or its nominee, issued in a denomination equal to the
outstanding principal amount of the Regulation S Temporary Global Note upon
expiration of the Restricted Period.
"Regulation S Temporary Global Note" means a temporary global Note in
the form of Exhibit A-2 hereto bearing the Private Placement Legend and
Regulation S Temporary Global Note Legend and deposited with or on behalf of and
registered in the name of the Depositary or its nominee, issued in a
denomination equal to the outstanding principal amount of the Notes initially
sold in reliance on Rule 903 of Regulation S.
"Related Party" with respect to any Principal means (A) any
controlling stockholder, 50% (or more) owned Subsidiary, or spouse or immediate
family member (in the case of an individual) of such Principal or (B) any trust,
corporation, partnership or other entity, the beneficiaries, stockholders,
partners, owners or Persons beneficially holding a 50% or more controlling
interest of which consist of such Principal and/or such other Persons referred
to in the immediately preceding clause (A).
"Responsible Officer," when used with respect to the Trustee, means
any officer within the Corporate Trust Department of the Trustee (or any
successor group of the Trustee) or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his or her
knowledge of and familiarity with the particular subject.
"Restricted Definitive Note" means a Definitive Note bearing the
Private Placement Legend.
"Restricted Global Note" means a Global Note bearing the Private
Placement Legend.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Period" means the 40-day restricted period as defined in
Regulation S.
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"Restricted Subsidiary" of a Person means any Subsidiary of the
referent Person that is not an Unrestricted Subsidiary.
"Rule 144" means Rule 144 promulgated under the Securities Act.
"Rule 144A" means Rule 144A promulgated under the Securities Act.
"Rule 903" means Rule 903 promulgated under the Securities Act.
"Rule 904" means Rule 904 promulgated the Securities Act.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Shelf Registration Statement" means the Shelf Registration Statement
as defined in the Registration Rights Agreement.
"Significant Subsidiary" means any 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, and amended from time to time .
"Stated Maturity" means, with respect to any installment of interest
or principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"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 Guarantee" shall mean the joint and several Guarantee by
the Domestic Subsidiaries of the Company's obligations under the Notes, in
substantially the form of such Subsidiary Guarantee attached as Exhibit D to
this Indenture.
"Subsidiary Guarantor" means each Domestic Subsidiary that executes a
Subsidiary Guarantee in accordance with the provisions of this Indenture, and
their respective successors and assigns.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. (S)(S) 77aaa-
77bbbb) as in effect on the date on which this Indenture is qualified under the
TIA.
"Trustee" means the party named as such above until a successor
replaces it in accordance with the applicable provisions of this Indenture and
thereafter means the successor serving hereunder.
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"Unrestricted Global Note" means a permanent global Note in the form
of Exhibit A-1 attached hereto that bears the Global Note Legend and that has
the "Schedule of Exchanges of Interests in the Global Note" attached thereto,
and that is deposited with or on behalf of and registered in the name of the
Depositary, representing a series of Notes that do not bear the Private
Placement Legend.
"Unrestricted Definitive Note" means one or more Definitive Notes that
do not bear and are not required to bear the Private Placement Legend.
"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 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 under Section 4.09, 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 under Section 4.09 hereof, calculated on a pro forma basis as if
such designation had occurred at the beginning of the four-quarter reference
period, and (ii) no Default or Event of Default would be in existence following
such designation.
"U.S. Person" means a U.S. person as defined in Rule 902(o) under the
Securities Act.
"Voting Stock" of any Person as of any date means the Capital Stock of
such Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"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.
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"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
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 Restricted
Subsidiaries of such Person and one or more Wholly Owned Restricted Subsidiaries
of such Person.
SECTION 1.02. OTHER DEFINITIONS.
Defined in
Term Section
"Affiliate Transaction"...................... 4.11
"Asset Sale Offer".......................... 4.10
"Authentication Order"....................... 2.02
"Change of Control Offer".................... 4.15
"Change of Control Payment".................. 4.15
"Change of Control Payment Date"............. 4.15
"Covenant Defeasance"........................ 8.03
"DTC"........................................ 2.03
"EBITDA"..................................... 4.03
"Event of Default"........................... 6.01
"Excess Proceeds"............................ 4.10
"incur"...................................... 4.09
"Legal Defeasance"........................... 8.02
"Offer Amount"............................... 3.09
"Offer Period"............................... 3.09
"Paying Agent"............................... 2.03
"Permitted Debt"............................. 4.09
"Purchase Date".............................. 3.09
"Registrar".................................. 2.03
"Regulation S Temporary Global Note Legend".. 2.06
"Restricted Payments"........................ 4.07
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; and
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<PAGE>
"obligor" on the Notes and the Subsidiary Guarantees means the Company
and the Subsidiary 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:
(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.
ARTICLE 2.
THE NOTES
SECTION 2.01. FORM AND DATING.
(a) General. The Notes and the Trustee's certificate of
authentication shall be substantially in the form of Exhibit A hereto. The
Notes may have notations, legends or endorsements required by law, stock
exchange rule or usage. Each Note shall be dated the date of its
authentication. The Notes shall be in denominations of $1,000 and integral
multiples thereof .
The terms and provisions contained in the Notes shall constitute, and
are hereby expressly made, a part of this Indenture and the Company and the
Trustee, by their execution and delivery of this Indenture, expressly agree to
such terms and provisions and to be bound thereby. However, to the extent any
provision of any Note conflicts with the express provisions of this Indenture,
the provisions of this Indenture shall govern and be controlling.
(b) Form of Notes. Notes issued in global form shall be substantially
in the form of Exhibits A-1 or A-2 attached hereto (including the Global Note
Legend thereon and the "Schedule of Exchanges of Interests in the Global Note"
attached thereto). Notes issued in definitive form shall be substantially in
the form of Exhibit A-1 attached hereto (but without the Global Note Legend
thereon and without the "Schedule of Exchanges of Interests in the Global Note"
attached thereto). 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 principal amount of outstanding Notes from time to time
endorsed thereon and that the aggregate principal 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 aggregate
principal amount of
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outstanding Notes represented thereby shall be made by the Trustee or the Note
Custodian, at the direction of the Trustee, in accordance with instructions
given by the Holder thereof as required by Section 2.06 hereof.
(c) Temporary Global Notes. 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
Euroclear or Cedel Bank, duly executed by the Company and authenticated by the
Trustee as hereinafter provided. The Restricted Period 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 non-United 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 during the Restricted Period pursuant to another exemption from
registration under the Securities Act and who will take delivery of a beneficial
ownership interest in a 144A Global Note, bearing a Private Placement Legend,
all as contemplated by Section 2.06(a)(ii) hereof), and (ii) an Officers'
Certificate from the Company. Following the termination of the 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 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.
(d) Euroclear and Cedel Procedures Applicable. The provisions of the
"Operating Procedures of the Euroclear System" and "Terms and Conditions
Governing Use of Euroclear" and the "General Terms and Conditions of Cedel Bank"
and "Customer Handbook" of Cedel Bank shall be applicable to transfers of
beneficial interests in the Regulation S Temporary Global Note and the
Regulation S Permanent Global Notes that are held by Participants through
Euroclear or Cedel Bank.
SECTION 2.02. EXECUTION AND AUTHENTICATION.
One Officer shall sign the Notes for the Company by manual or
facsimile signature. The Company's seal may be reproduced on the Notes and may
be in facsimile form.
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.
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 two
Officers (an "Authentication Order"), authenticate Notes for original issue up
to the aggregate principal amount stated
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in paragraph 4 of the Notes. 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 Holders 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 its Subsidiaries 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 Note Custodian with respect to the Global Notes.
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, premium or Liquidated Damages, if any, or interest on the Notes, and
will notify the Trustee of any default by the Company 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
Subsidiary) shall have no further liability for the money. If the Company or a
Subsidiary 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 reorganization proceedings relating to the Company, 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 (S) 312(a). If the Trustee is
not the Registrar, the Company 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 or such
shorter time as the Trustee may allow, as the Trustee may
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reasonably require of the names and addresses of the Holders of Notes and the
Company shall otherwise comply with TIA (S) 312(a).
SECTION 2.06. TRANSFER AND EXCHANGE.
(a) Transfer and Exchange of Global Notes. A Global Note may not be
transferred as a whole except by the Depositary to a nominee of the Depositary,
by a nominee of the Depositary to the Depositary or to another nominee of the
Depositary, or by the Depositary or any such nominee to a successor Depositary
or a nominee of such successor Depositary. All Global Notes will be exchanged
by the Company for Definitive Notes if (i) the Company delivers to the Trustee
notice from the Depositary that it is unwilling or unable to continue to act as
Depositary or that it is no longer a clearing agency registered under the
Exchange Act and, in either case, a successor Depositary is not appointed by the
Company within 120 days after the date of such notice from the Depositary or
(ii) the Company in its sole discretion determines that the Global Notes (in
whole but not in part) should be exchanged for Definitive Notes and delivers a
written notice to such effect to the Trustee; provided that in no event shall
the Regulation S Temporary Global Note be exchanged by the Company for
Definitive Notes prior to (x) the expiration of the Restricted Period and (y)
the receipt by the Registrar of any certificates required pursuant to Rule
903(c)(3)(ii)(B) under the Securities Act. Upon the occurrence of either of the
preceding events in (i) or (ii) above, Definitive Notes shall be issued in such
names as the Depositary shall instruct the Trustee. Global Notes also may be
exchanged or replaced, in whole or in part, as provided in Sections 2.07 and
2.10 hereof. Every Note authenticated and delivered in exchange for, or in lieu
of, a Global Note or any portion thereof, pursuant to this Section 2.06 or
Section 2.07 or 2.10 hereof, shall be authenticated and delivered in the form
of, and shall be, a Global Note. A Global Note may not be exchanged for another
Note other than as provided in this Section 2.06(a), however, beneficial
interests in a Global Note may be transferred and exchanged as provided in
Section 2.06(b),(c) or (f) hereof.
(b) Transfer and Exchange of Beneficial Interests in the Global Notes.
The transfer and exchange of beneficial interests in the Global Notes shall be
effected through the Depositary, in accordance with the provisions of this
Indenture and the Applicable Procedures. Beneficial interests in the Restricted
Global Notes shall be subject to restrictions on transfer comparable to those
set forth herein to the extent required by the Securities Act. Transfers of
beneficial interests in the Global Notes also shall require compliance with
either subparagraph (i) or (ii) below, as applicable, as well as one or more of
the other following subparagraphs, as applicable:
(i) Transfer of Beneficial Interests in the Same Global Note. Beneficial
interests in any Restricted Global Note may be transferred to Persons who take
delivery thereof in the form of a beneficial interest in the same Restricted
Global Note in accordance with the transfer restrictions set forth in the
Private Placement Legend; provided, however, that prior to the expiration of
the Restricted Period, transfers of beneficial interests in the Temporary
Regulation S Global Note may not be made to a U.S. Person or for the account
or benefit of a U.S. Person (other than the Initial Purchaser). Beneficial
interests in any Unrestricted Global Note may be transferred to Persons who
take delivery thereof in the form of a beneficial interest in an Unrestricted
Global Note. No written orders or instructions shall be required to be
delivered to the Registrar to effect the transfers described in this Section
2.06(b)(i).
(ii) All Other Transfers and Exchanges of Beneficial Interests in Global
Notes. In connection with all transfers and exchanges of beneficial interests
that are not subject to Section 2.06(b)(i) above, the transferor of such
beneficial interest must deliver to the Registrar either (A) (1) a written
order from a Participant or an Indirect Participant given to the Depositary in
accordance with
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the Applicable Procedures directing the Depositary to credit or cause to be
credited a beneficial interest in another Global Note in an amount equal to
the beneficial interest to be transferred or exchanged and (2) instructions
given in accordance with the Applicable Procedures containing information
regarding the Participant account to be credited with such increase or (B) (1)
a written order from a Participant or an Indirect Participant given to the
Depositary in accordance with the Applicable Procedures directing the
Depositary to cause to be issued a Definitive Note in an amount equal to the
beneficial interest to be transferred or exchanged and (2) instructions given
by the Depositary to the Registrar containing information regarding the Person
in whose name such Definitive Note shall be registered to effect the transfer
or exchange referred to in (1) above; provided that in no event shall
Definitive Notes be issued upon the transfer or exchange of beneficial
interests in the Regulation S Temporary Global Note prior to (x) the
expiration of the Restricted Period and (y) the receipt by the Registrar of
any certificates required pursuant to Rule 903(c)(3)(ii)(b) under the
Securities Act. Upon consummation of an Exchange Offer by the Company in
accordance with Section 2.06(f) hereof, the requirements of this Section
2.06(b)(ii) shall be deemed to have been satisfied upon receipt by the
Registrar of the instructions contained in the Letter of Transmittal delivered
by the Holder of such beneficial interests in the Restricted Global Notes.
Upon satisfaction of all of the requirements for transfer or exchange of
beneficial interests in Global Notes contained in this Indenture and the Notes
or otherwise applicable under the Securities Act, the Trustee shall adjust the
principal amount of the relevant Global Note(s) pursuant to Section 2.06(h)
hereof.
(iii) Transfer of Beneficial Interests to Another Restricted Global Note.
A beneficial interest in any Restricted Global Note may be transferred to a
Person who takes delivery thereof in the form of a beneficial interest in
another Restricted Global Note if the transfer complies with the requirements
of Section 2.06(b)(ii) above and the Registrar receives the following:
(A) if the transferee will take delivery in the form of a beneficial
interest in the 144A Global Note, then the transferor must deliver a
certificate in the form of Exhibit B hereto, including the certifications
in item (1) thereof; and
(B) if the transferee will take delivery in the form of a beneficial
interest in the Regulation S Temporary Global Note or the Regulation S
Global Note, then the transferor must deliver a certificate in the form
of Exhibit B hereto, including the certifications in item (2) thereof.
(iv) Transfer and Exchange of Beneficial Interests in a Restricted Global
Note for Beneficial Interests in the Unrestricted Global Note. A beneficial
interest in any Restricted Global Note may be exchanged by any holder thereof
for a beneficial interest in an Unrestricted Global Note or transferred to a
Person who takes delivery thereof in the form of a beneficial interest in an
Unrestricted Global Note if the exchange or transfer complies with the
requirements of Section 2.06(b)(ii) above and:
(A) such exchange or transfer is effected pursuant to the Exchange
Offer in accordance with the Registration Rights Agreement and the holder
of the beneficial interest to be transferred, in the case of an exchange,
or the transferee, in the case of a transfer, certifies in the applicable
Letter of Transmittal that it is not (1) a broker-dealer, (2) a Person
participating in the distribution of the Exchange Notes or (3) a Person
who is an affiliate (as defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf Registration
Statement in accordance with the Registration Rights Agreement;
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(C) such transfer is effected by a Participating Broker-Dealer
pursuant to the Exchange Offer Registration Statement in accordance with
the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a Restricted
Global Note proposes to exchange such beneficial interest for a beneficial
interest in an Unrestricted Global Note, a certificate from such holder in
the form of Exhibit C hereto, including the certifications in item (1)(a)
thereof; or
(2) if the holder of such beneficial interest in a Restricted
Global Note proposes to transfer such beneficial interest to a Person who
shall take delivery thereof in the form of a beneficial interest in an
Unrestricted Global Note, a certificate from such holder in the form of
Exhibit B hereto, including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the Registrar
or the Company so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar and/or
the Company, if applicable to the effect that such exchange or transfer is
in compliance with the Securities Act and that the restrictions on transfer
contained herein and in the Private Placement Legend are no longer required
in order to maintain compliance with the Securities Act.
If any such transfer is effected pursuant to subparagraph (B) or (D)
above at a time when an Unrestricted Global Note has not yet been issued, the
Company shall issue and, upon receipt of an Authentication Order in accordance
with Section 2.02 hereof, the Trustee shall authenticate one or more
Unrestricted Global Notes in an aggregate principal amount equal to the
aggregate principal amount of beneficial interests transferred pursuant to
subparagraph (B) or (D) above.
Beneficial interests in an Unrestricted Global Note cannot be
exchanged for, or transferred to Persons who take delivery thereof in the form
of, a beneficial interest in a Restricted Global Note.
(c) Transfer or Exchange of Beneficial Interests for Definitive Notes.
(i) Beneficial Interests in Restricted Global Notes to Restricted
Definitive Notes. If any holder of a beneficial interest in a Restricted
Global Note proposes to exchange such beneficial interest for a Restricted
Definitive Note or to transfer such beneficial interest to a Person who takes
delivery thereof in the form of a Restricted Definitive Note, then, upon
receipt by the Registrar of the following documentation:
(A) if the holder of such beneficial interest in a Restricted Global
Note proposes to exchange such beneficial interest for a Restricted
Definitive Note, a certificate from such holder in the form of Exhibit C
hereto, including the certifications in item (2)(a) thereof;
(B) if such beneficial interest is being transferred to a QIB in
accordance with Rule 144A under the Securities Act, a certificate to the
effect set forth in Exhibit B hereto, including the certifications in
item (1) thereof;
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(C) if such beneficial interest is being transferred to a Non-U.S.
Person in an offshore transaction in accordance with Rule 903 or Rule 904
under the Securities Act, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (2) thereof;
(D) if such beneficial interest is being transferred pursuant to an
exemption from the registration requirements of the Securities Act in
accordance with Rule 144 under the Securities Act, a certificate to the
effect set forth in Exhibit B hereto, including the certifications in
item (3)(a) thereof;
(E) if such beneficial interest is being transferred to an
Institutional Accredited Investor in reliance on an exemption from the
registration requirements of the Securities Act other than those listed
in subparagraphs (B) through (D) above, a certificate to the effect set
forth in Exhibit B hereto, including the certifications, certificates and
Opinion of Counsel required by item (3) thereof, if applicable;
(F) if such beneficial interest is being transferred to the Company or
any of its Subsidiaries, a certificate to the effect set forth in Exhibit
B hereto, including the certifications in item (3)(b) thereof; or
(G) if such beneficial interest is being transferred pursuant to an
effective registration statement under the Securities Act, a certificate
to the effect set forth in Exhibit B hereto, including the certifications
in item (3)(c) thereof,
the Trustee shall cause the aggregate principal amount of the applicable
Global Note to be reduced accordingly pursuant to Section 2.06(h) hereof,
and the Company shall execute and upon receipt of an Authentication Order
upon receipt of an Authentication Order the Trustee shall authenticate and
deliver to the Person designated in the instructions a Definitive Note in
the appropriate principal amount. Any Definitive Note issued in exchange
for a beneficial interest in a Restricted Global Note pursuant to this
Section 2.06(c) shall be registered in such name or names and in such
authorized denomination or denominations as the holder of such beneficial
interest shall instruct the Registrar through instructions from the
Depositary and the Participant or Indirect Participant. The Trustee shall
deliver such Definitive Notes to the Persons in whose names such Notes are
so registered. Any Definitive Note issued in exchange for a beneficial
interest in a Restricted Global Note pursuant to this Section 2.06(c)(i)
shall bear the Private Placement Legend and shall be subject to all
restrictions on transfer contained therein.
(ii) Notwithstanding Sections 2.06(c)(i)(A) and (C) hereof, a beneficial
interest in the Regulation S Temporary Global Note may not be exchanged for a
Definitive Note or transferred to a Person who takes delivery thereof in the
form of a Definitive Note prior to (x) the expiration of the Restricted Period
and (y) the receipt by the Registrar of any certificates required pursuant to
Rule 903(c)(3)(ii)(B) under the Securities Act, except in the case of a
transfer pursuant to an exemption from the registration requirements of the
Securities Act other than Rule 903 or Rule 904.
(iii) Beneficial Interests in Restricted Global Notes to Unrestricted
Definitive Notes. A holder of a beneficial interest in a Restricted Global
Note may exchange such beneficial interest for an Unrestricted Definitive Note
or may transfer such beneficial interest to a Person who takes delivery
thereof in the form of an Unrestricted Definitive Note only if:
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(A) such exchange or transfer is effected pursuant to the Exchange
Offer in accordance with the Registration Rights Agreement and the holder
of such beneficial interest, in the case of an exchange, or the
transferee, in the case of a transfer, certifies in the applicable Letter
of Transmittal that it is not (1) a broker-dealer, (2) a Person
participating in the distribution of the Exchange Notes or (3) a Person
who is an affiliate (as defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf Registration
Statement in accordance with the Registration Rights Agreement;
(C) such transfer is effected by a Broker-Dealer pursuant to the
Exchange Offer Registration Statement in accordance with the Registration
Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a Restricted Global
Note proposes to exchange such beneficial interest for a Definitive Note
that does not bear the Private Placement Legend, a certificate from such
holder in the form of Exhibit C hereto, including the certifications in
item (1)(b) thereof; or
(2) if the holder of such beneficial interest in a Restricted Global
Note proposes to transfer such beneficial interest to a Person who shall
take delivery thereof in the form of a Definitive Note that does not bear
the Private Placement Legend, a certificate from such holder in the form of
Exhibit B hereto, including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the Registrar
or the Company so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar and/or
the Company, if applicable to the effect that such exchange or transfer is
in compliance with the Securities Act and that the restrictions on transfer
contained herein and in the Private Placement Legend are no longer required
in order to maintain compliance with the Securities Act.
(iv) Beneficial Interests in Unrestricted Global Notes to Unrestricted
Definitive Notes. If any holder of a beneficial interest in an Unrestricted
Global Note proposes to exchange such beneficial interest for a Definitive
Note or to transfer such beneficial interest to a Person who takes delivery
thereof in the form of a Definitive Note, then, upon satisfaction of the
conditions set forth in Section 2.06(b)(ii) hereof, the Trustee shall cause
the aggregate principal amount of the applicable Global Note to be reduced
accordingly pursuant to Section 2.06(h) hereof, and the Company shall execute
and the Trustee shall authenticate and deliver to the Person designated in the
instructions a Definitive Note in the appropriate principal amount. Any
Definitive Note issued in exchange for a beneficial interest pursuant to this
Section 2.06(c)(iv) shall be registered in such name or names and in such
authorized denomination or denominations as the holder of such beneficial
interest shall instruct the Registrar through instructions from the Depositary
and the Participant or Indirect Participant. The Trustee shall deliver such
Definitive Notes to the Persons in whose names such Notes are so registered.
Any Definitive Note issued in exchange for a beneficial interest pursuant to
this Section 2.06(c)(iv) shall not bear the Private Placement Legend.
(d) Transfer and Exchange of Definitive Notes for Beneficial Interests.
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(i) Restricted Definitive Notes to Beneficial Interests in Restricted
Global Notes. If any Holder of a Restricted Definitive Note proposes to
exchange such Note for a beneficial interest in a Restricted Global Note or to
transfer such Restricted Definitive Notes to a Person who takes delivery
thereof in the form of a beneficial interest in a Restricted Global Note,
then, upon receipt by the Registrar of the following documentation:
(A) if the Holder of such Restricted Definitive Note proposes to
exchange such Note for a beneficial interest in a Restricted Global Note,
a certificate from such Holder in the form of Exhibit C hereto, including
the certifications in item (2)(b) thereof;
(B) if such Restricted Definitive Note is being transferred to a QIB
in accordance with Rule 144A under the Securities Act, a certificate to
the effect set forth in Exhibit B hereto, including the certifications in
item (1) thereof;
(C) if such Restricted Definitive Note is being transferred to a Non-
U.S. Person in an offshore transaction in accordance with Rule 903 or
Rule 904 under the Securities Act, a certificate to the effect set forth
in Exhibit B hereto, including the certifications in item (2) thereof;
(D) if such Restricted Definitive Note is being transferred pursuant
to an exemption from the registration requirements of the Securities Act
in accordance with Rule 144 under the Securities Act, a certificate to
the effect set forth in Exhibit B hereto, including the certifications in
item (3)(a) thereof;
(E) if such Restricted Definitive Note is being transferred to an
Institutional Accredited Investor in reliance on an exemption from the
registration requirements of the Securities Act other than those listed
in subparagraphs (B) through (D) above, a certificate to the effect set
forth in Exhibit B hereto, including the certifications, certificates and
Opinion of Counsel required by item (3) thereof, if applicable;
(F) if such Restricted Definitive Note is being transferred to the
Company or any of its Subsidiaries, a certificate to the effect set forth
in Exhibit B hereto, including the certifications in item (3)(b) thereof;
or
(G) if such Restricted Definitive Note is being transferred pursuant
to an effective registration statement under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including the
certifications in item (3)(c) thereof,
the Trustee shall cancel the Restricted Definitive Note, increase or cause
to be increased the aggregate principal amount of, in the case of clause
(A) above, the appropriate Restricted Global Note, in the case of clause
(B) above, the 144A Global Note, in the case of clause (C) above, the
Regulation S Global Note.
(ii) Restricted Definitive Notes to Beneficial Interests in Unrestricted
Global Notes. A Holder of a Restricted Definitive Note may exchange such Note
for a beneficial interest in an Unrestricted Global Note or transfer such
Restricted Definitive Note to a Person who takes delivery thereof in the form
of a beneficial interest in an Unrestricted Global Note only if:
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(A) such exchange or transfer is effected pursuant to the Exchange
Offer in accordance with the Registration Rights Agreement and the
Holder, in the case of an exchange, or the transferee, in the case of a
transfer, certifies in the applicable Letter of Transmittal that it is
not (1) a broker-dealer, (2) a Person participating in the distribution
of the Exchange Notes or (3) a Person who is an affiliate (as defined in
Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf Registration
Statement in accordance with the Registration Rights Agreement;
(C) such transfer is effected by a Broker-Dealer pursuant to the
Exchange Offer Registration Statement in accordance with the Registration
Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Definitive Notes proposes to exchange such
Notes for a beneficial interest in the Unrestricted Global Note, a
certificate from such Holder in the form of Exhibit C hereto, including the
certifications in item (1)(c) thereof; or
(2) if the Holder of such Definitive Notes proposes to transfer such
Notes to a Person who shall take delivery thereof in the form of a
beneficial interest in the Unrestricted Global Note, a certificate from
such Holder in the form of Exhibit B hereto, including the certifications
in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the Registrar
so requests or if the Applicable Procedures so require, an Opinion of
Counsel in form reasonably acceptable to the Registrar and or/the Company,
if applicable to the effect that such exchange or transfer is in compliance
with the Securities Act and that the restrictions on transfer contained
herein and in the Private Placement Legend are no longer required in order
to maintain compliance with the Securities Act.
Upon satisfaction of the conditions of any of the subparagraphs in this
Section 2.06(d)(ii), the Trustee shall cancel the Definitive Notes and
increase or cause to be increased the aggregate principal amount of the
Unrestricted Global Note.
(iii) Unrestricted Definitive Notes to Beneficial Interests in
Unrestricted Global Notes. A Holder of an Unrestricted Definitive Note may
exchange such Note for a beneficial interest in an Unrestricted Global Note or
transfer such Definitive Notes to a Person who takes delivery thereof in the
form of a beneficial interest in an Unrestricted Global Note at any time.
Upon receipt of a request for such an exchange or transfer, the Trustee shall
cancel the applicable Unrestricted Definitive Note and increase or cause to be
increased the aggregate principal amount of one of the Unrestricted Global
Notes.
If any such exchange or transfer from a Definitive Note to a
beneficial interest is effected pursuant to subparagraphs (ii)(B), (ii)(D) or
(iii) above at a time when an Unrestricted Global Note has not yet been issued,
the Company shall issue and, upon receipt of an Authentication Order in
accordance with Section 2.02 hereof, the Trustee shall authenticate one or more
Unrestricted Global Notes in an aggregate principal amount equal to the
principal amount of Definitive Notes so transferred.
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(e) Transfer and Exchange of Definitive Notes for Definitive Notes.
Upon request by a Holder of Definitive Notes and such Holder's compliance with
the provisions of this Section 2.06(e), the Registrar shall register the
transfer or exchange of Definitive Notes. Prior to such registration of
transfer or exchange, the requesting Holder shall present or surrender to the
Registrar the Definitive Notes duly endorsed or accompanied by a written
instruction of transfer in form satisfactory to the Registrar duly executed by
such Holder or by his attorney, duly authorized in writing. In addition, the
requesting Holder shall provide any additional certifications, documents and
information, as applicable, required pursuant to the following provisions of
this Section 2.06(e).
(i) Restricted Definitive Notes to Restricted Definitive Notes. Any
Restricted Definitive Note may be transferred to and registered in the name of
Persons who take delivery thereof in the form of a Restricted Definitive Note
if the Registrar receives the following:
(A) if the transfer will be made pursuant to Rule 144A under the
Securities Act, then the transferor must deliver a certificate in the
form of Exhibit B hereto, including the certifications in item (1)
thereof;
(B) if the transfer will be made pursuant to Rule 903 or Rule 904,
then the transferor must deliver a certificate in the form of Exhibit B
hereto, including the certifications in item (2) thereof; and
(C) if the transfer will be made pursuant to any other exemption from
the registration requirements of the Securities Act, then the transferor
must deliver a certificate in the form of Exhibit B hereto, including the
certifications, certificates and Opinion of Counsel required by item (3)
thereof, if applicable.
(ii) Restricted Definitive Notes to Unrestricted Definitive Notes. Any
Restricted Definitive Note may be exchanged by the Holder thereof for an
Unrestricted Definitive Note or transferred to a Person or Persons who take
delivery thereof in the form of an Unrestricted Definitive Note if:
(A) such exchange or transfer is effected pursuant to the Exchange
Offer in accordance with the Registration Rights Agreement and the
Holder, in the case of an exchange, or the transferee, in the case of a
transfer, certifies in the applicable Letter of Transmittal that it is
not (1) a broker-dealer, (2) a Person participating in the distribution
of the Exchange Notes or (3) a Person who is an affiliate (as defined in
Rule 144) of the Company;
(B) any such transfer is effected pursuant to the Shelf Registration
Statement in accordance with the Registration Rights Agreement;
(C) any such transfer is effected by a Participating Broker-Dealer
pursuant to the Exchange Offer Registration Statement in accordance with
the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Restricted Definitive Notes proposes to
exchange such Notes for an Unrestricted Definitive Note, a certificate from
such Holder in the form of Exhibit C hereto, including the certifications
in item (1)(d) thereof; or
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(2) if the Holder of such Restricted Definitive Notes proposes to
transfer such Notes to a Person who shall take delivery thereof in the form
of an Unrestricted Definitive Note, a certificate from such Holder in the
form of Exhibit B hereto, including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the Registrar
or the Company so requests, an Opinion of Counsel in form reasonably
acceptable to the Registrar and the Company, if applicable to the effect
that such exchange or transfer is in compliance with the Securities Act and
that the restrictions on transfer contained herein and in the Private
Placement Legend are no longer required in order to maintain compliance
with the Securities Act.
(iii) Unrestricted Definitive Notes to Unrestricted Definitive Notes. A
Holder of Unrestricted Definitive Notes may transfer such Notes to a Person
who takes delivery thereof in the form of an Unrestricted Definitive Note.
Upon receipt of a request to register such a transfer, the Registrar shall
register the Unrestricted Definitive Notes pursuant to the instructions from
the Holder thereof.
(f) Exchange Offer. Upon the occurrence 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, the
Trustee shall authenticate (i) one or more Unrestricted Global Notes in an
aggregate principal amount equal to the principal amount of the beneficial
interests in the Restricted Global Notes tendered for acceptance by Persons that
certify in the applicable Letters of Transmittal that (x) they are not broker-
dealers, (y) they are not participating in a distribution of the Exchange Notes
and (z) they are not affiliates (as defined in Rule 144) of the Company, and
accepted for exchange in the Exchange Offer and (ii) Definitive Notes in an
aggregate principal amount equal to the principal amount of the Restricted
Definitive Notes accepted for exchange in the Exchange Offer. Concurrently with
the issuance of such Notes, the Trustee shall cause the aggregate principal
amount of the applicable Restricted Global Notes to be reduced accordingly, and
the Company shall execute and the Trustee shall authenticate and deliver to the
Persons designated by the Holders of Definitive Notes so accepted Definitive
Notes in the appropriate principal amount.
(g) Legends.
The following legends shall appear on the face of all Global Notes and
Definitive Notes issued under this Indenture unless specifically stated
otherwise in the applicable provisions of this Indenture.
(i) Private Placement Legend.
(A) Except as permitted by subparagraph (B) below, each Global Note
and each Definitive Note (and all Notes issued in exchange therefor or
substitution thereof) shall bear the legend in substantially the
following form
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED
IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE
SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED
IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM.
EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE
SELLER OF THIS NOTE MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF
SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A AND REGULATION S
THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE
BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY MAY BE RESOLD,
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PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1)(a) TO A PERSON WHO THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144A, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER
THE SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT
OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF
THE COMPANY SO REQUESTS), (2) TO THE COMPANY OR (3) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER
APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER
IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE SECURITY EVIDENCED
HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE."
(B) Notwithstanding the foregoing, any Global Note or Definitive Note
issued pursuant to subparagraphs (b)(iv), (c)(iii), (c)(iv), (d)(ii),
(d)(iii), (e)(ii), (e)(iii) or (f) to this Section 2.06 (and all Notes
issued in exchange therefor or substitution thereof) shall not bear the
Private Placement Legend.
(ii) Global Note Legend. Each Global Note shall bear a legend in
substantially the following form:
"THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE
BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY
CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS
MAY BE REQUIRED PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL
NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a)
OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE
FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS
GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR
WRITTEN CONSENT OF THE COMPANY."
(iii) Regulation S Temporary Global Note Legend. The Regulation S
Temporary Global Note shall bear a legend in substantially the following form:
"THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE
CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES,
ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER
NOR THE BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL
BE ENTITLED TO RECEIVE PAYMENT OF INTEREST HEREON."
(h) Cancellation and/or Adjustment of Global Notes. At such time as
all beneficial interests in a particular Global Note have been exchanged for
Definitive Notes or a particular Global Note has been redeemed, repurchased or
cancelled in whole and not in part, each such Global Note shall be returned to
or retained and cancelled 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 or transferred to a
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Person who will take delivery thereof in the form of a beneficial interest in
another Global Note or for Definitive Notes, 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 by the Depositary at the
direction of the Trustee to reflect such reduction; and if the beneficial
interest is being exchanged for or transferred to a Person who will take
delivery thereof in the form of a beneficial interest in another Global Note,
such other Global Note shall be increased accordingly and an endorsement shall
be made on such Global Note by the Trustee or by the Depositary at the direction
of the Trustee to reflect such increase.
(i) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges, the Company
shall execute and the Trustee shall authenticate Global Notes and Definitive
Notes upon the Company's order or at the Registrar's request.
(ii) No service charge shall be made to a holder of a beneficial interest
in a Global Note or to a Holder of a Definitive Note 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 2.10, 3.06, 3.09, 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 Global Notes and Definitive Notes issued upon any registration
of transfer or exchange of Global Notes or Definitive Notes shall be the valid
obligations of the Company, evidencing the same debt, and entitled to the same
benefits under this Indenture, as the Global Notes or Definitive 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 any 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, (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 on such Notes and
for all other purposes, and none of the Trustee, any Agent or the Company
shall be affected by notice to the contrary.
(vii) The Trustee shall authenticate Global Notes and Definitive Notes in
accordance with the provisions of Section 2.02 hereof.
(viii) All certifications, certificates and Opinions of Counsel required
to be submitted to the Registrar pursuant to this Section 2.06 to effect a
registration of transfer or exchange may be submitted by facsimile.
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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 receipt of an
Authentication Order, 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 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 for its expenses in replacing a Note.
Every replacement Note is an additional obligation of the Company 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 cancelled 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 2.08 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; however, Notes held by the Company or a Subsidiary of
the Company shall not be deemed to be outstanding for purposes of Section
3.07(b) hereof.
If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Note is held by a bona fide purchaser.
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.
If the Paying Agent (other than the Company, a Subsidiary or an
Affiliate of any thereof) 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, or by any Person directly or indirectly controlling or controlled by or
under direct or indirect common control with the Company, 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 the Trustee knows are so owned shall be so disregarded.
Section 2.10. Temporary Notes
Until certificates representing Notes are ready for delivery, the
Company may prepare and the Trustee, upon receipt of an Authentication Order,
shall authenticate temporary Notes. Temporary Notes shall be substantially in
the form of certificated Notes but may have variations that the Company
considers appropriate for temporary Notes and as shall be reasonably acceptable
to the Trustee. Without
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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 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.
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 30 days but not more than 60 days before a redemption date, an
Officers' 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 or purchased in an
offer to purchase at any time, the Trustee shall select the Notes to be redeemed
or purchased 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 in
accordance with any other method the Trustee considers 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.
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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;
(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 cancellation of the original Note;
(d) the name and address of the Paying Agent;
(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 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; and
(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.
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, or such shorter
period allowed by the Trustee, prior to the redemption date, an Officers'
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.
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Section 3.05. Deposit of Redemption Price
One Business Day prior to 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 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,
all Notes to be redeemed.
If the Company complies with the provisions of the preceding
paragraph, on and after the redemption date, interest shall cease to accrue on
the Notes or the portions of Notes called for redemption. 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 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 shall be paid on the unpaid principal, from the redemption
date until such principal is paid, and to the extent lawful on any interest 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.
(a) Except as set forth in clause (b) of this Section 3.07, the Notes will
not be redeemable at the Company's option prior to January 15, 2003.
Thereafter, the Company shall have the option to redeem the Notes, in whole or
in part, upon not less than 30 nor more than 60 days' notice, at the redemption
prices (expressed as percentages of principal amount) set forth below plus
accrued and unpaid interest and Liquidated Damages, if any, thereon to the
applicable redemption date, if redeemed during the twelve-month period beginning
on January 15 of the years indicated below:
YEAR PERCENTAGE
---- ----------
2003..................................... 105.125%
2004..................................... 103.417%
2005..................................... 101.708%
2006 and thereafter...................... 100.000%
(b) Notwithstanding the provisions of clause (a) of this Section 3.07,
prior to January 15, 2001, the Company may redeem up to 35% of the principal
amount of Initial Notes at a redemption price of 110.25% of the aggregate
principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages thereon, if any, to the redemption date, with the net cash proceeds of
an initial public offering of common stock of the Company or a capital
contribution to the Company's common equity of the net cash proceeds of an
initial public offering of the Company's direct parent; provided that at least
$50.0 million in aggregate principal amount of Notes remain outstanding
immediately after the occurrence of such redemption (excluding Notes held by
the
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Company and its Subsidiaries); and provided, further that notice of such
redemption shall be given within 45 days of the date of the closing of such
initial public offering.
(c) 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.
The Company shall not be required to make mandatory redemption or
sinking fund 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 Asset Sale 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 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 shall be payable to
Holders who tender Notes pursuant to the Asset Sale Offer.
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 and the Purchase Date;
(c) that any Note not tendered or accepted for payment shall continue to
accrue interest;
(d) that, unless the Company defaults in making such payment, any Note
accepted for payment pursuant to the Asset Sale Offer shall cease to accrue
interest 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;
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(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 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 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 or before the Purchase Date, the Company shall, to the extent
lawful, accept for payment, on a pro rata basis to the extent necessary, the
Offer Amount of Notes or portions thereof tendered pursuant to the Asset Sale
Offer, or if less than the Offer Amount has been tendered, all Notes tendered,
and shall deliver to the Trustee an Officers' Certificate stating that such
Notes or portions thereof were accepted for payment by the Company in accordance
with the terms of this Section 3.09. The Company, the Depositary or the Paying
Agent, as the case may be, shall promptly (but in any case not later than five
days after the Purchase Date) mail or deliver to each tendering Holder an amount
equal to the purchase price of the Notes tendered by such Holder and accepted by
the Company for purchase, and the Company shall promptly issue a new Note, and
the Trustee, upon written request from the Company shall authenticate and mail
or deliver such new Note to such Holder, in a principal amount equal to any
unpurchased portion of the Note surrendered. Any Note not so accepted shall be
promptly mailed or delivered by the Company to the Holder thereof. The Company
shall publicly announce the results of the Asset Sale Offer on 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 a Subsidiary thereof,
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.
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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 then applicable interest rate on 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 (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.
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 Trustee and
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" that
describes the financial condition and results of operations of the Company and
its consolidated Subsidiaries (showing in reasonable detail, the revenues and
earnings before interest taxes depreciation and amortization ("EBITDA") of the
Company and its Restricted Subsidiaries separate from the revenues and EBITDA of
the Unrestricted Subsidiaries of the Company in the event that either the
revenue or the EBITDA of the Unrestricted Subsidiaries for the accounting period
covered thereby was greater than or equal to 10% of the revenue or EBITDA of the
Company and its consolidated Subsidiaries) 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 each
case within the time periods specified in the SEC's rules and regulations. In
addition, following the consummation of the exchange offer contemplated by the
Registration Rights Agreement, whether or not required by the rules and
regulations of the SEC, the Company shall file a copy of all such information
and reports with the SEC for public availability within the time periods
specified in the SEC's rules and regulations (unless the SEC will not accept
such a
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filing) and make such information available to securities analysts and
prospective investors upon request. The Company shall at all times comply with
TIA (S) 314(a).
(b) For so long as any Notes remain outstanding, the Company shall furnish
to the Holders and to securities analysts and prospective investors, 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 90 days after the end
of each fiscal year, an Officers' 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 Officers with a view to
determining whether the Company has kept, observed, performed and fulfilled its
obligations under this Indenture, and further stating, as to each such Officer
signing such certificate, that to the best of his or her knowledge the Company
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, 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.
(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 becoming aware of any Default or
Event of Default, an Officers' 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.
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Section 4.06. Stay, Extension and Usury Laws.
The Company 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 (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
(including, without limitation, any payment in connection with any merger or
consolidation involving the Company or any of its Restricted Subsidiaries) or to
the direct or indirect holders of the Company's Equity Interests in their
capacity as such (other than dividends or distributions payable in Equity
Interests (other than Disqualified Stock) of the Company or to the Company or a
Restricted Subsidiary of the Company); (ii) purchase, redeem or otherwise
acquire or retire for value (including, without limitation, in connection with
any merger or consolidation involving the Company) any Equity Interests of the
Company or any direct or indirect parent of the Company (other than any such
Equity Interests owned by the Company or any Wholly Owned Restricted Subsidiary
of the Company); (iii) make any payment on or with respect to, or purchase,
redeem, defease or otherwise acquire or retire for value any Indebtedness that
is subordinated to the Notes, except a payment of interest or principal at
Stated 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; and
(b) the Company would, at the time of such Restricted Payment and 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 Section 4.09 hereof; and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Company and its Restricted Subsidiaries
after the date of this Indenture (excluding Restricted Payments permitted by
clauses (ii), (iii) and (iv) of the next succeeding paragraph), is less than the
sum, without duplication, 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 this 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 since the date of this Indenture as a contribution to its common equity
capital or from the issue or sale of Equity Interests of the Company (other than
Disqualified Stock) or from the issue or sale of Disqualified Stock or debt
securities of the Company that have been converted into such Equity Interests
(other than Equity Interests (or Disqualified Stock or convertible debt
securities) sold to a Subsidiary of the Company), plus (iii) to the extent that
any Restricted Investment that was made after the
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date of this Indenture is sold for cash or otherwise liquidated or repaid 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 (iv) 50% of any dividends received by
the Company or a Wholly Owned Restricted Subsidiary thereof from an Unrestricted
Subsidiary of the Company representing Net Income of such Unrestricted
Subsidiary earned since the date of this Indenture; provided that such dividends
were not already included in calculating Consolidated Net Income of the Company
for such period.
The foregoing provisions shall not prohibit (i) the payment of any
dividend within 60 days after the date of declaration thereof, if at said date
of declaration such payment would have complied with the provisions of this
Indenture; (ii) the redemption, repurchase, retirement, defeasance or other
acquisition of any subordinated Indebtedness or Equity Interests of the Company
in exchange for, or out of the net cash proceeds of the substantially concurrent
sale (other than to a Restricted Subsidiary of the Company) of, other 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, defeasance or other acquisition shall be excluded from
clause (c)(ii) of the preceding paragraph; (iii) the defeasance, redemption,
repurchase or other acquisition of subordinated Indebtedness with the net cash
proceeds from an incurrence of Permitted Refinancing Indebtedness; (iv) the
payment of any dividend by a Restricted Subsidiary of the Company to the holders
of its common Equity Interests on a pro rata basis; (v) the repurchase,
redemption or other acquisition or retirement for value of any Equity Interests
of the Company or any Restricted Subsidiary of the Company held by any member of
the Company's (or any of its Restricted Subsidiaries') management pursuant to
any management equity subscription agreement or stock option agreement in effect
as of the date of this Indenture; provided that the aggregate price paid for all
such repurchased, redeemed, acquired or retired Equity Interests shall not
exceed $500,000 in any twenty-four-month period, provided that the amount
available in any given twelve-month period shall be increased by the excess, if
any, of (A) $500,000 over (B) the amount used pursuant to this clause (v) in the
immediately preceding twelve-month period and no Default or Event of Default
shall have occurred and be continuing immediately after such transaction; (vi)
(A) as long as NAC has no Material Assets other than the stock of the Company,
the payment to NAC in respect of taxes of NAC, the Company and its Subsidiaries
which are payable by or owed by NAC, and (B) if on or after January 1, 1998, NAC
owns or acquires any Material Asset other than the stock of the Company, the
payment to NAC in respect of federal (and state) income taxes for the tax
periods for which a federal consolidated return (and state combined return) is
filed by NAC for a consolidated (or combined) group of which NAC is the parent
and the Company and its Subsidiaries are members in an amount equal to the
amount of such federal (and state) income taxes allocable to the Company and its
Subsidiaries in accordance with the principles of Treasury Regulations Section
1.1552-1 (a) (2) (ii), as modified by the principles of Treasury Regulations
Section 1.1502-33 (d) (2), in either case, to the extent that such payments are
actually used by NAC to pay such taxes; provided, however, that for purposes of
this subsection (vi) only, the term "Material Asset" means any asset with a
gross value in excess of $200,000; and (vii) payments or dividends to NAC to
allow NAC to pay reasonable legal, accounting, investment banking, financial
advisory, management, outside director or other professional and administrative
fees and expenses incurred by it in an aggregate amount pursuant to this clause
(vii) not to exceed $750,000 per year.
The Board of Directors may designate any Restricted Subsidiary to be
an Unrestricted Subsidiary if such designation would not cause a Default. For
purposes of making such determination, all outstanding Investments by the
Company and its Restricted Subsidiaries (except to the extent repaid in cash) in
the Subsidiary so designated shall be deemed to be Restricted Payments at the
time of such designation and shall reduce the amount available for Restricted
Payments under the first paragraph of this Section 4.07. All such outstanding
Investments shall be deemed to constitute Investments in an amount
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equal to the fair market value of such Investments at the time of such
designation. Such designation shall only be permitted if such Restricted Payment
would be permitted at such time and if such Restricted Subsidiary otherwise
meets the definition of an Unrestricted Subsidiary.
The amount of all Restricted Payments (other than cash) shall be the
fair market value on the date of the Restricted Payment of the asset(s) or
securities proposed to be transferred or issued by the Company or such
Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment.
The fair market value of any non-cash Restricted Payment shall be determined by
the Board of Directors whose resolution with respect thereto shall be delivered
to the Trustee, such determination to be based upon an opinion or appraisal
issued by an accounting, appraisal or investment banking firm of national
standing if such fair market value exceeds $5.0 million. 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 this Section
4.07 were computed, together with a copy of any fairness opinion or appraisal
required by this Indenture.
Section 4.08. Dividend and Other Payment Restrictions Affecting 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) transfer any of its properties or assets to
the Company or any of its Restricted Subsidiaries. However, the foregoing
restrictions shall not apply to encumbrances or restrictions existing under or
by reason of (a) the Credit Agreement as in effect as of the date hereof and any
amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings thereof, provided that such amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings are no more restrictive, taken as a whole, with
respect to such dividend and other payment restrictions than those contained in
the Credit Agreement as in effect on the date hereof, (b) this Indenture and the
Notes, (c) applicable law, (d) any instrument governing 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, (e) customary non-assignment provisions in leases, licenses or
other agreements entered into in the ordinary course of business and consistent
with past practices, (f) 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, (g) any agreement for the sale
of a Restricted Subsidiary that restricts distributions by that Restricted
Subsidiary pending its sale, (h) Permitted Refinancing Indebtedness, provided
that the restrictions contained in the agreements governing such Permitted
Refinancing Indebtedness are no more restrictive, taken as a whole, than those
contained in the agreements governing the Indebtedness being refinanced, (i)
secured Indebtedness otherwise permitted to be incurred pursuant to the
provisions of Section 4.12 hereof that limits the right of the debtor to dispose
of the assets securing such Indebtedness, (j) provisions with respect to the
disposition or distribution of assets or property in joint venture agreements
and other similar agreements entered into in the ordinary course of business and
(k) restrictions on cash or other deposits or net worth imposed by customers
under contracts entered into in the ordinary course of business.
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Section 4.09. Incurrence of Indebtedness and Issuance of Preferred 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") any Indebtedness (including Acquired Debt) and that 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's most
recently ended four full fiscal quarters for which internal financial statements
are available immediately preceding the date on which such additional
Indebtedness is incurred or such Disqualified Stock is issued would have been at
least 2.0 to 1, 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, at the beginning of such four-quarter period.
The Company shall not incur any Indebtedness that is contractually
subordinated in right of payment to any other Indebtedness of the Company unless
such Indebtedness is also contractually subordinated in right of payment to the
Notes on substantially identical terms; provided, however, that no Indebtedness
of the Company shall be deemed to be contractually subordinated in right of
payment to any other Indebtedness of the Company solely by virtue of being
unsecured.
The provisions of the first paragraph of this covenant shall not
apply to the incurrence of any of the following items of Indebtedness
(collectively, "Permitted Debt"):
(i) the incurrence by the Company of term Indebtedness under Credit
Facilities; provided that the aggregate principal amount of all term
Indebtedness outstanding under all Credit Facilities after giving effect to
such incurrence does not exceed an amount equal to $25.0 million less the
aggregate amount of all repayments, optional or mandatory, of the principal of
any term Indebtedness under a Credit Facility that have been made since the
date of this Indenture;
(ii) the incurrence by the Company of revolving credit Indebtedness and
letters of credit (with letters of credit being deemed to have a principal
amount equal to the maximum potential liability of the Company and its
Subsidiaries thereunder) under Credit Facilities; provided that the aggregate
principal amount of all revolving credit Indebtedness outstanding under all
Credit Facilities after giving effect to such incurrence does not exceed an
amount equal to $35.0 million less the aggregate amount of all Net Proceeds of
Asset Sales applied to reduce the revolving credit commitments under a Credit
Facility pursuant to Section 4.10 hereof;
(iii) the incurrence by the Company of Indebtedness represented by the
Notes issued pursuant to the Offering;
(iv) the incurrence by the Company or any of its Subsidiaries of
Indebtedness represented by Capital Lease Obligations, mortgage financings or
purchase money obligations, in each case incurred for the purpose of financing
all or any part of the purchase price or cost of construction or improvement
of property, plant or equipment used in the business of the Company or such
Subsidiary, in an aggregate principal amount not to exceed $5.0 million at any
time outstanding;
(v) the incurrence by the Company or any of its Subsidiaries of Permitted
Refinancing Indebtedness in exchange for, or the net proceeds of which are
used to refund, refinance or replace
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Indebtedness (other than intercompany Indebtedness) that was permitted by this
Indenture to be incurred (x) pursuant to the Fixed Charge Coverage Ratio test
set forth in the first paragraph of this Section 4.09 or (y) pursuant to
clause (iii) of this Section 4.09;
(vi) the incurrence by the Company or any of its Restricted Subsidiaries
of intercompany Indebtedness between or among the Company and any of its
Wholly Owned Restricted Subsidiaries; provided, however, that (i) if the
Company is the obligor on such Indebtedness, such Indebtedness is expressly
subordinated to the prior payment in full in cash of all Obligations with
respect to the Notes and (ii)(A) any subsequent issuance or transfer of Equity
Interests that results in any such Indebtedness being held by a Person other
than the Company or a Restricted Subsidiary thereof and (B) any sale or other
transfer of any such Indebtedness to a Person that is not either the Company
or a Wholly Owned Restricted Subsidiary thereof 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 was not permitted by this
clause (vi);
(vii) the incurrence by the Company of Hedging Obligations that are
incurred for the purpose of fixing or hedging interest rate risk with respect
to any floating rate Indebtedness that is permitted by the terms of this
Indenture to be outstanding;
(viii) the Guarantee by the Company or any of the Subsidiary Guarantors of
Indebtedness of the Company or a Restricted Subsidiary of the Company that was
permitted to be incurred by another provision of this Section 4.09;
(ix) the incurrence by the Company or any of its Restricted Subsidiaries
of Earn-out Obligations in an aggregate amount not to exceed $5.0 million at
any time outstanding;
(x) 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 that was not permitted by this clause (x); and
(xi) the incurrence by the Company or any of its Restricted Subsidiaries
of additional Indebtedness in an aggregate principal amount (or accreted
value, as applicable) at any time outstanding not to exceed $10.0 million.
For purposes of determining compliance with this Section 4.09, in the
event that an item of Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (i) through (xi) above or is
entitled to be incurred pursuant to the first paragraph of this Section 4.09,
the Company shall, in its sole discretion, classify such item of Indebtedness in
any manner that complies with this Section 4.09. Accrual of interest and
accretion or amortization of original issue discount shall not be deemed to be
an incurrence of Indebtedness for purposes of this Section 4.09; provided, in
each such case, that the amount thereof is included in Fixed Charges of the
Company as accrued.
Section 4.10. Asset Sales
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, consummate 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
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assets or Equity Interests issued or sold or otherwise disposed of and (ii) at
least 75% of the consideration therefor received by the Company or such
Restricted Subsidiary is in the form of cash or long-term assets that are used
or useful in the same or similar line of business as the Company and its
Restricted Subsidiaries were engaged in on the date of such Asset Sale; 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 and (y) any securities, notes or
other obligations received by the Company or any such Restricted Subsidiary from
such transferee that are converted by the Company or such Restricted Subsidiary
into cash within 30 days of receipt (to the extent of the cash received), shall
be deemed to be cash for purposes of this provision.
Within 360 days after the receipt of any Net Proceeds from an Asset
Sale, the Company may apply such Net Proceeds at its option, (a) (i) to repay
term Indebtedness under the Credit Facilities or (ii) if no term Indebtedness
exists under the Credit Facilities, to reduce the revolving credit commitments
under the Credit Facilities or (b) to the acquisition of a majority of the
assets of, or a majority of the Voting Stock of, another business that is the
same or similar line of business as the Company and its Restricted Subsidiaries
were engaged in on the date of such Asset Sale, the making of a capital
expenditure or the acquisition of other long-term assets that are used or useful
in the same or similar line of business as the Company and its Restricted
Subsidiaries were engaged in on the date of such Asset Sale. Pending the final
application of any such Net Proceeds, the Company may temporarily reduce
revolving credit borrowings or otherwise invest such Net Proceeds in any manner
that is not prohibited by this Indenture. Any Net Proceeds from Asset Sales that
are not applied or invested as provided in the first sentence of this paragraph
will be deemed to constitute "Excess Proceeds." When the aggregate amount of
Excess Proceeds exceeds $5.0 million, the Company shall be required to make an
offer to all Holders of Notes and all holders of other Indebtedness containing
provisions similar to those set forth in this Indenture with respect to offers
to purchase or redeem with the proceeds of sales of assets (an "Asset Sale
Offer") to purchase the maximum principal amount of Notes and such other
Indebtedness 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 thereon, if any, to the date of
purchase, in accordance with the procedures set forth in Section 3.09 and such
other Indebtedness. To the extent that any Excess Proceeds remain after
consummation of an Asset Sale Offer, the Company may use such Excess Proceeds
for any purpose not otherwise prohibited by this Indenture. If the aggregate
principal amount of Notes tendered into such Asset Sale Offer 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 such offer to
purchase, the amount of Excess Proceeds shall be reset at zero.
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 transaction, 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 would 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 Officers' Certificate
certifying that such Affiliate Transaction complies with clause
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(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 such Affiliate Transaction from a financial point of view
issued by an accounting, appraisal or investment banking firm of national
standing. Notwithstanding the foregoing, the following items shall not be deemed
to be Affiliate Transactions: (i) any employment agreement or other compensation
plan or arrangement entered into by the Company or any of its Restricted
Subsidiaries in the ordinary course of business and consistent with the past
practice of the Company or such Restricted Subsidiary, (ii) transactions between
or among the Company and/or its Restricted Subsidiaries, (iii) payment of
reasonable directors fees or customary indemnification or similar arrangements,
(iv) Restricted Payments that are permitted by Section 4.07 hereof and (v)
payments and transactions in connection with the Transactions (as defined in the
Offering Memorandum) including the payment of any fees and expenses with respect
thereto, in each case to the extent disclosed in the Offering Memorandum under
the caption "Use of Proceeds."
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 on any asset now owned or hereafter acquired, or any income or profits
therefrom or assign or convey any right to receive income therefrom, except
Permitted Liens.
Section 4.13. Corporate Existence.
Subject to Article 5 hereof, the Company 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 or any
such Restricted Subsidiary and (ii) the rights (charter and statutory), licenses
and franchises of the Company and its Restricted Subsidiaries; provided,
however, that the Company shall not be required to preserve any such right,
license or franchise, or the corporate, partnership or other existence of any of
its 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 and its 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 4.14. Subsidiary Guarantees.
If the Company or any of its Domestic Subsidiaries shall acquire or
create another Domestic Subsidiary after the date hereof, then such newly
acquired or created Domestic Subsidiary shall execute a Subsidiary Guarantee in
the form attached hereto as Exhibit E and deliver an opinion of counsel, in
accordance with the terms of this Indenture, except for all Subsidiaries that
have properly been designated as Unrestricted Subsidiaries in accordance with
this Indenture for so long as they continue to constitute Unrestricted
Subsidiaries.
Section 4.15. Offer to Repurchase Upon Change of Control.
(a) Upon the occurrence of a Change of Control, the Company shall make an
offer (a "Change of Control Offer") to each Holder to repurchase all or any part
(equal to $1,000 or an integral multiple thereof) of each Holder's Notes at an
offer price in cash equal to 101% of the aggregate principal amount thereof plus
accrued and unpaid interest and Liquidated Damages thereon, if any, to the date
of
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purchase (the "Change of Control Payment"). Within 30 days following any Change
of Control, the Company shall mail a notice to each Holder stating: (1) that the
Change of Control Offer is being made pursuant to this Section 4.15 and that all
Notes tendered will be accepted for payment; (2) the purchase price and the
purchase date, which shall be no earlier than 30 days and no later than 60 days
from the date such notice is mailed (the "Change of Control Payment Date"); (3)
that any Note not tendered will continue to accrue interest; (4) that, unless
the Company defaults in the payment of the Change of Control Payment, all Notes
accepted for payment pursuant to the Change of Control Offer shall cease to
accrue interest after the Change of Control Payment Date; (5) that Holders
electing to have any Notes purchased pursuant to a Change of Control 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; (6) that Holders will
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 (7) that Holders whose Notes are being purchased
only in part will 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 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 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 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 by such Holder, 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.
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 this 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.
Section 4.16 Payments for Consent.
Neither the Company nor any of its Subsidiaries shall, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any Holder of any Notes for or as an inducement
to any consent, waiver or amendment of any of the terms or provisions of this
Indenture or the Notes unless such consideration is offered to be paid or is
paid to all Holders of the Notes
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that consent, waive or agree to amend in the time frame set forth in the
solicitation documents relating to such consent, waiver or agreement.
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
Registration Rights Agreement, 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 preceding 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 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 Section 4.09 hereof.
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 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 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.
An "Event of Default" occurs if:
(a) the Company defaults in the payment when due of interest on, or
Liquidated Damages with respect to, the Notes and such default continues for a
period of 30 days;
(b) the Company defaults in the payment when due of principal of or
premium, if any, on the Notes;
(c) the Company or any of its Restricted Subsidiaries fails to comply with
any of the provisions of Section 4.07, 4.09, 4.10 or 4.15 hereof;
(d) the Company or any of its Restricted Subsidiaries, for 60 days after
notice to the Company by the Trustee or the Holders of at least 25% in aggregate
principal amount of the Notes then outstanding voting as a single class, fails
to comply with any other covenant, representation, warranty or other agreement
in this Indenture or the Notes;
(e) a default occurs 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 this Indenture, which default results in the
acceleration of any such Indebtedness prior to its express maturity and, in each
case, the principal amount of such Indebtedness, together with the principal
amount of any other such Indebtedness or the maturity of which has been so
accelerated, aggregates $5.0 million or more;
(f) the Company or any of its Restricted Subsidiaries fails to pay a final
judgment or final judgments for the payment of money entered by a court or
courts of competent jurisdiction against the Company or any of its Restricted
Subsidiaries and such judgment or judgments remain unpaid, discharged or stayed
for a period of 60 days, provided that the aggregate of all such undischarged
judgments exceeds $5.0 million;
(g) 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:
(i) commences a voluntary case,
(ii) consents to the entry of an order for relief against it in an
involuntary case,
(iii) consents to the appointment of a Custodian of it or for all or
substantially all of its property,
(iv) makes a general assignment for the benefit of its creditors, or
(v) generally is not paying its debts as they become due;
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(h) a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that:
(i) 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 in an involuntary case;
(ii) appoints a Custodian 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 for all or substantially all of the
property 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
(iii) 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
(i) except as permitted by this Indenture or any Subsidiary Guarantee, any
Subsidiary Guarantee is held in any judicial proceeding to be unenforceable or
invalid or shall cease for any reason to be in full force and effect or any
Subsidiary Guarantor, or any Person acting on behalf of any Subsidiary
Guarantor, shall deny or disaffirm its obligations under its Subsidiary
Guarantee.
Section 6.02. Acceleration.
If any Event of Default (other than an Event of Default specified in
clause (g) or (h) of Section 6.01 hereof with respect to the Company, any
Significant Subsidiary or any group of Significant Subsidiaries that, taken as a
whole, would constitute a Significant Subsidiary) 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.
Notwithstanding the foregoing, if an Event of Default specified in clause (g) or
(h) of Section 6.01 hereof occurs with respect to the Company, any of its
Significant Subsidiaries or any group of Restricted Subsidiaries that, taken as
a whole, would constitute a Significant Subsidiary, all outstanding Notes shall
be due and payable immediately without further action or notice. The Holders of
a majority in aggregate principal amount of the then outstanding Notes by
written notice to the Trustee may on behalf of all of the Holders rescind an
acceleration and its consequences if the rescission would not conflict with any
judgment or decree and if all existing Events of Default (except nonpayment of
principal, interest or premium that has become due solely because of the
acceleration) have been cured or waived.
If an Event of Default occurs on or after January 15, 2003 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 hereof, then, upon acceleration of the Notes, an
equivalent premium shall also become and be immediately due and payable, to the
extent permitted by law, anything in this Indenture or in the Notes to the
contrary notwithstanding. If an Event of Default occurs prior to January 15,
2003 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 January 15, 2003 then, upon acceleration of the
Notes, an additional premium shall also become and be immediately due and
payable in an amount, for each of the years beginning on January 15 of the years
set forth below, as set forth below (expressed as a percentage of the amount
that would otherwise be due but for the provisions of this paragraph, plus
accrued interest, if any, to the date of payment):
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YEAR PERCENTAGE
---- ----------
1998....................................113.667%
1999....................................111.958%
2000....................................110.250%
2001....................................108.542%
2002....................................106.833%
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, 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 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.
Holders of not less than a majority in aggregate principal amount of
the then outstanding Notes by notice to the Trustee may, on behalf of the
Holders of all of the Notes, waive an existing Default or Event of Default and
its consequences hereunder, except a continuing Default or Event of Default in
the payment of the principal of, premium and Liquidated Damages, if any, or
interest on, the Notes (including in connection with an offer to purchase)
(provided, however, that the Holders of a majority in aggregate principal amount
of the then outstanding Notes may rescind an acceleration and its consequences,
including any related payment default that resulted from such acceleration).
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;
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(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.
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(a) or (b) 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, premium and Liquidated Damages, if any, and interest remaining
unpaid on the Notes and interest on overdue principal and, to the extent lawful,
interest 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 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
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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, it shall
pay out the money in the following order:
First: to the Trustee, its agents and attorneys for 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 and Liquidated Damages, if any, and interest, ratably,
without preference or priority of any kind, according to the amounts due and
payable on the Notes for principal, premium and Liquidated Damages, if any and
interest, respectively; and
Third: to the Company or to such party as a court of competent
jurisdiction shall direct.
The Trustee 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 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 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:
(i) the duties of the Trustee 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
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(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 certificates and opinions to determine whether or not they conform
to the requirements of this Indenture.
(c) The Trustee may 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;
(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), (c), (e) and (f) of this Section and Section 7.02.
(e) No provision of this Indenture shall require the Trustee to expend or
risk its own funds or incur any liability. The Trustee shall be under no
obligation to exercise any of its rights and powers under this Indenture at the
request of any Holders, unless such Holder shall have offered to the Trustee
security and indemnity satisfactory to it against any loss, liability or
expense.
(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
Officers' 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 Officers' Certificate or Opinion of Counsel. The Trustee may consult with
counsel and the written advice of such counsel or any Opinion of Counsel 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 appointed with due
care.
(d) The Trustee shall not be liable for any action it takes or omits to
take in good faith that it believes to be authorized or within the rights or
powers conferred upon it by this Indenture.
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(e) Unless otherwise specifically provided in this Indenture, any demand,
request, direction or notice from the Company shall be sufficient if signed by
an Officer of the Company.
(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 reasonable
security or indemnity against the costs, expenses and liabilities 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 Notes and may otherwise deal with the Company or any Affiliate
of the Company with the same rights it would have if it were not Trustee.
However, 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 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.
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 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 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.
Section 7.06. Reports by Trustee to Holders of the Notes.
Within 60 days after each May 15 beginning with the May 15 following
the date of this Indenture, 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 (S) 313(a) (but if no event described in
TIA (S) 313(a) has occurred within the twelve months preceding the reporting
date, no report need be transmitted). The Trustee also shall comply with TIA
(S) 313(b)(2). The Trustee shall also transmit by mail all reports as required
by TIA (S) 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 filed with the SEC and each stock
exchange on which the Notes are listed in accordance with TIA (S) 313(d). The
Company shall promptly notify the Trustee when the Notes are listed on any stock
exchange.
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Section 7.07. Compensation and Indemnity.
The Company shall pay to the Trustee from time to time reasonable
compensation for its acceptance of this Indenture and services hereunder. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company 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. Such expenses
shall include the reasonable compensation, disbursements and expenses of the
Trustee's agents and counsel.
The Company 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
costs and expenses of enforcing this Indenture against the Company (including
this Section 7.07) and defending itself against any claim (whether asserted by
the Company 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 or a portion thereof may be
attributable to its negligence or bad faith. The Trustee shall notify the
Company promptly of any claim for which it may seek indemnity. Failure by the
Trustee to so notify the Company shall not relieve the Company of its
obligations hereunder. The Company shall defend the claim and the Trustee shall
cooperate in the defense. The Trustee may have separate counsel and the Company
shall pay the reasonable fees and expenses of such counsel. The Company need
not pay for any settlement made without its consent, which consent shall not be
unreasonably withheld.
The obligations of the Company under this Section 7.07 shall survive
the satisfaction and discharge of this Indenture.
To secure the Company's payment obligations in this Section, the
Trustee shall have a Lien prior to the Notes on all money or property held or
collected by the Trustee, except that held in trust to pay principal and
interest 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(g) or (h) hereof occurs, the expenses and the
compensation for the services (including the fees and expenses of its agents and
counsel) are intended to constitute expenses of administration under any
Bankruptcy Law.
The Trustee shall comply with the provisions of TIA (S) 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.
The Trustee may resign in writing at any time and be discharged from
the trust hereby created by so notifying the Company. 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. The Company may
remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
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(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. 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. 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 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 a combined capital and surplus of at least $100 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 (S) 310(a)(1), (2) and (5). The Trustee is subject to TIA
(S) 310(b).
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<PAGE>
Section 7.11. Preferential Collection of Claims Against Company.
The Trustee is subject to TIA (S) 311(a), excluding any creditor
relationship listed in TIA (S) 311(b). A Trustee who has resigned or been
removed shall be subject to TIA (S) 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 Officers' 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 Eight.
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 shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, be deemed to have been
discharged from its obligations with respect to 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, and 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 Article 2 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 Eight. Subject to
compliance with this Article Eight, 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 shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, be released from its
obligations under the covenants contained in Sections 4.03, 4.07, 4.08, 4.09,
4.10, 4.11, 4.12, 4.13, 4.15 and 4.16 hereof with respect to the outstanding
Notes on and after the date the conditions set forth in Section 8.04 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 and
Subsidiary Guarantees, if any, shall not be deemed outstanding for accounting
purposes). For this purpose, Covenant Defeasance means that, with respect to
the outstanding Notes, the Company 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
56
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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(d) through 6.01(f) 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:
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) the Company must irrevocably deposit with the Trustee, in trust, for
the benefit of the Holders, cash in United States 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 and
Liquidated Damages, if any, on the outstanding Notes on the stated date for
payment thereof or on the applicable redemption date, as the case may be;
(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 of this 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;
(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(g) or 6.01(h) hereof is 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, any 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;
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<PAGE>
(f) the Company shall have delivered to the Trustee an Opinion of Counsel
(which may be subject to customary exceptions) to the effect that on 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 Officers'
Certificate stating that the deposit was not made by the Company with the intent
of preferring the Holders over any other creditors of the Company or with the
intent of defeating, hindering, delaying or defrauding any other creditors of
the Company; and
(h) the Company shall have delivered 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.
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 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, if any, and interest, but
such money need not be segregated from other funds except to the extent required
by law.
The Company 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 Eight 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, premium, if any,
or interest on any Note and remaining unclaimed for two years after such
principal, and premium, 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
secured creditor, look only to the Company 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 expense of the
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Company cause to be published once, in the New York Times and 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 Company's obligations 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 the Company makes any
payment of principal of, premium, if any, or interest on any Note following the
reinstatement of its obligations, the Company 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
Subsidiary Guarantors and the Trustee may amend or supplement this Indenture,
the Subsidiary Guarantees 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 or to alter the provisions of Article 2 hereof (including the
related definitions) in a manner that does not materially adversely affect any
Holder;
(c) to provide for the assumption of the Company's or a Subsidiary
Guarantor's obligations to the Holders of the Notes by a successor to the
Company or a Subsidiary Guarantor pursuant to Article 5 hereof;
(d) 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
hereunder of any Holder of the Note;
(e) to comply with requirements of the SEC in order to effect or maintain
the qualification of this Indenture under the TIA;
(f) to provide for the issuance of Additional Notes in accordance with the
limitations set forth in this Indenture as of the date hereof; or
(g) to allow any Subsidiary Guarantor to execute a supplemental indenture
and/or a Subsidiary Guarantee with respect to the Notes.
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Upon the request of the Company accompanied by a resolution of its
Board of Directors 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 the Subsidiary
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, the Company and the
Trustee may amend or supplement this Indenture (including Section 3.09, 4.10 and
4.15 hereof), the Subsidiary Guarantees and the Notes may be amended or
supplemented with the consent of the Holders of at least a majority in principal
amount of the Notes including Additional Notes, if any then outstanding voting
as a single class (including consents obtained in connection with a tender offer
or exchange offer for, or purchase of, the Notes), and, subject to Sections 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 the principal of, premium, if any, or
interest on the Notes, except a payment default resulting from an acceleration
that has been rescinded) or compliance with any provision of this Indenture, the
Subsidiary Guarantees or the Notes may be waived with the consent of the Holders
of a majority in principal amount of the then outstanding Notes including
Additional Notes, if any voting as a single class (including consents obtained
in connection with a tender offer or exchange offer for, or purchase of, the
Notes.
Upon the request of the Company accompanied by a resolution of its
Board of Directors 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 in the execution of such amended or supplemental Indenture
unless such amended or supplemental Indenture directly 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 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 6.04 and 6.07 hereof, the Holders of a
majority in aggregate principal amount of the Notes including Additional Notes,
if any then outstanding voting as a single class 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 under this Section 9.02 may not (with respect to any Notes held by a non-
consenting Holder):
(a) reduce the principal amount of Notes whose Holders must consent to an
amendment, supplement or waiver;
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(b) reduce the principal of or change the fixed maturity of any Note or
alter or waive any of 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;
(c) reduce the rate of or change the time for payment of interest,
including default interest, on any Note;
(d) 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 then outstanding Notes (including Additional Notes, if any) and a waiver
of the payment default that resulted from such acceleration);
(e) make any Note payable in money other than that stated in the Notes;
(f) 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 interest on the Notes;
(g) waive a redemption payment with respect to any Note (other than a
payment required by Sections 4.09, 4.10 and 4.15 hereof);
(h) make any change in Section 6.04 or 6.07 hereof or in the foregoing
amendment and waiver provisions; or
(i) release any Subsidiary Guarantor from any of its obligations under its
Subsidiary Guarantee or this Indenture, except in accordance with the terms of
this Indenture.
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 its 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.
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. The Company in
exchange for all Notes may issue and the Trustee shall, upon receipt of an
Authentication Order, authenticate new Notes 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 Nine if the amendment or supplement does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
The Company may not sign an amendment or supplemental Indenture until the 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, in addition to the documents required
by Section 10.04 hereof, 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.
MISCELLANEOUS
Section 10.01. Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or conflicts with
the duties imposed by TIA (S) 318(c), the imposed duties shall control.
Section 10.02. Notices.
Any notice or communication by the Company, any Subsidiary Guarantor
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 and/or any Subsidiary Guarantor:
Nationwide Credit, Inc.
6190 Powers Ferry Road, 4th Floor
Atlanta, Georgia 30339
Telecopier No.: (770) 644-7427
Attention: Jerrold Kaufman
With a copy to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Telecopier No.: (212) 310-8007
Attention: Stephen M. Besen
If to the Trustee:
State Street Bank and Trust Company
Goodwin Square, 23rd Floor
225 Asylum Street
Hartford, Connecticut 06103
Telecopier No.: (860) 244-1897
Attention: Kathy Larimore
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The Company, any Subsidiary Guarantor or the Trustee, by 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 mailed; 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 (S) 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 10.03. Communication by Holders of Notes with Other Holders of Notes.
Holders may communicate pursuant to TIA (S) 312(b) with other Holders
with respect to their rights under this Indenture or the Notes. The Company,
the Trustee, the Registrar and anyone else shall have the protection of TIA (S)
312(c).
Section 10.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to take
any action under this Indenture, the Company shall furnish to the Trustee:
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth in
Section 10.05 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 10.05 hereof) stating that, in the opinion of such counsel, all such
conditions precedent and covenants have been satisfied.
Section 10.05. Statements Required in Certificate or Opinion.
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 (S) 314(a)(4)) shall comply with the provisions of TIA
(S) 314(e) and shall include:
(a) a statement that the Person making such certificate or opinion has
read such covenant or condition;
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(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.
Section 10.06. 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 10.07. No Personal Liability of Directors, Officers, Employees and
Stockholders.
No past, present or future director, officer, employee, incorporator
or stockholder of the Company or any Subsidiary Guarantor, as such, shall have
any liability for any obligations of the Company or such Subsidiary Guarantor
under the Notes, the Subsidiary Guarantees, this 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 issuance of the Notes.
Section 10.08. 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, IF ANY,
WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT
THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED
THEREBY.
Section 10.09. 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.
Section 10.10. Successors.
All agreements of the Company in this Indenture and the Notes shall
bind its successors. All agreements of the Trustee in this Indenture shall bind
its successors.
Section 10.11. 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.
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Section 10.12. 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 10.13. 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]
65
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SIGNATURES
Dated as of January 28, 1998
NATIONWIDE CREDIT, INC.
By: /s/ Jerrold Kaufman
----------------------------------
Name: Jerrold Kaufman
Title: President and Chief Executive
Officer
STATE STREET BANK AND TRUST
COMPANY
By: /s/ Kathy A. Larimore
----------------------------------
Name: Kathy A. Larimore
Title: Assistant Vice President
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EXHIBIT A-1
(Face of Note)
================================================================================
10 1/4% Series A Senior Notes due 2008
CUSIP/CINS
-------------
No. $
----- -----------
NATIONWIDE CREDIT, INC.
promises to pay to Cede & Co.
or registered assigns,
the principal sum of
--------------------------------
Dollars ($ ) on January 15, 2008.
Interest Payment Dates: January 15 and July 15, commencing July 15, 1998
Record Dates: January 1 and July 1
Dated: January 23, 1998
NATIONWIDE CREDIT, INC.
By:
-------------------------------
Name:
Title:
This is one of the Global
Notes referred to in the
within-mentioned Indenture:
STATE STREET BANK AND TRUST COMPANY,
as Trustee
By:
--------------------------------
================================================================================
A-1-1
<PAGE>
(Back of Note)
10 1/4% Series A Senior Notes due 2008
THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE
BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY
CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS
MAY BE REQUIRED PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL
NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a)
OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE
FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS
GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR
WRITTEN CONSENT OF THE COMPANY.
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 COMPANY 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 SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN
A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE SECURITY
EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE
SELLER OF THIS NOTE MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF
SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A AND REGULATION S
THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE
BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR
OTHERWISE TRANSFERRED, ONLY (1)(a) TO A PERSON WHO THE SELLER REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A,
(b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE
SECURITIES ACT, (c) OUTSIDE THE
A-1-2
<PAGE>
UNITED STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS
OF RULE 904 UNDER THE SECURITIES ACT OR (d) IN ACCORDANCE WITH ANOTHER
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND
BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO REQUESTS), (2) TO THE
COMPANY OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH
CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL,
AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF
THE SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A)
ABOVE.
Capitalized terms used herein shall have the meanings assigned to them
in the Indenture referred to below unless otherwise indicated.
1. Interest. Nationwide Credit, Inc., a Delaware corporation (the
"Company"), promises to pay interest on the principal amount of this Note at
10.25% per annum from January 28, 1998 until maturity and shall pay the
Liquidated Damages, if any, payable pursuant to Section 5 of the Registration
Rights Agreement referred to below. The Company will pay interest and Liquidated
Damages, if any, semi-annually on January 15 and July 15 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 July 15, 1998. 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 that is 1% per annum in excess of the rate 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 will pay interest on the Notes
(except defaulted interest) and Liquidated Damages, if any, to the Persons who
are registered Holders of Notes at the close of business on the January 1 or
July 1 next preceding the Interest Payment Date, even if such Notes are
cancelled after such record date and on or before such Interest Payment Date,
except as provided in Section 2.12 of the Indenture with respect to defaulted
interest. The Notes will be payable as to principal, premium and Liquidated
Damages, if any, and interest at the office or agency of the Company maintained
for such purpose within or without the City and State of New York, or, at the
option of the Company, payment of interest and Liquidated Damages, if any, may
be made by check mailed to the Holders at their addresses set forth in the
register of Holders, and provided that payment by wire transfer of immediately
available funds will be required with respect to principal of and interest,
premium and Liquidated Damages, if any, on, all Global Notes and all other Notes
the Holders of which shall have provided wire transfer instructions to the
Company or the Paying Agent. Such payment shall be in such coin or currency of
the United States of America as at the time of payment is legal tender for
payment of public and private debts.
A-1-3
<PAGE>
3. Paying Agent and Registrar. Initially, State Street Bank and Trust
Company, the Trustee under the Indenture, will act as Paying Agent and
Registrar. The Company may change any Paying Agent or Registrar without notice
to any Holder. The Company or any of its Subsidiaries may act in any such
capacity.
4. Indenture. The Company issued the Notes under an Indenture dated
as of January 28, 1998 ("Indenture") between the Company 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 (S)(S) 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. To the extent any provision of this Note conflicts with the express
provisions of the Indenture, the provisions of the indenture shall govern and be
controlling. The Notes are obligations of the Company limited to $125.0 million
in aggregate principal amount, plus amounts, if any, issued to pay Liquidated
Damages on outstanding Notes as set forth in Paragraph 2 hereof.
5. Optional Redemption.
(a) Except as set forth in subparagraph (b) of this Paragraph 5, the
Notes will not be redeemable at the Company's option prior to January 15, 2003.
Thereafter, the Company shall have the option to redeem the Notes, in whole or
in part, upon not less than 30 nor more than 60 days' notice, at the redemption
prices (expressed as percentages of principal amount) set forth below plus
accrued and unpaid interest and Liquidated Damages, if any, thereon to the
applicable redemption date, if redeemed during the twelve-month period beginning
on January 15 of the years indicated below:
YEAR PERCENTAGE
---- ----------
2003................................................105.125%
2004................................................103.417%
2005................................................101.708%
2006 and thereafter.................................100.000%
(b) Notwithstanding the provisions of subparagraph (a) of this
Paragraph 5, prior to January 15, 2001, the Company may redeem up to 35% of the
aggregate principal amount of the Initial Notes at a redemption price of 110.25%
of the principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages thereon, if any, to the redemption date, with the net proceeds of an
initial public offering of common stock of the Company or a capital contribution
to the Company's common equity of the net cash proceeds of an initial public
offering of the Company's direct parent; provided that at least $50.0 million in
aggregate principal amount of Notes remain outstanding immediately after the
occurrence of such redemption (excluding Notes held by the Company and its
subsidiaries); and provided, further that notice of such redemption shall be
given with 45 days of the date of the closing of such initial public offering.
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-1-4
<PAGE>
(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
(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) If the Company or a Restricted Subsidiary consummates any Asset
Sales, within five days of each date on which the aggregate amount of Excess
Proceeds exceeds $5 million, the Company shall commence an offer to all Holders
of Notes and all holders of other Indebtedness containing provisions similar to
those set forth in the Indenture with respect to offers to purchase or redeem
with the proceeds of sales of assets (as "Asset Sale Offer") pursuant to Section
3.09 of the Indenture and such other Indebtedness to purchase the maximum
principal amount of Notes and such other Indebtedness 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 thereon, if any, to the date fixed for the closing of such offer in
accordance with the procedures set forth in the Indenture and such other
Indebtedness. 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 such deficiency for general corporate purposes. If the aggregate
principal amount of Notes surrendered by Holders thereof or the amount of such
other Indebtedness exceeds the amount of Excess Proceeds, the Trustee shall
select the Notes and such other Indebtedness 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.
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 in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000, unless all of the Notes held by a Holder are to be
redeemed. 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 denominations of $1,000 and integral multiples of
$1,000. 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, the Company
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, Supplement 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 voting as a single class, and any existing default
A-1-5
<PAGE>
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 voting as a single class. 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 certificated Notes, to provide for the assumption of
the Company's obligations to Holders of the Notes in case of a merger or
consolidation, or sale of substantially all of the Company's assets 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, to comply with the requirements of the Commission in order
to effect or maintain the qualification of the Indenture under the Trust
Indenture Act.
12. Defaults and Remedies. Events of Default include: (i) default
for 30 days in the payment when due of interest on or Liquidated Damages with
respect to , the Notes; (ii) default in payment when due of principal of or
premium, if any, on the Notes; (iii) failure by the Company or any of its
Restricted Subsidiaries to comply with Section 4.07, 4.09, 4.10 or 4.15 of the
Indenture; (iv) failure by the Company or any of its Restricted Subsidiaries for
60 days after notice to comply with any of its other agreements in the Indenture
or the Notes; by the Trustee or the Holders of at least 25% in aggregate
principal amount of the Notes then outstanding voting as a single class to
comply with any of its other covenant, representation, warranty or other
agreement in the Indenture or the Notes; (v) default under certain other
agreements relating to Indebtedness of the Company or any of its Restricted
Subsidiaries which default results in the acceleration of such Indebtedness
prior to its express maturity the principal amount which Indebtedness aggregates
$5.0 million or more; (vi) certain final judgments for the payment of money that
remain undischarged for a period of 60 days, provided the aggregate of all such
undischarged judgments exceeds $5.0 million; (vii) certain events of bankruptcy
or insolvency with respect to the Company or any of its significant
subsidiaries; and (viii) except as permitted by the Indenture or any Subsidiary
Guarantee, any 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 or any Subsidiary Guarantor or any Person acting on its behalf shall
deny or disaffirm its obligations under such Subsidiary Guarantee. 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. Notwithstanding the foregoing, in the case of an Event of
Default arising from certain events of bankruptcy or insolvency, all outstanding
Notes will become due and payable without further action or notice. Holders may
not enforce the Indenture or the Notes except as provided in the Indenture.
Subject to certain limitations, Holders of a majority in aggregate 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 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.
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. 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.
A-1-6
<PAGE>
14. No Recourse Against Others. A director, officer, employee,
incorporator or stockholder, of the Company, as such, shall not have any
liability for any obligations of the Company under the Notes 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.
15. Authentication. This Note shall not be valid until authenticated
by the manual signature of the Trustee or an authenticating agent.
16. Abbreviations. Customary abbreviations may be used in the name
of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
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).
17. Additional Rights of Holders of Restricted Global Notes and
Restricted Definitive Notes. In addition to the rights provided to Holders of
Notes under the Indenture, Holders of Restricted Global Notes and Restricted
Definitive Notes shall have all the rights set forth in the A/B Exchange
Registration Rights Agreement dated as of January 28, 1998, between the Company
and the parties named on the signature pages thereof (the "Registration Rights
Agreement").
18. 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 will 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:
Nationwide Credit, Inc.
6190 Powers Ferry Road, 4th Floor
Atlanta, Georgia 30339
Attention: Jerrold Kaufman
A-1-7
<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
---------------------------------------------------------
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-1-8
<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)
Signature Guarantee:
---------------------------
Tax Identification No:
-------------------------
A-1-9
<PAGE>
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE
The following exchanges of a part of this Global Note for an interest
in another Global Note or for a Definitive Note, or exchanges of a part of
another Global Note or Definitive Note for an interest in this Global Note, have
been made:
<TABLE>
<CAPTION>
Principal Amount
Amount of decrease Amount of increase of this
in in Principal Amount Global Note Signature of
Principal Amount of this following such authorized officer
of this Global Note decrease (or of Trustee or Note
Date of Exchange Global Note increase) Custodian
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
</TABLE>
A-1-10
<PAGE>
EXHIBIT A-2
(Face of Regulation S Temporary Global Note)
================================================================================
10 1/4% Series A Senior Notes due 2008
CUSIP/CINS
------------
No. $
----------- ------------
NATIONWIDE CREDIT, INC.
promises to pay to Cede & Co.
--------------------------------------
or registered assigns,
the principal sum of
---------------------------------------
Dollars ($________) on January 15, 2008.
Interest Payment Dates: January 15 and July 15, commencing July 15, 1998
Record Dates: January 1 and July 1.
Dated: January 28, 1998
NATIONWIDE CREDIT INC.
By:
------------------------
Name:
Title:
This is one of the Global
Notes referred to in the
within-mentioned Indenture:
STATE STREET BANK AND TRUST COMPANY,
as Trustee
By:
-------------------------------
================================================================================
A-2-1
<PAGE>
(Back of Regulation S Temporary Global Note)
10 1/4% Series A Senior Notes due 2008
THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE
CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES, ARE AS
SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE
BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED
TO RECEIVE PAYMENT OF INTEREST HEREON.
THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL
OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES
EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED
PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE
EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE,
(III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT
TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO
A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY.
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 COMPANY 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.
THIS SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE SECURITY
EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER OF
THIS NOTE MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF
THE SECURITIES ACT PROVIDED BY RULE 144A AND REGULATION S THEREUNDER. THE
HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY
THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY
(1)(a) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL
A-2-2
<PAGE>
BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED STATES
TO A FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER
THE SECURITIES ACT OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF
COUNSEL IF THE COMPANY SO REQUESTS), (2) TO THE COMPANY OR (3) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER
APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS
REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE SECURITY EVIDENCED HEREBY OF
THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE.
Capitalized terms used herein shall have the meanings assigned to them
in the Indenture referred to below unless otherwise indicated.
1. Interest. Nationwide Credit, Inc., a Delaware corporation (the
"Company"), promises to pay interest on the principal amount of this Note at
10.25% per annum from January 28, 1998 until maturity and shall pay the
Liquidated Damages, if any, payable pursuant to Section 5 of the Registration
Rights Agreement referred to below. The Company will pay interest and
Liquidated Damages, if any, semi-annually on January 15 and July 15 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 July 15, 1998.
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 that is 1% per annum in excess of the rate
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.
Until this Regulation S Temporary Global Note is exchanged for one or
more Regulation S Permanent Global Notes, 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.
2. Method of Payment. The Company will pay interest on the Notes
(except defaulted interest) and Liquidated Damages, if any, to the Persons who
are registered Holders of Notes at the close of business on the January 1 or
July 1 next preceding the Interest Payment Date, even if such Notes are
cancelled after such record date and on or before such Interest Payment Date,
except as provided in Section 2.12 of the Indenture with respect to defaulted
interest. The Notes will be payable as to principal, premium and Liquidated
Damages, if any, and interest at the office or agency of the Company maintained
for such purpose within or without the City and State of New York, or, at the
option of the Company, payment of interest and Liquidated Damages, if any, may
be made by check mailed to the Holders at their addresses set forth in the
register of Holders, and provided that payment by wire transfer
A-2-3
<PAGE>
of immediately available funds will be required with respect to principal of and
interest, premium and Liquidated Damages, if any, on, all Global Notes and all
other Notes the Holders of which shall have provided wire transfer instructions
to the Company or the Paying Agent. Such payment shall be in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts.
3. Paying Agent and Registrar. Initially, State Street Bank and Trust
Company, the Trustee under the Indenture, will act as Paying Agent and
Registrar. The Company may change any Paying Agent or Registrar without notice
to any Holder. The Company or any of its Subsidiaries may act in any such
capacity.
4. Indenture. The Company issued the Notes under an Indenture dated as
of January 28, 1998 ("Indenture") between the Company 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 (S)(S) 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. To the
extent any provision of this Note conflicts with the express provisions of the
Indenture, the provisions of the indenture shall govern and be controlling. The
Notes are obligations of the Company limited to $125.0 million in aggregate
principal amount, plus amounts, if any, issued to pay Liquidated Damages on
outstanding Notes as set forth in Paragraph 2 hereof.
5. Optional Redemption.
(a) Except as set forth in subparagraph (b) of this Paragraph 5, the
Notes will not be redeemable at the Company's option prior to January 15, 2003.
Thereafter, the Company shall have the option to redeem the Notes, in whole or
in part, upon not less than 30 nor more than 60 days' notice, at the redemption
prices (expressed as percentages of principal amount) set forth below plus
accrued and unpaid interest and Liquidated Damages, if any, thereon to the
applicable redemption date, if redeemed during the twelve-month period beginning
on January 15 of the years indicated below:
YEAR PERCENTAGE
---- ----------
2003................................................105.125%
2004................................................103.417%
2005................................................101.708%
2006 and thereafter.................................100.000%
(b) Notwithstanding the provisions of subparagraph (a) of this
Paragraph 5, prior to January 15, 2001, the Company may redeem up to 35% of the
aggregate principal amount of Initial Notes at a redemption price of 110.25% of
the principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages thereon, if any, to the redemption date, with the net proceeds of an
initial public offering of common stock of the Company or a Capital Contribution
to the Company's common equity of the net cash proceeds of an initial public
offering of the Company's direct parent; provided that at least $50.0 million in
aggregate principal amount of Notes remain outstanding immediately after the
occurrence of such redemption (excluding Notes held by the Company and its
subsidiaries); and provided, further that
A-2-4
<PAGE>
notice of such redemption shall be given with 45 days of the date of the closing
of such initial public offering.
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
(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) If the Company or a Restricted Subsidiary consummates any Asset
Sales, within five days of each date on which the aggregate amount of Excess
Proceeds exceeds $5 million, the Company shall commence an offer to all Holders
of Notes and all holders of other Indebtedness containing provisions similar to
those set forth in the Indenture with respect to offers to purchase or redeem
with the proceeds of sales of assets (as "Asset Sale Offer") pursuant to Section
3.09 of the Indenture and such other Indebtedness to purchase the maximum
principal amount of Notes and such other Indebtedness 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 thereon, if any, to the date fixed for the closing of such offer in
accordance with the procedures set forth in the Indenture and such other
Indebtedness. 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 such deficiency for general corporate purposes. If the aggregate
principal amount of Notes surrendered by Holders thereof or the amount of such
other Indebtedness exceeds the amount of Excess Proceeds, the Trustee shall
select the Notes and such other Indebtedness 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.
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 in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000, unless all of the Notes held by a Holder are to be
redeemed. 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 denominations of $1,000 and integral multiples of
$1,000. 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, the
A-2-5
<PAGE>
Company 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.
This Regulation S Temporary Global Note is exchangeable in whole or in
part for one or more 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 Global Notes, the Trustee shall cancel this Regulation S
Temporary Global Note.
10. Persons Deemed Owners. The registered Holder of a Note may be
treated as its owner for all purposes.
11. Amendment, Supplement 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 voting as a single class, 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 voting
as a single class. 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
certificated Notes, to provide for the assumption of the Company's obligations
to Holders of the Notes in case of a merger or consolidation, or sale of
substantially all of the Company's assets 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, to
comply with the requirements of the Commission in order to effect or maintain
the qualification of the Indenture under the Trust Indenture Act.
12. Defaults and Remedies. Events of Default include: (i) default
for 30 days in the payment when due of interest on or Liquidated Damages with
respect to , the Notes; (ii) default in payment when due of principal of or
premium, if any, on the Notes; (iii) failure by the Company or any of its
Restricted Subsidiaries to comply with Section 4.07, 4.09, 4.10 or 4.15 of the
Indenture; (iv) failure by the Company or any of its Restricted Subsidiaries for
60 days after notice to comply with any of its other agreements in the Indenture
or the Notes; by the Trustee or the Holders of at least 25% in aggregate
principal amount of the Notes then outstanding voting as a single class to
comply with any of its other covenant, representation, warranty or other
agreement in the Indenture or the Notes; (v) default under certain other
agreements relating to Indebtedness of the Company or any of its Restricted
Subsidiaries which default results in the acceleration of such Indebtedness
prior to its express maturity the principal amount which Indebtedness aggregates
$5.0 million or more; (vi) certain final judgments for the payment of money that
remain undischarged for a period of 60 days, provided the aggregate of all such
undischarged judgments exceeds $5.0 million; (vii) certain events of bankruptcy
or insolvency with respect to the Company or any of its significant
subsidiaries; and (viii) except as permitted by the Indenture or any Subsidiary
Guarantee, any 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 or any Subsidiary Guarantor or any Person acting on its behalf shall
deny or disaffirm its obligations under such Subsidiary Guarantee. 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. Notwithstanding the foregoing, in the case of an Event of
Default arising from certain events of bankruptcy or insolvency, all outstanding
Notes will become due and payable without further action or notice. Holders may
not enforce the Indenture or the Notes except as provided in the Indenture.
Subject to certain limitations, Holders of a majority in aggregate principal
amount of the then outstanding Notes may direct
A-2-6
<PAGE>
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
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. 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. 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.
14. No Recourse Against Others. A director, officer, employee,
incorporator or stockholder, of the Company, as such, shall not have any
liability for any obligations of the Company under the Notes 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.
15. Authentication. This Note shall not be valid until authenticated
by the manual signature of the Trustee or an authenticating agent.
16. Abbreviations. Customary abbreviations may be used in the name
of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
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).
17. Additional Rights of Holders of Restricted Global Notes and
Restricted Definitive Notes. In addition to the rights provided to Holders of
Notes under the Indenture, Holders of Restricted Global Notes and Restricted
Definitive Notes shall have all the rights set forth in the A/B Exchange
Registration Rights Agreement dated as of January 28, 1998, between the Company
and the parties named on the signature pages thereof (the "Registration Rights
Agreement").
18. 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 will 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:
Nationwide Credit, Inc.
6190 Powers Ferry Road, 4th Floor
Atlanta, Georgia 30339
Attention: Jerrold Kaufman
A-2-7
<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
---------------------------------------------------------
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-2-8
<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)
Signature Guarantee:
------------------------------
Tax Identification No:
----------------------------
A-2-9
<PAGE>
SCHEDULE OF EXCHANGES OF REGULATION S TEMPORARY GLOBAL NOTE
The following exchanges of a part of this Regulation S Temporary
Global Note for an interest in another Global Note or of other Restricted Global
Notes for an interest in this Global Note, have been made:
<TABLE>
<CAPTION>
Principal Amount
Amount of decrease Amount of increase of this
in in Principal Amount Global Note Signature of
Principal Amount of this following such authorized officer
of this Global Note decrease (or of Trustee or Note
Date of Exchange Global Note increase) Custodian
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
</TABLE>
A-2-10
<PAGE>
EXHIBIT B
FORM OF CERTIFICATE OF TRANSFER
Nationwide Credit, Inc.
6190 Powers Ferry Road, 4th Floor
Atlanta, Georgia 30339
State Street Bank and Trust Company
Goodwin Square, 23rd Floor
225 Asylum Street
Hartford, Connecticut 06103
Re: 10 1/4% Series A Senior Notes due 2008 of Nationwide Credit, Inc.
Reference is hereby made to the Indenture, dated as of January 28,
1998 (the "Indenture"), between Nationwide Credit, Inc., as issuer (the
---------
"Company"), and State Street Bank and Trust Company, as trustee. Capitalized
-------
terms used but not defined herein shall have the meanings given to them in the
Indenture.
______________, (the "Transferor") owns and proposes to transfer the
----------
Note[s] or interest in such Note[s] specified in Annex A hereto, in the
principal amount of $___________ in such Note[s] or interests (the "Transfer"),
--------
to __________ (the "Transferee"), as further specified in Annex A hereto. In
----------
connection with the Transfer, the Transferor hereby certifies that:
[CHECK ALL THAT APPLY]
1. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE
----------------------------------------------------------------------
144A GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO RULE 144A. The 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 beneficial
interest or Definitive Note is being transferred to a Person that the Transferor
reasonably believed and believes is purchasing the beneficial interest or
Definitive Note 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 and such Transfer is
in compliance with any applicable blue sky securities laws of any state of the
United States. Upon consummation of the proposed Transfer in accordance with
the terms of the Indenture, the transferred beneficial interest or Definitive
Note will be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the 144A Global Note and/or the Definitive Note and
in the Indenture and the Securities Act.
2.[ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE
----------------------------------------------------------------------
TEMPORARY REGULATION S GLOBAL NOTE, THE REGULATION S GLOBAL NOTE OR A DEFINITIVE
- --------------------------------------------------------------------------------
NOTE PURSUANT TO REGULATION S. The 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 (i) the Transfer is
not being made to a person in the United States and (x) at the time the buy
order was originated, the Transferee was outside the United States or such
Transferor and any Person acting on its behalf reasonably believed and believes
that the Transferee was outside the United States or (y) the transaction was
executed in, on or through the facilities of a designated offshore securities
market and neither such Transferor nor any Person acting on its
B-1
<PAGE>
behalf knows that the transaction was prearranged with a buyer in the United
States, (ii) no directed selling efforts have been made in contravention of the
requirements of Rule 903(b) or Rule 904(b) of Regulation S under the Securities
Act, (iii) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act and (iv) if the proposed
transfer is being made prior to the expiration of the Restricted Period, the
transfer is not being made to a U.S. Person or for the account or benefit of a
U.S. Person (other than an Initial Purchaser). Upon consummation of the proposed
transfer in accordance with the terms of the Indenture, the transferred
beneficial interest or Definitive Note will be subject to the restrictions on
Transfer enumerated in the Private Placement Legend printed on the Regulation S
Global Note, the Temporary Regulation S Global Note and/or the Definitive Note
and in the Indenture and the Securities Act.
3. [ ] CHECK AND COMPLETE IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL
-------------------------------------------------------------------
INTEREST IN A DEFINITIVE NOTE PURSUANT TO ANY PROVISION OF THE SECURITIES ACT
- -----------------------------------------------------------------------------
OTHER THAN RULE 144A OR REGULATION S. The Transfer is being effected in
- ------------------------------------
compliance with the transfer restrictions applicable to beneficial interests in
Restricted Global Notes and Restricted Definitive Notes and pursuant to and in
accordance with the Securities Act and any applicable blue sky securities laws
of any state of the United States, and accordingly the Transferor hereby further
certifies that (check one):
(a) such Transfer is being effected pursuant to and in accordance
with Rule 144 under the Securities Act;
or
(b) such Transfer is being effected to the Company or a subsidiary
thereof;
or
(c) such Transfer is being effected pursuant to an effective
registration statement under the Securities Act and in compliance with the
prospectus delivery requirements of the Securities Act;
or
[(d) such Transfer is being effected to an Institutional Accredited
Investor and pursuant to an exemption from the registration requirements of the
Securities Act other than Rule 144A, Rule 144 or Rule 904, and the Transferor
hereby further certifies that it has not engaged in any general solicitation
within the meaning of Regulation D under the Securities Act and the Transfer
complies with the transfer restrictions applicable to beneficial interests in a
Restricted Global Note or Restricted Definitive Notes and the requirements of
the exemption claimed, which certification is supported by (1) an Opinion of
Counsel provided by the Transferor or the Transferee (a copy of which the
Transferor has attached to this certification), to the effect that such Transfer
is in compliance with the Securities Act. Upon consummation of the proposed
transfer in accordance with the terms of the Indenture, the transferred
beneficial interest or Definitive Note will be subject to the restrictions on
transfer enumerated in the Private Placement Legend printed on the Definitive
Notes and in the Indenture and the Securities Act.]
4. [ ] Check if Transferee will take delivery of a beneficial interest in an
Unrestricted Global Note or of an Unrestricted Definitive Note.
B-2
<PAGE>
(a) [ ] CHECK IF TRANSFER IS PURSUANT TO RULE 144. (i) The Transfer is
being effected pursuant to and in accordance with Rule 144 under the Securities
Act and in compliance with the transfer restrictions contained in the Indenture
and any applicable blue sky securities laws of any state of the United States
and (ii) the restrictions on transfer contained in the Indenture and the Private
Placement Legend are not required in order to maintain compliance with the
Securities Act. Upon consummation of the proposed Transfer in accordance with
the terms of the Indenture, the transferred beneficial interest or Definitive
Note will no longer be subject to the restrictions on transfer enumerated in the
Private Placement Legend printed on the Restricted Global Notes, on Restricted
Definitive Notes and in the Indenture.
(b) [ ] CHECK IF TRANSFER IS PURSUANT TO REGULATION S. (i) The
Transfer is being effected pursuant to and in accordance with Rule 903 or Rule
904 under the Securities Act and in compliance with the transfer restrictions
contained in the Indenture and any applicable blue sky securities laws of any
state of the United States and (ii) the restrictions on transfer contained in
the Indenture and the Private Placement Legend are not required in order to
maintain compliance with the Securities Act. Upon consummation of the proposed
Transfer in accordance with the terms of the Indenture, the transferred
beneficial interest or Definitive Note will no longer be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed on
the Restricted Global Notes, on Restricted Definitive Notes and in the
Indenture.
(c) [ ] CHECK IF TRANSFER IS PURSUANT TO OTHER EXEMPTION. (i) The
Transfer is being effected pursuant to and in compliance with an exemption from
the registration requirements of the Securities Act other than Rule 144, Rule
903 or Rule 904 and in compliance with the transfer restrictions contained in
the Indenture and any applicable blue sky securities laws of any State of the
United States and (ii) the restrictions on transfer contained in the Indenture
and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act. Upon consummation of the proposed Transfer
in accordance with the terms of the Indenture, the transferred beneficial
interest or Definitive Note will not be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the Restricted Global
Notes or Restricted Definitive Notes and in the Indenture.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.
--------------------------------
[Insert Name of Transferor]
By:
-----------------------------
Name:
Title:
Dated:
----------, ---
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<PAGE>
ANNEX A TO CERTIFICATE OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(a) [ ] a beneficial interest in the:
(i) [ ] 144A Global Note (CUSIP _________), or
(ii) [ ] Regulation S Global Note (CUSIP _________), or
(iii) [ ] a Restricted Definitive Note.
2. After the Transfer the Transferee will hold:
[CHECK ONE]
(a) [ ] a beneficial interest in the:
(i) [ ] 144A Global Note (CUSIP ________), or
(ii) [ ] Regulation S Global Note (CUSIP ________), or
(iii) [ ] Unrestricted Global Note (CUSIP________); or
(b) [ ] a Restricted Definitive Note; or
(c) [ ] an Unrestricted Definitive Note,
in accordance with the terms of the Indenture.
B-4
<PAGE>
EXHIBIT C
FORM OF CERTIFICATE OF EXCHANGE
Nationwide Credit, Inc.
6190 Powers Ferry Road, 4th Floor
Atlanta, Georgia 30339
State Street Bank and Trust Company
Goodwin Square, 23rd Floor
225 Asylum Street
Hartford, Connecticut 06103
Re: 10 1/4% Series A Senior Notes due 2008 of Nationwide Credit, Inc.
(CUSIP_________________)
Reference is hereby made to the Indenture, dated as of January 28,
1998 (the "Indenture"), between Nationwide Credit, Inc., as issuer (the
---------
"Company"), and State Street Bank and Trust Company, as trustee. Capitalized
-------
terms used but not defined herein shall have the meanings given to them in the
Indenture.
____________, (the "Owner") owns and proposes to exchange the Note[s]
-----
or interest in such Note[s] specified herein, in the principal amount of
$____________ in such Note[s] or interests (the "Exchange"). In connection with
--------
the Exchange, the Owner hereby certifies that:
1. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN A
RESTRICTED GLOBAL NOTE FOR UNRESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS
IN AN UNRESTRICTED GLOBAL NOTE
(a) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED
-------------------------------------------------------------
GLOBAL NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In
- -----------------------------------------------------------------
connection with the Exchange of the Owner's beneficial interest in a Restricted
Global Note for a beneficial interest in an Unrestricted Global Note in an equal
principal amount, the Owner hereby certifies (i) the beneficial interest is
being acquired for the Owner's own account without transfer, (ii) such Exchange
has been effected in compliance with the transfer restrictions applicable to the
Global Notes and pursuant to and in accordance with the United States Securities
Act of 1933, as amended (the "Securities Act"), (iii) the restrictions on
--------------
transfer contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and (iv) the
beneficial interest in an Unrestricted Global Note is being acquired in
compliance with any applicable blue sky securities laws of any state of the
United States.
(b) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED
-------------------------------------------------------------
GLOBAL NOTE TO UNRESTRICTED DEFINITIVE NOTE. In connection with the Exchange of
- -------------------------------------------
the Owner's beneficial interest in a Restricted Global Note for an Unrestricted
Definitive Note, the Owner hereby certifies (i) the Definitive Note is being
acquired for the Owner's own account without transfer, (ii) such Exchange has
been effected in compliance with the transfer restrictions applicable to the
Restricted Global Notes and pursuant to and in accordance with the Securities
Act, (iii) the restrictions on transfer contained in the
C-1
<PAGE>
Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the Securities Act and (iv) the Definitive Note is being acquired in compliance
with any applicable blue sky securities laws of any state of the United States.
(c) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO
-------------------------------------------------------
BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection with the
- --------------------------------------------------
Owner's Exchange of a Restricted Definitive Note for a beneficial interest in an
Unrestricted Global Note, the Owner hereby certifies (i) the beneficial interest
is being acquired for the Owner's own account without transfer, (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to Restricted Definitive Notes and pursuant to and in accordance with
the Securities Act, (iii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act and (iv) the beneficial interest is being
acquired in compliance with any applicable blue sky securities laws of any state
of the United States.
(d) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO
-------------------------------------------------------
UNRESTRICTED DEFINITIVE NOTE. In connection with the Owner's Exchange of a
- ----------------------------
Restricted Definitive Note for an Unrestricted Definitive Note, the Owner hereby
certifies (i) the Unrestricted Definitive Note is being acquired for the Owner's
own account without transfer, (ii) such Exchange has been effected in compliance
with the transfer restrictions applicable to Restricted Definitive Notes and
pursuant to and in accordance with the Securities Act, (iii) the restrictions on
transfer contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and (iv) the
Unrestricted Definitive Note is being acquired in compliance with any applicable
blue sky securities laws of any state of the United States.
2. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN
RESTRICTED GLOBAL NOTES FOR RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS
IN RESTRICTED GLOBAL NOTES
(a) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED
-------------------------------------------------------------
GLOBAL NOTE TO RESTRICTED DEFINITIVE NOTE. In connection with the Exchange of
- -----------------------------------------
the Owner's beneficial interest in a Restricted Global Note for a Restricted
Definitive Note with an equal principal amount, the Owner hereby certifies that
the Restricted Definitive Note is being acquired for the Owner's own account
without transfer. Upon consummation of the proposed Exchange in accordance with
the terms of the Indenture, the Restricted Definitive Note issued will continue
to be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the Restricted Definitive Note and in the Indenture
and the Securities Act.
(b) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO
-------------------------------------------------------
BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE. In connection with the
- -----------------------------------------------
Exchange of the Owner's Restricted Definitive Note for a beneficial interest in
the [CHECK ONE] 144A Global Note, Regulation S Global Note, with an equal
principal amount, the Owner hereby certifies (i) the beneficial interest is
being acquired for the Owner's own account without transfer and (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to the Restricted Global Notes and pursuant to and in accordance with
the Securities Act, and in compliance with any applicable blue sky securities
laws of any state of the United States. Upon consummation of the proposed
Exchange in accordance with the terms of the Indenture, the beneficial interest
issued will be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the relevant Restricted Global Note and in the
Indenture and the Securities Act.
C-2
<PAGE>
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.
-----------------------------------
[Insert Name of Owner]
By:
-------------------------------
Name:
Title:
Dated:
-----------, ----
C-3
<PAGE>
EXHIBIT D
FORM OF NOTATION ON NOTE RELATING TO SUBSIDIARY GUARANTEE
Each Subsidiary Guarantor (as defined in the Indenture (the
"Indenture") referred to in the Note upon which this notation is endorsed), (i)
has jointly and severally unconditionally guaranteed (a) the due and punctual
payment of the principal of, premium and interest and Liquidated Damages, if
any, on the Notes, whether at maturity or an interest payment date, by
acceleration, call for redemption or otherwise, (b) the due and punctual payment
of interest on the overdue principal and premium of, and interest and Liquidated
Damages, if any, on the Notes, and (c) 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 and (ii)
has agreed to pay any and all costs and expenses (including reasonable
attorneys' fees) incurred by the Trustee or any Holder in enforcing any rights
under this Subsidiary Guarantee.
Notwithstanding the foregoing, in the event that the Subsidiary
Guarantor would constitute or result in a violation of any applicable fraudulent
conveyance or similar law of any relevant jurisdiction, the liability of such
Subsidiary Guarantor under its Subsidiary Guarantee shall be reduced to the
maximum amount permissible under such fraudulent conveyance or similar law.
No past, present or future director, officer, employee, agent,
incorporator, stockholder or agent of any Subsidiary Guarantor, as such, shall
have any liability for any obligations of the Company or any Subsidiary
Guarantor under the Notes, any Subsidiary Guarantee, Indenture, any supplemental
indenture delivered pursuant to the Indenture by such Subsidiary Guarantor or
any Subsidiary Guarantees, 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.
This Subsidiary Guarantee shall be binding upon each Subsidiary
Guarantor and its successors and assigns and shall inure to the benefit of the
successors and assigns of the Trustee and the Holders and, in the event of any
transfer or assignment of rights by the Holder 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.
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 have been executed by the Trustee under the
Indenture b the manual signature of one of its authorized officers. Capitalized
terms used herein have the meaning assigned to them in the Indenture.
SUBSIDIARY GUARANTOR
By:
----------------------------------
Name:
Title:
D-1
<PAGE>
EXHIBIT E
FORM OF SUPPLEMENTAL INDENTURE
TO BE DELIVERED BY SUBSIDIARY GUARANTORS
Supplemental Indenture (this "Supplemental Indenture"), dated as of
________________, among __________________ (the "Subsidiary Guarantor"), a
subsidiary of Nationwide Credit, Inc. (or its permitted successor), a Georgia
corporation (the "Company") and State Street Bank and Trust Company, as trustee
under the indenture referred to below (the "Trustee").
W I T N E S S E T H
WHEREAS, the Company has heretofore executed and delivered to the
Trustee an indenture (the "Indenture"), dated as of January 28, 1998 providing
for the issuance of an aggregate principal amount of up to $125.0 million of 10
1/4% Senior Notes due 2008 (the "Notes");
WHEREAS, the Indenture provides that under certain circumstances the
Subsidiary Guarantor shall execute and deliver to the Trustee a supplemental
indenture pursuant to which the Subsidiary Guarantor shall unconditionally
guarantee all of the Company's Obligations under the Notes and the Indenture on
the terms and conditions set forth herein (the "Subsidiary Guarantee"); and
WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is
authorized to execute and deliver this Supplemental Indenture.
NOW THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt of which is hereby acknowledged, the
Subsidiary Guarantor and the Trustee mutually covenant and agree for the equal
and ratable benefit of the Holders of the Notes as follows:
1. Capitalized Terms. Capitalized terms used herein without
-----------------
definition shall have the meanings assigned to them in the Indenture .
2. Agreement to Guarantee. The Subsidiary Guarantor hereby agrees
----------------------
as follows:
(a) Along with all Subsidiary Guarantors, to jointly and severally
Guarantee 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 the Indenture,
the Notes or the Obligations of the Company hereunder or
thereunder, that:
. (i) the principal of, premium, if any, and interest and Liquidated Damages,
if any, on the Notes will be promptly paid in full when due, whether at
maturity, by acceleration, redemption or otherwise, and interest on the
overdue principal of to the extent and interest and Liquidation Damages, if
any, on the Notes, to the extent lawful, and all other Obligations of the
Company to the Holders or the Trustee hereunder or under the Indenture will
be promptly paid in full or performed, all in accordance with the terms
hereof and under the Indenture;
(ii) in case of any extension of time of payment or renewal of
any Notes or any of such other Obligations, that same will
be promptly paid in full when due or performed in accordance
with the terms of the extension or
E-1
<PAGE>
renewal, whether at stated maturity, by acceleration or
otherwise. Failing payment when due of any amount so
guaranteed or any performance so guaranteed for whatever
reason, the Subsidiary Guarantors shall be jointly and
severally obligated to pay the same immediately.
(b) The obligations hereunder shall be unconditional, irrespective of
the validity, regularity or enforceability of the Notes or the
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, any action to enforce the same or any other
circumstance which might otherwise constitute a legal or
equitable discharge or defense of a guarantor.
(c) The following is hereby waived: 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.
(d) This Note Guarantee shall not be discharged except by complete
performance of the obligations contained in the Notes and the
Indenture.
(e) If any Holder or the Trustee is required by any court or
otherwise to return to the Company, the Subsidiary Guarantors, or
any Custodian, Trustee, liquidator or other similar official
acting in relation to either the Company or the Subsidiary
Guarantors, any amount paid by either to the Trustee or such
Holder, this Guarantee, to the extent theretofore discharged,
shall be reinstated in full force and effect.
(f) The Subsidiary Guarantor shall not be entitled to any right of
subrogation in relation to the Holders in respect of any
obligations guaranteed hereby until payment in full of all
obligations guaranteed hereby.
(g) As between the Subsidiary 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 of the Indenture for the purposes of this
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 of the Indenture, such obligations (whether or not due
and payable) shall forthwith become due and payable by the
Guarantors for the purpose of this Subsidiary Guarantee.
(h) 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
Guarantee.
E-2
<PAGE>
(i) Notwithstanding the foregoing, in the event that this Subsidiary
Guarantee would constitute or result in a violation of any
applicable fraudulent conveyance or similar law of any relevant
jurisdiction., the liability of the Subsidiary Guarantor under
this Supplemental Indenture and its Subsidiary Guarantee shall be
reduced to the maximum amount permissible under such fraudulent
conveyance or similar law..
3 Execution and Delivery. Each Subsidiary Guarantor agrees that
----------------------
the Guarantees shall remain in full force and effect notwithstanding any failure
to endorse on each Note a notation of such Note Guarantee.
4. Subsidiary Guarantor May Consolidate, Etc. on Certain Terms.
-----------------------------------------------------------
(a) The Subsidiary Guarantor may not 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
Subsidiary Guarantor unless:
(i) subject to Articles 4 and 5 of the Indenture, the Person formed
by or surviving any such consolidation or merger (if other than a
Subsidiary Guarantor or the Company) unconditionally assumes all
the obligations of such Guarantor, pursuant to a supplemental
indenture in form and substance reasonably satisfactory to the
Trustee, under the Notes, the Indenture and the Guarantee on the
terms set forth herein or therein; and
(ii) immediately after giving effect to such transaction, no Default
or Event of Default exists.
(b) 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 the 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 the Indenture as the Subsidiary
Guarantees theretofore and thereafter issued in accordance with the
terms of the Indenture as though all of such Subsidiary Guarantees had
been issued at the date of the execution hereof.
(c) Except as set forth in Articles 4 and 5 of the Indenture, and
notwithstanding clauses (a) and (b) above, nothing contained in the
Indenture or in any of the Notes shall prevent any consolidation or
merger of a Subsidiary Guarantor with or into the Company or another
Subsidiary Guarantor, or shall prevent any sale or conveyance of the
property of a Subsidiary Guarantor as an entirety or substantially as
an entirety to the Company or another Subsidiary Guarantor.
E-3
<PAGE>
5. Releases.
--------
(a) In the event of a sale or other disposition of all of the assets of
any Subsidiary Guarantor, by way of merger, consolidation or
otherwise, or a sale or other disposition of all to the capital stock
of any Subsidiary Guarantor, then such Subsidiary Guarantor (in the
event of a sale or other disposition, by way of merger, consolidation
or otherwise, of all of the capital stock of such Subsidiary
Guarantor) or the corporation acquiring the property (in the event of
a sale or other disposition of all or substantially all of the assets
of such Subsidiary Guarantor) will be released and relieved of any
obligations under its Guarantee; provided that the Net Proceeds of
such sale or other disposition are applied in accordance with the
applicable provisions of the Indenture, including without limitation
Section 4.10 of the Indenture. Upon delivery by the Company to the
Trustee of an Officers' 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 the Indenture, including without
limitation Section 4.10 of the Indenture, the Trustee shall execute
any documents reasonably required in order to evidence the release of
any Subsidiary Guarantor from its obligations under its Guarantee.
(b) Any Subsidiary Guarantor not released from its obligations under its
Subsidiary Guarantee shall remain liable for the full amount of
principal of and interest on the Notes and for the other obligations
of any Subsidiary Guarantor under the Indenture as provided in the
Indenture.
6. No Recourse Against Others. No past, present or future director,
--------------------------
officer, employee, incorporator, stockholder or agent of the Subsidiary
Guarantor, as such, shall have any liability for any obligations of the Company
or any Subsidiary Guarantor under the Notes, any Note Guarantees, the Indenture
or this Supplemental Indenture or for any claim based on, in respect of, or by
reason of, such obligations or their creation. Each Holder of the 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.
7. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF NEW YORK
SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE BUT WITHOUT
GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT
THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
8. Counterparts. The parties may sign any number of copies of this
-------------
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
9. Effect of Headings. The Section headings herein are for
------------------
convenience only and shall not affect the construction hereof.
10. The Trustee. The Trustee shall not be responsible in any manner
-----------
whatsoever for or in respect of the validity or sufficiency of this Supplemental
Indenture or for or in respect of the recitals contained herein, all of which
recitals are made solely by the Subsidiary Guarantor and the Company.
E-4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Supplemental Indenture to be duly executed and attested, all as of the date
first above written.
Dated:
---------------, ----
----------------------------------------
[Guaranteeing Subsidiary]
By:
----------------------------------------
Name:
Title:
STATE STREET BANK
AND TRUST COMPANY
as Trustee
By:
----------------------------------------
Name:
Title:
E-5
<PAGE>
EXHIBIT 4.3
================================================================================
A/B EXCHANGE
REGISTRATION RIGHTS AGREEMENT
Dated as of January 28, 1998
by and among
Nationwide Credit, Inc.
and
Lehman Brothers Inc.
================================================================================
<PAGE>
This Registration Rights Agreement (this "Agreement") is made and entered
---------
into as of January 28, 1998, by and between Nationwide Credit, Inc., a Georgia
corporation (the "Company"), and Lehman Brothers Inc. (the "Initial Purchaser")
------- -----------------
who has agreed to purchase the Company's 10 1/4% Series A Senior Notes due 2008
(the "Series A Notes") pursuant to the Purchase Agreement (as defined below).
--------------
This Agreement is made pursuant to the Purchase Agreement, dated January
23, 1998, (the "Purchase Agreement"), by and between the Company and the Initial
------------------
Purchaser. In order to induce the Initial Purchaser to purchase the Series A
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 Purchaser set forth in Section 3 of the Purchase
Agreement. Capitalized terms used herein and not otherwise defined shall have
the meaning assigned to them in the Indenture, dated January 28, 1998, between
the Company and State Street Bank and Trust Company, as Trustee, relating to the
Series A Notes and the Series B Notes (the "Indenture").
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have the
following meanings:
Act: The Securities Act of 1933, as amended.
---
Affiliate: As defined in Rule 144 of the Act.
---------
Broker-Dealer: Any broker or dealer registered under the Exchange Act.
-------------
Certificated Securities: Definitive Notes, as defined in the Indenture.
-----------------------
Closing Date: The date of this Agreement.
------------
Commission: The Securities and Exchange Commission.
----------
Consummate: A Registered 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 Series B Notes to be issued in the Exchange Offer, (b) the
maintenance of such Exchange Offer Registration Statement continuously effective
and the keeping of the Exchange Offer open for a period not less than the period
required pursuant to Section 3(b) hereof and (c) the delivery by the Company to
the Registrar under the Indenture of Series B Notes in the same aggregate
principal amount as the aggregate principal amount of Series A Notes tendered by
Holders thereof pursuant to the Exchange Offer.
Effectiveness Deadline: As defined in Section 3(a) and 4(a) hereof.
----------------------
Exchange Act: The Securities Exchange Act of 1934, as amended.
------------
2
<PAGE>
Exchange Offer: The exchange and issuance by the Company of a principal
--------------
amount of Series B Notes (which shall be registered pursuant to the Exchange
Offer Registration Statement) equal to the outstanding principal amount of
Series A Notes that are tendered by such Holders in connection with such
exchange and issuance.
Exchange Offer Registration Statement: The Registration Statement relating
-------------------------------------
to the Exchange Offer, including the related Prospectus.
Exempt Resales: The transactions in which the Initial Purchaser proposes
--------------
to sell the Series A Notes to certain "qualified institutional buyers," as such
term is defined in Rule 144A under the Act, and pursuant to Regulation S under
the Act.
Filing Deadline: As defined in Sections 3(a) and 4(a) hereof.
---------------
Holders: As defined in Section 2 hereof.
-------
Indemnified Holder: As defined in Section 8(a) hereof.
------------------
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.
Recommencement Date: As defined in Section 6(d) hereof.
-------------------
Registration Default: As defined in Section 5 hereof.
--------------------
Registration Statement: Any registration statement of the Company relating
----------------------
to (a) an offering of Series B 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) that 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.
Regulation S: Regulation S promulgated under the Act.
------------
Restricted Broker-Dealer: Any Broker-Dealer that holds Series B Notes that
------------------------
were acquired in the Exchange Offer in exchange for Series A Notes that such
Broker-Dealer acquired for its own account as a result of market making
activities or other trading activities (other than Series A Notes acquired
directly from the Company or any of its affiliates).
Rule 144: Rule 144 promulgated under the Act.
--------
Series B Notes: The Company's 10 1/4% Series B Senior Notes due 2008 to be
--------------
issued pursuant to the Indenture: (i) in the Exchange Offer or (ii) as
contemplated by Section 4 hereof.
Shelf Registration Statement: As defined in Section 4 hereof.
----------------------------
3
<PAGE>
Suspension Notice: As defined in Section 6(d) 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.
SECTION 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.
SECTION 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)(i) below have been complied
with), the Company shall (i) cause the Exchange Offer Registration Statement to
be filed with the Commission as soon as practicable after the Closing Date (the
"Exchange Offer Filing Date"), but in no event later than 60 days after the
Closing Date (such 60th day being the "Filing Deadline"), (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 135 days after the
Closing Date (such 135th day being the "Effectiveness Deadline"), (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 it
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 Series B 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 Series B Notes to be offered in
exchange for the Series A Notes that are Transfer Restricted Securities and to
permit resales of Series B Notes by Broker-Dealers that tendered into the
Exchange Offer for Series A Notes that such Broker-Dealer acquired for its own
account as a result of market making activities or other trading activities
(other than Series A Notes acquired directly from the Company or any of its
Affiliates) as contemplated by Section 3(c) below.
4
<PAGE>
(b) The Company shall use its 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 shall cause the Exchange Offer to comply with all applicable
federal and state securities laws. No securities other than the Series B Notes
shall be included in the Exchange Offer Registration Statement. The Company
shall use its 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 Broker-Dealer who holds Transfer Restricted Securities that
were acquired for the account of such Broker-Dealer as a result of market-making
activities or other trading activities (other than Transfer Restricted
Securities acquired directly from the Company or any Affiliate of the Company),
may exchange such Transfer Restricted Securities 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 any Series B
Notes received by such Broker-Dealer in the Exchange Offer and that the
Prospectus contained in the Exchange Offer Registration Statement may be used to
satisfy such prospectus delivery requirement. Such "Plan of Distribution"
section shall also contain all other information with respect to such sales by
such 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 Transfer Restricted Securities held by
any such Broker-Dealer, except to the extent required by the Commission as a
result of a change in policy, rules or regulations after the date of this
Agreement. See the Shearman & Sterling no-action letter (available July 2,
1993).
To the extent necessary to ensure that the Exchange Offer Registration
Statement is available for sales of Series B Notes by Broker-Dealers, the
Company agrees to use its best efforts to keep the Exchange Offer Registration
Statement continuously effective, supplemented and amended as required by the
provisions of Section 6(c) hereof and in conformity 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 Consummated, or such shorter period as will
terminate when all Transfer Restricted Securities covered by such Registration
Statement have been sold pursuant thereto. The Company shall promptly provide
sufficient copies of the latest version of such Prospectus to such Broker-
Dealers promptly upon request, and in no event later than one day after such
request, at any time during such period.
SECTION 4. SHELF REGISTRATION
(a) Shelf Registration. If (i) the Exchange Offer is not permitted by
------------------
applicable law (after the Company has complied with the procedures set forth in
Section 6(a)(i) below) 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
5
<PAGE>
or Commission policy from participating in the Exchange Offer or (B) such Holder
may not resell the Series B 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 Series A
Notes acquired directly from the Company or any of its Affiliates, then the
Company shall:
(x) cause to be filed, on or prior to 30 days after the earlier of (i) the
date on which the Company determines that the Exchange Offer Registration
Statement cannot be filed as a result of clause (a)(i) above and (ii) the date
on which the Company receives the notice specified in clause (a) (ii) above,
(such earlier date, the "Filing Deadline"), a shelf registration statement
---------------
pursuant to Rule 415 under the Act (which may be an amendment to the Exchange
Offer Registration Statement (the "Shelf Registration Statement")), relating to
----------------------------
all Transfer Restricted Securities, and
(y) shall use its best efforts to cause such Shelf Registration Statement
to become effective on or prior to 90 days after the Filing Deadline (such 90th
day the "Effectiveness Deadline").
----------------------
If, after the Company has filed an Exchange Offer Registration Statement
that satisfies the requirements of Section 3(a) above, the Company is required
to file and make effective a Shelf Registration Statement solely because the
Exchange Offer is not permitted under applicable federal law, then the filing of
the Exchange Offer Registration Statement shall be deemed to satisfy the
requirements of clause (x) above; provided that, in such event, the Company
shall remain obligated to meet the Effectiveness Deadline set forth in clause
(y).
The Company shall use its best efforts to keep any Shelf Registration
Statement required by this Section 4(a) 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 two years (as extended
pursuant to Section 6(c)(i)) following the date on which such Shelf Registration
Statement first becomes effective under the Act, or such shorter period as will
terminate when all Transfer Restricted Securities covered by such Registration
Statement have been sold pursuant thereto.
(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 as the Company may reasonably request for use in connection with any
Shelf Registration Statement or Prospectus or preliminary Prospectus included
therein. No Holder of Transfer Restricted Securities shall be entitled to
liquidated damages pursuant to Section 5 hereof unless and until such Holder
shall have provided all such reasonably requested information. Each selling
Holder agrees to promptly furnish additional information required to be
disclosed in order to make the information previously furnished to the Company
by such Holder not materially misleading.
6
<PAGE>
SECTION 5. LIQUIDATED DAMAGES
If (i) any Registration Statement required by this Agreement is not filed
with the Commission on or prior to the applicable Filing Deadline, (ii) any such
Registration Statement has not been declared effective by the Commission on or
prior to the applicable Effectiveness Deadline, (iii) the Exchange Offer has not
been Consummated within 30 Business Days after the Exchange Offer Registration
Statement is first declared effective by the Commission or (iv) 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 hereby agrees to pay to each Holder
--------------------
of Transfer Restricted Securities affected thereby liquidated damages in an
amount equal to $.05 per week per $1,000 in principal amount of Transfer
Restricted Securities held by such Holder for each week or portion thereof that
the Registration Default continues for the first 90-day period immediately
following the occurrence of such Registration Default. 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 in principal
amount of Transfer Restricted Securities; provided that the Company shall in no
event be required to pay liquidated damages for more than one Registration
Default at any given time. Notwithstanding anything to the contrary set forth
herein, (1) upon filing of the Exchange Offer Registration Statement (and/or, if
applicable, the Shelf Registration Statement), in the case of (i) above, (2)
upon the effectiveness of the Exchange Offer Registration Statement (and/or, if
applicable, the Shelf Registration Statement), in the case of (ii) above, (3)
upon Consummation of the Exchange Offer, in the case of (iii) above, or (4) upon
the filing of a post-effective amendment to the Registration Statement or an
additional Registration Statement that causes the Exchange Offer Registration
Statement (and/or, if applicable, the Shelf Registration Statement) to again be
declared effective or made usable in the case of (iv) above, the liquidated
damages payable with respect to the Transfer Restricted Securities as a result
of such clause (i), (ii), (iii) or (iv), as applicable, shall cease.
All accrued liquidated damages shall be paid to the Holders entitled
thereto, in the manner provided for the payment of interest in the Indenture, on
each Interest Payment Date (as defined in the Indenture), as more fully set
forth in the Indenture and the Notes. All obligations of the Company 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.
7
<PAGE>
SECTION 6. REGISTRATION PROCEDURES
(a) Exchange Offer Registration Statement. In connection with the Exchange
-------------------------------------
Offer, the Company shall comply with all applicable provisions of Section 6(c)
below, shall use its best efforts to effect such exchange and to permit the
resale of Series B Notes by Broker-Dealers that tendered in the Exchange Offer
Series A Notes that such Broker-Dealer acquired for its own account as a result
of its market making activities or other trading activities (other than Series A
Notes acquired directly from the Company or any of its Affiliates) being sold in
accordance with the intended method or methods of distribution thereof, and
shall comply with all of the following provisions:
(i) If in the reasonable opinion of counsel to the Company there is a
question as to whether the Exchange Offer is permitted by applicable
federal law, the Company hereby agrees to seek a no-action letter or other
favorable decision from the Commission allowing the Company to Consummate
an Exchange Offer for such Transfer Restricted Securities. The Company
hereby agrees to pursue the issuance of such a decision to the Commission
staff level. In connection with the foregoing, the Company hereby agrees
to take all such other actions as may be 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 (which need not be
favorable) by the Commission staff.
(ii) As a condition to its participation in the Exchange Offer, each
Holder of Transfer Restricted Securities (including, without limitation,
any Holder who is a Broker- Dealer) shall furnish, upon the request of the
Company, prior to the Consummation of the Exchange Offer, a written
representation to the Company (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
Series B Notes to be issued in the Exchange Offer and (C) it is acquiring
the Series B Notes in its ordinary course of business. Each Holder using
the Exchange Offer to participate in a distribution of the Series B Notes
hereby acknowledges and agrees that, if the resales are of Series B Notes
obtained by such Holder in exchange for Series A Notes acquired directly
from the Company or an Affiliate thereof, it (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.
8
<PAGE>
(iii) Prior to effectiveness of the Exchange Offer Registration
Statement, the Company shall provide a supplemental letter to the
Commission (A) stating that the Company is 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) as interpreted in the Commission's letter to
Shearman & Sterling dated July 2, 1993, and, if applicable, any no-action
-------------------
letter obtained pursuant to clause (i) above, (B) including a
representation that the Company has not entered into any arrangement or
understanding with any Person to distribute the Series B Notes to be
received in the Exchange Offer and that, to the best of the Company's
information and belief, each Holder participating in the Exchange Offer is
acquiring the Series B Notes in its ordinary course of business and has no
arrangement or understanding with any Person to participate in the
distribution of the Series B 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, if
applicable.
(b) Shelf Registration Statement. In connection with the Shelf
----------------------------
Registration Statement, the Company shall comply with all the provisions of
Section 6(c) below and shall use its 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 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, the Company shall:
(i) use its best efforts to keep such Registration Statement
continuously effective and provide all requisite financial statements 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 shall file promptly an appropriate amendment to such
Registration Statement curing such defect, and, if Commission review is
required, use its best efforts to cause such amendment to be declared
effective as soon as practicable.
(ii) prepare and file with the Commission such amendments and post-
effective amendments to the applicable Registration Statement as may be
necessary to keep such Registration Statement effective for the applicable
period set forth in Section 3 or 4 hereof, as the case may be; 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
9
<PAGE>
of all securities covered by such Registration Statement during the
applicable period in accordance with the intended method or methods of
distribution by the sellers thereof set forth in such Registration
Statement or supplement to the Prospectus;
(iii) advise the selling Holders promptly and, if requested by such
Persons, confirm such advice in writing, (A) when the Prospectus or any
Prospectus supplement or post-effective amendment has been filed, and, with
respect to any applicable 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. 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 shall use its best efforts to obtain the withdrawal or lifting
of such order at the earliest possible time;
(iv) 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;
(v) furnish to the Initial Purchaser and each selling Holder named in
any Registration Statement or Prospectus 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 in connection with such sale, if any, for a period
of at three 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
10
<PAGE>
Restricted Securities covered by such Registration Statement in connection
with such sale, if any, shall reasonably object within three Business Days
after the receipt thereof. A selling Holder 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;
(vi) 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 in connection with
such sale, if any, make the Company's 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 may reasonably request;
(vii) make available at reasonable times for inspection by the
selling Holders participating in any disposition pursuant to such
Registration Statement and any attorney or accountant retained by such
selling Holders, all financial and other records, pertinent corporate
documents of the Company and cause the Company's officers, directors and
employees to supply all information reasonably requested by any such
selling Holder, 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;
(viii) if requested by any selling Holders 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 may reasonably request to have included
therein, including, without limitation, information relating to the "Plan
of Distribution" of the Transfer Restricted Securities; 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;
(ix) furnish to each selling Holder upon their reasonable request 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);
(x) deliver to each selling Holder, 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
hereby consents to the use (in accordance with law) of the Prospectus and
any amendment or supplement thereto by each of the selling Holders in
connection with the offering and the sale of the Transfer Restricted
Securities covered by the Prospectus or any amendment or supplement
thereto;
(xi) upon the request of any selling Holder, enter into such
reasonable agreements (including underwriting agreements) and make such
representations and warranties and take all such other actions in
connection therewith in order to expedite or
11
<PAGE>
facilitate the disposition of the Transfer Restricted Securities pursuant
to any applicable Registration Statement contemplated by this Agreement as
may be reasonably requested by any Holder of Transfer Restricted Securities
in connection with any sale or resale pursuant to any applicable
Registration Statement and in such connection, the Company shall:
(A) upon request of any selling Holder, furnish (or in the case
of paragraphs (2) and (3), use its best efforts to cause to be
furnished) to each selling Holder, upon the effectiveness of the Shelf
Registration Statement or upon Consummation of the Exchange Offer, as
the case may be:
(1) (1) a certificate, dated such date, signed on behalf of the
Company by (x) the President or any Vice President and (y) a principal
financial or accounting officer of the Company, confirming, as of the
date thereof, the matters set forth in paragraphs (a) through (e) of
Section 8 of the Purchase Agreement and such other similar matters as
the selling Holders 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 covering
matters similar to those set forth in paragraph (f) of Section 7 of
the Purchase Agreement and such other matter as the selling Holders
may reasonably request, and in any event including a statement to the
effect that such counsel has participated in conferences with officers
and other representatives of the Company, representatives of the
independent public accountants for the Company and have considered the
matters required to be stated therein and the statements contained
therein, although such counsel has not independently verified the
accuracy, completeness or fairness of such statements; and that such
counsel advises that, on the basis of the foregoing (relying as to
materiality to the extent such counsel deems appropriate upon the
statements of officers and other representatives of the Company), no
facts came to such counsel's attention that caused such counsel to
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 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 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. Without limiting the foregoing, such
counsel may state further that such counsel assumes no responsibility
for, and has not independently verified, the accuracy, completeness or
fairness of the financial statements, notes and schedules and other
financial data included in any Registration Statement contemplated by
this Agreement or the related Prospectus; and
12
<PAGE>
(3) a customary comfort letter, dated the date of Consummation of
the Exchange Offer, or as of the date of effectiveness of the Shelf
Registration Statement, as the case may be, from the Company's
independent accountants, in the customary form and covering matters of
the type customarily covered in comfort letters to underwriters in
connection with underwritten offerings, and affirming the matters set
forth in the comfort letters delivered pursuant to Section 7(h) of the
Purchase Agreement;
(B) deliver such other documents and certificates as may be reasonably
requested by the selling Holders to evidence compliance with clause
(A) above and with any customary conditions contained in the any
agreement entered into by the Company pursuant to this clause (xi);
and
(C) 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 underwriter(s), if
any.
(xii) prior to any public offering of Transfer Restricted Securities,
cooperate with the selling Holders and their 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 may request and do any and all other acts or things reasonably
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 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;
(xiii) issue, upon the request of any Holder of Series A Notes
covered by any Shelf Registration Statement contemplated by this Agreement,
Series B Notes having an aggregate principal amount equal to the aggregate
principal amount of Series A Notes surrendered to the Company by such
Holder in exchange therefor or being sold by such Holder; such Series B
Notes to be registered in the name of such Holder or in the name of the
purchaser(s) of such Series B Notes, as the case may be; in return, the
Series A Notes held by such Holder shall be surrendered to the Company for
cancellation;
(xiv) 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 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 selling Holders may request at least two Business Days prior
to such sale of Transfer Restricted Securities;
13
<PAGE>
(xv) use its reasonable 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 to
consummate the disposition of such Transfer Restricted Securities, subject
to the proviso contained in clause (xii) above;
(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 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) otherwise use its 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);
(xviii) make appropriate officers of the Company available to the
selling Holders for meetings with prospective purchasers of the Transfer
Restricted Securities and prepare and present to potential investors
customary "road show" material in a manner consistent with other new
issuances of other securities similar to the Transfer Restricted
Securities;
(xix) 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 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; and
(xx) 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.
(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 (in each case, a "Suspension
----------
Notice"), such Holder will forthwith discontinue disposition of Transfer
- ------
Restricted Securities pursuant to the applicable Registration Statement until
(i) such Holder's has received copies of the supplemented or amended Prospectus
contemplated by Section 6(c)(iv) hereof, or (ii) such Holder is advised in
writing by the Company 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 (in each case, the "Recommencement Date"). Each
-------------------
Holder receiving a Suspension Notice hereby agrees that it will either (i)
destroy any
14
<PAGE>
Prospectuses, other than permanent file copies, then in such Holder's possession
which have been replaced by the Company with more recently dated Prospectuses or
(ii) deliver to the Company (at the Company's expense) all copies, other than
permanent file copies, then in such Holder's possession of the Prospectus
covering such Transfer Restricted Securities that was current at the time of
receipt of the Suspension 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 a number of days equal to the number of days in the period
from and including the date of delivery of the Suspension Notice to the date of
delivery of the Recommencement Date.
SECTION 7. REGISTRATION EXPENSES
(a) All expenses incident to the Company's performance of or compliance
with this Agreement will be borne by the Company, regardless of whether a
Registration Statement becomes effective, including without limitation: (i) all
registration and filing fees and expenses; (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 Series B 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, subject to Section 7(b) below, and the Holders of Transfer
Restricted Securities; (v) if the Company elects, in its sole discretion, to so
list the Series B Notes, all application and filing fees in connection with
listing the Series B 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
(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 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.
(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 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,
unless another firm shall be 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 the fees and expenses of such counsel
shall not exceed $25,000.
SECTION 8. INDEMNIFICATION
(a) The Company agrees to indemnify and hold harmless (i) each Holder and
(ii) each person, if any, who controls (within the meaning of Section 15 of the
Act or Section 20 of the Exchange Act) any Holder (any of the persons referred
to in this clause (ii) being hereinafter referred to as a "controlling person")
------------------
and (iii) the respective officers, directors, partners,
15
<PAGE>
employees, representatives and agents of any Holder or any controlling person
(any person referred to in clause (i), (ii) or (iii) may hereinafter be referred
to as an "Indemnified Holder"), from and against any and all losses, claims,
------------------
damages, liabilities and actions, (including without limitation, any legal or
other expenses incurred in connection with investigating or defending any
matter, including any action that could give rise to any such losses, claims,
damages, liabilities or actions), insofar as such loss, claim, damage, liability
or action arises out of, or is based upon, (i) any untrue statement or alleged
untrue statement of a material fact contained in any preliminary prospectus or
Prospectus, or any amendment or supplement thereto, provided by the Company to
any holder or any prospective purchaser of Series B Notes, or (ii) the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, except
insofar as such losses, claims, damages, liabilities or actions are caused by an
untrue statement or omission or alleged untrue statement or omission that is
based upon information relating to any of the Indemnified Holders furnished in
writing to the Company by any of the Indemnified Holders; provided, however,
that the Company shall not be liable in any such case to the extent that any
such loss, claim, damage, liability or action arises out of, or is based upon,
any untrue statement or alleged untrue statement or omission or alleged omission
made in any preliminary prospectus or Prospectus or amendment or supplement
thereto in reliance upon and in conformity with written information furnished to
the Company by such Indemnified Holder expressly for use therein; and provided
further that with respect to any such untrue statement or omission made in the
preliminary prospectus, the indemnity agreement contained in this Section 8(a)
shall not inure to the benefit of such Indemnified Holder who sold the Transfer
Restricted Securities to such person asserting any such loss, claim, damage,
liability or action, to the extent that such sale was an initial resale by the
Indemnified Holder and any such loss, claim, damage, liability or action of the
Indemnified Holder is a result of the fact that both (i) a copy of the
Prospectus was not sent or given to such person prior to, concurrently with or
promptly following the sale of such Transfer Restricted Securities to such
person, and (ii) the untrue statement or omission in the preliminary prospectus
was corrected in the Prospectus unless, in either case, such failure to deliver
the Prospectus was a result of non-compliance by the Company with Section 6 of
this Agreement. The foregoing indemnity is in addition to any liability which
the Company may otherwise have to any Indemnified Holder.
(b) Each Holder of Transfer Restricted Securities agrees, severally and not
jointly, to indemnify and hold harmless the Company, its officers and employees,
each of its directors, and each person, if any who controls (within the meaning
of Section 15 of the Act or Section 20 of the Exchange Act) the Company, to the
same extent as the foregoing indemnity from the Company to each of the
Indemnified Holders, but only with reference to information relating to such
Indemnified Holder furnished in writing to the Company by such Indemnified
Holder expressly for use in any Preliminary Prospectus or Prospectus. In no
event shall any indemnified Holder be liable or responsible for any amount in
excess of the amount by which the total amount received by such Indemnified
Holder with respect to its sale of Transfer Restricted Securities pursuant to
the Prospectus exceeds (i) the amount paid by such Indemnified Holder for such
Transfer Restricted Securities and (ii) the amount of any damages that such
Indemnified Holder has otherwise been required to pay by reason of such untrue
statement or alleged untrue statement or omission or alleged omission. The
foregoing indemnity agreement is in addition to any liability which the Holder
may otherwise have to the Company or any such director, officer, employee or
controlling person.
16
<PAGE>
(c) In case any action shall be commenced involving any person in respect
of which indemnity may be sought pursuant to Section 8(a) or 8(b) (the
"indemnified party"), the indemnified party shall promptly notify the person
against whom such indemnity may be sought (the "indemnifying person") in writing
of the claim or the commencement of that action; provided, however, that the
failure to notify the indemnifying party shall not relieve it from any liability
which it may have under this Section 8 except to the extent it has been
materially prejudiced by such failure and, provided further, that the failure to
notify the indemnifying party shall not relieve it from any liability which it
may have to an indemnified party otherwise than under this Section 8. If any
such claim or action shall be brought against an indemnified party, and it shall
notify the indemnifying party thereof, the indemnifying party shall be entitled
to participate therein and, to the extent that it wishes, jointly with any other
similarly notified indemnifying party, to assume the defense thereof with
counsel reasonably satisfactory to the indemnified party. After notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under this Section 8 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation; provided, however, that
the indemnified party shall have the right to employ counsel to represent such
indemnified party if, in the reasonable judgment of the indemnified party, it is
advisable for the indemnified party to be represented by separate counsel, and
in that event the fees and expenses of such separate counsel shall be paid by
the indemnifying party. No indemnifying party shall (i) without the prior
written consent of the indemnified parties (which consent shall not be
unreasonably withheld), settle or compromise or consent to the entry of any
judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action) unless such settlement, compromise or consent
includes an unconditional release of each indemnified party from all liability
arising out of such claim, action, suit or proceeding, or (ii) be liable for any
settlement of any such action effected without its written consent (which
consent shall not be unreasonably withheld), but if settled with the consent of
the indemnifying party or if there be a final judgment of the plaintiff in any
such action, the indemnifying party agrees to indemnify and hold harmless any
indemnified party from and against any loss or liability by reason of such
settlement or judgment.
(d) To the extent that the indemnification provided for in this Section 8
shall for any reason be unavailable to or insufficient to hold harmless an
indemnified party under Section 8(a) or 8(b) in respect of any loss, claim,
damage or liability, or any action in respect thereof, referred to therein, then
each indemnifying party shall, in lieu of indemnifying such indemnified party,
contribute to the amount paid or payable by such indemnified party as a result
of such loss, claim, damage or liability, or action in respect thereof, (i) in
such proportion as shall be appropriate to reflect the relative benefits
received by the Company, on the one hand, and the Holders, on the other hand,
from their sale of Transfer Restricted Securities or (ii) if the allocation
provided by clause 8(d)(i) is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause 8(d)(i) above but also the relative fault of the Company, on the
one hand, and of the Indemnified Holder, on the other hand, in connection with
the statements or omissions which resulted in such losses, claims, damages,
liabilities or judgments, as well as any other relevant equitable
considerations. The relative fault of the Company, on the one hand, and of the
Indemnified Holder, on the other hand, shall be determined
17
<PAGE>
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a material
fact relates to information supplied by the Company, on the one hand, or by the
Indemnified Holder, on the other hand, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company and the Holders agree that it would not be
just and equitable if contributions pursuant to this Section 8(d) were to be
determined by pro rata allocation or by any other method of allocation which
does not take into account the equitable considerations referred to herein. The
amount paid or payable by an indemnified party as a result of the loss, claim,
damage or liability, or action in respect thereof, referred to above in this
Section 8 shall be deemed to include, for purposes of this Section 8(d), 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 Section 8, no Holder or its related
Indemnified Holders shall be required to contribute, in the aggregate, any
amount in excess of the amount by which the total received by such Holder with
respect to the sale of its Transfer Restricted Securities pursuant to a
Registration Statement exceeds the sum of (A) the amount paid by such Holder for
such Transfer Restricted Securities plus (B) the amount of any damages which the
Holder has been required to pay by reason of any untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Holders' obligations to contribute pursuant to this
Section 8(c) are several in proportion to the respective principal amount of
Transfer Restricted Securities held by each of the Holders hereunder and not
joint.
18
<PAGE>
SECTION 9. RULE 144A
The Company hereby agrees with each Holder, for so long as any Transfer
Restricted Securities remain outstanding and during any period in which the
Company 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.
SECTION 10. MISCELLANEOUS
(a) Remedies. The Company acknowledges and agrees that any failure by the
--------
Company to comply with its obligations under Sections 3 and 4 hereof may result
in material irreparable injury to the Initial Purchaser or the Holders for which
there is no adequate remedy at law, that it will not be possible to measure
damages for such injuries precisely and that, in the event of any such failure,
the Initial Purchaser or any Holder may obtain such relief as may be required to
specifically enforce the Company's obligations under Sections 3 and 4 hereof.
The Company further agrees to waive the defense in any action for specific
performance that a remedy at law would be adequate.
(b) No Inconsistent Agreements. The Company will not, 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. The Company has not 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 securities under any agreement in effect on the date
hereof.
(c) 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 10(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 (excluding Transfer Restricted Securities held by the
Company of its Affiliates). 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.
19
<PAGE>
(d) Third Party Beneficiary. The Holders shall be third party
-----------------------
beneficiaries to the agreements made hereunder between the Company, on the one
hand, and the Initial Purchaser, on the other hand, and shall have the right to
enforce such agreements directly to the extent they may deem such enforcement
necessary or advisable to protect its rights or the rights of Holders hereunder.
(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:
Nationwide Credit, Inc.
6190 Powers Ferry Road, 4th Floor
Atlanta, Georgia 30339
Telecopier No.: (770) 644-7420
Attention: Chief Financial Officer
With a copy to:
Weil, Gotshal & Manges LLP
767 5th Avenue
New York, New York 10153
Telecopier No.: (212) 310-8007
Attention: Stephen M. Besen, Esq.
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.
Upon the date of filing of the Exchange Offer Registration Statement or a
Shelf Registration Statement, as the case may be, notice shall be delivered to
the Initial Purchaser (in the form attached hereto as Exhibit A) and shall be
addressed to: Lehman Brothers Inc., 3 World Financial Center, 200 Vesey Street,
New York, NY 10285, Attention: Syndicate Department. A copy of the notice
shall also be delivered to Latham & Watkins, 885 Third Avenue, Suite 1000, New
York, NY 10022, Attention: Kirk A. Davenport, Esq.
20
<PAGE>
(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, that nothing herein shall
be deemed to permit any assignment, transfer or other disposition of Transfer
Restricted Securities in violation of the terms hereof or of the Purchase
Agreement or the Indenture. If any transferee of any Holder shall acquire
Transfer Restricted Securities in any manner, whether by operation of law or
otherwise, such Transfer Restricted Securities shall be held subject to all of
the terms of this Agreement, and by taking and holding such Transfer Restricted
Securities such Person shall be conclusively deemed to have agreed to be bound
by and to perform all of the terms and provisions of this Agreement, including
the restrictions on resale set forth in this Agreement and, if applicable, the
Purchase Agreement, and such Person shall be entitled to receive the benefits
hereof.
(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]
21
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
NATIONWIDE CREDIT, INC.,
By: Jerrold Kaufman
-------------------------------
Name: Jerrold Kaufman
Title: President and Chief Executive
Officer
LEHMAN BROTHERS INC.
By: /s/ Theodore I. Davies
-------------------------------
Name: Theodore I. Davies
Title: Vice President
22
<PAGE>
EXHIBIT A
NOTICE OF FILING OF
A/B EXCHANGE OFFER REGISTRATION STATEMENT
To: Lehman Brothers Inc.
3 World Financial Center
200 Vesey Street
New York, NY 10285
From: Nationwide Credit, Inc.
___% Senior Notes
Date: ___, 1998
For your information only (NO ACTION REQUIRED):
Today, ______, 1998, we filed [an A/B Exchange Registration Statement/a
Shelf Registration Statement] with the Securities and Exchange Commission. We
currently expect this registration statement to be declared effective within __
business days of the date hereof.
23
<PAGE>
EXHIBIT 10.1
EXECUTION COPY
================================================================================
$60,000,000
CREDIT AGREEMENT
among
NCI ACQUISITION CORPORATION,
NATIONWIDE CREDIT, INC.,
as Borrower
The Several Lenders
from Time to Time Parties Hereto,
LEHMAN BROTHERS INC.,
as Arranger
LEHMAN COMMERCIAL PAPER INC.,
as Syndication Agent
FLEET CAPITAL CORPORATION,
as Administrative Agent
and
BHF - BANK AKTIENGESELLSCHAFT,
GRAND CAYMAN BRANCH,
as Documentation Agent
Dated as of January 28, 1998
================================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
SECTION 1. DEFINITIONS..................................................... 2
1.1 Defined Terms..................................................... 2
1.2 Other Definitional Provisions..................................... 24
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS................................. 24
2.1 Tranche B Term Loan Commitments................................... 24
2.2 Procedure for Tranche B Term Loan Borrowing....................... 24
2.3 Repayment of Tranche B Term Loans................................. 25
2.4 Revolving Credit Commitments...................................... 25
2.5 Procedure for Revolving Credit Borrowing.......................... 26
2.6 Repayment of Loans; Evidence of Debt.............................. 26
2.7 Commitment Fees, etc.............................................. 27
2.8 Termination or Reduction of Revolving Credit Commitments.......... 27
2.9 Optional Prepayments.............................................. 28
2.10 Mandatory Prepayments and Commitment Reductions................... 28
2.11 Conversion and Continuation Options............................... 29
2.12 Minimum Amounts and Maximum Number of Eurodollar Tranches......... 30
2.13 Interest Rates and Payment Dates.................................. 30
2.14 Computation of Interest and Fees.................................. 30
2.15 Inability to Determine Interest Rate.............................. 31
2.16 Pro Rata Treatment and Payments................................... 31
2.17 Requirements of Law............................................... 33
2.18 Taxes............................................................. 34
2.19 Indemnity......................................................... 35
2.20 Illegality........................................................ 36
2.21 Change of Lending Office.......................................... 36
2.22 Replacement of Lenders under Certain Circumstances................ 36
SECTION 3. LETTERS OF CREDIT............................................... 37
3.1 L/C Commitment.................................................... 37
3.2 Procedure for Issuance of Letter of Credit........................ 37
3.3 Commissions, Fees and Other Charges............................... 38
3.4 L/C Participations................................................ 38
3.5 Reimbursement Obligation of the Borrower.......................... 39
3.6 Obligations Absolute.............................................. 39
3.7 Letter of Credit Payments......................................... 40
3.8 Applications...................................................... 40
SECTION 4. REPRESENTATIONS AND WARRANTIES.................................. 40
4.1 Financial Condition............................................... 40
4.2 No Change......................................................... 41
4.3 Corporate Existence; Compliance with Law.......................... 41
4.4 Corporate Power; Authorization; Enforceable Obligations........... 41
4.5 No Legal Bar...................................................... 42
-i-
<PAGE>
Page
----
4.6 No Material Litigation............................................ 42
4.7 No Default........................................................ 42
4.8 Ownership of Property; Liens...................................... 42
4.9 Intellectual Property............................................. 42
4.10 Taxes............................................................. 43
4.11 Federal Regulations............................................... 43
4.12 Labor Matters..................................................... 43
4.13 ERISA............................................................. 43
4.14 Investment Company Act; Other Regulations......................... 44
4.15 Subsidiaries...................................................... 44
4.16 Use of Proceeds................................................... 44
4.17 Environmental Matters............................................. 44
4.18 Accuracy of Information, etc...................................... 45
4.19 Security Documents................................................ 46
4.20 Solvency.......................................................... 46
SECTION 5. CONDITIONS PRECEDENT............................................ 46
5.1 Conditions to Initial Extension of Credit......................... 46
5.2 Conditions to Each Extension of Credit............................ 48
SECTION 6. AFFIRMATIVE COVENANTS........................................... 49
6.1 Financial Statements.............................................. 49
6.2 Certificates; Other Information................................... 50
6.3 Payment of Obligations............................................ 51
6.4 Conduct of Business and Maintenance of Existence, etc............. 51
6.5 Maintenance of Property; Insurance................................ 51
6.6 Inspection of Property; Books and Records; Discussions............ 52
6.7 Notices........................................................... 52
6.8 Environmental Laws................................................ 52
6.9 Additional Collateral, etc........................................ 53
SECTION 7. NEGATIVE COVENANTS.............................................. 55
7.1 Financial Covenants............................................... 55
7.2 Limitation on Indebtedness........................................ 57
7.3 Limitation on Liens............................................... 57
7.4 Limitation on Fundamental Changes................................. 58
7.5 Limitation on Sale of Assets...................................... 59
7.6 Limitation on Dividends........................................... 59
7.7 Limitation on Capital Expenditures................................ 60
7.8 Limitation on Investments, Loans and Advances..................... 60
7.9 Limitation on Optional Payments and Modifications of Debt
Instruments, etc.; Limitation on Modification of Certificate
of Incorporation.................................................. 61
7.10 Limitation on Transactions with Affiliates........................ 61
7.11 Limitation on Sales and Leasebacks................................ 62
7.12 Limitation on Changes in Fiscal Periods........................... 62
7.13 Limitation on Negative Pledge Clauses............................. 62
7.14 Limitation on Restrictions on Subsidiary Distributions............ 62
7.15 Limitation on Lines of Business................................... 62
7.16 Limitation on Amendments to Acquisition Documentation............. 62
-ii-
<PAGE>
Page
----
7.17 Limitation on Activities of Holdings............................. 63
SECTION 8. EVENTS OF DEFAULT............................................... 63
SECTION 9. THE AGENTS...................................................... 66
9.1 Appointment...................................................... 66
9.2 Delegation of Duties............................................. 67
9.3 Exculpatory Provisions........................................... 67
9.4 Reliance by Agents............................................... 67
9.5 Notice of Default................................................ 68
9.6 Non-Reliance on Agents and Other Lenders......................... 68
9.7 Indemnification.................................................. 68
9.8 Agent in Its Individual Capacity................................. 69
9.9 Successor Agents................................................. 69
9.10 Authorization to Release Liens................................... 69
9.11 The Arranger..................................................... 70
9.12 The Documentation Agent.......................................... 70
SECTION 10. MISCELLANEOUS.................................................. 70
10.1 Amendments and Waivers........................................... 70
10.2 Notices.......................................................... 71
10.3 No Waiver; Cumulative Remedies................................... 72
10.4 Survival of Representations and Warranties....................... 72
10.5 Payment of Expenses.............................................. 72
10.6 Successors and Assigns; Participations and Assignments........... 73
10.7 Adjustments; Set-off............................................. 76
10.8 Counterparts..................................................... 76
10.9 Severability..................................................... 77
10.10 Integration...................................................... 77
10.11 GOVERNING LAW.................................................... 77
10.12 Submission To Jurisdiction; Waivers.............................. 77
10.13 Acknowledgements................................................. 78
10.14 WAIVERS OF JURY TRIAL............................................ 78
10.15 Confidentiality.................................................. 78
-iii-
<PAGE>
ANNEX:
A Pricing Grid
SCHEDULES:
1.1A Commitments
4.1 Accounting Adjustments
4.2 Material Events
4.4 Consents, Authorizations, Filings and Notices
4.6 Litigation
4.10 Taxes
4.15 Subsidiaries
4.19 UCC Filing Jurisdictions
7.2(e) Existing Indebtedness
7.3(f) Existing Liens
EXHIBITS:
A Form of Guarantee and Collateral Agreement
B Form of Compliance Certificate
C Form of Closing Certificate
D Form of Assignment and Acceptance
E-1 Form of Legal Opinion of Weil, Gotshal & Manges LLP
E-2 Form of Legal Opinion of Troutman Sanders LLP
F-1 Form of Tranche B Term Note
F-2 Form of Revolving Credit Note
G Form of Exemption Certificate
-iv-
<PAGE>
CREDIT AGREEMENT, dated as of January 28, 1998, among NCI ACQUISITION
CORPORATION, a Delaware corporation ("Holdings"), NATIONWIDE CREDIT, INC., a
Georgia corporation (the "Borrower"), the several banks and other financial
institutions or entities from time to time parties to this Agreement (the
"Lenders "), LEHMAN BROTHERS INC., as advisor and arranger (in such capacity,
the "Arranger"), LEHMAN COMMERCIAL PAPER INC., as syndication agent (in such
capacity, the "Syndication Agent"), FLEET CAPITAL CORPORATION, as administrative
agent (in such capacity, the "Administrative Agent"), and BHF - BANK
AKTIENGESELLSCHAFT, GRAND CAYMAN BRANCH, as Documentation Agent (in such
capacity, the "Documentation Agent").
W I T N E S S E T H:
-------------------
WHEREAS, (i) WPG Corporate Development Associates V, L.P., WPG Corporate
Development Associates V (Overseas), L.P., Centre Capital Investors II, L.P.
(together with certain of its affiliates), Centre Capital Tax-Exempt Investors
II, L.P., Centre Capital Offshore Investors II, L.P., State Board of
Administration of Florida, Centre Parallel Management Partners, L.P., Centre
Partners Coinvestment, L.P., Avalon Investment Partners, LLC, Weber Family Trust
dated 1/6/89, Lion Investments Limited and Westpool Investment Trust plc
(collectively, the "Equity Investors"), together with management of the Borrower
have formed Holdings and (ii) pursuant to the Agreement and Plan of Merger,
dated December 31, 1997, among Holdings, NCI Merger Corporation ("Acquisition
Co"), the Borrower, First Financial Management Corporation and First Data
Corporation (as amended, supplemented or otherwise modified from time to time,
the "Acquisition Agreement"), Acquisition Co has merged with the Borrower, with
the Borrower being the surviving corporation of such merger (the "Acquisition");
WHEREAS, in connection with the Acquisition, Acquisition Co obtained senior
secured credit facilities in an aggregate amount of $133,000,000 (the
"Acquisition Facility") to finance the Acquisition, to refinance existing
indebtedness of the Borrower and its subsidiaries, to pay related transaction
expenses and for working capital purposes;
WHEREAS, to refinance the Acquisition Facility, to finance the working
capital and general corporate needs of the Borrower and its subsidiaries and to
finance Permitted Acquisitions, the Borrower will require financing in the form
of (i) senior secured credit facilities in an aggregate principal amount of
$60,000,000 comprised of term loan facilities in an aggregate principal amount
of $25,000,000 and a revolving credit facility in an aggregate principal amount
of $35,000,000 and (ii) $100,000,000 in gross proceeds of unsecured senior notes
to be issued by Holdings; and
WHEREAS, the Lenders are willing to make such senior secured credit
facilities available upon and subject to the terms and conditions hereinafter
set forth;
NOW, THEREFORE, in consideration of the premises and the agreements
hereinafter set forth, the parties hereto hereby agree as follows:
<PAGE>
2
SECTION 1. DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the terms listed in
-------------
this Section 1.1 shall have the respective meanings set forth in this Section
1.1.
"Acquisition": as defined in the recitals hereto.
-----------
"Acquisition Agreement": as defined in the recitals hereto.
---------------------
"Acquisition Co": as defined in the recitals hereto.
--------------
"Acquisition Documentation": collectively, the Acquisition Agreement
-------------------------
and all schedules, exhibits, annexes and amendments thereto and all side
letters and agreements affecting the terms thereof or entered into in
connection therewith, in each case, as amended, supplemented or otherwise
modified from time to time.
"Acquisition Facility": as defined in the recitals hereto.
--------------------
"Acquisition Credit Agreement": the Credit Agreement, dated as of
----------------------------
December 31, 1997, among Holdings, Acquisitions Co, as borrower, Lehman
Brothers Inc., as arranger, and Lehman Commercial Paper Inc., as lender, as
syndication agent and as administrative agent.
"Adjustment Date": as defined in the Pricing Grid.
---------------
"Administrative Agent": as defined in the preamble hereto.
--------------------
"Affiliate": as to any Person, any other Person which, directly or
---------
indirectly, is in control of, is controlled by, or is under common control
with, such Person. For purposes of this definition, "control" of a Person
means the power, directly or indirectly, either to (a) vote 10% or more of
the securities having ordinary voting power for the election of directors
(or persons performing similar functions) of such Person or (b) direct or
cause the direction of the management and policies of such Person, whether
by contract or otherwise.
"Agents": the collective reference to the Syndication Agent and the
------
Administrative Agent.
"Aggregate Exposure": with respect to any Lender, an amount equal to
------------------
(a) until the Closing Date, the aggregate amount of such Lender's Commitments
and (b) thereafter, the sum of (i) the aggregate unpaid principal amount of such
Lender's Tranche B Term Loans and (ii) the amount of such Lender's Revolving
Credit Commitment or, if the Revolving Credit Commitments have been terminated,
the amount of such Lender's Revolving Extensions of Credit.
"Aggregate Exposure Percentage": with respect to any Lender, the
-----------------------------
ratio (expressed as a percentage) of such Lender's Aggregate Exposure to the
Aggregate Exposure of all Lenders.
<PAGE>
3
"Agreement": this Credit Agreement, as amended, supplemented or
---------
otherwise modified from time to time.
"Applicable Margin": for each Type of Loan, the rate per annum set
-----------------
forth under the relevant column heading below:
Base Rate Eurodollar
Loans Loans
--------- ----------
Revolving Credit Loans 0.875% 1.875%
Tranche B Term Loans 1.125% 2.125%
provided that, on and after the first Adjustment Date occurring after the
completion of one full fiscal quarter of the Borrower after the Closing Date,
the Applicable Margin with respect to Revolving Credit Loans and Tranche B Term
Loans will be determined pursuant to the Pricing Grid.
"Application": an application, in such form as the Issuing Lender may
-----------
specify from time to time, requesting the Issuing Lender to open a Letter of
Credit.
"Arranger": as defined in the preamble hereto.
--------
"Asset Sale": any Disposition of Property or series of related
----------
Dispositions of Property (other than any such Disposition permitted by clause
(a), (b), (c) or (d) of Section 7.5), excluding any Disposition which yields
gross proceeds to Holdings, the Borrower or any of its Subsidiaries (valued at
the initial principal amount thereof in the case of non-cash proceeds consisting
of notes or other debt securities and valued at fair market value in the case of
other non-cash proceeds) of less than $100,000 (provided that the aggregate
gross proceeds of Dispositions that may be so excluded shall not exceed
$500,000).
"Assignee": as defined in Section 10.6(c).
--------
"Assignment and Acceptance": as defined in Section 10.6(c).
--------------------------
"Assignor": as defined in Section 10.6(c).
--------
"Available Revolving Credit Commitment": as to any Revolving Credit
-------------------------------------
Lender at any time, an amount equal to the excess, if any, of (a) such Lender's
Revolving Credit Commitment over (b) such Lender's Revolving Extensions of
Credit.
"Base Rate": for any day, a rate per annum (rounded upwards, if
---------
necessary, to the next 1/16 of 1%) equal to the greatest of (a) the Prime Rate
in effect on such day, (b) the Base CD Rate in effect on such day plus 1% and
(c) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. For
purposes hereof: "Prime Rate" shall mean the rate of interest per annum publicly
announced from time to time by the Reference Bank as its prime or base rate in
effect at its principal office in New York City (the Prime Rate not being
intended to be the lowest rate of interest charged by the Reference Bank in
connection with extensions of credit to debtors); "Base CD Rate" shall mean the
sum of
<PAGE>
4
(a) the product of (i) the Three-Month Secondary CD Rate and (ii) a fraction,
the numerator of which is one and the denominator of which is one minus the C/D
Reserve Percentage and (b) the C/D Assessment Rate; and "Three-Month Secondary
CD Rate" shall mean, for any day, the secondary market rate for three-month
certificates of deposit reported as being in effect on such day (or, if such day
shall not be a Business Day, the next preceding Business Day) by the Board
through the public information telephone line of the Federal Reserve Bank of New
York (which rate will, under the current practices of the Board, be published in
Federal Reserve Statistical Release H.15(519) during the week following such
day), or, if such rate shall not be so reported on such day or such next
preceding Business Day, the average of the secondary market quotations for
three-month certificates of deposit of major money center banks in New York City
received at approximately 10:00 A.M., New York City time, on such day (or, if
such day shall not be a Business Day, on the next preceding Business Day) by the
Reference Bank from three New York City negotiable certificate of deposit
dealers of recognized standing selected by it. Any change in the Base Rate due
to a change in the Prime Rate, the Three-Month Secondary CD Rate or the Federal
Funds Effective Rate shall be effective as of the opening of business on the
effective day of such change in the Prime Rate, the Three-Month Secondary CD
Rate or the Federal Funds Effective Rate, respectively.
"Base Rate Loans": Loans the rate of interest applicable to which is
---------------
based upon the Base Rate.
"Benefitted Lender": as defined in Section 10.7(a).
-----------------
"Board": the Board of Governors of the Federal Reserve System of the
-----
United States (or any successor).
"Borrower": as defined in the preamble hereto.
--------
"Borrowing Date": any Business Day specified by the Borrower as a
--------------
date on which the Borrower requests the relevant Lenders to make Loans
hereunder.
"Business": as defined in Section 4.17(b).
--------
"Business Day": (i) for all purposes other than as covered by clause
------------
(ii) below, a day other than a Saturday, Sunday or other day on which commercial
banks in New York City are authorized or required by law to close and (ii) with
respect to all notices and determinations in connection with, and payments of
principal and interest on, Eurodollar Loans, any day which is a Business Day
described in clause (i) and which is also a day for trading by and between banks
in Dollar deposits in the interbank eurodollar market.
"Capital Expenditures": for any period, with respect to any Person,
--------------------
the aggregate of all expenditures by such Person and its Subsidiaries for the
acquisition or leasing (pursuant to a capital lease) of fixed or capital assets
or additions to equipment (including replacements, capitalized repairs and
improvements during such period) which should be capitalized under GAAP on a
consolidated balance sheet of such Person and its Subsidiaries.
"Capital Lease Obligations": as to any Person, the obligations of
-------------------------
such Person to
<PAGE>
5
pay rent or other amounts under any lease of (or other arrangement conveying the
right to use) real or personal property, or a combination thereof, which
obligations are required to be classified and accounted for as capital leases on
a balance sheet of such Person under GAAP, and, for the purposes of this
Agreement, the amount of such obligations at any time shall be the capitalized
amount thereof at such time determined in accordance with GAAP.
"Capital Stock": any and all shares, interests, participations or
-------------
other equivalents (however designated) of capital stock of a corporation, any
and all equivalent ownership interests in a Person (other than a corporation)
and any and all warrants, rights or options to purchase any of the foregoing.
"Cash Equivalents": (a) marketable direct obligations issued by, or
----------------
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; (b)
certificates of deposit, time deposits, eurodollar time deposits or overnight
bank deposits having maturities of six months or less from the date of
acquisition issued by any Lender or by any commercial bank organized under the
laws of the United States or any state thereof having combined capital and
surplus of not less than $500,000,000; (c) commercial paper of an issuer rated
at least A-2 by Standard & Poor's Ratings Services ("S&P") or P-2 by Moody's
Investors Service, Inc. ("Moody's"), or carrying an equivalent rating by a
nationally recognized rating agency, if both of the two named rating agencies
cease publishing ratings of commercial paper issuers generally, and maturing
within six months from the date of acquisition; (d) repurchase obligations of
any Lender or of any commercial bank satisfying the requirements of clause (b)
of this definition, having a term of not more than 30 days with respect to
securities issued or fully guaranteed or insured by the United States
government; (e) securities with maturities of one year or less from the date of
acquisition issued or fully guaranteed by any state, commonwealth or territory
of the United States, by any political subdivision or taxing authority of any
such state, commonwealth or territory or by any foreign government, the
securities of which state, commonwealth, territory, political subdivision,
taxing authority or foreign government (as the case may be) are rated at least A
by S&P or A by Moody's; (f) securities with maturities of six months or less
from the date of acquisition backed by standby letters of credit issued by any
Lender or any commercial bank satisfying the requirements of clause (b) of this
definition; or (g) shares of money market mutual or similar funds which invest
exclusively in assets satisfying the requirements of clauses (a) through (f) of
this definition.
"C/D Assessment Rate": for any day as applied to any Base Rate Loan,
-------------------
the annual assessment rate in effect on such day which is payable by a member of
the Bank Insurance Fund maintained by the Federal Deposit Insurance Corporation
(the "FDIC") classified as well-capitalized and within supervisory subgroup "B"
(or a comparable successor assessment risk classification) within the meaning of
12 C.F.R. (S) 327.4 (or any successor provision) to the FDIC (or any successor)
for the FDIC's (or such successor's) insuring time deposits at offices of such
institution in the United States.
"C/D Reserve Percentage": for any day as applied to any Base Rate
----------------------
Loan, that percentage (expressed as a decimal) which is in effect on such day,
as prescribed by the Board, for determining the maximum reserve requirement for
a Depositary Institution (as
<PAGE>
6
defined in Regulation D of the Board as in effect from time to time) in respect
of new non-personal time deposits in Dollars having a maturity of 30 days or
more.
"Closing Date": the date on which the conditions precedent set forth
------------
in Section 5.1 shall have been satisfied, which shall not occur later than
February 19, 1998.
"Code": the Internal Revenue Code of 1986, as amended from time to
----
time.
"Collateral": all Property of the Loan Parties, now owned or
----------
hereafter acquired, upon which a Lien is purported to be created by any Security
Document.
"Commitment": as to any Lender, the sum of the Tranche B Term Loan
----------
Commitment and the Revolving Credit Commitment of such Lender.
"Commitment Fee Rate": .375% per annum; provided, that on and after
-------------------
the first Adjustment Date occurring after the completion of one full fiscal
quarter of the Borrower after the Closing Date, the Commitment Fee Rate will be
determined pursuant to the Pricing Grid.
"Commonly Controlled Entity": an entity, whether or not incorporated,
--------------------------
which is under common control with the Borrower within the meaning of Section
4001 of ERISA or is part of a group which includes the Borrower and which is
treated as a single employer under Section 414 of the Code.
"Compliance Certificate": a certificate duly executed by a
----------------------
Responsible Officer, substantially in the form of Exhibit B.
"Confidential Information Memorandum": the Confidential Information
-----------------------------------
Memorandum dated December 1997 and furnished to the Lenders.
"Consolidated Current Assets": at any date, all amounts (other than
---------------------------
cash and Cash Equivalents) which would, in conformity with GAAP, be set forth
opposite the caption "total current assets" (or any like caption) on a
consolidated balance sheet of the Borrower and its Subsidiaries at such date.
"Consolidated Current Liabilities": at any date, all amounts which
--------------------------------
would, in conformity with GAAP, be set forth opposite the caption "total current
liabilities" (or any like caption) on a consolidated balance sheet of the
Borrower and its Subsidiaries at such date, but excluding (a) the current
portion of any Funded Debt of the Borrower and its Subsidiaries and (b) without
duplication of clause (a) above, all Indebtedness consisting of Revolving Credit
Loans to the extent otherwise included therein.
"Consolidated EBITDA": for any period, Consolidated Net Income for
-------------------
such period plus, without duplication and to the extent reflected as a charge in
the statement of such Consolidated Net Income for such period, the sum of (a)
income tax expense, (b) interest expense, amortization or writeoff of debt
discount and debt issuance costs and commissions, discounts and other fees and
charges associated with Indebtedness (including the Loans), (c) depreciation and
amortization expense, (d) amortization of intangibles (including, but not
limited to, goodwill) and organization costs, (e) any
<PAGE>
7
extraordinary, unusual or non-recurring expenses or losses (including, whether
or not otherwise includable as a separate item in the statement of such
Consolidated Net Income for such period, losses on sales of assets outside of
the ordinary course of business) and (f) any other non-cash charges, and minus,
to the extent included in the statement of such Consolidated Net Income for such
period, the sum of (a) interest income, (b) any extraordinary, unusual or non-
recurring income or gains (including, whether or not otherwise includable as a
separate item in the statement of such Consolidated Net Income for such period,
gains on the sales of assets outside of the ordinary course of business) and (c)
any other non-cash income, all as determined on a consolidated basis.
"Consolidated Interest Coverage Ratio": for any period, the ratio of
------------------------------------
(a) Consolidated EBITDA for such period to (b) Consolidated Interest Expense for
such period.
"Consolidated Interest Expense": for any period, total cash interest
-----------------------------
expense (including that attributable to Capital Lease Obligations) of the
Borrower and its Subsidiaries payable in respect of such period with respect to
all outstanding Indebtedness of the Borrower 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 Protection Agreements to the extent such net costs are
allocable to such period in accordance with GAAP).
"Consolidated Lease Expense": for any period, the aggregate amount of
--------------------------
fixed and contingent rentals payable by the Borrower and its Subsidiaries,
determined on a consolidated basis in accordance with GAAP, for such period with
respect to leases of real and personal property; provided, that payments with
respect to Capital Lease Obligations shall not constitute Consolidated Lease
Expense.
"Consolidated Net Income": for any period, the consolidated net
-----------------------
income (or loss) of the Borrower and its Subsidiaries, determined on a
consolidated basis in accordance with GAAP; provided that there shall be
excluded (a) the income (or deficit) of any Person accrued prior to the date it
becomes a Subsidiary of the Borrower or is merged into or consolidated with the
Borrower or any of its Subsidiaries, (b) the income (or deficit) of any Person
(other than a Subsidiary of the Borrower) in which the Borrower or any of its
Subsidiaries has an ownership interest, except to the extent that any such
income is actually received by the Borrower or such Subsidiary in the form of
dividends or similar distributions and (c) the undistributed earnings of any
Subsidiary of the Borrower to the extent that the declaration or payment of
dividends or similar distributions by such Subsidiary is not at the time
permitted by the terms of any Contractual Obligation (other than under any Loan
Document) or Requirement of Law applicable to such Subsidiary.
"Consolidated Total Debt": at any date, the aggregate principal
-----------------------
amount of all Indebtedness of the Borrower and its Subsidiaries at such date,
determined on a consolidated basis in accordance with GAAP.
"Consolidated Total Debt Ratio": as at the last day of any period of
-----------------------------
four consecutive fiscal quarters, the ratio of (a) Consolidated Total Debt on
such day to (b) Consolidated EBITDA for such period; provided that for purposes
of calculating Consolidated EBITDA of the Borrower and its Subsidiaries for any
period, the
<PAGE>
8
Consolidated EBITDA of any Person acquired by the Borrower or its Subsidiaries
during such period shall be included on a pro forma basis for such period
(assuming the consummation of each such acquisition and the incurrence or
assumption of any Indebtedness in connection therewith occurred on the first day
of such period) if the consolidated balance sheet of such acquired Person and
its consolidated Subsidiaries as at the end of the period preceding the
acquisition of such Person and the related consolidated statements of income and
stockholders' equity and of cash flows for the period in respect of which
Consolidated EBITDA is to be calculated (i) have been previously provided to the
Administrative Agent and the Lenders and (ii) either (A) have been reported on
without a qualification arising out of the scope of the audit by independent
certified public accountants of nationally recognized standing or (B) have been
found acceptable by the Administrative Agent; provided, further, that for the
purposes of determining such ratio described above for the fiscal quarters of
the Borrower ending March 31, 1998, June 30, 1998 and September 30, 1998,
Consolidated EBITDA for the relevant period shall be deemed to equal
Consolidated EBITDA for such fiscal quarter (and, in the case of the latter two
such determinations, each previous fiscal quarter in 1998) multiplied by 4, 2
and 4/3, respectively.
"Consolidated Working Capital": at any date, the excess of
----------------------------
Consolidated Current Assets on such date over Consolidated Current Liabilities
on such date.
"Continuing Directors": the directors of Holdings on the Closing
--------------------
Date, and each other director, if, in each case, such other director's
nomination for election to the board of directors of Holdings is recommended by
at least 66-2/3% of the then Continuing Directors or such other director
receives the vote of the Permitted Investors in his or her election by the
shareholders of Holdings.
"Contractual Obligation": as to any Person, any provision of any
----------------------
security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
Property is bound.
"Control Investment Affiliate": as to any Person, any other Person
----------------------------
which (a) directly or indirectly, is in control of, is controlled by, or is
under common control with, such Person and (b) is organized by such Person
primarily for the purpose of making equity or debt investments in one or more
companies. For purposes of this definition, "control" of a Person means the
power, directly or indirectly, to direct or cause the direction of the
management and policies of such Person whether by contract or otherwise.
"Default": any of the events specified in Section 8, whether or not
-------
any requirement for the giving of notice, the lapse of time, or both, has been
satisfied.
"Disposition": with respect to any Property, any sale, lease, sale
-----------
and leaseback, assignment, conveyance, transfer or other disposition thereof;
and the terms "Dispose" and "Disposed of" shall have correlative meanings.
"Documentation Agent": as defined in the preamble hereto.
-------------------
"Dollars" and "$": dollars in lawful currency of the United States.
------- -
<PAGE>
9
"Domestic Subsidiary": any Subsidiary of the Borrower organized under
-------------------
the laws of any jurisdiction within the United States.
"ECF Percentage": 75%; provided that with respect to each fiscal year
--------------
of the Borrower ending on or after December 31, 1998, the ECF Percentage shall
be reduced to 50%, 25% or 0% if the Consolidated Total Debt Ratio for the period
of four consecutive fiscal quarters ending on the last day of such fiscal year
is equal to or below 4.25 to 1.0, 3.5 to 1.0 or 2.5 to 1.0, respectively.
"Environmental Laws": any and all foreign, Federal, state, local or
------------------
municipal laws, rules, orders, regulations, statutes, ordinances, codes,
decrees, requirements of any Governmental Authority or other Requirements of Law
(including common law) regulating, relating to or imposing liability or
standards of conduct concerning protection of human health or the environment,
as now or may at any time hereafter be in effect.
"Equity Investors": as defined in the recitals hereto.
----------------
"ERISA": the Employee Retirement Income Security Act of 1974, as
-----
amended from time to time.
"Eurocurrency Reserve Requirements": for any day as applied to a
---------------------------------
Eurodollar Loan, the aggregate (without duplication) of the maximum rates
(expressed as a decimal fraction) of reserve requirements in effect on such day
(including, without limitation, basic, supplemental, marginal and emergency
reserves under any regulations of the Board or other Governmental Authority
having jurisdiction with respect thereto) dealing with reserve requirements
prescribed for eurocurrency funding (currently referred to as "Eurocurrency
Liabilities" in Regulation D of the Board) maintained by a member bank of the
Federal Reserve System.
"Eurodollar Base Rate": with respect to each day during each Interest
--------------------
Period pertaining to a Eurodollar Loan, the rate per annum determined on the
basis of the rate for deposits in Dollars for a period equal to such Interest
Period commencing on the first day of such Interest Period appearing on Page
3750 of the Dow Jones Markets screen as of 11:00 A.M., London time, two Business
Days prior to the beginning of such Interest Period. In the event that such rate
does not appear on Page 3750 of the Dow Jones Markets screen (or otherwise on
such service), the "Eurodollar Base Rate" for purposes of this definition shall
be determined by reference to such other comparable publicly available service
for displaying eurodollar rates as may be selected by the Administrative Agent
or, in the absence of such availability, by reference to the rate at which the
Administrative Agent is offered Dollar deposits at or about 11:00 A.M., New York
City time, two Business Days prior to the beginning of such Interest Period in
the interbank eurodollar market where its eurodollar and foreign currency and
exchange operations are then being conducted for delivery on the first day of
such Interest Period for the number of days comprised therein.
"Eurodollar Loans": Loans the rate of interest applicable to which is
----------------
based upon the Eurodollar Rate.
<PAGE>
10
"Eurodollar Rate": with respect to each day during each Interest
---------------
Period pertaining to a Eurodollar Loan, a rate per annum determined for such day
in accordance with the following formula (rounded upward to the nearest 1/100th
of 1%):
Eurodollar Base Rate
----------------------------------------
1.00 - Eurocurrency Reserve Requirements
"Eurodollar Tranche": the collective reference to Eurodollar Loans
------------------
the then current Interest Periods with respect to all of which begin on the same
date and end on the same later date (whether or not such Loans shall originally
have been made on the same day).
"Event of Default": any of the events specified in Section 8,
----------------
provided that any requirement for the giving of notice, the lapse of time, or
both, has been satisfied.
"Excess Cash Flow": for any fiscal year of the Borrower, the excess,
----------------
if any, of (a) the sum, without duplication, of (i) Consolidated Net Income for
such fiscal year, (ii) an amount equal to the amount of all non-cash charges
(including depreciation and amortization) deducted in arriving at such
Consolidated Net Income, (iii) decreases in Consolidated Working Capital for
such fiscal year, (iv) an amount equal to the aggregate net non-cash loss on the
Disposition of Property by the Borrower and its Subsidiaries during such fiscal
year (other than sales of inventory in the ordinary course of business), to the
extent deducted in arriving at such Consolidated Net Income and (v) the net
increase during such fiscal year (if any) in deferred tax accounts of the
Borrower over (b) the sum, without duplication, of (i) an amount equal to the
amount of all non-cash credits included in arriving at such Consolidated Net
Income, (ii) the aggregate amount actually paid by the Borrower and its
Subsidiaries in cash during such fiscal year on account of Capital Expenditures
(excluding the principal amount of Indebtedness incurred in connection with such
expenditures and any such expenditures financed with the proceeds of any
Reinvestment Deferred Amount), (iii) the aggregate amount of all prepayments of
Revolving Credit Loans during such fiscal year to the extent accompanying
permanent optional reductions of the Revolving Credit Commitments and all
optional prepayments of the Tranche B Term Loans during such fiscal year, (iv)
the aggregate amount of all regularly scheduled principal payments of Funded
Debt (including, without limitation, the Tranche B Term Loans) of the Borrower
and its Subsidiaries made during such fiscal year (other than in respect of any
revolving credit facility to the extent there is not an equivalent permanent
reduction in commitments thereunder), (v) increases in Consolidated Working
Capital for such fiscal year, (vi) an amount equal to the aggregate net non-cash
gain on the Disposition of Property by the Borrower and its Subsidiaries during
such fiscal year (other than sales of inventory in the ordinary course of
business), to the extent included in arriving at such Consolidated Net Income,
and (vii) the net decrease during such fiscal year (if any) in deferred tax
accounts of the Borrower.
"Excess Cash Flow Application Date": as defined in Section 2.10(c).
---------------------------------
"Excluded Foreign Subsidiaries": any Foreign Subsidiary in respect of
-----------------------------
which either (i) the pledge of 65% or more of the Capital Stock of such
Subsidiary as Collateral or (ii) the guaranteeing by such Subsidiary of the
Obligations, would, in the good faith judgment of the Borrower, result (or is
reasonably expected to result) in adverse tax
<PAGE>
11
consequences to the Borrower.
"Facility": each of (a) the Tranche B Term Loan Commitments and the
--------
Tranche B Term Loans made thereunder (the "Tranche B Term Loan Facility") and
(b) the Revolving Credit Commitments and the extensions of credit made
thereunder (the "Revolving Credit Facility").
"Federal Funds Effective Rate"; for any day, 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 on the next
succeeding 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 the day of such transactions received by the Reference Bank from
three federal funds brokers of recognized standing selected by it.
"Foreign Subsidiary": any Subsidiary of the Borrower that is not a
------------------
Domestic Subsidiary.
"Funded Debt": as to any Person, all Indebtedness of such Person that
-----------
matures more than one year from the date of its creation or matures within one
year from such date but is renewable or extendible, at the option of such
Person, to a date more than one year from such date or arises under a revolving
credit or similar agreement that obligates the lender or lenders to extend
credit during a period of more than one year from such date, including, without
limitation, all current maturities and current sinking fund payments in respect
of such Indebtedness whether or not required to be paid within one year from the
date of its creation and, in the case of the Borrower, Indebtedness in respect
of the Loans.
"Funding Office": the office of the Administrative Agent from time to
--------------
time specified by the Administrative Agent as its funding office by written
notice to the parties hereto.
"GAAP": generally accepted accounting principles in the United States
----
of America as in effect from time to time, except that for purposes of Section
7.1, GAAP shall be determined on the basis of such principles in effect on the
date hereof and consistent with those used in the preparation of the most recent
audited financial statements delivered pursuant to Section 4.1(b). In the event
that any "Accounting Change" (as defined below) shall occur and such change
results in a change in the method of calculation of financial covenants,
standards or terms in this Agreement, then the Borrower and the Administrative
Agent agree to enter into negotiations in order to amend such provisions of this
Agreement so as to equitably reflect such Accounting Changes with the desired
result that the criteria for evaluating the Borrower's financial condition shall
be the same after such Accounting Changes as if such Accounting Changes had not
been made. Until such time as such an amendment shall have been executed and
delivered by the Borrower, the Administrative Agent and the Required Lenders,
all financial covenants, standards and terms in this Agreement shall continue to
be calculated or construed as if such Accounting Changes had not occurred.
"Accounting Changes" refers to changes in accounting principles required by the
promulgation of any rule, regulation, pronouncement or opinion by the Financial
Accounting Standards Board of the American Institute of Certified Public
Accountants or, if applicable, the SEC.
<PAGE>
12
"Governmental Authority": any nation or government, any state or
----------------------
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government (including, without limitation, any securities exchange, self-
regulatory organization or the National Association of Insurance Commissioners).
"Guarantee and Collateral Agreement": the Guarantee and Collateral
----------------------------------
Agreement to be executed and delivered by Holdings, the Borrower and each
Subsidiary Guarantor, substantially in the form of Exhibit A, as the same may be
amended, supplemented or otherwise modified from time to time.
"Guarantee Obligation": as to any Person (the "guaranteeing person"),
--------------------
any obligation of (a) the guaranteeing person or (b) another Person (including,
without limitation, any bank under any letter of credit) to induce the creation
of which the guaranteeing person has issued a reimbursement, counterindemnity or
similar obligation, in either case guaranteeing or in effect guaranteeing any
Indebtedness, leases, dividends or other obligations (the "primary obligations")
of any other third Person (the "primary obligor") in any manner, whether
directly or indirectly, including, without limitation, any obligation of the
guaranteeing person, whether or not contingent, (i) to purchase any such primary
obligation or any Property constituting direct or indirect security therefor,
(ii) to advance or supply funds (1) for the purchase or payment of any such
primary obligation or (2) to maintain working capital or equity capital of the
primary obligor or otherwise to maintain the net worth or solvency of the
primary obligor, (iii) to purchase Property, securities or services primarily
for the purpose of assuring the owner of any such primary obligation of the
ability of the primary obligor to make payment of such primary obligation or
(iv) otherwise to assure or hold harmless the owner of any such primary
obligation against loss in respect thereof; provided, however, that the term
Guarantee Obligation shall not include endorsements of instruments for deposit
or collection in the ordinary course of business. The amount of any Guarantee
Obligation of any guaranteeing person shall be deemed to be the lower of (a) an
amount equal to the stated or determinable amount of the primary obligation in
respect of which such Guarantee Obligation is made and (b) the maximum amount
for which such guaranteeing person may be liable pursuant to the terms of the
instrument embodying such Guarantee Obligation, unless such primary obligation
and the maximum amount for which such guaranteeing person may be liable are not
stated or determinable, in which case the amount of such Guarantee Obligation
shall be such guaranteeing person's maximum reasonably anticipated liability in
respect thereof as determined by the Borrower in good faith.
"Guarantors": the collective reference to Holdings and the Subsidiary
----------
Guarantors.
"Holdings": as defined in the preamble hereto.
--------
"Indebtedness": of any Person at any date, without duplication, (a)
------------
all indebtedness of such Person for borrowed money, (b) all obligations of such
Person for the deferred purchase price of Property or services (other than
current trade payables incurred in the ordinary course of such Person's
business), (c) all obligations of such Person evidenced by notes, bonds,
debentures or other similar instruments, (d) all indebtedness created or arising
under any conditional sale or other title retention
<PAGE>
13
agreement with respect to Property acquired by such Person (even though 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), (e) all Capital
Lease Obligations of such Person, (f) all obligations of such Person, contingent
or otherwise, as an account party under acceptance, letter of credit or similar
facilities, (g) all obligations of such Person, contingent or otherwise, to
purchase, redeem, retire or otherwise acquire for value any Capital Stock (other
than common stock) of such Person, (h) all Guarantee Obligations of such Person
in respect of obligations of the kind referred to in clauses (a) through (g)
above; (i) all obligations of the kind referred to in clauses (a) through (h)
above secured by (or for which the holder of such obligation has an existing
right, contingent or otherwise, to be secured by) any Lien on Property
(including, without limitation, accounts and contract rights) owned by such
Person, whether or not such Person has assumed or become liable for the payment
of such obligation, (j) for the purposes of Section 8(e) only, all obligations
of such Person in respect of Interest Rate Protection Agreements and (k) the
liquidation value of any preferred Capital Stock of such Person or its
Subsidiaries held by any Person other than such Person and its Wholly Owned
Subsidiaries.
"Insolvency": with respect to any Multiemployer Plan, the condition
----------
that such Plan is insolvent within the meaning of Section 4245 of ERISA.
"Insolvent": pertaining to a condition of Insolvency.
---------
"Intellectual Property": the collective reference to all rights,
---------------------
priorities and privileges relating to intellectual property, whether arising
under United States, multinational or foreign laws or otherwise, including,
without limitation, copyrights, copyright licenses, patents, patent licenses,
trademarks, trademark licenses, technology, know-how and processes, and all
rights to sue at law or in equity for any infringement or other impairment
thereof, including the right to receive all proceeds and damages therefrom.
"Interest Payment Date": (a) as to any Base Rate Loan, the last day
---------------------
of each March, June, September and December to occur while such Loan is
outstanding and the final maturity date of such Loan, (b) as to any Eurodollar
Loan having an Interest Period of three months or less, the last day of such
Interest Period, (c) as to any Eurodollar Loan having an Interest Period longer
than three months, each day which is three months, or a whole multiple thereof,
after the first day of such Interest Period and the last day of such Interest
Period and (d) as to any Loan (other than any Revolving Credit Loan that is a
Base Rate Loan), the date of any repayment or prepayment made in respect
thereof.
"Interest Period": as to any Eurodollar Loan, (a) initially, the
---------------
period commencing on the borrowing or conversion date, as the case may be, with
respect to such Eurodollar Loan and ending one, two, three or six months
thereafter, as selected by the Borrower in its notice of borrowing or notice of
conversion, as the case may be, given with respect thereto; and (b) thereafter,
each period commencing on the last day of the next preceding Interest Period
applicable to such Eurodollar Loan and ending one, two, three or six months
thereafter, as selected by the Borrower by irrevocable notice to the
Administrative Agent not less than three Business Days prior to the last day of
the then current Interest Period with respect thereto; provided that, all of the
foregoing provisions relating to Interest Periods are subject to the following:
<PAGE>
14
(i) if any Interest Period would otherwise end on a day
that is not a Business Day, such Interest Period shall be extended to
the next succeeding Business Day unless the result of such extension
would be to carry such Interest Period into another calendar month in
which event such Interest Period shall end on the immediately
preceding Business Day;
(ii) any Interest Period that would otherwise extend
beyond the Revolving Credit Termination Date or beyond the date final
payment is due on the Tranche B Term Loans shall end on the Revolving
Credit Termination Date or such due date, as applicable;
(iii) 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 end on the last Business Day of a calendar
month; and
(iv) the Borrower shall select Interest Periods so as not
to require a payment or prepayment of any Eurodollar Loan during an
Interest Period for such Loan.
"Interest Rate Protection Agreement": any interest rate protection
----------------------------------
agreement, interest rate futures contract, interest rate option, interest rate
cap or other interest rate hedge arrangement, to or under which the Borrower or
any of its Subsidiaries is a party or a beneficiary on the date hereof or
becomes a party or a beneficiary after the date hereof.
"Issuing Lender": Fleet Capital Corporation, in its capacity as
--------------
issuer of any Letter of Credit.
"Joint Ventures": collectively, Yanci Services Company, a Georgia
--------------
general partnership, and Health Care Financial Services Associates, a Georgia
joint venture.
"L/C Commitment": $5,000,000.
--------------
"L/C Fee Payment Date": the last day of each March, June, September
--------------------
and December and the last day of the Revolving Credit Commitment Period.
"L/C Obligations": at any time, an amount equal to the sum of (a) the
---------------
aggregate then undrawn and unexpired amount of the then outstanding Letters of
Credit and (b) the aggregate amount of drawings under Letters of Credit which
have not then been reimbursed pursuant to Section 3.5.
"L/C Participants": the collective reference to all the Revolving
----------------
Credit Lenders other than the Issuing Lender.
"Lenders": as defined in the preamble hereto.
-------
"Letters of Credit": as defined in Section 3.1(a).
-----------------
<PAGE>
15
"Lien": any mortgage, pledge, hypothecation, assignment, deposit
----
arrangement, encumbrance, lien (statutory or other), charge or other security
interest or any preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including, without limitation, any
conditional sale or other title retention agreement and any capital lease having
substantially the same economic effect as any of the foregoing).
"Loan": any loan made by any Lender pursuant to this Agreement.
----
"Loan Documents": this Agreement, the Security Documents, the
--------------
Applications and the Notes.
"Loan Parties": Holdings, the Borrower and each Subsidiary of the
------------
Borrower which is a party to a Loan Document.
"Majority Facility Lenders": with respect to any Facility, the
-------------------------
holders of more than 50% of the aggregate unpaid principal amount of the Tranche
B Term Loans or the Total Revolving Extensions of Credit, as the case may be,
outstanding under such Facility (or, in the case of the Revolving Credit
Facility, prior to any termination of the Revolving Credit Commitments, the
holders of more than 50% of the Total Revolving Credit Commitments).
"Majority Revolving Credit Facility Lenders": the Majority Facility
------------------------------------------
Lenders in respect of the Revolving Credit Facility.
"Master Collectors": Master Collectors of Dallas, Inc., a Texas
-----------------
corporation.
"Material Adverse Effect": a material adverse effect on (a) the
-----------------------
Acquisition, (b) the business, assets, property or condition (financial or
otherwise) of the Borrower and its Subsidiaries taken as a whole or (c) the
validity or enforceability of this Agreement or any of the other Loan Documents
or the rights or remedies of the Agents or the Lenders hereunder or thereunder.
"Material Environmental Amount": an amount payable by the Borrower
-----------------------------
and/or its Subsidiaries in excess of $250,000 for remedial costs, compliance
costs, compensatory damages, punitive damages, fines, penalties or any
combination thereof.
"Materials of Environmental Concern": any gasoline or petroleum
----------------------------------
(including crude oil or any fraction thereof) or petroleum products or any
hazardous or toxic substances, materials or wastes, defined or regulated as such
in or under any Environmental Law, including, without limitation, asbestos,
polychlorinated biphenyls and urea-formaldehyde insulation.
"Multiemployer Plan": a Plan which is a multiemployer plan as defined
------------------
in Section 4001(a)(3) of ERISA.
"Net Cash Proceeds": (a) in connection with any Asset Sale or any
-----------------
Recovery Event, the proceeds thereof in the form of cash and Cash Equivalents
(including any such proceeds received by way of deferred payment of principal
pursuant to a note or
<PAGE>
16
installment receivable or purchase price adjustment receivable or otherwise, but
only as and when received) of such Asset Sale or Recovery Event, net of
attorneys' fees, accountants' fees, investment banking fees, amounts required to
be applied to the repayment of Indebtedness secured by a Lien expressly
permitted hereunder on any asset which is the subject of such Asset Sale or
Recovery Event (other than any Lien pursuant to a Security Document) and other
customary fees and expenses actually incurred in connection therewith and net of
taxes paid or reasonably estimated to be payable as a result thereof (after
taking into account any available tax credits or deductions and any tax sharing
arrangements) and (b) in connection with any issuance or sale of debt securities
or instruments or the incurrence of loans, the cash proceeds received from such
issuance or incurrence, net of attorneys' fees, investment banking fees,
accountants' fees, underwriting discounts and commissions and other customary
fees and expenses actually incurred in connection therewith.
"Non-Excluded Taxes": as defined in Section 2.18(a).
------------------
"Non-U.S. Lender": as defined in Section 2.18(d).
---------------
"Notes": the collective reference to any promissory note evidencing
-----
Loans.
"Obligations": the unpaid principal of and interest on (including,
-----------
without limitation, interest accruing after the maturity of the Loans and
Reimbursement Obligations and interest accruing after the filing of any petition
in bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding, relating to the Borrower, whether or not a claim for post-filing or
post-petition interest is allowed in such proceeding) the Loans and all other
obligations and liabilities of the Borrower to the Administrative Agent or to
any Lender (or, in the case of Interest Rate Protection Agreements, any
affiliate of any Lender), whether direct or indirect, absolute or contingent,
due or to become due, or now existing or hereafter incurred, which may arise
under, out of, or in connection with, this Agreement, any other Loan Document,
the Letters of Credit, any Interest Rate Protection Agreement entered into with
any Lender or any affiliate of any Lender or any other document made, delivered
or given in connection herewith or therewith, whether on account of principal,
interest, reimbursement obligations, fees, indemnities, costs, expenses
(including, without limitation, all fees, charges and disbursements of counsel
to the Administrative Agent or to any Lender that are required to be paid by the
Borrower pursuant hereto) or otherwise.
"Other Taxes": any and all present or future stamp or documentary
-----------
taxes or any other excise or property taxes, charges or similar levies arising
from any payment made hereunder or from the execution, delivery or enforcement
of, or otherwise with respect to, this Agreement.
"Participant": as defined in Section 10.6(b).
-----------
"Payment Office": the office of the Administrative Agent from time to
--------------
time specified by the Administrative Agent as its payment office to the other
parties hereto.
"PBGC": the Pension Benefit Guaranty Corporation established pursuant
----
to Subtitle A of Title IV of ERISA (or any successor).
<PAGE>
17
"Permitted Acquisition": any acquisition of all or substantially all
---------------------
the assets of, or shares or other equity interests in, a Person or division or
line of business of a Person (or any subsequent investment made in a previously
acquired Permitted Acquisition) if immediately after giving effect thereto: (a)
no Default or Event of Default shall have occurred and be continuing or would
result therefrom, (b) all transactions related thereto shall be consummated in
accordance with applicable laws in all material respects, (c) any acquired or
newly formed corporation, partnership, association or other business entity
shall be owned by the Borrower or a domestic Wholly Owned Subsidiary and all
actions required to be taken, if any, with respect to such acquired or newly
formed Subsidiary under Section 6.9 shall have been taken, (d) unless the
Consolidated Total Debt Ratio on a pro forma basis after giving effect to such
acquisition or formation recomputed as of the last day of the most recently
ended fiscal quarter of the Borrower and the Subsidiaries as if such acquisition
and related financings or other transactions had occurred on the first day of
each relevant period for testing such compliance shall be less than 3.50 to
1.00, any acquired or newly formed corporation, partnership, association or
other business entity shall have had a positive cash flow for its most recently
ended fiscal year, provided that if the Consolidated Total Debt Ratio on a pro
forma basis after giving effect to such acquisition or formation recomputed as
of the last day of the most recently ended fiscal quarter of the Borrower and
the Subsidiaries as if such acquisition and related financings or other
transactions had occurred on the first day of each relevant period for testing
such compliance shall be greater than or equal to 3.50 to 1.00, the requirement
stated in this clause (d) shall not apply in respect of investments the
aggregate consideration of which shall not exceed $5,000,000 and (e)(i) the
Consolidated Total Debt Ratio on a pro forma basis after giving effect to such
acquisition or formation, including an adjustment for any cost savings permitted
by Regulation S-X of the Securities Act of 1933, as amended, recomputed as at
the last day of the most recently ended fiscal quarter of the Borrower and the
Subsidiaries as if such acquisition and related financings or other transactions
had occurred on the first day of each relevant period for testing such
compliance shall be less than 4.75 to 1.00, and, if the amount of such
investment or series of related investments exceeds $3,000,000, then the
Borrower shall have delivered to the Administrative Agent an officers'
certificate to such effect, together with all relevant financial information for
such Subsidiary or assets, and (ii) any acquired or newly formed Subsidiary
shall not be liable for any Indebtedness (except for Indebtedness permitted by
Section 7.2).
"Permitted Investors": the collective reference to the Equity
-------------------
Investors and their Control Investment Affiliates.
"Person": an individual, partnership, corporation, limited liability
------
company, business trust, joint stock company, trust, unincorporated association,
joint venture, Governmental Authority or other entity of whatever nature.
"Plan": at a particular time, any employee benefit plan which is
----
covered by Title IV of ERISA and in respect of which the Borrower or a Commonly
Controlled Entity is (or, if such plan were terminated at such time, would under
Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5)
of ERISA.
"Pricing Grid": the pricing grid attached hereto as Annex A.
------------
<PAGE>
18
"Pro Forma Balance Sheet": as defined in Section 4.1(a).
-----------------------
"Projections": as defined in Section 6.2(c).
-----------
"Properties": as defined in Section 4.17(a).
----------
"Property": any right or interest in or to property of any kind
--------
whatsoever, whether real, personal or mixed and whether tangible or intangible,
including, without limitation, Capital Stock; it being understood, for the
avoidance of doubt, that to the extent any Loan Party has no right or interest
in a trust account established in the ordinary course of its debt collateral
business such trust account shall not be deemed to be "Property".
"Recovery Event": any settlement of or payment in respect of any
--------------
property or casualty insurance claim or any condemnation proceeding relating to
any asset of Holdings, the Borrower or any of its Subsidiaries.
"Reference Bank": Citibank, N.A.
--------------
"Register": as defined in Section 10.6(d).
--------
"Regulation G": Regulation G of the Board as in effect from time to
------------
time.
"Regulation U": Regulation U of the Board as in effect from time to
------------
time.
"Reimbursement Obligation": the obligation of the Borrower to
------------------------
reimburse the Issuing Lender pursuant to Section 3.5 for amounts drawn under
Letters of Credit.
"Reinvestment Deferred Amount": with respect to any Reinvestment
----------------------------
Event, the aggregate Net Cash Proceeds received by Holdings, the Borrower or any
of its Subsidiaries in connection therewith which are not applied to prepay the
Tranche B Term Loans or reduce the Revolving Credit Commitments pursuant to
Section 2.10(b) as a result of the delivery of a Reinvestment Notice.
"Reinvestment Event": any Asset Sale or Recovery Event in respect of which
------------------
the Borrower has delivered a Reinvestment Notice.
"Reinvestment Notice": a written notice executed by a Responsible
-------------------
Officer stating that no Event of Default has occurred and is continuing and that
the Borrower (directly or indirectly through a Subsidiary) intends and expects
to use all or a specified portion of the Net Cash Proceeds of an Asset Sale or
Recovery Event to acquire assets useful in its business.
"Reinvestment Prepayment Amount": with respect to any Reinvestment
------------------------------
Event, the Reinvestment Deferred Amount relating thereto less any amount
expended prior to the relevant Reinvestment Prepayment Date to acquire assets
useful in the Borrower's business.
"Reinvestment Prepayment Date": with respect to any Reinvestment
----------------------------
Event, the earlier of (a) the date occurring one year after such Reinvestment
Event and (b) the date
<PAGE>
19
on which the Borrower shall have determined not to, or shall have otherwise
ceased to, acquire assets useful in the Borrower's business with all or any
portion of the relevant Reinvestment Deferred Amount.
"Reorganization": with respect to any Multiemployer Plan, the
--------------
condition that such plan is in reorganization within the meaning of Section 4241
of ERISA.
"Reportable Event": any of the events set forth in Section 4043(c) of
----------------
ERISA, other than those events as to which the thirty day notice period is
waived under regulations promulgated under Title IV of ERISA.
"Required Lenders": the holders of more than 50% of (a) until the
----------------
Closing Date, the Commitments and (b) thereafter, the sum of (i) the aggregate
unpaid principal amount of the Tranche B Term Loans and (ii) the Total Revolving
Credit Commitments or, if the Revolving Credit Commitments have been terminated,
the Total Revolving Extensions of Credit.
"Required Prepayment Lenders": the Majority Facility Lenders in
---------------------------
respect of each Facility.
"Requirement of Law": as to any Person, the Certificate of
------------------
Incorporation and By-Laws or other organizational or governing documents of such
Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its Property or to which such Person or
any of its Property is subject.
"Responsible Officer": the chief executive officer, president or
-------------------
chief financial officer, vice-president finance or controller of the Borrower,
but in any event, with respect to financial matters, the chief financial
officer, vice-president finance or controller of the Borrower.
"Restricted Payment": as defined in Section 7.6.
------------------
"Revolving Credit Commitment": as to any Lender, the obligation of
---------------------------
such Lender, if any, to make Revolving Credit Loans and participate in Letters
of Credit, in an aggregate principal and/or face amount not to exceed the amount
set forth under the heading "Revolving Credit Commitment" opposite such Lender's
name on Schedule 1.1A or in the Assignment and Acceptance pursuant to which such
Revolving Credit Lender became a party hereto, as the same may be changed from
time to time pursuant to the terms hereof. The original amount of the Total
Revolving Credit Commitments is $35,000,000.
"Revolving Credit Commitment Period": the period from and including
----------------------------------
the Closing Date to the Revolving Credit Termination Date.
"Revolving Credit Lender": each Lender which has a Revolving Credit
-----------------------
Commitment or which has made Revolving Credit Loans.
"Revolving Credit Loans": as defined in Section 2.4.
----------------------
<PAGE>
20
"Revolving Credit Percentage": as to any Revolving Credit Lender at
---------------------------
any time, the percentage which such Lender's Revolving Credit Commitment then
constitutes of the Total Revolving Credit Commitments (or, at any time after the
Revolving Credit Commitments shall have expired or terminated, the percentage
which the aggregate principal amount of such Lender's Revolving Credit Loans
then outstanding constitutes of the aggregate principal amount of the Revolving
Credit Loans then outstanding).
"Revolving Credit Termination Date": the sixth anniversary of the
---------------------------------
Closing Date.
"Revolving Extensions of Credit": as to any Revolving Credit Lender
------------------------------
at any time, an amount equal to the sum of (a) the aggregate principal amount of
all Revolving Credit Loans made by such Lender then outstanding and (b) such
Lender's Revolving Credit Percentage of the L/C Obligations then outstanding.
"SEC": the Securities and Exchange Commission (or successors thereto
---
or an analogous Governmental Authority).
"Security Documents": the collective reference to the Guarantee and
------------------
Collateral Agreement and all other security documents hereafter delivered to the
Administrative Agent granting a Lien on any Property of any Person to secure the
obligations and liabilities of any Loan Party under any Loan Document.
"Senior Note Indenture": the Indenture entered into by the Borrower
---------------------
and certain of its Subsidiaries in connection with the issuance of the Senior
Notes, together with all instruments and other agreements entered into by the
Borrower or such Subsidiaries in connection therewith, as the same may be
amended, supplemented or otherwise modified from time to time in accordance with
Section 7.9.
"Senior Notes": the notes of the Borrower issued on the Closing Date
------------
pursuant to the Senior Note Indenture.
"Single Employer Plan": any Plan which is covered by Title IV of
--------------------
ERISA, but which is not a Multiemployer Plan.
"Solvent": when used with respect to any Person, means that, as of
-------
any date of determination, (a) the amount of the "present fair saleable value"
of the assets of such Person will, as of such date, exceed the amount of all
"liabilities of such Person, contingent or otherwise", as of such date, as such
quoted terms are determined in accordance with applicable federal and state laws
governing determinations of the insolvency of debtors, (b) the present fair
saleable value of the assets of such Person will, as of such date, be greater
than the amount that will be required to pay the liability of such Person on its
debts as such debts become absolute and matured, (c) such Person will not have,
as of such date, an unreasonably small amount of capital with which to conduct
its business, and (d) such Person will be able to pay its debts as they mature.
For purposes of this definition, (i) "debt" means liability on a "claim", and
(ii) "claim" means any (x) right to payment, whether or not such a right is
reduced to judgment, liquidated, unliquidated, fixed, contingent, matured,
unmatured, disputed, undisputed, legal, equitable, secured or unsecured or (y)
right to an equitable remedy for breach of performance if such breach
<PAGE>
21
gives rise to a right to payment, whether or not such right to an equitable
remedy is reduced to judgment, fixed, contingent, matured or unmatured,
disputed, undisputed, secured or unsecured.
"Specified Change of Control": a "Change of Control" as defined in
---------------------------
the Senior Note Indenture.
"Specified Entities": collectively, any Wholly Owned Foreign
------------------
Subsidiary, the Joint Ventures and Master Collectors.
"Subsidiary": as to any Person, a corporation, partnership, limited
----------
liability company or other entity of which shares of stock or other ownership
interests having ordinary voting power (other than stock or such other ownership
interests having such power only by reason of the happening of a contingency) to
elect a majority of the board of directors or other managers of such
corporation, partnership or other entity are at the time owned, or the
management of which is otherwise controlled, directly or indirectly through one
or more intermediaries, or both, by such Person. Unless otherwise qualified, all
references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall (i)
refer to a Subsidiary or Subsidiaries of the Borrower and (ii) exclude the Joint
Ventures.
"Subsidiary Guarantor": each Subsidiary of the Borrower other than
--------------------
any Excluded Foreign Subsidiary and Master Collectors.
"Syndication Agent": as defined in the preamble hereto.
-----------------
"Total Revolving Credit Commitments": at any time, the aggregate
----------------------------------
amount of the Revolving Credit Commitments at such time.
"Total Revolving Extensions of Credit": at any time, the aggregate
------------------------------------
amount of the Revolving Extensions of Credit of the Revolving Credit Lenders at
such time.
"Tranche B Term Loan": as defined in Section 2.1.
-------------------
"Tranche B Term Loan Commitment": as to any Lender, the obligation of
------------------------------
such Lender, if any, to make a Tranche B Term Loan to the Borrower hereunder in
a principal amount not to exceed the amount set forth under the heading "Tranche
B Term Loan Commitment" opposite such Lender's name on Schedule 1.1A or in the
Assignment and Acceptance pursuant to which such Lender became a party hereto.
The original aggregate amount of the Tranche B Term Loan Commitments is
$25,000,000.
"Tranche B Term Loan Lender": each Lender which has a Tranche B Term
--------------------------
Loan Commitment or which has made a Tranche B Term Loan.
"Tranche B Term Loan Percentage": as to any Lender at any time, the
------------------------------
percentage which such Lender's Tranche B Term Loan Commitment then constitutes
of the aggregate Tranche B Term Loan Commitments (or, at any time after the
Closing Date, the percentage which the aggregate principal amount of such
Lender's Tranche B Term Loans then outstanding constitutes of the aggregate
principal amount of the Tranche B Term Loans then outstanding).
<PAGE>
22
"Transferee": as defined in Section 10.15.
----------
"Type": as to any Loan, its nature as a Base Rate Loan or a
----
Eurodollar Loan.
"Uniform Customs": the Uniform Customs and Practice for Documentary
---------------
Credits (1993 Revision), International Chamber of Commerce Publication No. 500,
as the same may be amended from time to time.
"United States": the United States of America.
-------------
"Wholly Owned Foreign Subsidiary": any Foreign Subsidiary that is a
-------------------------------
Wholly Owned Subsidiary.
"Wholly Owned Subsidiary": as to any Person, any other Person all of
-----------------------
the Capital Stock of which (other than directors' qualifying shares required by
law) is owned by such Person directly and/or through other Wholly Owned
Subsidiaries.
"Wholly Owned Subsidiary Guarantor": any Subsidiary Guarantor that is
---------------------------------
a Wholly Owned Subsidiary of the Borrower.
1.2 Other Definitional Provisions. (a) Unless otherwise specified
-----------------------------
therein, all terms defined in this Agreement shall have the defined meanings
when used in the other Loan Documents or any certificate or other document made
or delivered pursuant hereto or thereto.
(b) As used herein and in the other Loan Documents, and any
certificate or other document made or delivered pursuant hereto or thereto,
accounting terms relating to Holdings, the Borrower and its Subsidiaries not
defined in Section 1.1 and accounting terms partly defined in Section 1.1, to
the extent not defined, shall have the respective meanings given to them under
GAAP.
(c) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and Section, Schedule and
Exhibit references are to this Agreement unless otherwise specified.
(d) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS
2.1 Tranche B Term Loan Commitments. Subject to the terms and
-------------------------------
conditions hereof, each Tranche B Term Loan Lender severally agrees to make a
term loan (a "Tranche B Term Loan") to the Borrower on the Closing Date in an
amount not to exceed the amount of the Tranche B Term Loan Commitment of such
Lender. The Tranche B Term Loans may from time to time be Eurodollar Loans or
Base Rate Loans, as determined by the Borrower and notified to the
Administrative Agent in accordance with Sections 2.2 and 2.11.
2.2 Procedure for Tranche B Term Loan Borrowing. The Borrower shall
-------------------------------------------
give the
<PAGE>
23
Administrative Agent irrevocable notice (which notice must be received by the
Administrative Agent prior to 10:00 A.M., New York City time, (a) one Business
Day prior to the anticipated Closing Date in the case of Eurodollar Loans and
(b) on the Closing Date in the case of Base Rate Loans) requesting that the
Tranche B Term Loan Lenders make the Tranche B Term Loans on the Closing Date,
specifying the amount to be borrowed and the Type of Tranche B Term Loans to be
borrowed and, in the case of Eurodollar Loans, the length of the initial
Interest Period therefor. Upon receipt of such notice the Administrative Agent
shall promptly notify each Tranche B Term Loan Lender thereof. Not later than
12:00 Noon, New York City time, on the Closing Date each Tranche B Term Loan
Lender shall make available to the Administrative Agent at the Funding Office an
amount in immediately available funds equal to the Tranche B Term Loan or
Tranche B Term Loans to be made by such Lender. The Administrative Agent shall
make available to the Borrower with the aggregate of the amounts made available
to the Administrative Agent by the Tranche B Term Loan Lenders in immediately
available funds.
2.3 Repayment of Tranche B Term Loans. The Tranche B Term Loan of
---------------------------------
each Tranche B Lender shall mature in 28 consecutive quarterly installments,
commencing on March 31, 1998, each of which shall be in an amount equal to such
Lender's Tranche B Term Loan Percentage multiplied by the amount set forth below
opposite such installment:
Installment Principal Amount
----------- ----------------
March 31, 1998 $ 62,500
June 30, 1998 62,500
September 30, 1998 62,500
December 31, 1998 62,500
March 31, 1999 62,500
June 30, 1999 62,500
September 30, 1999 62,500
December 31, 1999 62,500
March 31, 2000 62,500
June 30, 2000 62,500
September 30, 2000 62,500
December 31, 2000 62,500
March 31, 2001 62,500
June 30, 2001 62,500
September 30, 2001 62,500
December 31, 2001 62,500
March 31, 2002 62,500
June 30, 2002 62,500
September 30, 2002 62,500
December 31, 2002 62,500
March 31, 2003 62,500
June 30, 2003 62,500
September 30, 2003 62,500
December 31, 2003 62,500
March 31, 2004 5,875,000
June 30, 2004 5,875,000
September 30, 2004 5,875,000
December 31, 2004 5,875,000
<PAGE>
24
2.4 Revolving Credit Commitments. (a) Subject to the terms and
----------------------------
conditions hereof, each Revolving Credit Lender severally agrees to make
revolving credit loans ("Revolving Credit Loans") to the Borrower from time to
time during the Revolving Credit Commitment Period in an aggregate principal
amount at any one time outstanding which, when added to such Lender's Revolving
Credit Percentage of the L/C Obligations then outstanding, does not exceed the
amount of such Lender's Revolving Credit Commitment. During the Revolving
Credit Commitment Period the Borrower may use the Revolving Credit Commitments
by borrowing, prepaying the Revolving Credit Loans in whole or in part, and
reborrowing, all in accordance with the terms and conditions hereof. The
Revolving Credit Loans may from time to time be Eurodollar Loans or Base Rate
Loans, as determined by the Borrower and notified to the Administrative Agent in
accordance with Sections 2.5 and 2.11, provided that no Revolving Credit Loan
shall be made as a Eurodollar Loan after the day that is one month prior to the
Revolving Credit Termination Date.
(b) The Borrower shall repay all outstanding Revolving Credit Loans
on the Revolving Credit Termination Date.
2.5 Procedure for Revolving Credit Borrowing. The Borrower may
----------------------------------------
borrow under the Revolving Credit Commitments during the Revolving Credit
Commitment Period on any Business Day, provided that the Borrower shall give the
Administrative Agent irrevocable notice (which notice must be received by the
Administrative Agent (a) prior to 12:00 Noon, New York City time, three Business
Days prior to the requested Borrowing Date, in the case of Eurodollar Loans, or
(b) prior to 10:00 A.M., New York City time, on the requested Borrowing Date, in
the case of Base Rate Loans), specifying (i) the amount and Type of Revolving
Credit Loans to be borrowed, (ii) the requested Borrowing Date and (iii) in the
case of Eurodollar Loans, the length of the initial Interest Period therefor.
Each borrowing under the Revolving Credit Commitments shall be in an amount
equal to (x) in the case of Base Rate Loans, $500,000 or a whole multiple of
$100,000 in excess thereof (or, if the then aggregate Available Revolving Credit
Commitments are less than $500,000, such lesser amount) and (y) in the case of
Eurodollar Loans, $5,000,000 or a whole multiple of $1,000,000 in excess
thereof. Upon receipt of any such notice from the Borrower, the Administrative
Agent shall promptly notify each Revolving Credit Lender thereof. Each
Revolving Credit Lender will make the amount of its pro rata share of each
borrowing available to the Administrative Agent for the account of the Borrower
at the Funding Office prior to 12:00 Noon, New York City time, on the Borrowing
Date requested by the Borrower in funds immediately available to the
Administrative Agent. Such borrowing will then be made available to the
Borrower by the Administrative Agent in like funds as received by the
Administrative Agent.
2.6 Repayment of Loans; Evidence of Debt. (a) The Borrower hereby
------------------------------------
unconditionally promises to pay to the Administrative Agent for the account of
the appropriate Revolving Credit Lender or Tranche B Term Loan Lender, as the
case may be, (i) the then unpaid principal amount of each Revolving Credit Loan
of such Revolving Credit Lender on the Revolving Credit Termination Date (or on
such earlier date on which the Loans become due and payable pursuant to Section
8) and (ii) the principal amount of each Tranche B Term Loan of such Tranche B
Term Loan Lender in installments according to the amortization schedule set
forth in Section 2.3 (or on such earlier date on which the Loans become due and
payable pursuant to Section 8). The Borrower hereby further agrees to pay
interest on the unpaid principal amount of the Loans from time to time
outstanding from the date hereof until payment in full thereof at the rates per
annum, and on the dates, set forth in Section 2.13.
<PAGE>
25
(b) Each Lender shall maintain in accordance with its usual practice
an account or accounts evidencing indebtedness of the Borrower to such Lender
resulting from each Loan of such Lender from time to time, including the amounts
of principal and interest payable and paid to such Lender from time to time
under this Agreement.
(c) The Administrative Agent, on behalf of the Borrower, shall
maintain the Register pursuant to Section 10.6(d), and a subaccount therein for
each Lender, in which shall be recorded (i) the amount of each Loan made
hereunder and any Note evidencing such Loan, the Type thereof and each Interest
Period applicable thereto, (ii) the amount of any principal or interest due and
payable or to become due and payable from the Borrower to each Lender hereunder
and (iii) both the amount of any sum received by the Administrative Agent
hereunder from the Borrower and each Lender's share thereof.
(d) The entries made in the Register and the accounts of each Lender
maintained pursuant to Section 2.6(c) shall, to the extent permitted by
applicable law, be prima facie evidence of the existence and amounts of the
obligations of the Borrower therein recorded; provided, however, that the
failure of any Lender or the Administrative Agent to maintain the Register or
any such account, or any error therein, shall not in any manner affect the
obligation of the Borrower to repay (with applicable interest) the Loans made to
such Borrower by such Lender in accordance with the terms of this Agreement.
(e) The Borrower agrees that, upon the request to the Administrative
Agent by any Lender, the Borrower will execute and deliver to such Lender a
promissory note of the Borrower evidencing any Tranche B Term Loans or Revolving
Credit Loans, as the case may be, of such Lender, substantially in the forms of
Exhibit F-1 or F-2, respectively, with appropriate insertions as to date and
principal amount.
2.7 Commitment Fees, etc. (a) The Borrower agrees to pay to the
---------------------
Administrative Agent for the account of each Revolving Credit Lender a
commitment fee for the period from and including the Closing Date to the last
day of the Revolving Credit Commitment Period, computed at the Commitment Fee
Rate on the average daily amount of the Available Revolving Credit Commitment of
such Lender during the period for which payment is made, payable quarterly in
arrears on the last day of each March, June, September and December and on the
Revolving Credit Termination Date, commencing on the first of such dates to
occur after the date hereof.
(b) The Borrower agrees to pay to the Syndication Agent the fees in
the amounts and on the dates previously agreed to in writing by the Borrower and
the Syndication Agent.
(c) The Borrower agrees to pay to the Administrative Agent the fees
in the amounts and on the dates from time to time agreed to in writing by the
Borrower and the Administrative Agent.
2.8 Termination or Reduction of Revolving Credit Commitments. The
--------------------------------------------------------
Borrower shall have the right, upon not less than three Business Days' notice to
the Administrative Agent, to terminate the Revolving Credit Commitments or, from
time to time, to reduce the amount of the Revolving Credit Commitments; provided
that no such termination or reduction of Revolving Credit Commitments shall be
permitted if, after giving effect thereto and to any prepayments of the
Revolving Credit Loans made on the effective date thereof, the Total Revolving
Extensions of
<PAGE>
26
Credit would exceed the Total Revolving Credit Commitments. Any such reduction
shall be in an amount equal to $500,000, or a whole multiple of $100,000 in
excess thereof, and shall reduce permanently the Revolving Credit Commitments
then in effect.
2.9 Optional Prepayments. The Borrower may at any time and from time
--------------------
to time prepay the Loans, in whole or in part, without premium or penalty, upon
irrevocable notice delivered to the Administrative Agent at least three Business
Days prior thereto in the case of Eurodollar Loans and at least one Business Day
prior thereto in the case of Base Rate Loans, which notice shall specify the
date and amount of prepayment and whether the prepayment is of Eurodollar Loans
or Base Rate Loans; provided, that if a Eurodollar Loan is prepaid on any day
other than the last day of the Interest Period applicable thereto, the Borrower
shall also pay any amounts owing pursuant to Section 2.19. Upon receipt of any
such notice the Administrative Agent shall promptly notify each relevant Lender
thereof. If any such notice is given, the amount specified in such notice shall
be due and payable on the date specified therein, together with (except in the
case of Revolving Credit Loans which are Base Rate Loans) accrued interest to
such date on the amount prepaid. Partial prepayments of Tranche B Term Loans
and Revolving Credit Loans shall be in an aggregate principal amount of $500,000
or a whole multiple of $100,000 in excess thereof.
2.10 Mandatory Prepayments and Commitment Reductions. (a) Unless
-----------------------------------------------
the Required Prepayment Lenders shall otherwise agree, if any Indebtedness shall
be incurred by Holdings, the Borrower or any of its Subsidiaries (excluding any
Indebtedness permitted by Section 7.2 of this Agreement), an amount equal to
100% of the Net Cash Proceeds thereof shall be applied on the date of such
issuance or incurrence toward the prepayment of the Tranche B Term Loans and the
reduction of the Revolving Credit Commitments as set forth in Section 2.10(d).
(b) Unless the Required Prepayment Lenders shall otherwise agree, if
on any date Holdings, the Borrower or any of its Subsidiaries shall receive Net
Cash Proceeds from any Asset Sale or Recovery Event then, unless a Reinvestment
Notice shall be delivered in respect thereof, such Net Cash Proceeds shall be
applied on such date toward the prepayment of the Tranche B Term Loans and the
reduction of the Revolving Credit Commitments as set forth in Section 2.10(d);
provided, that, notwithstanding the foregoing, (i) the aggregate Net Cash
Proceeds of Asset Sales and Recovery Events that may be excluded from the
foregoing requirement pursuant to a Reinvestment Notice shall not exceed
$3,000,000 in any fiscal year of the Borrower and (ii) on each Reinvestment
Prepayment Date, an amount equal to the Reinvestment Prepayment Amount with
respect to the relevant Reinvestment Event shall be applied toward the
prepayment of the Tranche B Term Loans and the reduction of the Revolving Credit
Commitments as set forth in Section 2.10(d).
(c) Unless the Required Prepayment Lenders shall otherwise agree, if,
for any fiscal year of the Borrower commencing with the fiscal year ending
December 31, 1998, there shall be Excess Cash Flow, the Borrower shall, on the
relevant Excess Cash Flow Application Date, apply the ECF Percentage of such
Excess Cash Flow toward the prepayment of the Tranche B Term Loans and the
reduction of the Revolving Credit Commitments as set forth in Section 2.10(d).
Each such prepayment and commitment reduction shall be made on a date (an
"Excess Cash Flow Application Date") no later than five days after the earlier
of (i) the date on which the financial statements of the Borrower referred to in
Section 6.1(a), for the fiscal year with respect to which such prepayment is
made, are required to be delivered to the Lenders and (ii) the date
<PAGE>
27
such financial statements are actually delivered.
(d) Amounts to be applied in connection with prepayments and
Commitment reductions made pursuant to Section 2.10 shall be applied, first, to
the prepayment of the Tranche B Term Loans and, second, except in the case of
Section 2.10(c), to reduce permanently the Revolving Credit Commitments. Any
such reduction of the Revolving Credit Commitments shall be accompanied by
prepayment of the Revolving Credit Loans to the extent, if any, that the Total
Revolving Extensions of Credit exceed the amount of the Total Revolving Credit
Commitments as so reduced, provided that if the aggregate principal amount of
Revolving Credit Loans then outstanding is less than the amount of such excess
(because L/C Obligations constitute a portion thereof), the Borrower shall, to
the extent of the balance of such excess, replace outstanding Letters of Credit
and/or deposit an amount in cash in a cash collateral account established with
the Administrative Agent for the benefit of the Lenders on terms and conditions
satisfactory to the Administrative Agent. The application of any prepayment
pursuant to Section 2.10 shall be made first to Base Rate Loans and second to
Eurodollar Loans. Each prepayment of the Loans under Section 2.10 (except in
the case of Revolving Credit Loans that are Base Rate Loans) shall be
accompanied by accrued interest to the date of such prepayment on the amount
prepaid.
2.11 Conversion and Continuation Options. (a) The Borrower may elect
-----------------------------------
from time to time to convert Eurodollar Loans to Base Rate Loans by giving the
Administrative Agent at least two Business Days' prior irrevocable notice of
such election, provided that any such conversion of Eurodollar Loans may only be
made on the last day of an Interest Period with respect thereto. The Borrower
may elect from time to time to convert Base Rate Loans to Eurodollar Loans by
giving the Administrative Agent at least three Business Days' prior irrevocable
notice of such election (which notice shall specify the length of the initial
Interest Period therefor), provided that no Base Rate Loan under a particular
Facility may be converted into a Eurodollar Loan (i) when any Event of Default
has occurred and is continuing and the Administrative Agent or the Majority
Facility Lenders in respect of such Facility have determined in its or their
sole discretion not to permit such conversions or (ii) after the date that is
one month prior to the final scheduled termination or maturity date of such
Facility. Upon receipt of any such notice the Administrative Agent shall
promptly notify each relevant Lender thereof.
(b) Any Eurodollar Loan may be continued as such upon the expiration
of the then current Interest Period with respect thereto by the Borrower giving
irrevocable notice to the Administrative Agent, in accordance with the
applicable provisions of the term "Interest Period" set forth in Section 1.1 of
the length of the next Interest Period to be applicable to such Loans, provided
that no Eurodollar Loan under a particular Facility may be continued as such (i)
when any Event of Default has occurred and is continuing and the Administrative
Agent has or the Majority Facility Lenders in respect of such Facility have
determined in its or their sole discretion not to permit such continuations or
(ii) after the date that is one month prior to the final scheduled termination
or maturity date of such Facility, and provided, further, that if the Borrower
shall fail to give any required notice as described above in this paragraph or
if such continuation is not permitted pursuant to the preceding proviso such
Loans shall be automatically converted to Base Rate Loans on the last day of
such then expiring Interest Period. Upon receipt of any such notice the
Administrative Agent shall promptly notify each relevant Lender thereof.
2.12 Minimum Amounts and Maximum Number of Eurodollar Tranches.
---------------------------------------------------------
Notwithstanding anything to the contrary in this Agreement, all borrowings,
conversions, continuations and optional prepayments of Eurodollar Loans
hereunder and all selections of
<PAGE>
28
Interest Periods hereunder shall be in such amounts and be made pursuant to such
elections so that, (a) after giving effect thereto, the aggregate principal
amount of the Eurodollar Loans comprising each Eurodollar Tranche shall be equal
to $5,000,000 or a whole multiple of $1,000,000 in excess thereof and (b) no
more than six Eurodollar Tranches shall
be outstanding at any one time.
2.13 Interest Rates and Payment Dates. (a) Each Eurodollar Loan
--------------------------------
shall bear interest for each day during each Interest Period with respect
thereto at a rate per annum equal to the Eurodollar Rate determined for such day
plus the Applicable Margin.
(b) Each Base Rate Loan shall bear interest at a rate per annum equal
to the Base Rate plus the Applicable Margin.
(c) (i) If all or a portion of the principal amount of any Loan or
Reimbursement Obligation shall not be paid when due (whether at the stated
maturity, by acceleration or otherwise), all outstanding Loans and Reimbursement
Obligations (whether or not overdue) shall bear interest at a rate per annum
which is equal to (x) in the case of the Loans, the rate that would otherwise be
applicable thereto pursuant to the foregoing provisions of this Section 2.13
plus 2% or (y) in the case of Reimbursement Obligations, the rate applicable to
Base Rate Loans under the Revolving Credit Facility plus 2%, and (ii) if all or
a portion of any interest payable on any Loan or Reimbursement Obligation or any
commitment fee or other amount payable hereunder shall not be paid when due
(whether at the stated maturity, by acceleration or otherwise), such overdue
amount shall bear interest at a rate per annum equal to the rate applicable to
Base Rate Loans under the relevant Facility plus 2% (or, in the case of any such
other amounts that do not relate to a particular Facility, the Base Rate plus
4%), in each case, with respect to clauses (i) and (ii) above, from the date of
such non-payment until such amount is paid in full (as well after as before
judgment).
(d) Interest shall be payable in arrears on each Interest Payment
Date, provided that interest accruing pursuant to paragraph (c) of this Section
2.13 shall be payable from time to time on demand.
2.14 Computation of Interest and Fees. (a) Interest, fees and
--------------------------------
commissions payable pursuant hereto shall be calculated on the basis of a 360-
day year for the actual days elapsed, except that, with respect to Base Rate
Loans the rate of interest on which is calculated on the basis of the Prime
Rate, the interest thereon shall be calculated on the basis of a 365- (or 366-,
as the case may be) day year for the actual days elapsed. The Administrative
Agent shall as soon as practicable notify the Borrower and the relevant Lenders
of each determination of a Eurodollar Rate. Any change in the interest rate on
a Loan resulting from a change in the Base Rate or the Eurocurrency Reserve
Requirements shall become effective as of the opening of business on the day on
which such change becomes effective. The Administrative Agent shall as soon as
practicable notify the Borrower and the relevant Lenders of the effective date
and the amount of each such change in interest rate.
(b) Each determination of an interest rate by the Administrative
Agent pursuant to any provision of this Agreement shall be conclusive and
binding on the Borrower and the Lenders in the absence of manifest error. The
Administrative Agent shall, at the request of the Borrower, deliver to the
Borrower a statement showing the quotations used by the Administrative Agent in
determining any interest rate pursuant to Section 2.13(a).
<PAGE>
29
2.15 Inability to Determine Interest Rate. If prior to the first day
------------------------------------
of any Interest Period:
(a) the Administrative Agent shall have determined (which
determination shall be conclusive and binding upon the Borrower) that, by
reason of circumstances affecting the relevant market, adequate and
reasonable means do not exist for ascertaining the Eurodollar Rate for such
Interest Period, or
(b) the Administrative Agent shall have received notice from the
Majority Facility Lenders in respect of the relevant Facility that the
Eurodollar Rate determined or to be determined for such Interest Period
will not adequately and fairly reflect the cost to such Lenders (as
conclusively certified by such Lenders) of making or maintaining their
affected Loans during such Interest Period,
the Administrative Agent shall give telecopy or telephonic notice thereof to the
Borrower and the relevant Lenders as soon as practicable thereafter. If such
notice is given (x) any Eurodollar Loans under the relevant Facility requested
to be made on the first day of such Interest Period shall be made as Base Rate
Loans, (y) any Loans under the relevant Facility that were to have been
converted on the first day of such Interest Period to Eurodollar Loans shall be
continued as Base Rate Loans and (z) any outstanding Eurodollar Loans under the
relevant Facility shall be converted, on the last day of the then current
Interest Period, to Base Rate Loans. Until such notice has been withdrawn by
the Administrative Agent, no further Eurodollar Loans under the relevant
Facility shall be made or continued as such, nor shall the Borrower have the
right to convert Loans under the relevant Facility to Eurodollar Loans.
2.16 Pro Rata Treatment and Payments. (a) Each borrowing by the
-------------------------------
Borrower from the Lenders hereunder, each payment by the Borrower on account of
any commitment fee and any reduction of the Commitments of the Lenders shall be
made according to the respective Tranche B Term Loan Percentages or Revolving
Credit Percentages, as the case may be, of the relevant Lenders.
(b) Each payment (including each prepayment) by the Borrower on
account of principal of and interest on the Tranche B Term Loans shall be made
pro rata according to the respective outstanding principal amounts of the
Tranche B Term Loans then held by the Tranche B Term Loan Lenders. The amount
of each principal prepayment of the Tranche B Term Loans shall be applied to
reduce the then remaining installments of the Tranche B Term Loans pro rata
based upon the then remaining principal amount thereof. Amounts prepaid on
account of the Tranche B Term Loans may not be reborrowed.
(c) Each payment (including each prepayment) by the Borrower on
account of principal of and interest on the Revolving Credit Loans shall be made
pro rata according to the respective outstanding principal amounts of the
Revolving Credit Loans then held by the Revolving Credit Lenders.
(d) All payments (including prepayments) to be made by the Borrower
hereunder, whether on account of principal, interest, fees or otherwise, shall
be made without setoff or counterclaim and shall be made prior to 12:00 Noon,
New York City time, on the due date thereof to the Administrative Agent, for the
account of the Lenders, at the Payment Office, in
<PAGE>
30
Dollars and in immediately available funds. The Administrative Agent shall
distribute such payments to the Lenders promptly upon receipt in like funds as
received. If any payment hereunder (other than payments on the Eurodollar Loans)
becomes due and payable on a day other than a Business Day, such payment shall
be extended to the next succeeding Business Day. If any payment on a Eurodollar
Loan becomes due and payable on a day other than a Business Day, the maturity
thereof shall be extended to the next succeeding Business Day unless the result
of such extension would be to extend such payment into another calendar month,
in which event such payment shall be made on the immediately preceding Business
Day. In the case of any extension of any payment of principal pursuant to the
preceding two sentences, interest thereon shall be payable at the then
applicable rate during such extension.
(e) Unless the Administrative Agent shall have been notified in
writing by any Lender prior to a borrowing that such Lender will not make the
amount that would constitute its share of such borrowing available to the
Administrative Agent, the Administrative Agent may assume that such Lender is
making such amount available to the Administrative Agent, and the Administrative
Agent may, in reliance upon such assumption, make available to the Borrower a
corresponding amount. If such amount is not made available to the
Administrative Agent by the required time on the Borrowing Date therefor, such
Lender shall pay to the Administrative Agent, on demand, such amount with
interest thereon at a rate equal to the daily average Federal Funds Effective
Rate for the period until such Lender makes such amount immediately available to
the Administrative Agent. A certificate of the Administrative Agent submitted
to any Lender with respect to any amounts owing under this Section 2.16(e) shall
be conclusive in the absence of manifest error. If such Lender's share of such
borrowing is not made available to the Administrative Agent by such Lender
within three Business Days of such Borrowing Date, the Administrative Agent
shall also be entitled to recover such amount with interest thereon at the rate
per annum applicable to Base Rate Loans under the relevant Facility, on demand,
from the Borrower.
(f) Unless the Administrative Agent shall have been notified in
writing by the Borrower prior to the date of any payment being made hereunder
that the Borrower will not make such payment to the Administrative Agent, the
Administrative Agent may assume that the Borrower is making such payment, and
the Administrative Agent may, but shall not be required to, in reliance upon
such assumption, make available to the Lenders their respective pro rata shares
of a corresponding amount. If such payment is not made to the Administrative
Agent by the Borrower within three Business Days of such required date, the
Administrative Agent shall be entitled to recover, on demand, from each Lender
to which any amount which was made available pursuant to the preceding sentence,
such amount with interest thereon at the rate per annum equal to the daily
average Federal Funds Effective Rate. Nothing herein shall be deemed to limit
the rights of the Administrative Agent or any Lender against the Borrower.
2.17 Requirements of Law. (a) If the adoption of or any change in
-------------------
any Requirement of Law or in the interpretation or application thereof or
compliance by any Lender with any request or directive (whether or not having
the force of law) from any central bank or other Governmental Authority made
subsequent to the date hereof:
(i) shall subject any Lender to any tax of any kind whatsoever
with respect to this Agreement, any Letter of Credit, any Application or
any Eurodollar Loan made by it, or change the basis of taxation of payments
to such Lender in respect thereof (except for Non-Excluded Taxes covered by
Section 2.18 and changes in the rate of tax on, or the
<PAGE>
31
establishment of a tax based on, the net income of such Lender);
(ii) shall impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirement against assets held
by, deposits or other liabilities in or for the account of, advances, loans
or other extensions of credit by, or any other acquisition of funds by, any
office of such Lender which is not otherwise included in the determination
of the Eurodollar Rate hereunder; or
(iii) shall impose on such Lender any other condition;
and the result of any of the foregoing is to increase the cost to such Lender,
by an amount which such Lender deems to be material, of making, converting into,
continuing or maintaining Eurodollar Loans or issuing or participating in
Letters of Credit, or to reduce any amount receivable hereunder in respect
thereof, then, in any such case, the Borrower shall promptly pay such Lender,
upon its demand, any additional amounts necessary to compensate such Lender for
such increased cost or reduced amount receivable. If any Lender becomes
entitled to claim any additional amounts pursuant to this Section 2.17, it shall
promptly notify the Borrower (with a copy to the Administrative Agent) of the
event by reason of which it has become so entitled.
(b) If any Lender shall have determined that the adoption of or any
change in any Requirement of Law regarding capital adequacy or in the
interpretation or application thereof or compliance by such Lender or any
corporation controlling such Lender with any request or directive regarding
capital adequacy (whether or not having the force of law) from any Governmental
Authority made subsequent to the date hereof shall have the effect of reducing
the rate of return on such Lender's or such corporation's capital as a
consequence of its obligations hereunder or under or in respect of any Letter of
Credit to a level below that which such Lender or such corporation could have
achieved but for such adoption, change or compliance (taking into consideration
such Lender's or such corporation's policies with respect to capital adequacy)
by an amount deemed by such Lender to be material, then from time to time, after
submission by such Lender to the Borrower (with a copy to the Administrative
Agent) of a written request therefor, the Borrower shall pay to such Lender such
additional amount or amounts as will compensate such Lender for such reduction.
(c) A certificate as to any additional amounts payable pursuant to
this Section submitted by any Lender to the Borrower (with a copy to the
Administrative Agent) shall be conclusive in the absence of manifest error. The
obligations of the Borrower pursuant to this Section shall survive the
termination of this Agreement and the payment of the Loans and all other amounts
payable hereunder.
2.18 Taxes. (a) All payments made by the Borrower under this
-----
Agreement shall be made free and clear of, and without deduction or withholding
for or on account of, any present or future income, stamp or other taxes,
levies, imposts, duties, charges, fees, deductions or withholdings, now or
hereafter imposed, levied, collected, withheld or assessed by any Governmental
Authority, excluding net income taxes and franchise taxes (imposed in lieu of
net income taxes) imposed on any Agent or any Lender as a result of a present or
former connection between such Agent or such Lender and the jurisdiction of the
Governmental Authority imposing such tax or any political subdivision or taxing
authority thereof or therein (other than any such connection arising solely from
such Agent or such Lender having executed, delivered or performed its
obligations or received a payment under, or enforced, this Agreement or any
other
<PAGE>
32
Loan Document). If any such non-excluded taxes, levies, imposts, duties,
charges, fees, deductions or withholdings ("Non-Excluded Taxes") or Other Taxes
are required to be withheld from any amounts payable to any Agent or any Lender
hereunder, the amounts so payable to such Agent or such Lender shall be
increased to the extent necessary to yield to such Agent or such Lender (after
payment of all Non-Excluded Taxes and Other Taxes) interest or any such other
amounts payable hereunder at the rates or in the amounts specified in this
Agreement, provided, however, that the Borrower shall not be required to
increase any such amounts payable to any Lender with respect to any Non-Excluded
Taxes (i) that are attributable to such Lender's failure to comply with the
requirements of paragraph (d) or (e) of this Section, (ii) that are United
States withholding taxes imposed on amounts payable to such Lender at the time
the Lender becomes a party to this Agreement, except to the extent that such
Lender's assignor (if any) was entitled, at the time of assignment, to receive
additional amounts from the Borrower with respect to such Non-Excluded Taxes
pursuant to Section 2.18(a) or (iii) that are imposed solely as a result of
action taken by the Lender.
(b) In addition, the Borrower shall pay any Other Taxes to the
relevant Governmental Authority in accordance with applicable law.
(c) Whenever any Non-Excluded Taxes or Other Taxes are payable by the
Borrower, as promptly as possible thereafter the Borrower shall send to the
Administrative Agent for the account of the relevant Agent or Lender, as the
case may be, a certified copy of an original official receipt received by the
Borrower showing payment thereof. If the Borrower fails to pay any Non-Excluded
Taxes or Other Taxes when due to the appropriate taxing authority or fails to
remit to the Agents the required receipts or other required documentary
evidence, the Borrower shall indemnify the Administrative Agent and the Lenders
for any incremental taxes, interest or penalties that may become payable by any
Agent or any Lender as a result of any such failure. The agreements in this
Section 2.18 shall survive the termination of this Agreement and the payment of
the Loans and all other amounts payable hereunder.
(d) Each Lender (or Transferee) that is not a U.S. Person as defined
in Section 7701(a)(30) of the Code (a "Non-U.S. Lender") shall deliver to the
Borrower and the Administrative Agent (or, in the case of a Participant, to the
Lender from which the related participation shall have been purchased) two
copies of either U.S. Internal Revenue Service Form 1001 or Form 4224, or, in
the case of a Non-U.S. Lender claiming exemption from U.S. federal withholding
tax under Section 871(h) or 881(c) of the Code with respect to payments of
"portfolio interest" a statement substantially in the form of Exhibit H and a
Form W-8, or any subsequent versions thereof or successors thereto properly
completed and duly executed by such Non-U.S. Lender claiming complete exemption
from, or a reduced rate of, U.S. federal withholding tax on all payments by the
Borrower under this Agreement and the other Loan Documents. Such forms shall be
delivered by each Non-U.S. Lender on or before the date it becomes a party to
this Agreement (or, in the case of any Participant, on or before the date such
Participant purchases the related participation). In addition, each Non-U.S.
Lender shall deliver such forms promptly upon the obsolescence or invalidity of
any form previously delivered by such Non-U.S. Lender. Each Non-U.S. Lender
shall promptly notify the Borrower at any time it determines that it is no
longer in a position to provide any previously delivered certificate to the
Borrower (or any other form of certification adopted by the U.S. taxing
authorities for such purpose). Notwithstanding any other provision of this
Section 2.18(d), a Non-U.S. Lender shall not be required to deliver any form
pursuant to this Section 2.18(d) that such Non-U.S. Lender is not legally able
to deliver.
<PAGE>
33
(e) A Lender that is entitled to an exemption from or reduction of
any other tax with respect to payments under this Agreement shall deliver to the
Borrower (with a copy to the Administrative Agent), at the time or times
prescribed by applicable law or reasonably requested by the Borrower, such
properly completed and executed documentation prescribed by applicable law as
will permit such payments to be made without withholding or at a reduced rate,
provided that such Lender is legally entitled to complete, execute and deliver
such documentation and in such Lender's reasonable judgment such completion,
execution or submission would not materially prejudice the legal position of
such Lender.
(f) If the Administrative Agent or any Lender (or Transferee)
receives a refund in respect of Non-Excluded Taxes paid by the Borrower, which
in the good faith judgment of such Lender is allocable to such payment, it shall
promptly pay such refund, together with any other amounts paid by the Borrower
in connection with such refunded Non-Excluded Taxes, to the Borrower, net of all
out-of-pocket expenses of such Lender incurred in obtaining such refund,
provided, however, that the Borrower agrees to promptly return such refund to
the Administrative Agent or the applicable Lender (or Transferee), as the case
may be, if it receives notice from the Administrative Agent or applicable Lender
(or Transferee) that such Administrative Agent or Lender (or Transferee) is
required to repay such refund.
2.19 Indemnity. The Borrower agrees to indemnify each Lender and to
---------
hold each Lender harmless from any loss or expense which such Lender may sustain
or incur as a consequence of (a) default by the Borrower in making a borrowing
of, conversion into or continuation of Eurodollar Loans after the Borrower has
given a notice requesting the same in accordance with the provisions of this
Agreement, (b) default by the Borrower in making any prepayment after the
Borrower has given a notice thereof in accordance with the provisions of this
Agreement or (c) the making of a prepayment of Eurodollar Loans on a day which
is not the last day of an Interest Period with respect thereto. Such
indemnification may include an amount equal to the excess, if any, of (i) the
amount of interest which would have accrued on the amount so prepaid, or not so
borrowed, converted or continued, for the period from the date of such
prepayment or of such failure to borrow, convert or continue to the last day of
such Interest Period (or, in the case of a failure to borrow, convert or
continue, the Interest Period that would have commenced on the date of such
failure) in each case at the applicable rate of interest for such Loans provided
for herein (excluding, however, the Applicable Margin included therein, if any)
over (ii) the amount of interest (as reasonably determined by such Lender) which
would have accrued to such Lender on such amount by placing such amount on
deposit for a comparable period with leading banks in the interbank eurodollar
market. A certificate as to any amounts payable pursuant to this Section 2.19
submitted to the Borrower by any Lender shall be conclusive in the absence of
manifest error. This covenant shall survive the termination of this Agreement
and the payment of the Loans and all other amounts payable hereunder.
2.20 Illegality. Notwithstanding any other provision herein, if the
----------
adoption of or any change in any Requirement of Law or in the interpretation or
application thereof shall make it unlawful for any Lender to make or maintain
Eurodollar Loans as contemplated by this Agreement, (a) the commitment of such
Lender hereunder to make Eurodollar Loans, continue Eurodollar Loans as such and
convert Base Rate Loans to Eurodollar Loans shall forthwith be cancelled and (b)
such Lender's Loans then outstanding as Eurodollar Loans, if any, shall be
converted automatically to Base Rate Loans on the respective last days of the
then current Interest Periods with respect to such Loans or within such earlier
period as required by law. If
<PAGE>
34
any such conversion of a Eurodollar Loan occurs on a day which is not the last
day of the then current Interest Period with respect thereto, the Borrower shall
pay to such Lender such amounts, if any, as may be required pursuant to Section
2.19.
2.21 Change of Lending Office. Each Lender agrees that, upon the
------------------------
occurrence of any event giving rise to the operation of Section 2.17, 2.18, or
2.20 with respect to such Lender, it will, if requested by the Borrower, use
reasonable efforts (subject to overall policy considerations of such Lender) to
designate another lending office for any Loans affected by such event with the
object of avoiding the consequences of such event; provided, that such
designation is made on terms that, in the sole judgment of such Lender, cause
such Lender and its lending office(s) to suffer no economic, legal or regulatory
disadvantage, and provided, further, that nothing in this Section 2.21 shall
affect or postpone any of the obligations of any Borrower or the rights of any
Lender pursuant to Section 2.17, 2.18 or 2.20.
2.22 Replacement of Lenders under Certain Circumstances. The
--------------------------------------------------
Borrower shall be permitted to replace any Lender which (a) requests
reimbursement for amounts owing pursuant to Section 2.17 or 2.18 or (b) defaults
in its obligation to make Loans hereunder, with a replacement financial
institution; provided that (i) such replacement does not conflict with any
Requirement of Law, (ii) no Event of Default shall have occurred and be
continuing at the time of such replacement, (iii) prior to any such replacement,
such Lender shall have taken no action under Section 2.21 so as to eliminate the
continued need for payment of amounts owing pursuant to Section 2.17 or 2.18,
(iv) the replacement financial institution shall purchase, at par, all Loans and
other amounts owing to such replaced Lender on or prior to the date of
replacement, (v) the Borrower shall be liable to such replaced Lender under
Section 2.19 if any Eurodollar Loan owing to such replaced Lender shall be
purchased other than on the last day of the Interest Period relating thereto,
(vi) the replacement financial institution, if not already a Lender, shall be
reasonably satisfactory to the Administrative Agent, (vii) the replaced Lender
shall be obligated to make such replacement in accordance with the provisions of
Section 10.6 (provided that the Borrower shall be obligated to pay the
registration and processing fee referred to therein), (viii) until such time as
such replacement shall be consummated, the Borrower shall pay all additional
amounts (if any) required pursuant to Section 2.17 or 2.18, as the case may be,
and (ix) any such replacement shall not be deemed to be a waiver of any rights
which the Borrower, the Administrative Agent or any other Lender shall have
against the replaced Lender.
SECTION 3. LETTERS OF CREDIT
3.1 L/C Commitment. (a) Subject to the terms and conditions hereof,
--------------
the Issuing Lender, in reliance on the agreements of the other Revolving Credit
Lenders set forth in Section 3.4(a), agrees to issue letters of credit ("Letters
of Credit") for the account of the Borrower on any Business Day during the
Revolving Credit Commitment Period in such form as may be approved from time to
time by the Issuing Lender; provided that the Issuing Lender shall have no
obligation to issue any Letter of Credit if, after giving effect to such
issuance, (i) the L/C Obligations would exceed the L/C Commitment or (ii) the
aggregate amount of the Available Revolving Credit Commitments would be less
than zero. Each Letter of Credit shall (i) be denominated in Dollars and (ii)
expire no later than the earlier of (x) the first anniversary of its date of
issuance and (y) the date which is five Business Days prior to the Revolving
Credit Termination Date, provided that any Letter of Credit with a one-year term
may provide for the renewal thereof for additional one-year periods (which shall
in no event extend beyond the date referred to in clause (y) above).
<PAGE>
35
(b) Each Letter of Credit shall be subject to the Uniform Customs
and, to the extent not inconsistent therewith, the laws of the State of New
York.
(c) The Issuing Lender shall not at any time be obligated to issue
any Letter of Credit hereunder if such issuance would conflict with, or cause
the Issuing Lender or any L/C Participant to exceed any limits imposed by, any
applicable Requirement of Law.
3.2 Procedure for Issuance of Letter of Credit. The Borrower may
------------------------------------------
from time to time request that the Issuing Lender issue a Letter of Credit by
delivering to the Issuing Lender at its address for notices specified herein an
Application therefor, completed to the satisfaction of the Issuing Lender, and
such other certificates, documents and other papers and information as the
Issuing Lender may request. Upon receipt of any Application, the Issuing Lender
will process such Application and the certificates, documents and other papers
and information delivered to it in connection therewith in accordance with its
customary procedures and shall promptly issue the Letter of Credit requested
thereby (but in no event shall the Issuing Lender be required to issue any
Letter of Credit earlier than three Business Days after its receipt of the
Application therefor and all such other certificates, documents and other papers
and information relating thereto) by issuing the original of such Letter of
Credit to the beneficiary thereof or as otherwise may be agreed to by the
Issuing Lender and the Borrower. The Issuing Lender shall furnish a copy of such
Letter of Credit to the Borrower promptly following the issuance thereof. The
Issuing Lender shall promptly furnish to the Administrative Agent, which shall
in turn promptly furnish to the Lenders, notice of the issuance of each Letter
of Credit (including the amount thereof).
3.3 Commissions, Fees and Other Charges. (a) The Borrower will pay
-----------------------------------
a commission on the average daily amount of all outstanding Letters of Credit at
a per annum rate equal to the Applicable Margin then in effect with respect to
Eurodollar Loans under the Revolving Credit Facility, shared ratably among the
Revolving Credit Lenders and payable quarterly in arrears on each L/C Fee
Payment Date after the issuance date. In addition, the Borrower shall pay to
the Issuing Lender for its own account a fronting fee of 1/4 of 1% per annum of
the undrawn and unexpired amount of the Letter of Credit, payable quarterly in
arrears on each L/C Fee Payment Date after the Issuance Date.
(b) In addition to the foregoing fees and commissions, the Borrower
shall pay or reimburse the Issuing Lender for such normal and customary costs
and expenses as are incurred or charged by the Issuing Lender in issuing,
negotiating, effecting payment under, amending or otherwise administering any
Letter of Credit.
3.4 L/C Participations. (a) The Issuing Lender irrevocably agrees
------------------
to grant and hereby grants to each L/C Participant, and, to induce the Issuing
Lender to issue Letters of Credit hereunder, each L/C Participant irrevocably
agrees to accept and purchase and hereby accepts and purchases from the Issuing
Lender, on the terms and conditions hereinafter stated, for such L/C
Participant's own account and risk an undivided interest equal to such L/C
Participant's Revolving Credit Percentage in the Issuing Lender's obligations
and rights under each Letter of Credit issued hereunder and the amount of each
draft paid by the Issuing Lender thereunder. Each L/C Participant
unconditionally and irrevocably agrees with the Issuing Lender that, if a draft
is paid under any Letter of Credit for which the Issuing Lender is not
reimbursed in full by the Borrower in accordance with the terms of this
Agreement, such L/C Participant shall pay to the Issuing Lender upon demand at
the Issuing Lender's address for notices specified herein an amount equal
<PAGE>
36
to such L/C Participant's Revolving Credit Percentage of the amount of such
draft, or any part thereof, which is not so reimbursed.
(b) If any amount required to be paid by any L/C Participant to the
Issuing Lender pursuant to Section 3.4(a) in respect of any unreimbursed portion
of any payment made by the Issuing Lender under any Letter of Credit is paid to
the Issuing Lender within three Business Days after the date such payment is
due, such L/C Participant shall pay to the Issuing Lender on demand an amount
equal to the product of (i) such amount, times (ii) the daily average Federal
Funds Effective Rate during the period from and including the date such payment
is required to the date on which such payment is immediately available to the
Issuing Lender, times (iii) a fraction the numerator of which is the number of
days that elapse during such period and the denominator of which is 360. If any
such amount required to be paid by any L/C Participant pursuant to Section
3.4(a) is not made available to the Issuing Lender by such L/C Participant
within three Business Days after the date such payment is due, the Issuing
Lender shall be entitled to recover from such L/C Participant, on demand, such
amount with interest thereon calculated from such due date at the rate per annum
applicable to Base Rate Loans under the Revolving Credit Facility. A certificate
of the Issuing Lender submitted to any L/C Participant with respect to any
amounts owing under this Section shall be conclusive in the absence of manifest
error.
(c) Whenever, at any time after the Issuing Lender has made payment
under any Letter of Credit and has received from any L/C Participant its pro
rata share of such payment in accordance with Section 3.4(a), the Issuing Lender
receives any payment related to such Letter of Credit (whether directly from the
Borrower or otherwise, including proceeds of collateral applied thereto by the
Issuing Lender), or any payment of interest on account thereof, the Issuing
Lender will distribute to such L/C Participant its pro rata share thereof;
provided, however, that in the event that any such payment received by the
Issuing Lender shall be required to be returned by the Issuing Lender, such L/C
Participant shall return to the Issuing Lender the portion thereof previously
distributed by the Issuing Lender to it.
3.5 Reimbursement Obligation of the Borrower. The Borrower agrees to
----------------------------------------
reimburse the Issuing Lender on each date on which the Issuing Lender notifies
the Borrower of the date and amount of a draft presented under any Letter of
Credit and paid by the Issuing Lender for the amount of (a) such draft so paid
and (b) any taxes, fees, charges or other costs or expenses incurred by the
Issuing Lender in connection with such payment. Each such payment shall be made
to the Issuing Lender at its address for notices specified herein in lawful
money of the United States and in immediately available funds. Interest shall
be payable on any and all amounts remaining unpaid by the Borrower under this
Section from the date such amounts become payable (whether at stated maturity,
by acceleration or otherwise) until payment in full at the rate set forth in
Section 2.13(c). Each drawing under any Letter of Credit shall (unless an event
of the type described in clause (i) or (ii) of Section 8(f) shall have occurred
and be continuing with respect to the Borrower, in which case the procedures
specified in Section 3.4 for funding by L/C Participants shall apply) constitute
a request by the Borrower to the Administrative Agent for a borrowing pursuant
to Section 2.5 of Base Rate Loans in the amount of such drawing. The Borrowing
Date with respect to such borrowing shall be the date of such drawing.
3.6 Obligations Absolute. The Borrower's obligations under this
--------------------
Section 3 shall be absolute and unconditional under any and all circumstances
and irrespective of any setoff, counterclaim or defense to payment which the
Borrower may have or have had against the Issuing
<PAGE>
37
Lender, any beneficiary of a Letter of Credit or any other Person. The Borrower
also agrees with the Issuing Lender that the Issuing Lender shall not be
responsible for, and the Borrower's Reimbursement Obligations under Section 3.5
shall not be affected by, among other things, the validity or genuineness of
documents or of any endorsements thereon, even though such documents shall in
fact prove to be invalid, fraudulent or forged, or any dispute between or among
the Borrower and any beneficiary of any Letter of Credit or any other party to
which such Letter of Credit may be transferred or any claims whatsoever of the
Borrower against any beneficiary of such Letter of Credit or any such
transferee. The Issuing Lender shall not be liable for any error, omission,
interruption or delay in transmission, dispatch or delivery of any message or
advice, however transmitted, in connection with any Letter of Credit, except for
errors or omissions found by a final and nonappealable decision of a court of
competent jurisdiction to have resulted from the gross negligence or willful
misconduct of the Issuing Lender. The Borrower agrees that any action taken or
omitted by the Issuing Lender under or in connection with any Letter of Credit
or the related drafts or documents, if done in the absence of gross negligence
or willful misconduct and in accordance with the standards or care specified in
the Uniform Commercial Code of the State of New York, shall be binding on the
Borrower and shall not result in any liability of the Issuing Lender to the
Borrower.
3.7 Letter of Credit Payments. If any draft shall be presented for
-------------------------
payment under any Letter of Credit, the Issuing Lender shall promptly notify the
Borrower of the date and amount thereof. The responsibility of the Issuing
Lender to the Borrower in connection with any draft presented for payment under
any Letter of Credit shall, in addition to any payment obligation expressly
provided for in such Letter of Credit, be limited to determining that the
documents (including each draft) delivered under such Letter of Credit in
connection with such presentment are substantially in conformity with such
Letter of Credit.
3.8 Applications. To the extent that any provision of any
------------
Application related to any Letter of Credit is inconsistent with the provisions
of this Section 3, the provisions of this Section 3 shall apply.
SECTION 4. REPRESENTATIONS AND WARRANTIES
To induce the Agents and the Lenders to enter into this Agreement and
to make the Loans and issue or participate in the Letters of Credit, Holdings
and the Borrower hereby jointly and severally represent and warrant to each
Agent and each Lender that:
4.1 Financial Condition. (a) The unaudited pro forma consolidated
-------------------
balance sheet of the Borrower and its consolidated Subsidiaries as at September
30, 1997 (including the notes thereto) (the "Pro Forma Balance Sheet"), copies
of which have heretofore been furnished to each Lender, has been prepared giving
effect (as if such events had occurred on such date) to (i) the consummation of
the Acquisition, (ii) the Loans to be made and the Senior Notes to be issued on
the Closing Date and the use of proceeds thereof and (iii) the payment of fees
and expenses in connection with the foregoing. The Pro Forma Balance Sheet has
been prepared based on the best information available to the Borrower as of the
date of delivery thereof, and presents fairly on a pro forma basis the estimated
financial position of Borrower and its consolidated Subsidiaries as at September
30, 1997, assuming that the events specified in the preceding sentence had
actually occurred at such date.
(b) The audited consolidated balance sheets of the Borrower (i) as at
December
<PAGE>
38
31, 1996, and the related consolidated statements of income and of cash flows
for the fiscal year ended on such date, reported on by and accompanied by an
unqualified report from Ernst & Young L.L.P., present fairly the consolidated
financial condition of the Borrower as at such date, and the consolidated
results of its operations and its consolidated cash flows for the fiscal year
then ended. The audited consolidated balance sheet of the Borrower as at
September 30, 1997 and the related consolidated statements of income and of cash
flows for the nine month period ended on such date, reported on by and
accompanied by an unqualified report from Ernst & Young L.L.P., present fairly
the consolidated financial condition of the Borrower as at such date, and the
consolidated results of its operations and its consolidated cash flows for the
nine month period then ended. The unaudited consolidated balance sheet of the
Borrower as at November 30, 1997, and the related unaudited consolidated
statements of income and cash flows for the eleven month period ended on such
date, present fairly the consolidated financial condition of the Borrower as at
such date, and the consolidated results of its operations and its consolidated
cash flows for the eleven month period then ended (subject to normal year-end
audit adjustments and accounting adjustments described on Schedule 4.1). All
such financial statements, including the related schedules and notes thereto,
have been prepared in accordance with GAAP applied consistently throughout the
periods involved (except as approved by the aforementioned firm of accountants
and disclosed therein). Holdings, the Borrower and its Subsidiaries do not have
any material Guarantee Obligations, contingent liabilities and liabilities for
taxes, or any long-term leases or unusual forward or long-term commitments,
including, without limitation, any interest rate or foreign currency swap or
exchange transaction or other obligation in respect of derivatives, which are
not reflected in the most recent financial statements referred to in this
paragraph (b). During the period from September 30, 1997 to and including the
date hereof there has been no Disposition by the Borrower of any material part
of its business or Property other than the Acquisition and subsequent merger.
4.2 No Change. Except as set forth in Schedule 4.2 (which matter is
---------
set forth for purposes of disclosure and has not had and could not reasonably be
expected to have a Material Adverse Effect), since September 30, 1997, there has
been no development or event which has had or could reasonably be expected to
have a Material Adverse Effect.
4.3 Corporate Existence; Compliance with Law. Each of Holdings, the
----------------------------------------
Borrower and its Subsidiaries (a) is duly organized, validly existing and in
good standing under the laws of the jurisdiction of its organization, (b) has
the corporate power and authority, and the legal right, to own and operate its
Property, to lease the Property it operates as lessee and to conduct the
business in which it is currently engaged, (c) is duly qualified as a foreign
corporation and in good standing under the laws of each jurisdiction where its
ownership, lease or operation of Property or the conduct of its business
requires such qualification and (d) is in compliance with all Requirements of
Law except to the extent that the failure to comply therewith could not, in the
aggregate, reasonably be expected to have a Material Adverse Effect.
4.4 Corporate Power; Authorization; Enforceable Obligations. Each
-------------------------------------------------------
Loan Party has the corporate power and authority, and the legal right, to make,
deliver and perform the Loan Documents to which it is a party and, in the case
of the Borrower, to borrow hereunder. Each Loan Party has taken all necessary
corporate action to authorize the execution, delivery and performance of the
Loan Documents to which it is a party and, in the case of the Borrower, to
authorize the borrowings on the terms and conditions of this Agreement. No
consent or authorization of, filing with, notice to or other act by or in
respect of, any Governmental Authority or any other Person is required in
connection with the Acquisition and the borrowings
<PAGE>
39
hereunder or the operation of the Borrower's business following the Closing Date
or with the execution, delivery, performance, validity or enforceability of this
Agreement or any of the Loan Documents, except (i) consents, authorizations,
filings and notices described in Schedule 4.4, as to which the failure to obtain
could not, in the aggregate, reasonably be expected to have a Material Adverse
Effect and (ii) the filings referred to in Section 4.19. Each Loan Document has
been duly executed and delivered on behalf of each Loan Party party thereto.
This Agreement constitutes, and each other Loan Document upon execution will
constitute, a legal, valid and binding obligation of each Loan Party party
thereto, enforceable against each such Loan Party in accordance with its terms,
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).
4.5 No Legal Bar. The execution, delivery and performance of this
------------
Agreement and the other Loan Documents, the issuance of Letters of Credit, the
borrowings hereunder and the use of the proceeds thereof will not violate any
Requirement of Law or any Contractual Obligation of Holdings, the Borrower or
any of its Subsidiaries and will not result in, or require, the creation or
imposition of any Lien on any of their respective properties or revenues
pursuant to any Requirement of Law or any such Contractual Obligation (other
than the Liens created by the Security Documents). No Requirement of Law or
Contractual Obligation applicable to the Borrower or any of its Subsidiaries
could reasonably be expected to have a Material Adverse Effect.
4.6 No Material Litigation. Except as set forth in Schedule 4.6
----------------------
(which matter is set forth for purposes of disclosure and has not had and could
not reasonably be expected to have a Material Adverse Effect), no litigation,
investigation or proceeding of or before any arbitrator or Governmental
Authority is pending or, to the knowledge of Holdings or the Borrower,
threatened by or against Holdings, the Borrower or any of its Subsidiaries or
against any of their respective properties or revenues (a) with respect to any
of the Loan Documents or any of the transactions contemplated hereby or thereby,
or (b) which could reasonably be expected to have a Material Adverse Effect.
4.7 No Default. Neither Holdings, the Borrower nor any of its
----------
Subsidiaries is in default under or with respect to any of its Contractual
Obligations in any respect which could reasonably be expected to have a Material
Adverse Effect. No Default or Event of Default has occurred and is continuing.
4.8 Ownership of Property; Liens. Each of Holdings, the Borrower and
----------------------------
its Subsidiaries has title in fee simple to, or a valid leasehold interest in,
all its material real property, and good title to, or a valid leasehold interest
in, all its other material Property, and none of such Property is subject to any
Lien except as permitted by Section 7.3.
4.9 Intellectual Property. The Borrower and each of its Subsidiaries
---------------------
owns, or is licensed to use, all Intellectual Property necessary for the conduct
of its business as currently conducted. No material claim has been asserted and
is pending by any Person challenging or questioning the use of any Intellectual
Property or the validity or effectiveness of any Intellectual Property, nor does
Holdings or Borrower know of any valid basis for any such claim. The use of
Intellectual Property by Holdings, the Borrower and its Subsidiaries does not
infringe on the rights of any Person in any material respect.
<PAGE>
40
4.10 Taxes. Except as set forth in Schedule 4.10, each of Holdings,
-----
the Borrower and each of its Subsidiaries has filed or caused to be filed all
Federal, state and other material tax returns which are required to be filed and
has paid all taxes shown to be due and payable on said returns or on any
assessments made against it or any of its Property and all other taxes, fees or
other charges imposed on it or any of its Property by any Governmental Authority
(other than any the amount or validity of which are currently being contested in
good faith by appropriate proceedings and with respect to which reserves in
conformity with GAAP have been provided on the books of Holdings, the Borrower
or its Subsidiaries, as the case may be); no tax Lien has been filed, and, to
the knowledge of Holdings and the Borrower, no material claim is being asserted,
with respect to any such tax, fee or other charge.
4.11 Federal Regulations. No part of the proceeds of any Loans will
-------------------
be used for "purchasing" or "carrying" any "margin stock" within the respective
meanings of each of the quoted terms under Regulation G or Regulation U as now
and from time to time hereafter in effect or for any purpose which violates the
provisions of the Regulations of the Board. If requested by any Lender or the
Administrative Agent, the Borrower will furnish to the Administrative Agent and
each Lender a statement to the foregoing effect in conformity with the
requirements of FR Form G-3 or FR Form U-1 referred to in Regulation G or
Regulation U, as the case may be.
4.12 Labor Matters. There are no strikes or other labor disputes
-------------
against Holdings, the Borrower or any of its Subsidiaries pending or, to the
knowledge of Holdings or the Borrower, threatened that (individually or in the
aggregate) could reasonably be expected to have a Material Adverse Effect.
Hours worked by and payment made to employees of Holdings, the Borrower and its
Subsidiaries have not been in violation of the Fair Labor Standards Act or any
other applicable Requirement of Law dealing with such matters that (individually
or in the aggregate) could reasonably be expected to have a Material Adverse
Effect. All payments due from Holdings, the Borrower or any of its Subsidiaries
on account of employee health and welfare insurance that (individually or in the
aggregate) could reasonably be expected to have a Material Adverse Effect if not
paid have been paid or accrued as a liability on the books of Holdings, the
Borrower or the relevant Subsidiary.
4.13 ERISA. Neither a Reportable Event nor an "accumulated funding
-----
deficiency" (within the meaning of Section 412 of the Code or Section 302 of
ERISA) has occurred during the five-year period prior to the date on which this
representation is made or deemed made with respect to any Plan, and each Plan
has complied in all material respects with the applicable provisions of ERISA
and the Code. No termination of a Single Employer Plan has occurred, and no
Lien in favor of the PBGC or a Plan has arisen, during such five-year period.
The present value of all accrued benefits under each Single Employer Plan (based
on those assumptions used to fund such Plans) did not, as of the last annual
valuation date prior to the date on which this representation is made or deemed
made, exceed the value of the assets of such Plan allocable to such accrued
benefits by a material amount. Neither the Borrower nor any Commonly Controlled
Entity has had a complete or partial withdrawal from any Multiemployer Plan
which has resulted or could reasonably be expected to result in a material
liability under ERISA to the Borrower, and the Borrower could not reasonably be
expected to become subject to any material liability under ERISA if the Borrower
or any such Commonly Controlled Entity were to withdraw completely from all
Multiemployer Plans as of the valuation date most closely preceding the date on
which this representation is made or deemed made. No such Multiemployer
<PAGE>
41
Plan is in Reorganization or Insolvent.
4.14 Investment Company Act; Other Regulations. No Loan Party is an
-----------------------------------------
"investment company", or a company "controlled" by an "investment company",
within the meaning of the Investment Company Act of 1940, as amended. No Loan
Party is subject to regulation under any Requirement of Law (other than
Regulation X of the Board) which limits its ability to incur Indebtedness.
4.15 Subsidiaries. (a) Schedule 4.15 sets forth as of the Closing
------------
Date the name and jurisdiction of incorporation of each Subsidiary and, as to
each such Subsidiary, the percentage of each class of Capital Stock owned by any
Loan Party.
(b) There are no outstanding subscriptions, options, warrants, calls,
rights or other agreements or commitments (other than stock options granted to
employees or directors and directors' qualifying shares) of any nature relating
to any Capital Stock of the Borrower or any Subsidiary.
4.16 Use of Proceeds. The proceeds of the Tranche B Term Loans shall
---------------
be used to refinance the Acquisition Facility and to pay related fees and
expenses. The proceeds of the Revolving Credit Loans and the Letters of Credit
shall be used for general corporate purposes in the ordinary course of business
and to finance Permitted Acquisitions.
4.17 Environmental Matters. Except as individually or in the
---------------------
aggregate could not reasonably be expected to result in the payment of a
Material Environmental Amount:
(a) The facilities and properties owned, leased or operated by
Holdings, the Borrower or any of its Subsidiaries (the "Properties") do not
contain, and have not previously contained, any Materials of Environmental
Concern in amounts or concentrations or under circumstances which (i) constitute
or constituted a violation of, or (ii) could give rise to liability under, any
Environmental Law.
(b) The Properties and all operations at the Properties are in
material compliance, and have in the last five years been in material
compliance, with all applicable Environmental Laws, and there is no
contamination at, under or about the Properties or violation of any
Environmental Law with respect to the Properties or the business operated by
Holdings, the Borrower or any of its Subsidiaries (the "Business") which could
materially interfere with the continued operation of the Properties or
materially impair the fair saleable value thereof. Neither Holdings, the
Borrower nor any of its Subsidiaries has assumed any liability of any other
Person under Environmental Laws.
(c) Neither Holdings, the Borrower nor any of its Subsidiaries has
received or is aware of any notice of violation, alleged violation, non-
compliance, liability or potential liability regarding environmental matters or
compliance with Environmental Laws with regard to any of the Properties or the
Business, nor does Holdings or the Borrower have knowledge or reason to believe
that any such notice will be received or is being threatened.
(d) Materials of Environmental Concern have not been transported or
disposed of from the Properties in violation of, or in a manner or to a location
which could give rise to liability under, any Environmental Law, nor have any
Materials of Environmental Concern been
<PAGE>
42
generated, treated, stored or disposed of at, on or under any of the Properties
in violation of, or in a manner that could give rise to liability under, any
applicable Environmental Law.
(e) No judicial proceeding or governmental or administrative action
is pending or, to the knowledge of Holdings and the Borrower, threatened, under
any Environmental Law to which Holdings, the Borrower or any Subsidiary is or
will be named as a party with respect to the Properties or the Business, nor are
there any consent decrees or other decrees, consent orders, administrative
orders or other orders, or other administrative or judicial requirements
outstanding under any Environmental Law with respect to the Properties or the
Business.
(f) There has been no release or threat of release of Materials of
Environmental Concern at or from the Properties, or arising from or related to
the operations of Holdings, the Borrower or any Subsidiary in connection with
the Properties or otherwise in connection with the Business, in violation of or
in amounts or in a manner that could give rise to liability under Environmental
Laws.
4.18 Accuracy of Information, etc. No statement or information
----------------------------
contained in this Agreement, any other Loan Document, the Confidential
Information Memorandum or any other material document, certificate or statement
furnished to the Administrative Agent or the Lenders or any of them, by or on
behalf of any Loan Party for use in connection with the transactions
contemplated by this Agreement or the other Loan Documents, contained as of the
date such statement, information, document or certificate was so furnished (or,
in the case of the Confidential Information Memorandum, as of the date of this
Agreement), any untrue statement of a material fact or omitted to state a
material fact necessary in order to make the statements contained herein or
therein not misleading. The projections and pro forma financial information
contained in the materials referenced above are based upon good faith estimates
and assumptions believed by management of the Borrower to be reasonable at the
time made, it being recognized by the Lenders that such financial information as
it relates to future events is not to be viewed as fact and that actual results
during the period or periods covered by such financial information may differ
from the projected results set forth therein by a material amount. As of the
date hereof, the representations and warranties contained in the Acquisition
Agreement are true and correct in all material respects. There is no fact known
to any Loan Party that could reasonably be expected to have a Material Adverse
Effect that has not been expressly disclosed herein, in the other Loan
Documents, in the Confidential Information Memorandum or in any other documents,
certificates and statements furnished to the Administrative Agent and the
Lenders for use in connection with the transactions contemplated hereby and by
the other Loan Documents.
4.19 Security Documents. The Guarantee and Collateral Agreement is
------------------
effective to create in favor of the Administrative Agent, for the benefit of the
Lenders, a legal, valid and enforceable security interest in the Collateral
described therein and proceeds thereof. In the case of the Pledged Stock
described in the Guarantee and Collateral Agreement, when stock certificates
representing such Pledged Stock are delivered to the Administrative Agent, and
in the case of the other Collateral described in the Guarantee and Collateral
Agreement, when financing statements in appropriate form are filed in the
offices specified on Schedule 4.19 and such other filings as are specified on
Schedule 3 to the Guarantee and Collateral Agreement are made, the Guarantee and
Collateral Agreement shall constitute a fully perfected Lien on, and security
interest in, all right, title and interest of the Loan Parties in such
Collateral and the proceeds thereof, as security for the Obligations (as defined
in the Guarantee and Collateral Agreement), in each case prior and superior in
right to any other Person (except, in the case of Collateral other
<PAGE>
43
than Pledged Stock, Liens permitted by Section 7.3).
4.20 Solvency. Each Loan Party is, and after giving effect to the
--------
Acquisition and the incurrence of all Indebtedness and obligations being
incurred in connection herewith and therewith will be and will continue to be,
Solvent.
SECTION 5. CONDITIONS PRECEDENT
5.1 Conditions to Initial Extension of Credit. The agreement of each
-----------------------------------------
Lender to make the initial extension of credit requested to be made by it is
subject to the satisfaction, prior to or concurrently with the making of such
extension of credit on the Closing Date (which date shall occur on or before
February 19, 1998), of the following conditions precedent:
(a) Loan Documents. The Administrative Agent shall have received (i)
--------------
this Agreement, executed and delivered by a duly authorized officer of
Holdings and the Borrower, (ii) the Guarantee and Collateral Agreement,
executed and delivered by a duly authorized officer of Holdings, the
Borrower and each Subsidiary Guarantor, and (iii) for the account of each
relevant Lender, Notes conforming to the requirements hereof and executed
and delivered by a duly authorized officer of the Borrower.
(b) Senior Notes. The Borrower shall have issued the Senior Notes
------------
for at least $100,000,000 in aggregate gross cash proceeds on terms and
conditions reasonably satisfactory to the Administrative Agent and the
Syndication Agent.
(c) Structure. The capital, tax and legal structure of each Loan
---------
Party after the financing contemplated hereby shall be as described in this
Agreement and in the Acquisition Documentation.
(d) Pro Forma Balance Sheet; Financial Statements. The Lenders shall
---------------------------------------------
have received (i) the Pro Forma Balance Sheet, (ii) the audited
consolidated financial statements of the Borrower for the fiscal year ended
on December 31, 1996 and the nine-month period ended September 30, 1997 and
(iii) unaudited interim consolidated financial statements of the Borrower
for each fiscal month and quarterly period ended subsequent to the date of
the latest applicable financial statements delivered pursuant to clause
(ii) of this paragraph as to which such financial statements are available
(including as of and for the period ended November 30, 1997 and for such
subsequent periods as are available), and such financial statements shall
not, in the reasonable judgment of the Lenders, reflect any Material
Adverse Effect in the consolidated financial condition of the Borrower, as
reflected in the financial statements or projections contained in the
Confidential Information Memorandum.
(e) Approvals. All governmental and third party approvals (including
---------
landlords' consents and other consents and approvals necessary for the
conduct of the debt collection business of the Borrower and its
Subsidiaries in all material respects subsequent to the change of control
to occur as a result of the Acquisition) reasonably necessary or reasonably
advisable in connection with the Acquisition, the continuing operations of
the Borrower and its Subsidiaries and the transactions contemplated hereby
shall have been obtained and be in full force and effect, and all
applicable waiting periods shall have
<PAGE>
44
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 financing contemplated hereby.
(f) Related Agreements. The Syndication Agent shall have received
------------------
(in a form reasonably satisfactory to the Syndication Agent), with a copy
for each Lender, true and correct copies, certified as to authenticity by
the Borrower, of the Acquisition Agreement and such other documents or
instruments as may be reasonably requested by the Syndication Agent,
including, without limitation, a copy of the Senior Note Indenture and any
other debt instrument, security agreement or other material contract to
which the Loan Parties may be a party.
(g) Termination of Acquisition Facility. The Administrative Agent
-----------------------------------
shall have received evidence satisfactory to the Administrative Agent that
the Acquisition Credit Agreement shall be simultaneously terminated and all
amounts thereunder shall be simultaneously paid in full with the initial
borrowings under this Agreement.
(h) Fees. The Lenders, the Arranger, the Syndication Agent and the
----
Administrative Agent shall have received all fees required to be paid, and
all expenses for which invoices have been presented, including, without
limitation, the reasonable fees and expenses of legal counsel, on or before
the Closing Date.
(i) Lien Searches. The Administrative Agent shall have received the
-------------
results of a recent lien search in each of the jurisdictions where assets
of the Loan Parties are located, and such search shall reveal no liens on
any of the assets of the Loan Parties except for liens permitted by Section
7.3 or discharged on or prior to the Closing Date pursuant to documentation
satisfactory to the Administrative Agent.
(j) Environmental Due Diligence. The Administrative Agent shall have
---------------------------
received reasonably satisfactory environmental due diligence results with
respect to the real properties owned or leased by the Borrower and its
Subsidiaries.
(k) Expenses. The Administrative Agent shall have received
--------
satisfactory evidence that the fees and expenses to be incurred in
connection with the Acquisition and the financing thereof shall not exceed
$10,250,000.
(l) Closing Certificate. The Administrative Agent shall have
-------------------
received, with a counterpart for each Lender, a certificate of each Loan
Party, dated the Closing Date, substantially in the form of Exhibit C, with
appropriate insertions and attachments.
(m) Legal Opinions. The Administrative Agent shall have received the
--------------
following executed legal opinions:
(i) the legal opinion of Weil, Gotshal & Manges LLP,
counsel to Holdings, the Borrower and its Subsidiaries, substantially
in the form of Exhibit E-1;
(ii) the legal opinion of Weil, Gotshal & Manges LLP,
delivered in connection with the Acquisition Documentation,
accompanied by a
<PAGE>
45
reliance letter in favor of the Lenders; and
(iii) the legal opinion of Troutman Sanders LLP, Georgia
counsel to the Borrower, substantially in the form of Exhibit E-2.
Each such legal opinion shall cover such other matters incident to the
transactions contemplated by this Agreement as the Administrative Agent may
reasonably require.
(n) Pledged Stock; Stock Power. The Administrative Agent shall have
--------------------------
received the certificates representing the shares of Capital Stock pledged
pursuant to the Guarantee and Collateral Agreement, together with an
undated stock power for each such certificate executed in blank by a duly
authorized officer of the pledgor thereof.
(o) Filings, Registrations and Recordings. Each document (including,
-------------------------------------
without limitation, any Uniform Commercial Code financing statement)
required by the Security Documents or under law or reasonably requested by
the Administrative Agent to be filed, registered or recorded in order to
create in favor of the Administrative Agent, for the benefit of the
Lenders, a perfected Lien on the Collateral described therein, prior and
superior in right to any other Person (other than with respect to Liens
expressly permitted by Section 7.3), shall be in proper form for filing,
registration or recordation.
(p) Insurance. The Administrative Agent shall have received
---------
insurance certificates satisfying the requirements of Section 5.3 of the
Guarantee and Collateral Agreement.
5.2 Conditions to Each Extension of Credit. The agreement of each
--------------------------------------
Lender to make any extension of credit requested to be made by it on any date
(including, without limitation, its initial extension of credit) is subject to
the satisfaction of the following conditions precedent:
(a) Representations and Warranties. Each of the representations and
------------------------------
warranties made by any Loan Party in or pursuant to the Loan Documents
shall be true and correct on and as of such date as if made on and as of
such date.
(b) No Default. No Default or Event of Default shall have occurred
----------
and be continuing on such date or after giving effect to the extensions of
credit requested to be made on such date.
Each borrowing by and issuance of a Letter of Credit on behalf of the Borrower
hereunder shall constitute a representation and warranty by the Borrower as of
the date of such extension of credit that the conditions contained in this
Section 5.2 have been satisfied.
SECTION 6. AFFIRMATIVE COVENANTS
Holdings and the Borrower hereby jointly and severally agree that, so
long as the Commitments remain in effect, any Letter of Credit remains
outstanding or any Loan or other amount is owing to any Lender or any Agent
hereunder, each of Holdings and the Borrower shall and shall cause each of its
Subsidiaries to:
6.1 Financial Statements. Furnish to each Agent and each Lender:
--------------------
<PAGE>
46
(a) as soon as available, but in any event within 90 days after the
end of each fiscal year of the Borrower, a copy of the audited consolidated
balance sheet of the Borrower and its consolidated Subsidiaries as at the
end of such year and the related audited consolidated statements of income
and of cash flows for such year, setting forth in each case in comparative
form the figures for the previous year, reported on without a "going
concern" or like qualification or exception, or qualification arising out
of the scope of the audit, by Ernst & Young LLP or other independent
certified public accountants of nationally recognized standing;
(b) as soon as available, but in any event not later than 45 days
after the end of each of the first three quarterly periods of each fiscal
year of the Borrower, the unaudited consolidated balance sheet of the
Borrower and its Subsidiaries as at the end of such quarter and the related
unaudited consolidated statements of income and of cash flows for such
quarter and the portion of the fiscal year through the end of such quarter,
setting forth in each case in comparative form the figures for the previous
year, certified (with respect to the 1998 fiscal year and thereafter) by a
Responsible Officer as being fairly stated in all material respects
(subject to normal year-end audit adjustments); and
(c) as soon as available, but in any event not later than 45 days
after the end of each month occurring during each fiscal year of the
Borrower (other than the third, sixth, ninth and twelfth such month), the
unaudited consolidated balance sheets of the Borrower and its Subsidiaries
as at the end of such month and the related unaudited consolidated
statements of income and of cash flows for such month and the portion of
the fiscal year through the end of such month, setting forth in each case
in comparative form the figures for the previous year, certified (with
respect to the 1998 fiscal year and thereafter) by a Responsible Officer as
being fairly stated in all material respects (subject to normal year-end
audit adjustments);
all such financial statements shall be complete and correct in all material
respects and shall be prepared in reasonable detail and in accordance with GAAP
applied consistently throughout the periods reflected therein and with prior
periods (except as approved by such accountants or officer, as the case may be,
and disclosed therein).
6.2 Certificates; Other Information. Furnish to each Agent and each
-------------------------------
Lender, or, in the case of clause (g), to the relevant Lender:
(a) concurrently with the delivery of the financial statements
referred to in Section 6.1(a), a certificate of the independent certified
public accountants reporting on such financial statements stating that in
making the examination necessary therefor no knowledge was obtained of any
Default or Event of Default, except as specified in such certificate;
(b) concurrently with the delivery of any financial statements
pursuant to Section 6.1, (i) a certificate of a Responsible Officer stating
that, to the best of each such Responsible Officer's knowledge, each Loan
Party during such period has observed or performed all of its covenants and
other agreements, and satisfied every condition, contained in this
Agreement and the other Loan Documents to which it is a party to be
observed, performed or satisfied by it, and that such Responsible Officer
has obtained no
<PAGE>
47
knowledge of any Default or Event of Default except as specified in such
certificate and (ii) in the case of quarterly or annual financial
statements, (x) a Compliance Certificate containing all information
necessary for determining compliance by Holdings, the Borrower and its
Subsidiaries with the provisions of this Agreement referred to therein as
of the last day of the fiscal quarter or fiscal year of the Borrower, as
the case may be, and (y) to the extent not previously disclosed to the
Administrative Agent, a listing of any county or state within the United
States where any Loan Party keeps inventory or equipment and of any
Intellectual Property acquired by any Loan Party since the date of the most
recent list delivered pursuant to this clause (y) (or, in the case of the
first such list so delivered, since the Closing Date);
(c) as soon as available, and in any event no later than 45 days
after the end of each fiscal year of the Borrower, a detailed consolidated
budget for the following fiscal year (including a projected consolidated
balance sheet of the Borrower and its Subsidiaries as of the end of the
following fiscal year, and the related consolidated statements of projected
cash flow, projected changes in financial position and projected income),
and, as soon as available, significant revisions, if any, of such budget
and projections with respect to such fiscal year (collectively, the
"Projections"), which Projections shall in each case be accompanied by a
certificate of a Responsible Officer stating that such Projections are
based on reasonable estimates, information and assumptions and that such
Responsible Officer has no reason to believe that such Projections are
incorrect or misleading in any material respect;
(d) within 45 days after the end of each fiscal quarter of the
Borrower, a narrative discussion and analysis of the financial condition
and results of operations of the Borrower 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, as compared to the portion
of the Projections covering such periods and to the comparable periods of
the previous year;
(e) to the extent approval is required by the Required Lenders
pursuant to Section 7.9, no later than 10 Business Days prior to the
effectiveness thereof, copies of substantially final drafts of any proposed
amendment, supplement, waiver or other modification with respect to the
Senior Note Indenture or the Acquisition Documentation;
(f) within five days after the same are sent, copies of all financial
statements and reports which Holdings or the Borrower sends to the holders
of any class of its debt securities or public equity securities and within
five days after the same are filed, copies of all financial statements and
reports which Holdings or the Borrower may make to, or file with, the SEC;
and
(g) promptly, such additional financial and other information as any
Lender may from time to time reasonably request.
6.3 Payment of Obligations. Pay, discharge or otherwise satisfy at
----------------------
or before maturity or before they become delinquent, as the case may be, all its
material obligations of whatever nature, except where the amount or validity
thereof is currently being contested in good faith by appropriate proceedings
and reserves in conformity with GAAP with respect thereto have been provided on
the books of Holdings, the Borrower or its Subsidiaries, as the case may be.
<PAGE>
48
6.4 Conduct of Business and Maintenance of Existence, etc. (a) (i)
------------------------------------------------------
Preserve, renew and keep in full force and effect its corporate existence and
(ii) take all reasonable action to maintain all rights, privileges and
franchises necessary or desirable in the normal conduct of its business, except,
in each case, as otherwise permitted by Section 7.4 and except, in the case of
clause (ii) above, to the extent that failure to do so could not reasonably be
expected to have a Material Adverse Effect; and (b) comply with all Contractual
Obligations and Requirements of Law except to the extent that failure to comply
therewith could not, in the aggregate, reasonably be expected to have a Material
Adverse Effect.
6.5 Maintenance of Property; Insurance. (a) Keep all Property
----------------------------------
useful and necessary in its business in good working order and condition,
ordinary wear and tear excepted and (b) maintain with financially sound and
reputable insurance companies insurance on all its Property in at least such
amounts and against at least such risks (but including in any event public
liability, product liability and business interruption) as are usually insured
against in the same general area by companies engaged in the same or a similar
business.
6.6 Inspection of Property; Books and Records; Discussions. (a)
------------------------------------------------------
Keep proper books of records and account in which full, true and correct entries
in conformity with GAAP and all Requirements of Law shall be made of all
dealings and transactions in relation to its business and activities and (b)
permit representatives of any Lender to visit and inspect any of its properties
and examine and make abstracts from any of its books and records at any
reasonable time and as often as may reasonably be desired and to discuss the
business, operations, properties and financial and other condition of Holdings,
the Borrower and its Subsidiaries with officers and employees of Holdings, the
Borrower and its Subsidiaries and with its independent certified public
accountants.
6.7 Notices. Promptly give notice to the Administrative Agent and
-------
each Lender of:
(a) the occurrence of any Default or Event of Default;
(b) any (i) default or event of default under any Contractual
Obligation of Holdings, the Borrower or any of its Subsidiaries or (ii)
litigation, investigation or proceeding which may exist at any time between
Holdings, the Borrower or any of its Subsidiaries and any Governmental
Authority, which in either case, if not cured or if adversely determined,
as the case may be, could reasonably be expected to have a Material Adverse
Effect;
(c) any litigation or proceeding affecting Holdings, the Borrower or
any of its Subsidiaries in which the amount involved is $2,500,000 or more
and not covered by insurance or in which injunctive or similar relief is
sought;
(d) the following events, as soon as possible and in any event within
30 days after the Borrower knows or has reason to know thereof: (i) the
occurrence of any Reportable Event with respect to any Plan, a failure to
make any required contribution to a Plan, the creation of any Lien in favor
of the PBGC or a Plan or any withdrawal from, or the termination,
Reorganization or Insolvency of, any Multiemployer Plan, any of which are
reasonably likely to result in a material liability to the Borrower, or
(ii) the institution of proceedings or the taking of any other action by
the PBGC or the Borrower or any
<PAGE>
49
Commonly Controlled Entity or any Multiemployer Plan with respect to the
withdrawal from, or the termination, Reorganization or Insolvency of, any
Plan; and
(e) any development or event which has had or could reasonably be
expected to have a Material Adverse Effect.
Each notice pursuant to this Section 6.7 shall be accompanied by a statement of
a Responsible Officer setting forth details of the occurrence referred to
therein and stating what action Holdings, the Borrower or the relevant
Subsidiary proposes to take with respect thereto.
6.8 Environmental Laws. (a) Comply in all material respects with,
------------------
and ensure compliance in all material respects by all tenants and subtenants, if
any, with, all applicable Environmental Laws, and obtain and comply in all
material respects with and maintain, and ensure that all tenants and subtenants
obtain and comply in all material respects with and maintain, any and all
licenses, approvals, notifications, registrations or permits required by
applicable Environmental Laws.
(b) Conduct and complete all investigations, studies, sampling and
testing, and all remedial, removal and other actions required under
Environmental Laws and promptly comply in all material respects with all lawful
orders and directives of all Governmental Authorities regarding Environmental
Laws.
6.9 Additional Collateral, etc. (a) With respect to any Property
--------------------------
acquired after the Closing Date by Holdings, the Borrower or any of its
Subsidiaries (other than an Excluded Foreign Subsidiary) (other than any
Property described in paragraph (b), (c) or (d) below and real property having a
value (including improvements thereof) of less than $1,000,000) as to which the
Administrative Agent, for the benefit of the Lenders, does not have a perfected
Lien, promptly (i) execute and deliver to the Administrative Agent such
amendments to the Guarantee and Collateral Agreement or such other documents as
the Administrative Agent deems necessary or advisable in order to grant to the
Administrative Agent, for the benefit of the Lenders, a security interest in
such Property and (ii) take all actions necessary or advisable to grant to the
Administrative Agent, for the benefit of the Lenders, a perfected first priority
security interest in such Property, including without limitation, the filing of
Uniform Commercial Code financing statements in such jurisdictions as may be
required by the Guarantee and Collateral Agreement or by law or as may be
requested by the Administrative Agent.
(b) With respect to any fee interest in any real property having a
value (together with improvements thereof) of at least $1,000,000 acquired after
the Closing Date by Holdings, the Borrower or any of its Subsidiaries (other
than any such real property owned by an Excluded Foreign Subsidiary or subject
to a Lien expressly permitted by Section 7.3(g)), promptly (i) execute and
deliver a first priority mortgage in form and substance reasonably satisfactory
to the Administrative Agent in favor of the Administrative Agent, for the
benefit of the Lenders, covering such real property, (ii) if requested by the
Administrative Agent, provide the Lenders with (x) title and extended coverage
insurance covering such real property in an amount at least equal to the
purchase price of such real estate (or such other amount as shall be reasonably
specified by the Administrative Agent) as well as a current ALTA survey thereof,
together with a surveyor's certificate and (y) any consents or estoppels
reasonably deemed necessary or advisable by the Administrative Agent in
connection with such mortgage or deed of trust, each of the foregoing in form
and substance reasonably satisfactory to the Administrative Agent and (iii) if
<PAGE>
50
requested by the Administrative Agent, deliver to the Administrative Agent legal
opinions relating to the matters described above, which opinions shall be in
form and substance, and from counsel, reasonably satisfactory to the
Administrative Agent.
(c) With respect to any new Subsidiary (other than an Excluded
Foreign Subsidiary) created or acquired after the Closing Date by Holdings
(which, for the purposes of this paragraph (c), shall include any existing
Subsidiary that ceases to be an Excluded Foreign Subsidiary and Master Collector
if at any time the fair market value of Master Collector exceeds $1,000,000),
the Borrower or any of its Subsidiaries, promptly (i) execute and deliver to the
Administrative Agent such amendments to the Guarantee and Collateral Agreement
as the Administrative Agent deems necessary or advisable in order to grant to
the Administrative Agent, for the benefit of the Lenders, a perfected first
priority security interest in the Capital Stock of such new Subsidiary which is
owned by Holdings, the Borrower or any of its Subsidiaries, (ii) deliver to the
Administrative Agent the certificates representing such Capital Stock, together
with undated stock powers, in blank, executed and delivered by a duly authorized
officer of Holdings, the Borrower or such Subsidiary, as the case may be, (iii)
cause such new Subsidiary (A) to become a party to the Guarantee and Collateral
Agreement and (B) to take such actions necessary or advisable to grant to the
Administrative Agent for the benefit of the Lenders a perfected first priority
security interest in the Collateral described in the Guarantee and Collateral
Agreement with respect to such new Subsidiary, including, without limitation,
the filing of Uniform Commercial Code financing statements in such jurisdictions
as may be required by the Guarantee and Collateral Agreement or by law or as may
be requested by the Administrative Agent, and (iv) if requested by the
Administrative Agent, deliver to the Administrative Agent legal opinions
relating to the matters described above, which opinions shall be in form and
substance, and from counsel, reasonably satisfactory to the Administrative
Agent.
(d) With respect to any new Excluded Foreign Subsidiary created or
acquired after the Closing Date by Holdings, the Borrower or any of its Domestic
Subsidiaries, promptly (i) execute and deliver to the Administrative Agent such
amendments to the Guarantee and Collateral Agreement as the Administrative Agent
deems necessary or advisable in order to grant to the Administrative Agent, for
the benefit of the Lenders, a perfected first priority security interest in the
Capital Stock of such new Subsidiary which is owned by Holdings, the Borrower or
any of its Domestic Subsidiaries (provided that in no event shall more than 65%
of the total outstanding Capital Stock of any such new Subsidiary be required to
be so pledged), (ii) deliver to the Administrative Agent the certificates
representing such Capital Stock, together with undated stock powers, in blank,
executed and delivered by a duly authorized officer of Holdings, the Borrower or
such Subsidiary, as the case may be, and take such other action as may be
necessary or, in the opinion of the Administrative Agent, desirable to perfect
the Lien of the Administrative Agent thereon, and (iii) if requested by the
Administrative Agent, deliver to the Administrative Agent legal opinions
relating to the matters described above, which opinions shall be in form and
substance, and from counsel, reasonably satisfactory to the Administrative
Agent.
(e) If at any time the fair market value of any Foreign Subsidiary
existing on or created after the Closing Date shall exceed $2,000,000, promptly
(i) execute and deliver to the Administrative Agent a pledge agreement governed
by the law of the country in which such Foreign Subsidiary is organized if the
Administrative Agent (upon notice by the Borrower of such fair market value of a
Foreign Subsidiary) deems such action necessary or advisable in order to grant
to the Administrative Agent, for the benefit of the Lenders, a perfected first
priority security interest in the Capital Stock of such new Subsidiary which is
owned by Holdings, the Borrower or
<PAGE>
51
any of its Domestic Subsidiaries (provided that in no event shall more than 65%
of the total outstanding Capital Stock of any such new Subsidiary be required to
be so pledged), (ii) if not previously done so, deliver to the Administrative
Agent the certificates representing such Capital Stock, together with undated
stock powers, in blank, executed and delivered by a duly authorized officer of
Holdings, the Borrower or such Subsidiary, as the case may be, and take such
other action as may be necessary or, in the opinion of the Administrative Agent,
desirable to perfect the Lien of the Administrative Agent thereon, and (iii) if
requested by the Administrative Agent, deliver to the Administrative Agent legal
opinions relating to the matters described above, which opinions shall be in
form and substance, and from counsel, reasonably satisfactory to the
Administrative Agent.
SECTION 7. NEGATIVE COVENANTS
Holdings and the Borrower hereby jointly and severally agree that, so
long as the Commitments remain in effect, any Letter of Credit remains
outstanding or any Loan or other amount is owing to any Lender or any Agent
hereunder, each of Holdings and the Borrower shall not, and shall not permit any
of its Subsidiaries to, directly or indirectly:
7.1 Financial Covenants.
-------------------
(a) Minimum Consolidated EBITDA. Permit the Consolidated EBITDA for
---------------------------
any period of four consecutive fiscal quarters of the Borrower (or, if less, the
number of full fiscal quarters in 1998) ending with any fiscal quarter set forth
below to be less than the amount set forth below opposite such fiscal quarter:
Fiscal Quarter Minimum Consolidated EBITDA
-------------- ---------------------------
March 31, 1998 $ 5,400,000
June 30, 1998 $10,500,000
September 30, 1998 $16,500,000
December 31, 1998 $23,000,000
March 31, 1999 $23,250,000
June 30, 1999 $23,500,000
September 30, 1999 $23,750,000
December 31, 1999 $24,000,000
March 31, 2000 $24,250,000
June 30, 2000 $24,500,000
September 30, 2000 $24,750,000
December 31, 2000 $25,000,000
March 31, 2001 $25,250,000
June 30, 2001 $25,500,000
September 30, 2001 $25,750,000
December 31, 2001 $26,000,000
March 31, 2002 $26,250,000
June 30, 2002 $26,500,000
September 30, 2002 $26,750,000
December 31, 2002 $27,000,000
March 31, 2003 $27,000,000
June 30, 2003 $27,000,000
<PAGE>
52
September 30, 2003 $27,000,000
December 31, 2003 $27,000,000
(b) Consolidated Total Debt Ratio. Permit the Consolidated Total
-----------------------------
Debt Ratio as at the last day of any period of four consecutive fiscal quarters
of the Borrower (or, if less, the number of full fiscal quarters in 1998) ending
with any fiscal quarter set forth below to exceed the ratio set forth below
opposite such fiscal quarter:
Consolidated
Fiscal Quarter Total Debt Ratio
-------------- ----------------
March 31, 1998 5.70 to 1.00
June 30, 1998 5.75 to 1.00
September 30, 1998 5.50 to 1.00
December 31, 1998 5.20 to 1.00
March 31, 1999 5.00 to 1.00
June 30, 1999 4.80 to 1.00
September 30, 1999 4.60 to 1.00
December 31, 1999 4.40 to 1.00
March 31, 2000 4.30 to 1.00
June 30, 2000 4.20 to 1.00
September 30, 2000 4.10 to 1.00
December 31, 2000 4.00 to 1.00
Thereafter 4.00 to 1.00
; provided that, if the Borrower shall Repurchase (as defined in Section 7.9(a))
Senior Notes in an aggregate principal amount of more than $5,000,000, then as
of the last day of each fiscal quarter of the Borrower after the date of such
Repurchase the ratio set forth above under the heading "Consolidated Total Debt
Ratio" shall be deemed to be as follows: (i) if the aggregate principal amount
of Senior Notes Repurchased (on a cumulative basis from the date hereof) is less
than $12,5000,000, 3.83 to 1.00; (ii) if the aggregate principal amount of
Senior Notes Repurchased (on a cumulative basis from the date hereof) is less
than $20,000,000, 3.66 to 1.00; and (iii) if the aggregate principal amount of
the Senior Notes Repurchased (on a cumulative basis from the date hereof) is
greater than or equal to $20,000,000, 3.50 to 1.00.
(c) Consolidated Interest Coverage Ratio. Permit the Consolidated
------------------------------------
Interest Coverage Ratio for any period of four consecutive fiscal quarters of
the Borrower (or, if less, the number of full fiscal quarters in 1998) ending
with any fiscal quarter set forth below to be less than the ratio set forth
below opposite such fiscal quarter:
Consolidated Interest
Fiscal Quarter Coverage Ratio
-------------- ---------------------
March 31, 1998 1.80 to 1.00
June 30, 1998 1.75 to 1.00
September 30, 1998 1.80 to 1.00
December 31, 1998 1.90 to 1.00
March 31, 1999 1.95 to 1.00
<PAGE>
53
June 30, 1999 2.00 to 1.00
September 30, 1999 2.05 to 1.00
December 31, 1999 2.10 to 1.00
March 31, 2000 2.15 to 1.00
June 30, 2000 2.20 to 1.00
September 30, 2000 2.25 to 1.00
December 31, 2000 2.30 to 1.00
March 31, 2001 2.35 to 1.00
June 30, 2001 2.40 to 1.00
September 30, 2001 2.45 to 1.00
December 31, 2001 2.50 to 1.00
Thereafter 2.50 to 1.00
7.2 Limitation on Indebtedness. Create, incur, assume or suffer to
--------------------------
exist any Indebtedness, except:
(a) Indebtedness of any Loan Party pursuant to any Loan Document;
(b) Indebtedness of the Borrower to any Subsidiary and of any Wholly
Owned Subsidiary Guarantor to the Borrower or any other Subsidiary;
(c) (i) Indebtedness of the Borrower in respect of the Senior Notes
in an aggregate principal amount not to exceed $100,000,000 and (ii)
Guarantee Obligations of any Subsidiary Guarantor in respect of such
Indebtedness;
(d) (i) Indebtedness secured by Liens permitted by Section 7.3(g) and
(ii) Capital Lease Obligations, so long as the principal amount of the
Indebtedness and the Capital Lease Obligation outstanding pursuant to
clauses (i) and (ii) shall not exceed $5,000,000 in the aggregate at any
one time;
(e) Indebtedness outstanding on the date hereof and listed on
Schedule 7.2(e) and any refinancings, refundings, renewals or extensions
thereof (without any increase in the principal amount thereof);
(f) guarantees made in the ordinary course of business by the
Borrower or any of its Subsidiaries of obligations of any Wholly Owned
Subsidiary Guarantor;
(g) Indebtedness of any Specified Entity to the Borrower or any
Subsidiary Guarantor (so long as no Default or Event of Default shall have
occurred and be continuing at the time of the incurrence of such
Indebtedness), provided that (x) the requirements of Section 6.9 are
satisfied, (y) the aggregate principal amount of such Indebtedness to the
Borrower or any Subsidiary Guarantor at any time outstanding shall not
exceed $2,000,000 less the aggregate amount of all investments made in or
loans to such Specified Entities pursuant to Section 7.8(h) and (z) no such
Indebtedness (other than Indebtedness in an aggregate principal amount not
to exceed $275,000 incurred by Yanci Services Company) shall be incurred by
the Joint Ventures subsequent to the Closing Date; and
<PAGE>
54
(h) additional Indebtedness of the Borrower or any of its
Subsidiaries in an aggregate principal amount (for the Borrower and all
Subsidiaries) not to exceed $5,000,000 at any one time outstanding.
7.3 Limitation on Liens. Create, incur, assume or suffer to exist
-------------------
any Lien upon any of its Property or revenues, whether now owned or hereafter
acquired, except for:
(a) Liens for taxes not yet due or which are being contested in good
faith by appropriate proceedings, provided that adequate reserves with
respect thereto are maintained on the books of the Borrower or its
Subsidiaries, as the case may be, in conformity with GAAP;
(b) carriers', warehousemen's, mechanics', materialmen's,
repairmen's, collection attorneys' or other like Liens arising in the
ordinary course of business which are not overdue for a period of more than
30 days or which are being contested in good faith by appropriate
proceedings;
(c) pledges or deposits in connection with workers' compensation,
unemployment insurance and other social security legislation;
(d) deposits to secure the performance of bids, trade contracts
(other than for borrowed money), leases, statutory obligations, surety and
appeal bonds, performance bonds and other obligations of a like nature
incurred in the ordinary course of business;
(e) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount and which do not in any case
materially detract from the value of the Property subject thereto or
materially interfere with the ordinary conduct of the business of the
Borrower or any of its Subsidiaries;
(f) Liens in existence on the date hereof listed on Schedule 7.3(f),
securing Indebtedness permitted by Section 7.2(e), provided that no such
Lien is spread to cover any additional Property after the Closing Date and
that the principal amount of Indebtedness secured thereby is not increased;
(g) Liens securing Indebtedness of the Borrower or any other
Subsidiary incurred pursuant to Section 7.2(c) to finance the acquisition
of fixed or capital assets, provided that (i) such Liens shall be created
substantially simultaneously with the acquisition of such fixed or capital
assets, (ii) such Liens do not at any time encumber any Property other than
the Property financed by such Indebtedness and (iii) the amount of
Indebtedness secured thereby is not increased;
(h) Liens created pursuant to the Security Documents;
(i) any interest or title of a lessor under any Capital Lease
Obligation or other lease entered into by the Borrower or any other
Subsidiary in the ordinary course of its business and covering only the
assets so leased; and
(j) Liens not otherwise permitted by this Section 7.3 so long as
neither (i) the
<PAGE>
55
aggregate outstanding principal amount of the obligations secured thereby
nor (ii) the aggregate fair market value (determined as of the date such
Lien is incurred) of the assets subject thereto exceeds (as to the Borrower
and all Subsidiaries) $2,000,000 at any one time.
7.4 Limitation on Fundamental Changes. Enter into any merger,
---------------------------------
consolidation or amalgamation, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution), or Dispose of all or substantially all
of its Property or business except:
(a) any Subsidiary of the Borrower may be merged or consolidated with
or into the Borrower (provided that the Borrower shall be the continuing or
surviving corporation) or with or into any Wholly Owned Subsidiary
Guarantor (provided that the Wholly Owned Subsidiary Guarantor shall be the
continuing or surviving corporation);
(b) any Subsidiary of the Borrower may Dispose of any or all of its
assets (upon voluntary liquidation or otherwise) to the Borrower or any
Wholly Owned Subsidiary Guarantor;
(c) each of the Joint Ventures may Dispose of any or all of its
assets (upon voluntary liquidation or otherwise) to any Person or
liquidate, wind up or dissolve itself in any manner; and
(d) any Excluded Foreign Subsidiary may be merged or consolidated
with or into, or Dispose of any or all of its assets (upon voluntary
liquidation or otherwise) to, any other Excluded Foreign Subsidiary.
7.5 Limitation on Sale of Assets. Dispose of any of its Property or
----------------------------
business (including, without limitation, receivables and leasehold interests),
whether now owned or hereafter acquired, or, in the case of any Subsidiary,
issue or sell any shares of such Subsidiary's Capital Stock to any Person,
except:
(a) the Disposition of obsolete or worn out property in the ordinary
course of business;
(b) Dispositions permitted by Section 7.4;
(c) the sale or issuance of any Subsidiary's Capital Stock to the
Borrower or any Wholly Owned Subsidiary Guarantor;
(d) the Disposition of Property having a book value or a fair market
value not to exceed $1,000,000 in the aggregate for any fiscal year of the
Borrower;
(e) any Recovery Event, provided that the requirements of Section
2.10(b) are complied with in connection therewith; and
(f) Asset Sales in respect of assets having an aggregate book value
not exceeding $5,000,000 in any fiscal year, provided, that the
requirements of Section 2.10(b) are complied with in connection therewith.
<PAGE>
56
7.6 Limitation on Dividends. Declare or pay any dividend (other than
-----------------------
dividends payable solely in common stock of the Person making such dividend) on,
or make any payment on account of, or set apart assets for a sinking or other
analogous fund for, the purchase, redemption, defeasance, retirement or other
acquisition of, any shares of any class of Capital Stock of Holdings, the
Borrower or any Subsidiary or any warrants or options to purchase any such
Capital Stock, whether now or hereafter outstanding, or make any other
distribution in respect thereof, either directly or indirectly, whether in cash
or property or in obligations of Holdings, the Borrower or any Subsidiary
(collectively, "Restricted Payments"), except that (a) any Subsidiary may make
Restricted Payments to the Borrower or any Wholly Owned Subsidiary Guarantor,
(b) any Excluded Foreign Subsidiary may make Restricted Payments to any other
Excluded Foreign Subsidiary and (c) the Borrower may pay dividends to Holdings
to permit Holdings to pay any taxes which are due and payable by Holdings and
the Borrower (and its Subsidiaries) as part of a consolidated, combined or
unitary tax filing group or which are due and payable by Holdings with respect
to its own operations.
7.7 Limitation on Capital Expenditures. Make or commit to make (by
----------------------------------
way of the acquisition of securities of a Person or otherwise) any Capital
Expenditure, except (a) Capital Expenditures of the Borrower and its
Subsidiaries not exceeding $8,350,000 in fiscal year 1998, $6,100,000 in fiscal
year 1999 and $5,500,000 in each fiscal year thereafter, provided, that (i) any
such amount referred to above, if not so expended in the fiscal year for which
it is permitted, may be carried over for expenditure in the next succeeding
fiscal year and (ii) Capital Expenditures made pursuant to this clause (a)
during any fiscally year shall be deemed made, first, in respect of amounts
permitted for such fiscal year as provided above and second, in respect of
amounts carried over from the prior fiscal year pursuant to subclause (i) above,
and (b) Capital Expenditures made with the proceeds of any Reinvestment Deferred
Amounts.
7.8 Limitation on Investments, Loans and Advances. Make any advance,
---------------------------------------------
loan, extension of credit (by way of guaranty or otherwise) or capital
contribution to, or purchase any stock, bonds, notes, debentures or other
securities of or any assets constituting all or a material part of a business
unit of, or make any other investment in, any Person, except:
(a) extensions of trade credit in the ordinary course of business;
(b) investments in Cash Equivalents;
(c) Guarantee Obligations permitted by Section 7.2;
(d) the Acquisition;
(e) investments made by the Borrower or any of its Subsidiaries with
the proceeds of any Reinvestment Deferred Amount resulting from a Recovery
Event;
(f) investments by Holdings, the Borrower or any of its Subsidiaries
in the Borrower or a Wholly Owned Subsidiary Guarantor;
(g) other investments constituting Permitted Acquisitions, provided
that the aggregate consideration for all Permitted Acquisitions while this
Agreement is in effect shall not exceed $30,000,000 unless the Borrower
shall have obtained the prior written consent of the Required Lenders;
<PAGE>
57
(h) so long as no Default or Event of Default shall have occurred and
be continuing, the Borrower and any Subsidiary may make investments in or
loans to, or create, any Specified Entity (by way of capital contribution
or otherwise), provided that (x) the requirements of Section 6.9 are
satisfied, (y) the aggregate amount of all investments in or loans to such
Specified Entities shall not exceed $2,000,000 minus the aggregate
principal amount of any Indebtedness of any Specified Entity at any such
time outstanding in accordance with Section 7.2(h) and (z) no such
investments shall be made in and no such loans shall be made to (other than
loans to Yanci Services Company in an aggregate principal amount not to
exceed $275,000) any Joint Ventures subsequent to the Closing Date;
(i) loans and advances to employees or directors of the Borrower made
pursuant to a form of promissory note provided to the Administrative Agent
prior to the date hereof (with any such changes as are reasonably
satisfactory to the Administrative Agent) and made solely to fund purchases
of Capital Stock of Holdings to the extent the proceeds therefrom are
concurrently received by Holdings and contributed to the Borrower, in an
aggregate amount not to exceed $500,000 at any one time outstanding; and
(j) in addition to investments otherwise expressly permitted by this
Section 7.8, so long as no Default or Event of Default shall have occurred
and be continuing, investments by the Borrower or any of its Subsidiaries
in an aggregate amount (valued at cost) not to exceed $2,000,000 during the
term of this Agreement.
7.9 Limitation on Optional Payments and Modifications of Debt
---------------------------------------------------------
Instruments, etc.; Limitation on Modification of Certificate of Incorporation.
- ------------------------------------------------------------------------------
(a) Make or offer to make any payment, prepayment, repurchase or redemption of
or otherwise defease or segregate funds (collectively, a "Repurchase") with
respect to the Senior Notes (other than scheduled interest payments required to
be made in cash); provided that if (i) the Tranche B Term Loans have been repaid
in full, (ii) the Consolidated Total Debt Ratio on a pro forma basis after
giving effect to such Repurchase recomputed as of the last day of the most
recently ended fiscal quarter of the Borrower and its Subsidiaries as if such
Repurchase had occurred on the first day of the relevant period for testing such
compliance shall be less than 3.50 to 1.00 and (iii) no Default or Event of
Default shall have occurred and be continuing or would result therefrom, then
the Borrower may Repurchase up to an aggregate principal amount of $25,000,000
of Senior Notes, (b) amend, modify, waive or otherwise change, or consent or
agree to any amendment, modification, waiver or other change to, any of the
terms of the Senior Notes (other than any such amendment, modification, waiver
or other change which (i) would extend the maturity or reduce the amount of any
payment of principal thereof or which would reduce the rate or extend the date
for payment of interest thereon and (ii) does not involve the payment of a
consent fee) or (c) amend its certificate of incorporation in any manner
determined by the Administrative Agent to be adverse to the Lenders without the
prior written consent of the Required Lenders.
7.10 Limitation on Transactions with Affiliates. Enter into any
------------------------------------------
transaction, including, without limitation, any purchase, sale, lease or
exchange of Property, the rendering of any service or the payment of any
management, advisory or similar fees, with any Affiliate (other than Holdings,
the Borrower or any Wholly Owned Subsidiary Guarantor) unless such transaction
is (a) otherwise permitted under this Agreement, (b) in the ordinary course of
business of Holdings, the Borrower or such Subsidiary, as the case may be, and
(c) upon fair and reasonable
<PAGE>
58
terms no less favorable to Holdings, the Borrower or such Subsidiary, as the
case may be, than it would obtain in a comparable arm's length transaction with
a Person which is not an Affiliate, except the provision to administrative
services to any Specified Entity in the ordinary course of business consistent
with past practices.
7.11 Limitation on Sales and Leasebacks. Enter into any arrangement
----------------------------------
with any Person providing for the leasing by Holdings, the Borrower or any
Subsidiary of real or personal property which has been or is to be sold or
transferred by Holdings, the Borrower or such Subsidiary to such Person or to
any other Person to whom funds have been or are to be advanced by such Person on
the security of such property or rental obligations of Holdings, the Borrower or
such Subsidiary.
7.12 Limitation on Changes in Fiscal Periods. Permit the fiscal year
---------------------------------------
of the Borrower to end on a day other than December 31 or change the Borrower's
method of determining fiscal quarters.
7.13 Limitation on Negative Pledge Clauses. Enter into or suffer to
-------------------------------------
exist or become effective any agreement which prohibits or limits the ability of
Holdings, the Borrower or any of its Subsidiaries to create, incur, assume or
suffer to exist any Lien upon any of its Property or revenues, whether now owned
or hereafter acquired, to secure the Obligations or, in the case of Holdings or
any Subsidiary Guarantor, its obligations under the Guarantee and Collateral
Agreement, other than (a) this Agreement and the other Loan Documents, (b) any
agreements governing any purchase money Liens or Capital Lease Obligations
otherwise permitted hereby or Indebtedness permitted pursuant to Section 7.2(c)
(in which case, any prohibition or limitation shall only be effective against
the assets financed thereby) and (c) the Senior Note Indenture.
7.14 Limitation on Restrictions on Subsidiary Distributions. Enter
------------------------------------------------------
into or suffer to exist or become effective any consensual encumbrance or
restriction on the ability of any Subsidiary of the Borrower to (a) pay
dividends or make any other distributions in respect of any Capital Stock of
such Subsidiary held by, or pay any Indebtedness owed to, the Borrower or any
other Subsidiary of the Borrower, (b) make loans or advances to the Borrower or
any other Subsidiary of the Borrower or (c) transfer any of its assets to the
Borrower or any other Subsidiary of the Borrower, except for such encumbrances
or restrictions existing under or by reason of (i) any restrictions existing
under the Loan Documents and (ii) any restrictions with respect to a Subsidiary
imposed pursuant to an agreement which has been entered into in connection with
the Disposition of all or substantially all of the Capital Stock or assets of
such Subsidiary.
7.15 Limitation on Lines of Business. Enter into any business,
-------------------------------
either directly or through any Subsidiary, except for those businesses in which
the Borrower and its Subsidiaries are engaged on the date of this Agreement or
which are reasonably related thereto.
7.16 Limitation on Amendments to Acquisition Documentation. (a)
-----------------------------------------------------
Amend, supplement or otherwise modify (pursuant to a waiver or otherwise) the
terms and conditions of the indemnities and licenses furnished to the Borrower
or any of its Subsidiaries pursuant to the Acquisition Documentation such that
after giving effect thereto such indemnities or licenses shall be materially
less favorable to the interests of the Loan Parties or the Lenders with respect
thereto or (b) otherwise amend, supplement or otherwise modify the terms and
conditions of the Acquisition Documentation except to the extent that any such
amendment, supplement or
<PAGE>
59
modification could not reasonably be expected to have a Material Adverse Effect.
7.17 Limitation on Activities of Holdings. In the case of Holdings,
------------------------------------
notwithstanding anything to the contrary in this Agreement or any other Loan
Document, (a) conduct, transact or otherwise engage in, or commit to conduct,
transact or otherwise engage in, any business or operations other than (I) those
incidental to its ownership of the Capital Stock of the Borrower or (II) the
issuance of Capital Stock so long as no Default or Event of Default shall have
occurred and be continuing or would result therefrom, (b) incur, create, assume
or suffer to exist any Indebtedness or other liabilities or financial
obligations, except (i) nonconsensual obligations imposed by operation of law,
(ii) pursuant to the Loan Documents to which it is a party and (iii) obligations
with respect to its Capital Stock, or (c) own, lease, manage or otherwise
operate any properties or assets (including cash (other than cash received in
connection with dividends made by the Borrower in accordance with Section 7.6
pending application in the manner contemplated by said Section) and cash
equivalents) other than the ownership of shares of Capital Stock of the
Borrower.
SECTION 8. EVENTS OF DEFAULT
If any of the following events shall occur and be continuing:
(a) The Borrower shall fail to pay any principal of any Loan or
Reimbursement Obligation when due in accordance with the terms hereof; or
the Borrower shall fail to pay any interest on any Loan or Reimbursement
Obligation, or any other amount payable hereunder or under any other Loan
Document, within five days after any such interest or other amount becomes
due in accordance with the terms hereof; or
(b) Any representation or warranty made or deemed made by any Loan
Party herein or in any other Loan Document or which is contained in any
certificate, document or financial or other statement furnished by it at
any time under or in connection with this Agreement or any such other Loan
Document shall prove to have been inaccurate in any material respect on or
as of the date made or deemed made; or
(c) Any Loan Party shall default in the observance or performance of
any agreement contained in clause (i) or (ii) of Section 6.4(a) (with
respect to Holdings and the Borrower only), Section 6.7(a), Section 7 or
Section 5.6 of the Guarantee and Collateral Agreement; or
(d) Any Loan Party shall default in the observance or performance of
any other agreement contained in this Agreement or any other Loan Document
(other than as provided in paragraphs (a) through (c) of this Section), and
such default shall continue unremedied for a period of 30 days; or
(e) Holdings, the Borrower or any of its Subsidiaries shall (i)
default in making any payment of any principal of any Indebtedness
(including, without limitation, any Guarantee Obligation, but excluding the
Loans) on the scheduled or original due date with respect thereto; or (ii)
default in making any payment of any interest on any such Indebtedness
beyond the period of grace (not to exceed 31 days), if any, provided in the
instrument or agreement under which such Indebtedness was created; or (iii)
default in the observance or performance of any other agreement or
condition relating to any such
<PAGE>
60
Indebtedness or contained in any instrument or agreement evidencing,
securing or relating thereto, or any other event shall occur or condition
exist, the effect of which default or other event or condition is to cause,
or to permit the holder or beneficiary of such Indebtedness (or a trustee
or agent on behalf of such holder or beneficiary) to cause, with the giving
of notice if required, such Indebtedness to become due prior to its stated
maturity or (in the case of any such Indebtedness constituting a Guarantee
Obligation) to become payable; provided, that a default, event or condition
described in clause (i), (ii) or (iii) of this paragraph (e) shall not at
any time constitute an Event of Default unless, at such time, one or more
defaults, events or conditions of the type described in clauses (i), (ii)
and (iii) of this paragraph (e) shall have occurred and be continuing with
respect to Indebtedness the outstanding principal amount of which exceeds
in the aggregate $2,000,000; or
(f) (i) Holdings, the Borrower or any of its Subsidiaries shall
commence any case, proceeding or other action (A) 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 it or its debts, or (B) seeking appointment
of a receiver, trustee, custodian, conservator or other similar official
for it or for all or any substantial part of its assets, or Holdings, the
Borrower or any of its Subsidiaries shall make a general assignment for the
benefit of its creditors; or (ii) there shall be commenced against
Holdings, the Borrower or any of its Subsidiaries any case, proceeding or
other action of a nature referred to in clause (i) above which (A) results
in the entry of an order for relief or any such adjudication or appointment
or (B) remains undismissed, undischarged or unbonded for a period of 60
days; or (iii) there shall be commenced against Holdings, the Borrower or
any of its Subsidiaries any case, proceeding or other action seeking
issuance of a warrant of attachment, execution, distraint or similar
process against all or any substantial part of its assets which results in
the entry of an order for any such relief which shall not have been
vacated, discharged, or stayed or bonded pending appeal within 60 days from
the entry thereof; or (iv) Holdings, the Borrower or any of its
Subsidiaries shall take any action in furtherance of, or indicating its
consent to, approval of, or acquiescence in, any of the acts set forth in
clause (i), (ii), or (iii) above; or (v) Holdings, the Borrower or any of
its Subsidiaries shall generally not, or shall be unable to, or shall admit
in writing its inability to, pay its debts as they become due; or
(g) (i) Any Person shall engage in any non-exempt "prohibited
transaction" (as defined in Section 406 of ERISA or Section 4975 of the
Code) involving any Plan, (ii) any "accumulated funding deficiency" (as
defined in Section 302 of ERISA), whether or not waived, shall exist with
respect to any Plan or any Lien in favor of the PBGC or a Plan shall arise
on the assets of the Borrower or any Commonly Controlled Entity, (iii) a
Reportable Event shall occur with respect to, or proceedings shall commence
to have a trustee appointed, or a trustee shall be appointed, to administer
or to terminate, any Single Employer Plan, which Reportable Event or
commencement of proceedings or appointment of a trustee is, in the
reasonable opinion of the Required Lenders, likely to result in the
termination of such Plan for purposes of Title IV of ERISA, (iv) any Single
Employer Plan shall terminate for purposes of Title IV of ERISA, (v) the
Borrower or any Commonly Controlled Entity shall, or in the reasonable
opinion of the Required Lenders is likely to,
<PAGE>
61
incur any liability in connection with a withdrawal from, or the Insolvency
or Reorganization of, a Multiemployer Plan or (vi) any other similar event
or condition not in the ordinary course shall occur or exist with respect
to a Plan; and in each case in clauses (i) through (vi) above, such event
or condition, together with all other such events or conditions, if any,
could, in the sole judgment of the Required Lenders, reasonably be expected
to have a Material Adverse Effect; or
(h) One or more judgments or decrees shall be entered against
Holdings, the Borrower or any of its Subsidiaries involving in the
aggregate a liability (not paid or fully covered by insurance as to which
the relevant insurance company has acknowledged coverage or not paid or
covered by an indemnity made by First Data Corporation ("FDC") as to which
FDC has acknowledged responsibility for payment) of $1,000,000 or more, and
all such judgments or decrees shall not have been vacated, discharged,
stayed or bonded pending appeal within 30 days from the entry thereof; or
(i) Any of the Security Documents shall cease, for any reason, to be
in full force and effect, or any Loan Party shall so assert, or any Lien
created by any of the Security Documents shall cease to be enforceable and
of the same effect and priority purported to be created thereby; or
(j) The guarantee contained in Section 2 of the Guarantee and
Collateral Agreement shall cease, for any reason, to be in full force and
effect or any Loan Party shall so assert; or
(k) (i) The Permitted Investors (including any combination thereof)
shall cease to have the power to vote or direct the voting of securities
having a majority of the ordinary voting power for the election of
directors of Holdings (determined on a fully diluted basis); (ii) the
Permitted Investors (including any combination thereof) shall cease to own
of record and beneficially an amount of common stock of Holdings equal to
at least 80% of the amount of common stock of Holdings owned by the
Permitted Investors of record and beneficially as of the Closing Date;
(iii) the board of directors of Holdings shall cease to consist of a
majority of Continuing Directors; (iv) Holdings shall cease to own and
control, of record and beneficially, directly, 100% of each class of
outstanding Capital Stock of the Borrower free and clear of all Liens
(except Liens created by the Guarantee and Collateral Agreement); or (v) a
Specified Change of Control shall occur;
then, and in any such event, (A) if such event is an Event of Default specified
in clause (i) or (ii) of paragraph (f) above with respect to the Borrower,
automatically the Commitments shall immediately terminate and the Loans
hereunder (with accrued interest thereon) and all other amounts owing under this
Agreement and the other Loan Documents (including, without limitation, all
amounts of L/C Obligations, whether or not the beneficiaries of the then
outstanding Letters of Credit shall have presented the documents required
thereunder) shall immediately become due and payable, and (B) if such event is
any other Event of Default, either or both of the following actions may be
taken: (i) with the consent of the Majority Revolving Credit Facility Lenders,
the Administrative Agent may, or upon the request of the Majority Revolving
Credit Facility Lenders, the Administrative Agent shall, by notice to the
Borrower declare the Revolving Credit Commitments to be terminated forthwith,
whereupon the Revolving Credit Commitments shall immediately terminate; and (ii)
with the consent of the Required Lenders, the Administrative Agent may, or upon
the request of the Required Lenders, the Administrative Agent shall, by
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62
notice to the Borrower, declare the Loans hereunder (with accrued interest
thereon) and all other amounts owing under this Agreement and the other Loan
Documents (including, without limitation, all amounts of L/C Obligations,
whether or not the beneficiaries of the then outstanding Letters of Credit shall
have presented the documents required thereunder) to be due and payable
forthwith, whereupon the same shall immediately become due and payable. With
respect to all Letters of Credit with respect to which presentment for honor
shall not have occurred at the time of an acceleration pursuant to this
paragraph, the Borrower shall at such time deposit in a cash collateral account
opened by the Administrative Agent an amount equal to the aggregate then undrawn
and unexpired amount of such Letters of Credit. Amounts held in such cash
collateral account shall be applied by the Administrative Agent to the payment
of drafts drawn under such Letters of Credit, and the unused portion thereof
after all such Letters of Credit shall have expired or been fully drawn upon, if
any, shall be applied to repay other obligations of the Borrower hereunder and
under the other Loan Documents. After all such Letters of Credit shall have
expired or been fully drawn upon, all Reimbursement Obligations shall have been
satisfied and all other obligations of the Borrower hereunder and under the
other Loan Documents shall have been paid in full, the balance, if any, in such
cash collateral account shall be returned to the Borrower (or such other Person
as may be lawfully entitled thereto).
SECTION 9. THE AGENTS
9.1 Appointment. Each Lender hereby irrevocably designates and
-----------
appoints the Agents as the agents of such Lender under this Agreement and the
other Loan Documents, and each such Lender irrevocably authorizes each Agent, in
such capacity, to take such action on its behalf under the provisions of this
Agreement and the other Loan Documents and to exercise such powers and perform
such duties as are expressly delegated to the such Agent by the terms of this
Agreement and the other Loan Documents, together with such other powers as are
reasonably incidental thereto. Notwithstanding any provision to the contrary
elsewhere in this Agreement, no Agent shall have any duties or responsibilities,
except those expressly set forth herein, or any fiduciary relationship with any
Lender, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or any other Loan
Document or otherwise exist against any Agent.
9.2 Delegation of Duties. Each Agent may execute any of its duties
--------------------
under this Agreement and the other Loan Documents by or through agents or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. No Agent shall be responsible for the
negligence or misconduct of any agents or attorneys in-fact selected by it with
reasonable care.
9.3 Exculpatory Provisions. Neither any Agent nor any of their
----------------------
respective officers, directors, employees, agents, attorneys-in-fact or
affiliates shall be (i) liable for any action lawfully taken or omitted to be
taken by it or such Person under or in connection with this Agreement or any
other Loan Document (except to the extent that any of the foregoing are found by
a final and nonappealable decision of a court of competent jurisdiction to have
resulted from its or such Person's own gross negligence or willful misconduct)
or (ii) responsible in any manner to any of the Lenders for any recitals,
statements, representations or warranties made by any Loan Party or any officer
thereof contained in this Agreement or any other Loan Document or in any
certificate, report, statement or other document referred to or provided for in,
or received by the Agents under or in connection with, this Agreement or any
other Loan Document or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any
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63
other Loan Document or for any failure of any Loan Party a party thereto to
perform its obligations hereunder or thereunder. The Agents shall not be under
any obligation to any Lender to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, this
Agreement or any other Loan Document, or to inspect the properties, books or
records of any Loan Party.
9.4 Reliance by Agents. Each Agent shall be entitled to rely, and
------------------
shall be fully protected in relying, upon any instrument, writing, resolution,
notice, consent, certificate, affidavit, letter, telecopy, telex or teletype
message, statement, order or other document or conversation believed by it to be
genuine and correct and to have been signed, sent or made by the proper Person
or Persons and upon advice and statements of legal counsel (including, without
limitation, counsel to Holdings or the Loan Parties), independent accountants
and other experts selected by the Administrative Agent. The Agents may deem and
treat the payee of any Note as the owner thereof for all purposes unless a
written notice of assignment, negotiation or transfer thereof shall have been
filed with the Administrative Agent. Each Agent shall be fully justified in
failing or refusing to take any action under this Agreement or any other Loan
Document unless it shall first receive such advice or concurrence of the
Required Lenders (or, if so specified by this Agreement, all Lenders) as it
deems appropriate or it shall first be indemnified to its satisfaction by the
Lenders against any and all liability and expense which may be incurred by it by
reason of taking or continuing to take any such action. Each Agent shall in all
cases be fully protected in acting, or in refraining from acting, under this
Agreement and the other Loan Documents in accordance with a request of the
Required Lenders (or, if so specified by this Agreement, all Lenders), and such
request and any action taken or failure to act pursuant thereto shall be binding
upon all the Lenders and all future holders of the Loans.
9.5 Notice of Default. No Agent shall be deemed to have knowledge or
-----------------
notice of the occurrence of any Default or Event of Default hereunder unless
such Agent has received notice from a Lender, Holdings or the Borrower referring
to this Agreement, describing such Default or Event of Default and stating that
such notice is a "notice of default". In the event that the Administrative
Agent receives such a notice, the Administrative Agent shall give notice thereof
to the Lenders. The Administrative Agent shall take such action with respect to
such Default or Event of Default as shall be reasonably directed by the Required
Lenders (or, if so specified by this Agreement, all Lenders); provided that
unless and until the Administrative Agent shall have received such directions,
the Administrative Agent may (but shall not be obligated to) take such action,
or refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable in the best interests of the Lenders.
9.6 Non-Reliance on Agents and Other Lenders. Each Lender expressly
----------------------------------------
acknowledges that neither the Agents nor any of their respective officers,
directors, employees, agents, attorneys-in-fact or affiliates have made any
representations or warranties to it and that no act by any Agent hereinafter
taken, including any review of the affairs of a Loan Party or any affiliate of a
Loan Party, shall be deemed to constitute any representation or warranty by any
Agent to any Lender. Each Lender represents to the Agents that it has,
independently and without reliance upon any Agent or any other Lender, and based
on such documents and information as it has deemed appropriate, made its own
appraisal of and investigation into the business, operations, property,
financial and other condition and creditworthiness of the Loan Parties and their
affiliates and made its own decision to make its Loans hereunder and enter into
this Agreement. Each Lender also represents that it will, independently and
without reliance upon any Agent or any other Lender, and based on such documents
and information as it shall deem
<PAGE>
64
appropriate at the time, continue to make its own credit analysis, appraisals
and decisions in taking or not taking action under this Agreement and the other
Loan Documents, and to make such investigation as it deems necessary to inform
itself as to the business, operations, property, financial and other condition
and creditworthiness of the Loan Parties and their affiliates. Except for
notices, reports and other documents expressly required to be furnished to the
Lenders by the Administrative Agent hereunder, no Agent shall have any duty or
responsibility to provide any Lender with any credit or other information
concerning the business, operations, property, condition (financial or
otherwise), prospects or creditworthiness of any Loan Party or any affiliate of
a Loan Party which may come into the possession of such Agent or any of its
officers, directors, employees, agents, attorneys-in-fact or affiliates.
9.7 Indemnification. The Lenders agree to indemnify each Agent in
---------------
its capacity as such (to the extent not reimbursed by Holdings or the Borrower
and without limiting the obligation of Holdings or the Borrower to do so),
ratably according to their respective Aggregate Exposure Percentages in effect
on the date on which indemnification is sought under this Section 9.7 (or, if
indemnification is sought after the date upon which the Commitments shall have
terminated and the Loans shall have been paid in full, ratably in accordance
with such Aggregate Exposure Percentages immediately prior to such date), from
and against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind
whatsoever which may at any time (including, without limitation, at any time
following the payment of the Loans) be imposed on, incurred by or asserted
against such Agent in any way relating to or arising out of, the Commitments,
this Agreement, any of the other Loan Documents or any documents contemplated by
or referred to herein or therein or the transactions contemplated hereby or
thereby or any action taken or omitted by such Agent under or in connection with
any of the foregoing; provided that no Lender shall be liable for the payment of
any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements which are found by a
final and nonappealable decision of a court of competent jurisdiction to have
resulted from such Agent's gross negligence or willful misconduct. The
agreements in this Section 9.7 shall survive the payment of the Loans and all
other amounts payable hereunder.
9.8 Agent in Its Individual Capacity. Each Agent and its affiliates
--------------------------------
may make loans to, accept deposits from and generally engage in any kind of
business with any Loan Party as though such Agent was not an Agent. With
respect to its Loans made or renewed by it and with respect to any Letter of
Credit issued or participated in by it, each Agent shall have the same rights
and powers under this Agreement and the other Loan Documents as any Lender and
may exercise the same as though it were not an Agent, and the terms "Lender" and
"Lenders" shall include each Agent in its individual capacity.
9.9 Successor Agents. The Administrative Agent may resign as
----------------
Administrative Agent upon 10 days' notice to the Lenders and the Borrower. If
the Administrative Agent shall resign as Administrative Agent under this
Agreement and the other Loan Documents, then the Required Lenders shall appoint
from among the Lenders a successor agent for the Lenders, which successor agent
shall (unless an Event of Default under Section 8(a) or Section 8(f) with
respect to the Borrower shall have occurred and be continuing) be subject to
approval by the Borrower (which approval shall not be unreasonably withheld or
delayed), whereupon such successor agent shall succeed to the rights, powers and
duties of the Administrative Agent, and the term "Administrative Agent" shall
mean such successor agent effective upon such appointment and approval, and the
former Administrative Agent's rights, powers and duties as Administrative
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65
Agent shall be terminated, without any other or further act or deed on the part
of such former Administrative Agent or any of the parties to this Agreement or
any holders of the Loans. If no successor agent has accepted appointment as
Administrative Agent by the date that is 10 days following a retiring
Administrative Agent's notice of resignation, the retiring Administrative
Agent's resignation shall nevertheless thereupon become effective, and the
Lenders shall assume and perform all of the duties of the Administrative Agent
hereunder until such time, if any, as the Required Lenders appoint a successor
agent as provided for above. The Syndication Agent may, at any time, by notice
to the Lenders and the Administrative Agent, resign as Syndication Agent
hereunder, whereupon the duties, rights, obligations and responsibilities
hereunder shall automatically be assumed by, and inure to the benefit of, the
Administrative Agent, without any further act by the Syndication Agent, the
Administrative Agent or any Lender. After any retiring Agent's resignation 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 and the other Loan Documents.
9.10 Authorization to Release Liens. The Administrative Agent is
------------------------------
hereby irrevocably authorized by each of the Lenders to release any Lien
covering any Property of the Borrower or any of its Subsidiaries that is the
subject of a Disposition which is permitted by this Agreement or which has been
consented to in accordance with Section 10.1.
9.11 The Arranger. The Arranger, in its capacity as such, shall have
------------
no duties or responsibilities, and shall incur no liability, under this
Agreement and the other Loan Documents.
9.12 The Documentation Agent. The Documentation Agent, in its
-----------------------
capacity as such, shall have no duties or responsibilities, and shall incur no
liability, under this Agreement and the other Loan Documents.
SECTION 10. MISCELLANEOUS
10.1 Amendments and Waivers. Neither this Agreement, any other Loan
----------------------
Document, nor any terms hereof or thereof may be amended, supplemented or
modified except in accordance with the provisions of this Section 10.1. The
Required Lenders and each Loan Party party to the relevant Loan Document may, or
(with the written consent of the Required Lenders) the Agents and each Loan
Party party to the relevant Loan Document may, from time to time, (a) enter into
written amendments, supplements or modifications hereto and to the other Loan
Documents for the purpose of adding any provisions to this Agreement or the
other Loan Documents or changing in any manner the rights of the Lenders or of
the Loan Parties hereunder or thereunder or (b) waive, on such terms and
conditions as the Required Lenders, or the Agents, as the case may be, may
specify in such instrument, any of the requirements of this Agreement or the
other Loan Documents or any Default or Event of Default and its consequences;
provided, however, that no such waiver and no such amendment, supplement or
modification shall (i) forgive the principal amount or extend the final
scheduled date of maturity of any Loan, extend the scheduled date of any
amortization payment in respect of any Tranche B Term Loan, reduce the stated
rate of any interest, fee or letter of credit commission payable hereunder or
extend the scheduled date of any payment thereof, or increase the amount or
extend the expiration date of any Lender's Revolving Credit Commitment, in each
case without the consent of each Lender directly affected thereby; (ii) amend,
modify or waive any provision of this Section 10.1 or reduce any percentage
specified in the definition of Required Lenders or Required Prepayment Lenders,
consent to the assignment or transfer by the Borrower of any of its rights and
obligations under
<PAGE>
66
this Agreement and the other Loan Documents, release all or substantially all of
the Collateral or release all or substantially all of the Subsidiary Guarantors
from their obligations under the Guarantee and Collateral Agreement, in each
case without the written consent of all Lenders; (iii) amend, modify or waive
any condition precedent to any extension of credit under the Revolving Credit
Facility set forth in Section 5.2 (including, without limitation, in connection
with any waiver of an existing Default or Event of Default) without the written
consent of the Majority Revolving Credit Facility Lenders; (iv) reduce the
percentage specified in the definition of Majority Facility Lenders without the
written consent of all Lenders under each affected Facility; (v) amend, modify
or waive any provision of Section 9 without the written consent of the Agents;
(vi) amend, modify or waive any provision of Section 3 without the written
consent of the Issuing Lender or (vii) amend, modify or waive any provision of
Section 2.10 without the written consent of the Required Prepayment Lenders. Any
such waiver and any such amendment, supplement or modification shall apply
equally to each of the Lenders and shall be binding upon the Loan Parties, the
Lenders, the Administrative Agent and all future holders of the Loans. In the
case of any waiver, the Loan Parties, the Lenders and the Administrative Agent
shall be restored to their former position and rights hereunder and under the
other Loan Documents, and any Default or Event of Default waived shall be deemed
to be cured and not continuing; but no such waiver shall extend to any
subsequent or other Default or Event of Default, or impair any right consequent
thereon.
10.2 Notices. All notices, requests and demands to or upon the
-------
respective parties hereto to be effective shall be in writing (including by
telecopy), and, unless otherwise expressly provided herein, shall be deemed to
have been duly given or made when delivered, or three Business Days after being
deposited in the mail, postage prepaid, or, in the case of telecopy notice, when
received, addressed as follows in the case of Holdings, the Borrower, the
Syndication Agent and the Administrative Agent, and as set forth in an
administrative questionnaire delivered to the Administrative Agent in the case
of the Lenders, or to such other address as may be hereafter notified by the
respective parties hereto:
Holdings: NCI Acquisition Corporation
2255 Northwest Parkway, Suite H
Marietta, Georgia 30067
Attention: Jerry Kaufman
Telecopy: (770) 644-7414
Telephone: (770) 644-7411
The Borrower: Nationwide Credit, Inc.
2255 Northwest Parkway, Suite H
Marietta, Georgia 30067
Attention: Jerry Kaufman
Telecopy: (770) 644-7414
Telephone: (770) 644-7411
In the case of Holdings, and the Weiss, Peck & Greer
Borrower, with a copy to: One New York Plaza, 30th Floor
New York, New York 10004
Attention: Craig S. Whiting
Telecopy: (212) 908-0112
Telephone: (212) 908-9500
<PAGE>
67
Centre Partners Management LLC
30 Rockefeller Plaza, Suite 5050
New York, New York 10020
Attention: Paul Zepf
Telecopy: (212) 332-5801
Telephone: (212) 332-5800
and
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attention: Jane McDonald
The Syndication Agent or Lehman Commercial Paper Inc.
the Administrative Agent: 3 World Financial Center
New York, New York 10285
Attention: Michele Swanson
Telecopy: (212) 528-0819
Telephone: (212) 526-0330
provided that any notice, request or demand to or upon the either Agent or the
Lenders shall not be effective until received.
10.3 No Waiver; Cumulative Remedies. No failure to exercise and no
------------------------------
delay in exercising, on the part of the either Agent or any Lender, any right,
remedy, power or privilege hereunder or under the other Loan Documents shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, remedy, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or privilege.
The rights, remedies, powers and privileges herein provided are cumulative and
not exclusive of any rights, remedies, powers and privileges provided by law.
10.4 Survival of Representations and Warranties. All representations
------------------------------------------
and warranties made hereunder, in the other Loan Documents and in any document,
certificate or statement delivered pursuant hereto or in connection herewith
shall survive the execution and delivery of this Agreement and the making of the
Loans hereunder.
10.5 Payment of Expenses. The Borrower agrees (a) to pay or
-------------------
reimburse the Agents and the Arranger for all their reasonable out-of-pocket
costs and expenses incurred in connection with the development, preparation and
execution of, and any amendment, supplement or modification to, this Agreement
and the other Loan Documents and any other documents prepared in connection
herewith or therewith, and the consummation and administration of the
transactions contemplated hereby and thereby, including, without limitation, the
reasonable fees and disbursements of counsel to the Administrative Agent, (b) to
pay or reimburse each Lender and the Agents for all its costs and expenses
incurred in connection with the enforcement or preservation of any rights under
this Agreement, the other Loan Documents and any such other documents,
including, without limitation, the fees and disbursements of counsel (including
the allocated fees and expenses of in-house counsel) to each Lender and of
counsel to the Agents, (c) to pay, indemnify, and hold each Lender and the
Agents harmless from, any and all recording and
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68
filing fees or any amendment, supplement or modification of, or any waiver or
consent under or in respect of, this Agreement, the other Loan Documents and any
such other documents, and (d) to pay, indemnify, and hold each Lender, the
Arranger and the Agents and their respective officers, directors, employees,
affiliates, agents and controlling persons (each, an "indemnitee") harmless from
and against any and all other liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever with respect to the execution, delivery, enforcement,
performance and administration of this Agreement, the other Loan Documents and
any such other documents, including, without limitation, any of the foregoing
relating to the use of proceeds of the Loans or the violation of, noncompliance
with or liability under, any Environmental Law applicable to the operations of
Holdings, the Borrower any of its Subsidiaries or any of the Properties and the
reasonable fees and expenses of legal counsel in connection with claims, actions
or proceedings by any indemnitee against the Borrower hereunder (all the
foregoing in this clause (d), collectively, the "indemnified liabilities"),
provided, that the Borrower shall have no obligation hereunder to any indemnitee
with respect to indemnified liabilities to the extent such indemnified
liabilities are found by a final and nonappealable decision of a court of
competent jurisdiction to have resulted from the gross negligence or willful
misconduct of such indemnitee. Without limiting the foregoing, and to the extent
permitted by applicable law, the Borrower agrees not to assert and to cause its
Subsidiaries not to assert, and hereby waive and agree to cause its Subsidiaries
to so waive, all rights for contribution or any other rights of recovery with
respect to all claims, demands, penalties, fines, liabilities, settlements,
damages, costs and expenses of whatever kind or nature, under or related to
Environmental Laws, that any of them might have by statute or otherwise against
any indemnitee. The agreements in this Section shall survive repayment of the
Loans and all other amounts payable hereunder.
10.6 Successors and Assigns; Participations and Assignments. (a)
------------------------------------------------------
This Agreement shall be binding upon and inure to the benefit of Holdings, the
Borrower, the Lenders, the Agents, all future holders of the Loans and their
respective successors and assigns, except that the Borrower may not assign or
transfer any of its rights or obligations under this Agreement without the prior
written consent of the Agents and each Lender.
(b) Any Lender may, without the consent of the Borrower and with
notice to the Syndication Agent, in accordance with applicable law, at any time
sell to one or more banks, financial institutions or other entities (each, a
"Participant") participating interests in any Loan owing to such Lender, any
Commitment of such Lender or any other interest of such Lender hereunder and
under the other Loan Documents. In the event of any such sale by a Lender of a
participating interest to a Participant, such Lender's obligations under this
Agreement to the other parties to this Agreement shall remain unchanged, such
Lender shall remain solely responsible for the performance thereof, such Lender
shall remain the holder of any such Loan for all purposes under this Agreement
and the other Loan Documents, and the Borrower and the Agents shall continue to
deal solely and directly with such Lender in connection with such Lender's
rights and obligations under this Agreement and the other Loan Documents. In no
event shall any Participant under any such participation have any right to
approve any amendment or waiver of any provision of any Loan Document, or any
consent to any departure by any Loan Party therefrom, except to the extent that
such amendment, waiver or consent would reduce the principal of, or interest on,
the Loans or any fees payable hereunder, or postpone the date of the final
maturity of the Loans, in each case to the extent subject to such participation.
The Borrower agrees that if amounts outstanding under this Agreement and the
Loans are due or unpaid, or shall have been declared or shall have become due
and payable upon the occurrence of an Event of
<PAGE>
69
Default, each Participant shall, to the maximum extent permitted by applicable
law, be deemed to have the right of setoff in respect of its participating
interest in amounts owing under this Agreement to the same extent as if the
amount of its participating interest were owing directly to it as a Lender under
this Agreement, provided that, in purchasing such participating interest, such
Participant shall be deemed to have agreed to share with the Lenders the
proceeds thereof as provided in Section 10.7(a) as fully as if it were a Lender
hereunder. The Borrower also agrees that each Participant shall be entitled to
the benefits of Sections 2.17, 2.18 and 2.19 with respect to its participation
in the Commitments and the Loans outstanding from time to time as if it was a
Lender; provided that, in the case of Section 2.18, such Participant shall have
complied with the requirements of said Section and provided, further, that no
Participant shall be entitled to receive any greater amount pursuant to any such
Section than the transferor Lender would have been entitled to receive in
respect of the amount of the participation transferred by such transferor Lender
to such Participant had no such transfer occurred.
(c) Any Lender (an "Assignor") may, in accordance with applicable law
and with written notice to the Syndication Agent, at any time and from time to
time assign to any Lender or any affiliate thereof or a Person under common
management with a Lender or, with the consent of the Borrower and the Syndicate
Agent (which, in each case, shall not be unreasonably withheld or delayed), to
an additional bank, financial institution or other entity (an "Assignee") all or
any part of its rights and obligations under this Agreement pursuant to an
Assignment and Acceptance (an "Assignment and Acceptance") substantially in the
form of Exhibit D, executed by such Assignee, such Assignor, the Syndication
Agent and the Administrative Agent (and, where the consent of the Borrower is
required pursuant to the foregoing provisions, by the Borrower) and delivered to
the Administrative Agent for its acceptance and recording in the Register;
provided that no such assignment to an Assignee (other than any Lender or any
affiliate thereof) shall be in an aggregate principal amount of less than
$5,000,000 (other than in the case of an assignment of all of a Lender's
interests under this Agreement), unless otherwise agreed by the Borrower, the
Syndication Agent and the Administrative Agent. Any such assignment need not be
ratable as among the Facilities. Upon such execution, delivery, acceptance and
recording, from and after the effective date determined pursuant to such
Assignment and Acceptance, (x) the Assignee thereunder shall be a party hereto
and, to the extent provided in such Assignment and Acceptance, have the rights
and obligations of a Lender hereunder with a Commitment and/or Loans as set
forth therein, and (y) the Assignor thereunder shall, to the extent provided in
such Assignment and Acceptance, be released from its obligations under this
Agreement (and, in the case of an Assignment and Acceptance covering all of an
Assignor's rights and obligations under this Agreement, such assigning Lender
shall cease to be a party hereto). Notwithstanding any provision of this Section
11.6, the consent of the Borrower shall not be required for any assignment which
occurs at any time when any Event of Default shall have occurred and be
continuing.
(d) The Administrative Agent (acting for this purpose as agent of the
Borrower) shall maintain at its address referred to in Section 10.2 a copy of
each Assignment and Acceptance delivered to it and a register (the "Register")
for the recordation of the names and addresses of the Lenders and the Commitment
of, and principal amount of the Loans owing to, each Lender from time to time
and any Notes evidencing such Loans. The entries in the Register shall be
conclusive, in the absence of manifest error, and the Borrower, the
Administrative Agent and the Lenders shall treat each Person whose name is
recorded in the Register as the owner of the Loan and any Note evidencing such
Loan recorded therein for all purposes of this Agreement. Any assignment of any
Loan whether or not evidenced by a Note shall be effective only upon
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70
appropriate entries with respect thereto being made in the Register (and each
Note shall expressly so provide). Any assignment or transfer of all or part of a
Loan evidenced by a Note shall be registered on the Register only upon surrender
for registration of assignment or transfer of the Note evidencing such Loan,
accompanied by a duly executed Assignment and Acceptance, and thereupon one or
more new Notes in the same aggregate principal amount shall be issued to the
designated Assignee and the old Notes shall be returned by the Administrative
Agent to the Borrower marked "cancelled". The Register shall be available for
inspection by the Borrower or any Lender at any reasonable time and from time to
time upon reasonable prior notice.
(e) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender and an Assignee (and, in the case of an Assignee that is not
then a Lender or an affiliate thereof or a Person under common management with
such Lender, by the Borrower, the Administrative Agent, the Syndication Agent
and the Issuing Lender) together with payment to the Administrative Agent of a
registration and processing fee of $2,000 (except that no such registration and
processing fee shall be payable (y) in connection with an assignment by or to
Lehman Commercial Paper Inc. or (z) in the case of an Assignee which is already
a Lender or is an affiliate of a Lender or a Person under common management with
a Lender), the Administrative Agent shall (i) promptly accept such Assignment
and Acceptance and (ii) on the effective date determined pursuant thereto record
the information contained therein in the Register and give notice of such
acceptance and recordation to the Lenders and the Borrower. On or prior to such
effective date, the Borrower, at its own expense, upon request, shall execute
and deliver to the Administrative Agent (in exchange for the Revolving Credit
Note and/or Term Notes, as the case may be, of the assigning Lender) a new
Revolving Credit Note and/or Term Notes, as the case may be, to the order of
such Assignee in an amount equal to the Revolving Credit Commitment and/or
applicable Tranche B Term Loans, as the case may be, assumed or acquired by it
pursuant to such Assignment and Acceptance and, if the assigning Lender has
retained a Revolving Credit Commitment and/or Tranche B Term Loans, as the case
may be, upon request, a new Revolving Credit Note and/or Term Notes, as the case
may be, to the order of the assigning Lender in an amount equal to the Revolving
Credit Commitment and/or applicable Tranche B Term Loans, as the case may be,
retained by it hereunder. Such new Notes shall be dated the Closing Date and
shall otherwise be in the form of the Note replaced thereby.
(f) For avoidance of doubt, the parties to this Agreement acknowledge
that the provisions of this Section concerning assignments of Loans and Notes
relate only to absolute assignments and that such provisions do not prohibit
assignments creating security interests, including, without limitation, any
pledge or assignment by a Lender of any Loan or Note to any Federal Reserve Bank
in accordance with applicable law.
10.7 Adjustments; Set-off. (a) Except to the extent that this
--------------------
Agreement provides for payments to be allocated to the Lenders under a
particular Facility, if any Lender (a "Benefitted Lender") shall at any time
receive any payment of all or part of its Loans or the Reimbursement Obligations
owing to it, or interest thereon, or receive any collateral in respect thereof
(whether voluntarily or involuntarily, by set-off, pursuant to events or
proceedings of the nature referred to in Section 8(f), or otherwise), in a
greater proportion than any such payment to or collateral received by any other
Lender, if any, in respect of such other Lender's Loans or the Reimbursement
Obligations owing to such other Lender, or interest thereon, such Benefitted
Lender shall purchase for cash from the other Lenders a participating interest
in such portion of each such other Lender's Loan and/or of the Reimbursement
Obligations owing to each such other Lender, or shall provide such other Lenders
with the benefits of any such collateral, or the
<PAGE>
71
proceeds thereof, as shall be necessary to cause such Benefitted Lender to share
the excess payment or benefits of such collateral or proceeds ratably with each
of the Lenders; provided, however, that if all or any portion of such excess
payment or benefits is thereafter recovered from such Benefitted Lender, such
purchase shall be rescinded, and the purchase price and benefits returned, to
the extent of such recovery, but without interest.
(b) In addition to any rights and remedies of the Lenders provided by
law, each Lender shall have the right, without prior notice to Holdings or the
Borrower, any such notice being expressly waived by Holdings and the Borrower to
the extent permitted by applicable law, upon any amount becoming due and payable
by Holdings or the Borrower hereunder (whether at the stated maturity, by
acceleration or otherwise) to set off and appropriate and apply against such
amount any and all deposits (general or special, time or demand, provisional or
final), in any currency, and any other credits, indebtedness or claims, in any
currency, in each case whether direct or indirect, absolute or contingent,
matured or unmatured, at any time held or owing by such Lender or any branch or
agency thereof to or for the credit or the account of Holdings or the Borrower.
Each Lender agrees promptly to notify Holdings, the Borrower and the
Administrative Agent after any such setoff and application made by such Lender,
provided that the failure to give such notice shall not affect the validity of
such setoff and application.
10.8 Counterparts. This Agreement may be executed by one or more of
------------
the parties to this Agreement on any number of separate counterparts (including
by telecopy), and all of said counterparts taken together shall be deemed to
constitute one and the same instrument. A set of the copies of this Agreement
signed by all the parties shall be lodged with the Borrower and the
Administrative Agent.
10.9 Severability. Any provision of this Agreement which is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
10.10 Integration. This Agreement and the other Loan Documents
-----------
represent the agreement of Holdings, the Borrower, the Administrative Agent and
the Lenders with respect to the subject matter hereof, and there are no
promises, undertakings, representations or warranties by the Administrative
Agent or any Lender relative to subject matter hereof not expressly set forth or
referred to herein or in the other Loan Documents.
10.11 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS
-------------
OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
10.12 Submission To Jurisdiction; Waivers. Each of Holdings and the
-----------------------------------
Borrower hereby irrevocably and unconditionally:
(a) submits for itself and its Property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to which
it is a party, or for recognition and enforcement of any judgment in
respect thereof, to the non-exclusive general jurisdiction of the Courts of
the State of New York, the courts of the United States for the
<PAGE>
72
Southern District of New York, and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought in
such courts and waives any objection that it may now or hereafter have to
the venue of any such action or proceeding in any such court or that such
action or proceeding was brought in an inconvenient court and agrees not to
plead or claim the same;
(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail
(or any substantially similar form of mail), postage prepaid, to Holdings
or the Borrower, as the case may be at its address set forth in Section
10.2 or at such other address of which the Administrative Agent shall have
been notified pursuant thereto;
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any right it
may have to claim or recover in any legal action or proceeding referred to
in this Section 10.12 any special, exemplary, punitive or consequential
damages.
10.13 Acknowledgements. Each of Holdings and the Borrower hereby
----------------
acknowledges that:
(a) it has been advised by counsel in the negotiation, execution and
delivery of this Agreement and the other Loan Documents;
(b) neither the Administrative Agent nor any Lender has any fiduciary
relationship with or duty to Holdings or the Borrower arising out of or in
connection with this Agreement or any of the other Loan Documents, and the
relationship between Administrative Agent and Lenders, on one hand, and
Holdings and the Borrower, on the other hand, in connection herewith or
therewith is solely that of debtor and creditor; and
(c) no joint venture is created hereby or by the other Loan Documents
or otherwise exists by virtue of the transactions contemplated hereby among
the Lenders or among Holdings, the Borrower and the Lenders.
10.14 WAIVERS OF JURY TRIAL. HOLDINGS, THE BORROWER, THE AGENTS AND
---------------------
THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY
LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT
AND FOR ANY COUNTERCLAIM THEREIN.
10.15 Confidentiality. Each of the Agents and each Lender agrees to
---------------
keep confidential all non-public information provided to it by any Loan Party
pursuant to this Agreement that is designated by such Loan Party as
confidential; provided that nothing herein shall prevent any Agent or any Lender
from disclosing any such information (a) to the Administrative Agent, any other
Lender or any affiliate of any Lender, (b) to any Participant or Assignee (each,
a "Transferee") or prospective Transferee which agrees to comply with the
<PAGE>
73
provisions of this Section, (c) to the employees, directors, agents, attorneys,
accountants and other professional advisors of such Lender or its affiliates,
(d) upon the request or demand of any Governmental Authority having jurisdiction
over the such Agent or such Lender, (e) in response to any order of any court or
other Governmental Authority or as may otherwise be required pursuant to any
Requirement of Law, (f) if requested or required to do so in connection with any
litigation or similar proceeding, (g) which has been publicly disclosed other
than in breach of this Section 10.15, (h) to the National Association of
Insurance Commissioners or any similar organization or any nationally recognized
rating agency that requires access to information about a Lender's investment
portfolio in connection with ratings issued with respect to such Lender, or (i)
in connection with the exercise of any remedy hereunder or under any other Loan
Document.
<PAGE>
74
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their proper and duly authorized officers as
of the day and year first above written.
NCI ACQUISITION CORPORATION
By: /s/ JERRY KAUFMAN
-------------------------------------
Name: Jerry Kaufman
Title: President and Chief Executive
Officer
NATIONWIDE CREDIT, INC.
By: /s/ JERRY KAUFMAN
-------------------------------------
Name: Jerry Kaufman
Title: President and Chief Executive
Officer
<PAGE>
75
LEHMAN BROTHERS INC.,
as Arranger
By: /s/ DENNIS DEE
-------------------------------------
Name: Dennis Dee
Title:
LEHMAN COMMERCIAL PAPER INC., as
Syndication Agent and as a Lender
By: /s/ DENNIS DEE
-------------------------------------
Name: Dennis Dee
Title:
<PAGE>
76
SOUTHERN PACIFIC BANK, as a Lender
By: /s/ CHARLES D. MARTORANO
-------------------------------------
Name: Charles D. Martorano
Title: Senior Vice President
<PAGE>
77
BHF - BANK AKTIENGESELLSCHAFT,
GRAND CAYMAN BRANCH, as Documentation
Agent and as a Lender
By: /s/ JOHN SYKES
-------------------------------------
Name: John Sykes
Title: Assistant Vice President
By: TONY HEYMAN
-------------------------------------
Name: Tony Heyman
Title: Assistant Treasurer
<PAGE>
78
FLEET CAPITAL CORPORATION,
as Administrative Agent and as a Lender
By: /s/ CHARLES GAROKIANIAN
-------------------------------------
Name: Charles Garokianian
Title: Senior Vice President
<PAGE>
79
Annex A
-------
Pricing Grid
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Consolidated Applicable Margin Applicable Margin
Total Debt for Eurodollar Loans for Base Rate Loans
Ratio
-----------------------------------------------------------
Revolving Tranche B Revolving Tranche B Commitment
Credit Term Credit Term Fee
Loans Loans Loans Loans Rate
====================================================================================================================
<S> <C> <C> <C> <C> <C>
Greater than or Equal to 5.00 to 1.00 2.000% 2.250% 1.000% 1.250% 0.375
- --------------------------------------------------------------------------------------------------------------------
Less than 5.00 to 1.00 1.875% 2.125% 0.875% 1.125% 0.375
but Greater than or Equal to 4.50 to 1.00
- --------------------------------------------------------------------------------------------------------------------
Less than 4.50 to 1.00 1.625% 2.000% 0.625% 1.000% 0.375
but Greater than or Equal to 4.00 to 1.00
- --------------------------------------------------------------------------------------------------------------------
Less than 4.00 to 1.00 1.500% 1.875% 0.500% 0.875% 0.375
but Greater than or Equal to 3.50 to 1.00
- --------------------------------------------------------------------------------------------------------------------
Less than 3.50 to 1.00 1.375% 1.750% 0.375% 0.750% 0.250
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
Changes in the Applicable Margin with respect to the Revolving Credit Loan and
the Tranche B Term Loans resulting from changes in the Consolidated Total Debt
Ratio shall become effective on the date (the "Adjustment Date") on which
financial statements are delivered to the Lenders pursuant to Section 6.1 (but
in any event not later than the 45th day after the end of each of the first
three quarterly periods of each fiscal year or the 90th day after the end of
each fiscal year, as the case may be) and shall remain in effect until the next
change to be effected pursuant to this paragraph. If any financial statements
referred to above are not delivered within the time periods specified above,
then, until such financial statements are delivered, the Consolidated Total Debt
Ratio as at the end of the fiscal period that would have been covered thereby
shall for the purposes of this definition be deemed to be greater than 5.00 to
1. In addition, at all times while an Event of Default shall have occurred and
be continuing, the Consolidated Total Debt Ratio shall for the purposes of this
definition be deemed to be greater than 5.00 to 1. Each determination of the
Consolidated Total Debt Ratio pursuant to this definition shall be made with
respect to the period of four consecutive fiscal quarters of the Borrower ending
at the end of the period covered by the relevant financial statements.
<PAGE>
SCHEDULE 1.1A
COMMITMENTS: LENDING OFFICES AND ADDRESSES
Commitments
-----------
Name of Lender and Tranche B
Information for Notices Revolving Credit Term Loan
- ----------------------- ---------------- ---------
<PAGE>
EXHIBIT 10.2
NATIONWIDE CREDIT, INC.
10 1/4% SENIOR NOTES DUE 2008
PURCHASE AGREEMENT
January 23, 1998
LEHMAN BROTHERS INC.
Three World Financial Center
New York, New York 10285
Dear Ladies and Gentlemen:
Nationwide Credit, Inc., a Georgia corporation (the
"Company"), proposes to issue and sell (the "Offering") to you (the "Initial
------- -------- -------
Purchaser") $100.0 million in aggregate principal amount of its 10 1/4% Senior
- ---------
Notes due 2008 (the "Series A Notes") pursuant to the terms of an Indenture (the
--------------
"Indenture") between the Company and State Street Bank and Trust Company, as
---------
trustee (the "Trustee"), relating to the Series A Notes. Capitalized terms used
-------
but not defined herein shall have the meanings given to such terms in the
Indenture. This is to confirm the agreement concerning the purchase of the
Series A Notes from the Company by the Initial Purchaser.
The Series A Notes will be offered and sold to you pursuant to
an exemption from the registration requirements under the Securities Act of
1933, as amended (the "Act"). The Company has prepared a preliminary offering
---
memorandum (the "Preliminary Offering Memorandum"), dated January 6, 1998 and a
-------------------------------
final offering memorandum (the "Offering Memorandum"), dated January 23, 1998,
-------------------
relating to the Company and the Series A Notes. As described in the Offering
Memorandum, the Company will use all of the net proceeds from the offering of
the Series A Notes to refinance the Acquisition Facilities (as defined below).
Upon original issuance thereof, and until such time as the
same is no longer required under the applicable requirements of the Act, the
Series A Notes (and all securities issued in exchange therefor or in
substitution thereof) shall bear the following legend:
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND THE SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE SECURITY
EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER OF THIS NOTE MAY BE
RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE
SECURITIES ACT PROVIDED BY RULE 144A AND REGULATION S
<PAGE>
THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED HEREBY MAY BE RESOLD,
PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1) (a) TO A PERSON WHO THE
SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING
THE REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (c) OUTSIDE THE
UNITED STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT OR (d) IN ACCORDANCE
WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO
REQUESTS), (2) TO THE COMPANY OR (3) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY
OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH
SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE
SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A)
ABOVE."
You have advised the Company that you will make offers (the
"Exempt Resales") of the Series A Notes purchased by you hereunder on the terms
--------------
set forth in the Offering Memorandum, as amended or supplemented, solely to (i)
persons whom you reasonably believe to be "qualified institutional buyers" as
defined in Rule 144A under the Act ("QIBs") and (ii) outside the United States
----
to persons other than U.S. Persons in offshore transactions meeting the
requirements of Rule 904 of Regulation S ("Regulations S") under the Act (such
-------------
persons specified in clauses (i) and (ii) being referred to herein as the
"Eligible Purchasers"). As used herein, the terms "offshore transaction,"
-------------------
"United States" and "U.S. person" have the respective meanings given to them in
------------- -----------
Regulation S. You will offer the Series A Notes to Eligible Purchasers initially
at a price equal to 100% of the principal amount thereof. Such price may be
changed at any time without notice.
As described in the Offering Memorandum, on December 31, 1997,
the Company (i) merged (the "Merger") with and into NCI Merger Corporation, a
Georgia corporation ("Mergerco"), pursuant to that certain Merger Agreement,
dated December 31, 1997, by and among NCI Acquisition Corporation ("NAC"),
Mergerco, First Data Corporation and First Financial Management Corporation and
(ii) entered into a $133.0 million senior credit facility to finance the Merger
(the "Acquisition Facilities"). The Company will use the proceeds from the
Offering, together with borrowings under the Credit Agreement (as defined
herein), to repay the Acquisition Facilities.
Holders (including subsequent transferees) of the Series A
Notes will have the registration rights set forth in the registration rights
agreement (the "Registration Rights Agreement"), to be dated January 28, 1998
-----------------------------
(the "Closing Date"), in the form of Exhibit A hereto, for so long as such
------------
Series A Notes constitute "Transfer Restricted Securities" (as defined in the
------------------------------
Registration Rights Agreement). 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, (i) a registration
----------
statement under the Act (the "Exchange Offer Registration Statement") relating
-------------------------------------
to the Company's 10 1/4% Series B Senior Notes due 2008 (the "Series B Notes"
--------------
and, together with the Series A Notes, the "Notes") to be offered in exchange
-----
for the Series A Notes, (such offer to exchange being referred to collectively
as the "Registered Exchange Offer") and (ii) a shelf registration statement
-------------------------
pursuant to Rule 415 under the Act (the "Shelf Registration Statement") relating
----------------------------
to the resale by certain
2
<PAGE>
holders of the Series A Notes, and to use its best efforts to cause such
Registration Statements to be declared effective. This Agreement, the Indenture
and the Registration Rights Agreement are hereinafter referred to collectively
as the "Operative Documents." This is to confirm the agreements concerning the
-------------------
purchase of the Series A Notes from the Company by you.
1. Representations, Warranties and Agreements of the Company.
The Company represents, warrants and agrees as follows:
A. The Preliminary Offering Memorandum and Offering
Memorandum have been prepared by the Company for use by the Initial Purchaser in
connection with the Exempt Resales. No stop order or decree preventing the use
of the Preliminary Offering Memorandum or the Offering Memorandum, or any
amendment or supplement thereto, or any order asserting that the transactions
contemplated by this Agreement are subject to the registration requirements of
the Act, has been issued and no proceeding for that purpose has commenced or is
pending or, to the knowledge of the Company, is contemplated.
(b) The Preliminary Offering Memorandum and the Offering
Memorandum as of their respective dates and the Offering Memorandum as of the
Closing Date, did not and will not at any time contain an untrue statement of a
material fact or omit to state a material fact necessary, in order to make the
statements, in light of the circumstances under which they were made, not
misleading, except that this representation and warranty does not apply to
statements in or omissions from the Preliminary Offering Memorandum and Offering
Memorandum made in reliance upon and in conformity with information relating to
the Initial Purchaser furnished to the Company in writing by or on behalf of the
Initial Purchaser expressly for use therein.
(c) The market-related and customer-related data and estimates
included in the Offering Memorandum are based on or derived from sources which
the Company believes to be reliable and accurate.
(d) The Company is a corporation duly incorporated and validly
existing and in good standing under the laws of the State of Georgia with full
corporate power and authority to own, lease and operate its properties and to
conduct its business, and is duly registered and qualified to conduct its
business and is in good standing in each jurisdiction or place where the nature
of its properties or the conduct of its business requires such registration or
qualification, except where the failure so to register or qualify or to be in
good standing does not have a material adverse effect on the condition
(financial or other), business, properties, net worth or results of operations
of the Company (a "Material Adverse Effect").
-----------------------
(e) The Company has all requisite power and authority to
execute, deliver and perform its obligations under each of the Operative
Documents and to consummate the transactions contemplated hereby and thereby and
to issue, sell and deliver the Notes as provided herein and therein.
(f) This Agreement has been duly and validly authorized,
executed and delivered by the Company and, assuming due authorization, execution
and delivery by the Initial Purchaser, is a legally valid and binding agreement
of the Company, enforceable against the Company in accordance with its terms,
except as the enforcement hereof and thereof may be limited by bankruptcy,
insolvency or other similar laws affecting the enforcement of creditors' rights
generally and subject to the applicability of general principles of equity, and
except as rights to indemnity and contribution hereunder and thereunder may be
limited by Federal or state securities laws or principles of public
3
<PAGE>
policy.
(g) The Registration Rights Agreement has been duly and
validly authorized by the Company and, upon its execution and delivery by the
Company and, assuming due authorization, execution and delivery by the Initial
Purchaser, will constitute a legally valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms, except as the
enforcement hereof and thereof may be limited by bankruptcy, insolvency or other
similar laws affecting the enforcement of creditors' rights generally and
subject to the applicability of general principles of equity, and except as
rights to indemnity and contribution hereunder and thereunder may be limited by
Federal or state securities laws or principles of public policy.
(h) The Indenture has been duly and validly authorized by the
Company, and upon its execution and delivery and, assuming due authorization,
execution and delivery by the Trustee, will constitute the valid and binding
agreement of the Company, enforceable against the Company in accordance with its
terms, subject to the qualification that the enforceability of the Company's
obligations thereunder may be limited by bankruptcy, fraudulent conveyance,
insolvency, reorganization, moratorium, and other laws relating to or affecting
creditors' rights generally and by general equitable principles; no
qualification of the Indenture under the Trust Indenture Act of 1939, as amended
(the "1939 Act") is required in connection with the offer and sale of the Series
--------
A Notes contemplated hereby or in connection with the Exempt Resales.
(i) The Series A Notes have been duly and validly authorized
by the Company and when duly issued and authenticated by the Company in
accordance with the terms of the Indenture and, assuming due authentication of
the Series A Notes by the Trustee, upon delivery to the Initial Purchaser
against payment therefor in accordance with the terms hereof, will have been
validly issued and delivered, and will constitute valid and binding obligations
of the Company entitled to the benefits of the Indenture, enforceable against
the Company in accordance with their terms, subject to the qualification that
the enforceability of the Company's obligations thereunder may be limited by
bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium, and
other laws relating to or affecting creditors' rights generally and by general
equitable principles.
(j) The Series B Notes have been duly and validly authorized
by the Company and if and when duly issued and authenticated in accordance with
the terms of the Indenture and delivered in accordance with the Exchange Offer
provided for in the Registration Rights Agreement, will constitute valid and
binding obligations of the Company entitled to the benefits of the Indenture,
enforceable against the Company in accordance with their terms, subject to the
qualification that the enforceability of the Company's obligations thereunder
may be limited by bankruptcy, fraudulent conveyance, insolvency, reorganization,
moratorium, and other laws relating to or affecting creditors' rights generally
and by general equitable principles.
(k) The Company has all requisite corporate power and
authority to enter into (i) the credit agreement (the "Credit Agreement"), to be
----------------
dated January 28, 1998, by and among the Company, Lehman Brothers Inc., as
arranger, Lehman Commercial Paper Inc., as syndication agent, and the lenders
named therein and (ii) any and all other agreements and instruments ancillary to
or entered into in connection with the transaction contemplated by the Credit
Agreement (items (i) and (ii) are referred to collectively as the "Credit
------
Documents").
- ---------
(l) Each of the Credit Agreement and the other Credit
Documents has been duly and validly authorized, and upon their execution and
delivery by the Company and, assuming due authorization, execution and delivery
by the other parties thereto, will be legally valid and binding
4
<PAGE>
agreements of the Company, enforceable against the Company in accordance with
its terms, subject to the qualification that the enforceability of the Company's
obligations thereunder may be limited by bankruptcy, fraudulent conveyance,
insolvency, reorganization, moratorium, and other laws relating to or affecting
creditors' rights generally and by general equitable principles; (ii) the
Company will have at least $60.0 million of borrowings available to it under the
Credit Agreement (giving effect to the covenants contained in the Credit
Agreement) after the Closing of the sale of the Series A Notes hereunder, the
receipt by the Company of the proceeds therefrom and the application of such
proceeds as described under the caption "Use of Proceeds" in the Offering
Memorandum; and (iii) all representation and warranties made by the Company in
the Credit Agreement are true and correct in all material respects as of the
date hereof.
(m) All the shares of capital stock of the Company outstanding
prior to the issuance of the Series A Notes have been duly authorized and
validly issued and are fully paid and nonassessable.
(n) The Company owns the capital stock of the corporations and
entities set forth on Exhibit B hereto, and the Company does not own any capital
stock of any other corporation or entity except as set forth in Exhibit B. Each
of the Company's subsidiaries have been duly incorporated and are validly
existing as corporations in good standing under the laws of their respective
jurisdictions of incorporation, are duly qualified to do business and are in
good standing as foreign corporations in each jurisdiction in which their
respective ownership or lease of property or the conduct of their respective
businesses requires such qualification, and have all power and authority
necessary to own or hold their respective properties and to conduct the
businesses in which they are engaged; and none of the subsidiaries of the
Company is a "significant subsidiary," as such term is defined in Rule 405 of
the rules promulgated under the Securities Act.
(o) There are no legal or governmental proceedings pending or,
to the knowledge of the Company, threatened, against the Company or to which any
of its properties is subject, that are not disclosed in the Offering Memorandum
and which, if adversely decided, are reasonably likely to cause a Material
Adverse Effect or to materially affect the issuance of the Notes or the
consummation of the other transactions contemplated by the Operative Documents.
The Offering Memorandum contains accurate summaries of all material agreements,
contracts, indentures, leases or other instruments. The Company is not involved
in any strike, job action or labor dispute with any group of employees, and, to
the Company's knowledge, no such action or dispute is threatened.
(p) No material relationship, direct or indirect, exists
between or among the Company on the one hand, and the directors, officers,
stockholders, customers or suppliers of the Company on the other hand, which is
required to be described in the Offering Memorandum and which is not so
described.
(q) The Company (i) is not in violation of its articles of
incorporation, by-laws or other organizational document, (ii) is not in default
in any material respect, and no event has occurred which, with notice or lapse
of time or both, would constitute such a default, in the due performance or
observance of any term, covenant or condition contained in any indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument to
which it is a party or by which it is bound or to which any of its properties or
assets is subject that is material to the Company's financial condition or
prospects (collectively, the "Material Agreements") or (iii) except as would
-------------------
not, individually or in the aggregate, have a Material Adverse Effect, is not in
violation of any law, statute, ordinance, governmental rule, regulation, filing
or injunction or court decree to which it or its property or assets may be
subject or has failed to obtain any license, permit, certificate, franchise or
other governmental
5
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authorization or permit necessary to the ownership of its property or to the
conduct of its business.
(r) None of the issuance, offer or sale of the Series A Notes,
the execution, delivery or performance by the Company of this Agreement or the
other Operative Documents, compliance by the Company with the provisions hereof
or thereof nor consummation by the Company of the transactions contemplated
hereby or thereby; and none of the execution, delivery or performance by the
Company of the Credit Agreement or the other Credit Documents, compliance by the
Company with the provisions thereof nor consummation by the Company of the
transactions contemplated thereby (i) requires any consent, approval,
authorization or other order of, or registration or filing with, any court,
regulatory body, administrative agency or other governmental body, agency or
official (except such as may be required in connection with the registration
under the Act of the Series B Notes in accordance with the Registration Rights
Agreement, qualification of the Indenture under the 1939 Act and compliance with
the securities or Blue Sky laws of various jurisdictions and except for such
consents as have been or will be obtained prior to the Closing Date and except
for such consents as would not, individually or in the aggregate, have a
Material Adverse Effect), or conflicts or will conflict with or constitutes or
will constitute a breach of, or a default under, the articles of incorporation
or bylaws, or other organizational documents, of the Company or (ii) conflicts
or will conflict with or constitutes or will constitute a breach of, or a
default under any Material Agreement or will violate any law, statute,
ordinance, governmental rule, regulation, filing or injunction or court decree
to which it or its property or assets may be subject or will result in the
creation or imposition of any lien, charge or encumbrance upon any property or
assets of the Company pursuant to the terms of any agreement or instrument to
which it is a party or by which it may be bound or to which any of its property
or assets is subject.
(s) The accountants, Ernst & Young, LLP, who have certified
certain of the financial statements included as part of the Offering Memorandum,
are independent public accountants under Rule 101 of the AICPA's Code of
Professional Conduct, and its interpretation and rulings.
(t) The consolidated historical and pro forma financial
statements, together with related notes, set forth in the Offering Memorandum
comply as to form in all material respects with the requirements of Regulation
S-X under the Act applicable to registration statements on Form S-1 under the
Act. Such historical financial statements fairly present the financial position
of the Company at the respective dates indicated and the results of operations
and cash flows for the respective periods indicated, in accordance with
generally accepted accounting principals consistently applied throughout such
periods. Such pro forma financial statements 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
in good faith and present fairly the historical and proposed transactions
contemplated by the Offering Memorandum and this Agreement. The other financial
and statistical information and data included in the Offering Memorandum,
historical and pro forma, is fairly presented, in all material respects, and
prepared on a basis consistent with such financial statements and the books and
records of the Company.
(u) Except as disclosed in, or specifically contemplated by,
the Offering Memorandum, subsequent to the date as of which such information is
attributed in the Offering Memorandum, the Company has not incurred any
liability or obligation, direct or contingent, or entered into any transaction,
in each case not in the ordinary course of business, that is material to the
Company, and there has not been any material change in the capital stock, or
material increase in the short-term or long-term debt, of the Company or any
material adverse change, or any development involving or which would reasonably
be expected to involve a prospective material adverse change, in the condition
(financial or other), business, properties, net worth, results of operations or
prospects
6
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of the Company.
(v) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurances that (i) transactions are
executed in accordance with management's general or specific authorization; (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 existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(w) The Company has good and marketable title to all property
(real and personal) described in the Offering Memorandum as being owned by it,
free and clear of all liens, claims, security interests or other encumbrances
except such as are described in or contemplated by transactions described in the
Offering Memorandum and all the material property described in the Offering
Memorandum as being held under lease by the Company is held by it under valid,
subsisting and enforceable leases, with only such exceptions as in the aggregate
are not materially burdensome and do not interfere with the conduct of the
business of the Company. The Company enjoys peaceful and undisturbed possession
under all leases to which it is party as lessee, except for such leases that,
singly or in the aggregate, would not have a Material Adverse Effect.
(x) The Company owns or possess all patents, trademarks,
trademark registration, service marks, service mark registrations, trade names,
copyrights, licenses, inventions, trade secrets and rights described in the
Offering Memorandum as being owned by it or necessary for the conduct of its
business, and the Company is not aware of any claim to the contrary or any
challenge by any other person to the rights of the Company with respect to the
foregoing, except for such failure to own or possess intellectual property
rights or such claims or challenges which would not, individually or in the
aggregate, have a Material Adverse Effect.
(y) Except as would not, individually or in the aggregate,
have a Material Adverse Effect, (i) the Company has all certificates, consents,
exemptions, orders, permits, licenses, authorizations, or other approvals (each,
an "Authorization") of and from, and has made all declarations and filings with,
-------------
all Federal, state, local and other governmental authorities, all
self-regulatory organizations and all courts and other tribunals (including,
without limitation, any Authorization required by the Federal Trade Commission
or other governmental body under the Fair Debt Collection Practices Act and any
state or local law or governmental body regulating the debt collection
industry), necessary or required to engage in the business currently conducted
by it in the manner described in the Offering Memorandum, (ii) all such
Authorizations are valid and in full force and effect and (iii) the Company is
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.
(z) The present fair saleable value of the assets of the
Company 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 as they become absolute and matured. The assets of the Company do
not constitute unreasonably small capital to carry out its 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. Upon
the issuance of the Notes, the present fair saleable value of the assets of the
Company will exceed the amount that will be required to be paid on or in respect
of its existing debts and other liabilities (including the maximum amount of
liability that may reasonably be
7
<PAGE>
expected to result from contingent liabilities) as they become absolute and
matured, the assets of the Company will not constitute unreasonably small
capital to carry out its business as now conducted or as proposed to be
conducted, including the capital needs of the Company, taking into account the
projected capital requirements and capital availability of the Company.
(aa) Neither the Company nor, to the knowledge of the Company,
any director, officer, agent, employee or other person associated with or acting
on behalf of the Company, has used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expense relating to
political activity; made any direct or indirect 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; or
made any bribe, rebate, payoff, influence payment, kickback or other unlawful
payment.
(bb) The Company is not and, upon sale of the Series A Notes
to be issued and sold thereby in accordance herewith and the application of the
net proceeds to the Company of such sale as described in the Offering Memorandum
under the caption "Use of Proceeds," will not be an "investment company" within
the meaning of the Investment Company Act of 1940, as amended.
(cc) Neither the Company nor any affiliate (as defined in Rule
501(b) of Regulation D ("Regulation D") under the Act) of the Company has
------------
directly, or through any agent (provided that no representation is made as to
the Initial Purchaser or any person acting on its behalf), (i) sold, offered for
sale, solicited offers to buy or otherwise negotiated in respect of, any
security (as defined in the Act) which is or could be integrated with the
offering and sale of the Notes in a manner that would require the registration
of the Series A Notes under the Act or (ii) engaged in any form of general
solicitation or general advertising (within the meaning of Regulation D,
including, but not limited to, advertisements, articles, notices or other
communications published in any newspaper, magazine, or similar medium or
broadcast over television or radio, or any seminar or meeting whose attendees
have been invited by any general solicitation or general advertising) in
connection with the offering of the Series A Notes. No securities of the same
class as the Series A Notes have been issued and sold by the Company within the
six-month period immediately prior to the date hereof.
(dd) Except as permitted by the Act, the Company has not
distributed and, prior to the later to occur of the Closing Date and completion
of the distribution of the Series A Notes, will not distribute any offering
material in connection with the offering and sale of the Series A Notes other
than the Preliminary Offering Memorandum and Offering Memorandum.
(ee) When the Series A Notes are issued and delivered pursuant
to this Agreement, such Series A Notes will not be of the same class (within the
meaning of Rule 144A under the Act) as securities of the Company that are listed
on a national securities exchange registered under Section 6 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") or that are quoted in a
------------
United States automated inter-dealer quotation system.
(ff) Assuming (i) that your representations and warranties in
Section 2 are true, (ii) compliance by you with your covenants set forth in
Section 2 and (iii) that each of the Eligible Purchasers is a QIB or a person
who is not a "U.S. person" who acquires the Series A Notes outside the United
States in an "offshore transaction" (within the meaning of Rule 904 of
Regulation S), the purchase of the Series A Notes by you pursuant hereto and the
resale of the Series A Notes pursuant hereto pursuant to the Exempt Resales is
exempt from the registration requirements of the Act.
(gg) The Company is in compliance in all material respects
with all presently
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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 would have any
liability; the Company has not incurred and does not expect to incur liability
under (i) Title IV of ERISA with respect to termination of, or withdrawal from,
any "pension plan" or (ii) Sections 412 or 4971 of the Internal Revenue Code of
1986, as amended, including the regulations and published interpretations
thereunder (the "Code"); each "pension plan" for which the Company 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.
(hh) There are no contracts, agreements or understandings
between the Company and any person granting such person the right to require the
Company to file a registration statement under the Securities Act with respect
to any securities of the Company owned or to be owned by such person or to
require the Company to include such securities in the securities registered
pursuant to the Exchange Offer Registration Statement, the Shelf Registration
Statement or in any securities being registered pursuant to any other
registration statement filed by the Company under the Securities Act.
(ii) The Company carries, or is covered by, insurance in such
amounts and covering such risks as is adequate for the conduct of its businesses
and the value of its properties and as is customary for companies engaged in
similar businesses in similar industries.
(jj) The Company has filed all federal, state and local income
and franchise tax returns required to be filed through the date hereof and has
paid all taxes due thereon, and no tax deficiency has been determined adversely
to the Company nor does the Company have any knowledge of any tax deficiency
which, if determined adversely to the Company, might have a Material Adverse
Effect.
(kk) Since the date as of which information is attributed in
the Offering Memorandum through the date hereof, and except as may otherwise be
disclosed in the Offering Memorandum, the Company has not (i) issued or granted
any securities, (ii) incurred any liability or obligation, direct or contingent,
other than liabilities and obligations which were incurred in the ordinary
course of business, (iii) entered into any transaction not in the ordinary
course of business or (iv) declared or paid any dividend on its capital stock.
(ll) There has been no storage, disposal, generation,
manufacture, refinement, transportation, handling or treatment of toxic wastes,
medical wastes, hazardous wastes or hazardous substances by the Company (or, to
the knowledge of the Company, any of its predecessors in interest) at, upon or
from any of the property now or previously owned or leased by the Company in
violation of any applicable law, ordinance, rule, regulation, order, judgment,
decree or permit or which would require remedial action under any applicable
law, ordinance, rule, regulation, order, judgment, decree or permit, except for
any violation or remedial action which would not have, or could not be
reasonably likely to have, singularly or in the aggregate with all such
violations and remedial actions, a Material Adverse Effect; there has been no
material spill, discharge, leak, emission, injection, escape, dumping or release
of any kind onto such property or into the environment surrounding such property
of any toxic wastes, medical wastes, solid wastes, hazardous wastes or hazardous
substances due to or caused by the Company or with respect to which the Company
has knowledge, except for any such spill, discharge, leak, emission, injection,
escape, dumping or release which would not have or would not be reasonably
likely to have, singularly or in the aggregate with all such spills, discharges,
leaks, emissions, injections, escapes, dumpings and releases, a material adverse
effect on the general affairs,
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<PAGE>
management, financial position, stockholders' equity or results of operations of
the Company; and the terms "hazardous wastes," "toxic wastes," "hazardous
substances" and "medical wastes" shall have the meanings specified in any
applicable local, state, federal and foreign laws or regulations with respect to
environmental protection.
(mm) Each of the Preliminary Offering Memorandum and the
Offering Memorandum 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 Act.
(nn) The Company has not taken, and will not take, any action
that might cause this Agreement or the issuance or sale of the Notes to violate
Regulations G, T, U or X of the Board of Governors of the Federal Reserve System
or analogous foreign laws and regulations.
(oo) There is no contract or document concerning the Company
of a character required to be described in the Offering Memorandum that is not
so described.
(pp) There are no contracts, agreements or understandings
between the Company and any other person that would give rise to a valid claim
against the Company or the Initial Purchaser for a brokerage commission,
finder's fee or like payment in connection with the issuance, purchase and sale
of the Notes.
(qq) The Company does not do business with the government of
Cuba or with any person or affiliate located in Cuba within the meaning of
Section 517.075, Florida Statutes.
(rr) None of the Company or any of its affiliates or any
person acting on its or their behalf has engaged or will engage in any directed
selling efforts within the meaning of Rule 902(b) of Regulation S with respect
to the Notes, and the Company and its affiliates and all persons acting on its
of their behalf have complied with and will comply with the offering
restrictions requirements of Regulation S in connection with the offering of the
Notes outside of the United States and, in connection therewith, the Offering
Memorandum will contain the disclosure required by Rule 902(h).
(ss) The Series A Notes offered and sold by the Company in
reliance on Regulation S have been and will be offered and sold only in offshore
transactions.
(tt) The Series A Notes sold by the Company in reliance on
Regulation S will be represented upon issuance by a temporary global security
that may not be exchanged for definitive securities until the expiration of the
40-day restricted period referred to in Rule 903(c)(3) of the Act and only upon
certification of beneficial ownership of such Series A Notes by non-U.S. persons
or U.S. persons who purchased such Series A Notes in transactions that were
exempt from the registration requirements of the Act.
(uu) The sale of the Series A Notes by the Company and any
resale of the Series A Notes by the Initial Purchaser pursuant to Regulation S
will be "offshore transactions" and will not be part of a plan or scheme to
evade the registration provision of the Act.
2. Representations, Warranties and Agreements of the Initial
Purchaser. The Initial Purchaser represents and warrants that:
(a) It is a QIB or an institutional accredited investor as
defined in Rule 501(a) under the Act with such knowledge and experience in
financial and business matters as are necessary in
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order to evaluate the merits and risks of an investment in the Series A Notes.
(b) It (i) is not acquiring the Series A Notes with a view to
any distribution thereof or with any present intention of offering or selling
any of the Series A Notes in a transaction that would violate the Act or the
securities laws of any State of the United States or any other applicable
jurisdiction; (ii) in connection with the Exempt Resales, will solicit offers to
buy the Notes only from, and will offer to sell the Notes only to, the Eligible
Purchasers in accordance with this Agreement and on the terms contemplated by
the Offering Memorandum; and (iii) will not offer or sell the Notes, nor has it
offered or sold the Notes by, or otherwise engaged in, any form of general
solicitation or general advertising (within the meaning of Regulation D;
including, but not limited to, advertisements, articles, notices or other
communications published in any newspaper, magazine, or similar medium or
broadcast over television or radio, or any seminar or meeting whose attendees
have been invited by any general solicitation or general advertising) in
connection with the offering of the Series A Notes.
(c) The Notes have not been and will not be registered under
the 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 Act or pursuant to an exemption from the registration requirements of
the Act. The Initial Purchaser represents that it has not offered, sold or
delivered the Notes, and will not offer, sell or deliver the Notes (i) as part
of its distribution at any time or (ii) otherwise until 40 days after the later
of the commencement of the offering and the Closing Date (such period, the
"Restricted Period"), within the United States or to, or for the account or
-----------------
benefit of U.S. persons, except in accordance with Rule 144A under the Act.
Accordingly, the Initial Purchaser represents and agrees that neither it, its
affiliates nor any persons acting on its behalf has engaged or will engage in
any directed selling efforts within the meaning of Rule 902(b) of Regulation S
with respect to the Notes, and it, its affiliates and all persons acting on its
behalf have complied and will comply with the offering restrictions requirements
of Regulation S.
(d) The Initial Purchaser agrees that, at or prior to
confirmation of a sale of Notes (other than a sale pursuant to Rule 144A), it
will have sent to each distributor, dealer or person receiving a selling
concession, fee or other remuneration that purchases Notes from it during the
Restricted Period a confirmation or notice substantially to the following
effect:
"The Notes 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 or the closing date, except in either case in accordance with
Regulation S (or Rule 144A if available) under the Securities Act, and
in connection with any subsequent sale by you of the Notes covered
hereby in reliance on Regulation S during the period referred to above
to any distributor, dealer or person receiving a selling concession,
fee or other remuneration, you must deliver a notice to substantially
the foregoing effect. Terms used above have the meanings assigned to
them in Regulation S."
The Initial 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 Notes, except with its affiliates or with the
prior written consent of the Company.
(e) The Initial Purchaser further represents and agrees that
(i) it has not offered or sold and will not offer or sell any Notes to persons
in the United Kingdom prior to the expiry of the period of six months from the
issue date of the Notes, except to persons whose ordinary activities
11
<PAGE>
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 with respect to
anything done by it in relation to the Notes 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 Notes to a person who is of a kind described in Article 11(3) of
the Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order
1995 or is a person to whom the document may otherwise lawfully be issued or
passed on.
(f) The Initial Purchaser agrees not to cause any
advertisement of the Notes to be published in any newspaper or periodical or
posted in any public place and not to issue any circular relating to the Notes,
except such advertisements as include the statements required by Regulation S.
(g) The Series A Notes offered and sold by the Initial
Purchaser pursuant hereto in reliance on Regulation S have been and will be
offered and sold only in offshore transactions.
(h) The sale of the Series A Notes by the Initial Purchaser
pursuant to Regulation S are "offshore transactions" and are not part of a plan
or scheme to evade the registration provision of the Act.
(i) The Initial Purchaser agrees that the Series A Notes
offered and sold in reliance on Regulation S will be represented upon issuance
by a global security that may not be exchanged for definitive securities until
the expiration of the 40-day restricted period referred to in Rule 903(c)(3) of
the Act and only upon certification of beneficial ownership of such Series A
Notes by non-U.S. persons or U.S. persons who purchased such Series A Notes in
transactions that were exempt from the registration requirements of the Act.
(j) The Initial Purchaser understands that the Company and,
for purposes of the opinions to be delivered to you pursuant to Section 7
hereof, counsel to the Company and counsel to the Initial Purchaser, will rely
upon the accuracy and truth of the foregoing representations and you hereby
consent to such reliance.
The terms used in this Section 2 that have meanings assigned
to them in Regulation S are used herein as so defined.
The Initial Purchaser further agrees that, in connection with
the Exempt Resales, it will solicit offers to buy the Series A Notes only from,
and will offer to sell the Series A Notes only to, the Eligible Purchasers in
Exempt Resales.
3. Purchase of the Notes by the Initial Purchaser. On the
basis of the representations and warranties contained in, and subject to the
terms and conditions of, this Agreement, the Company agrees to sell $100.0
million in aggregate principal amount of Series A Notes to the Initial Purchaser
and the Initial Purchaser agrees to purchase $100.0 million in aggregate
principal amount of Series A Notes. The Initial Purchaser will purchase such
aggregate principal amount of Series A Notes at an aggregate purchase price
equal to 97% of the principal amount thereof (the "Purchase Price").
--------------
The Company shall not be obligated to deliver any of the
Series A Notes to be delivered, except upon payment for all the Series A Notes
to be purchased on such Closing Date as
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provided herein.
4. Delivery of and Payment.
(a) Delivery to the Initial Purchaser of and payment for the
Series A Notes shall be made at 9:00 a.m., New York City time, on the Closing
Date at the offices of Latham & Watkins, 885 Third Avenue, New York, New York
10022, or such other time or place as you and the Company shall designate.
(b) One or more Series A Notes in definitive form, registered
in the name of Cede & Co., as nominee of the Depository Trust Company ("DTC"),
---
or such other names as the Initial Purchaser may request upon at least one
business days' notice to the Company, having an aggregate principal amount
corresponding to the aggregate principal amount of Series A Note sold pursuant
to Eligible Resales (collectively, the "Global Note"), shall be delivered by the
-----------
Company to the Initial Purchaser, against payment by the Initial Purchaser of
the purchase price thereof by wire transfer of immediately available funds as
the Company may direct by written notice delivered to you two business days
prior to the Closing Date. The Global Note in definitive form shall be made
available to you for inspection not later than 2:00 p.m. on the business day
immediately preceding the Closing Date.
5. Further Agreements of the Company. The Company agrees:
(a) To advise you promptly and, if requested by you, to
confirm such advice in writing, of (i) the issuance by the Commission or any
state securities commission of any stop order suspending the qualification or
exemption from qualification of any Series A Notes for offering or sale in any
jurisdiction, or the initiation of any proceeding for such purpose by the
Commission or any state securities commission or other regulatory authority, and
(ii) the happening of any event that makes any statement of a material fact made
in the Preliminary Offering Memorandum or the Offering Memorandum untrue or
which requires the making of any additions to or changes in the Preliminary
Offering Memorandum or the Offering Memorandum in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The Company shall use its best efforts to prevent the issuance of
any stop order or order suspending the qualification or exemption of the Series
A Notes by the Commission or under any state securities or Blue Sky laws and, if
at any time any state securities commission shall issue any stop order
suspending the qualification or exemption of the Series A Notes under any state
securities or Blue Sky laws, the Company shall use every reasonable effort to
obtain the withdrawal or lifting of such order at the earliest possible time.
(b) To furnish to you, without charge, as many copies of the
Offering Memorandum, and any amendments or supplements thereto, as you may
reasonably request. The Company consents to the use of the Preliminary Offering
Memorandum and the Offering Memorandum, and any amendments and supplements
thereto required pursuant to this Agreement, by you in connection with the
Exempt Resales that are in compliance with this Agreement.
(c) Not to amend or supplement the Offering Memorandum prior
to the Closing Date or during the period referred to in (d) below unless you
shall previously have been advised of, and shall not have reasonably objected
to, such amendment or supplement within a reasonable time, but in any event not
longer than three days after being furnished a copy of such amendment or
supplement. The Company shall promptly prepare, upon any reasonable request by
you, any amendment or supplement to the Offering Memorandum that may be
necessary or advisable in
13
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connection with Exempt Resales.
(d) If, in connection with any Exempt Resales or market making
transactions after the date of this Agreement and prior to the consummation of
the Exchange Offer, any event shall occur that, in the judgment of the Company
or in the judgment of counsel to you, makes any statement of a material fact in
the Offering Memorandum untrue or that requires the making of any additions to
or changes in the Offering Memorandum in order to make the statements in the
Offering Memorandum, in light of the circumstances at the time that the Offering
Memorandum is delivered to prospective Eligible Purchasers, not misleading, or
if it is necessary to amend or supplement the Offering Memorandum to comply with
all applicable laws, the Company shall promptly notify you of such event and
prepare an appropriate amendment or supplement to the Offering Memorandum so
that (i) the statements in the Offering Memorandum as amended or supplemented
will, in light of the circumstances at the time that the Offering Memorandum is
delivered to prospective Eligible Purchasers, not be misleading and (ii) the
Offering Memorandum will comply with applicable law.
(e) To cooperate with you and your counsel in connection with
the qualification of the Series A Notes for offer and sale by you and by dealers
under the state securities or Blue Sky laws of such jurisdictions as you may
request (provided, however, that the Company shall not be obligated to qualify
as a foreign corporation in any jurisdiction in which it is not now so qualified
or to take any action that would subject it to general consent to service of
process in any jurisdiction in which it is not now so subject). The Company
shall continue such qualification in effect so long as required by law for
distribution of the Series A Notes and shall file such consents to service of
process or other documents as may be necessary in order to effect such
qualification.
(f) Not to voluntarily claim, and to actively resist any
attempts to claim, the benefit of any usury laws against the holders of the
Series A Notes.
(g) Prior to the Closing Date, to furnish to you, as soon as
they have been prepared, a copy of any internal consolidated financial
statements of the Company for any period subsequent to the period covered by the
financial statements appearing in the Offering Memorandum.
(h) To use its reasonable best efforts to do and perform all
things required to be done and performed under this Agreement by it prior to or
after the Closing Date and to satisfy all conditions precedent on its part to
the delivery of the Series A Notes.
(i) Not to sell, offer for sale or solicit offers to buy or
otherwise negotiate in respect of any security (as defined in the Act) that
would be integrated with the sale of the Series A Notes in a manner that would
require the registration under the Act of the sale to you or the Eligible
Purchasers of Series A Notes.
(j) For so long as any of the Notes remain outstanding and
during any period in which the Company is not subject to Section 13 or 15(d) of
the Exchange Act, to make available to any registered holder or beneficial owner
of Series A Notes in connection with any sale thereof and any prospective
purchaser of such Series A Notes from such registered holder or beneficial
owner, the information required by Rule 144A(d)(4) under the Act.
(k) To comply with its agreements in the Registration Rights
Agreement, and all agreements set forth in the representation letters of the
Company to DTC relating to the approval of the Notes by DTC for "book-entry"
transfer.
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(l) To cause the Exchange Offer, if available, to be made in
the appropriate form, as contemplated by the Registration Rights Agreement, to
permit registration of the Series B Notes to be offered in exchange for the
Series A Notes, and to comply with all applicable federal and state securities
laws in connection with the Registered Exchange Offer.
(m) To use its best efforts to effect the inclusion of the
Notes in the National Association of Securities Dealers, Inc. Automated
Quotation System - PORTAL ("PORTAL") and to permit the Notes to be eligible for
------
clearance and settlement through DTC.
(n) To apply the net proceeds from the sale of the Series A
Notes being sold by the Company as set forth in the Offering Memorandum under
the caption "Use of Proceeds."
(o) To take such steps as shall be necessary to ensure that
the Company shall not become an "investment company" within the meaning of such
term under the Investment Company Act of 1940 and the rules and regulations of
the Commission thereunder.
(p) For a period of five years following the Closing Date or
until there are no longer any Notes outstanding, to furnish to the Initial
Purchaser as soon as available copies of any annual reports, quarterly reports
and current reports filed with the Commission on Forms 10-K, 10-Q and 8-K, or
such other similar forms as may be designated by the Commission, and such other
documents, reports and information as shall be furnished by the Company to the
Trustee or to the holders of the Notes pursuant to the Indenture.
(q) Except for borrowings under the Credit Agreement, for a
period of 90 days from the date of the Offering Memorandum, not to, directly or
indirectly, sell, contract to sell, grant any option to purchase, issue any
instrument convertible into or exchangeable for, or otherwise transfer or
dispose of (or enter into any transaction or device which is designed to, or
could be expected to, result in the disposition in the future of), any debt
securities of the Company, except (i) for the Exchange Notes in connection with
the Exchange Offer or (ii) with the prior consent of the Initial Purchaser.
6. Expenses. The Company agrees that, whether or not the
transactions contemplated by this Agreement are consummated or this Agreement
becomes effective or is terminated, to pay all costs, expenses, fees and taxes
incident to and in connection with: (i) the preparation, printing, filing and
distribution of the Preliminary Offering Memorandum and the Offering Memorandum
(including, without limitation, financial statements) and all amendments and
supplements thereto (but not, however, legal fees and expenses of your counsel
incurred in connection therewith), (ii) the preparation, printing (including,
without limitation, word processing and duplication costs) and delivery of this
Agreement, the Indenture, all Blue Sky Memoranda and all other agreements,
memoranda, correspondence and other documents printed and delivered in
connection herewith and with the Exempt Resales (but not, however, legal fees
and expenses of your counsel incurred in connection with any of the foregoing
other than fees of such counsel plus reasonable disbursements incurred in
connection with the preparation, printing and delivery of such Blue Sky
Memoranda), (iii) the issuance and delivery by the Company of the Notes, (iv)
the qualification of the Notes for offer and sale under the securities or Blue
Sky laws of the several states (including, without limitation, the reasonable
fees and disbursements of your counsel relating to such registration or
qualification), (v) furnishing such copies of the Preliminary Offering
Memorandum and the Offering Memorandum, and all amendments and supplements
thereto, as may be reasonably requested for use in connection with the Exempt
Resales, (vi) the preparation of certificates for the Notes (including, without
limitation, printing and engraving thereof), (vii) the fees, disbursements and
expenses of the Company's counsel
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and accountants, (viii) all expenses and listing fees in connection with the
application for quotation of the Series A Notes in PORTAL, (ix) all fees and
expenses (including fees and expenses of counsel) of the Company in connection
with approval of the Notes by DTC for "book-entry" transfer and (x) the
performance by the Company of its other obligations under this Agreement.
7. Conditions of Initial Purchaser's Obligations. The
obligations of the Initial Purchaser hereunder are subject to the accuracy, when
made and again on the Closing Date (as if made again on and as of such date), of
the representations and warranties of the Company contained herein, to the
performance by the Company of its obligations hereunder, and to each of the
following additional terms and conditions:
(a) The Offering Memorandum shall have been printed and copies
distributed to you not later than 9:00 a.m., New York City time, on January 26,
1998, or at such later date and time as you may approve in writing, and no stop
order suspending the qualification or exemption from qualification of the Senior
Notes in any jurisdiction referred to in Section 5(e) shall have been issued and
no proceeding for that purpose shall have been commenced or shall be pending or
threatened.
(b) No Initial Purchaser shall have discovered and disclosed
to the Company on or prior to such Closing Date that the Offering Memorandum or
any amendment or supplement thereto contains an untrue statement of a fact
which, in the opinion of Latham & Watkins, counsel for the Initial Purchaser, is
material or omits to state a fact which, in the opinion of such counsel, is
material and is necessary to make the statements, in the light of the
circumstances under which they were made, not misleading.
(c) All corporate proceedings and other legal matters incident
to the authorization, form and validity of this Agreement, the other Operative
Documents, the Credit Documents, the Offering Memorandum, and all other legal
matters relating to this Agreement and the transactions contemplated hereby
shall be reasonably satisfactory in all material respects to counsel for the
Initial Purchaser, and the Company shall have furnished to such counsel all
documents and information that they may reasonably request to enable them to
pass upon such matters.
(d) No action shall have been taken and no statute, rule,
regulation or order shall have been enacted, adopted or issued by any
governmental agency which would, as of the Closing Date, have a Material Adverse
Effect; and no action, suit or proceeding shall have been commenced and be
pending against or affecting or, to the Company's knowledge, threatened against
it before any court or arbitrator or any governmental body, agency or official
that, if adversely determined, could reasonably be expected to result in a
Material Adverse Effect.
(e) Since the dates as of which information is given in the
Offering Memorandum and other than as set forth in the Offering Memorandum, (i)
there shall not have been any material adverse change, or any development that
is reasonably likely to result in a material adverse change, or any material
change in the long-term debt, or material increase in the short-term debt, from
that set forth in the Offering Memorandum, (ii) no dividend or distribution of
any kind shall have been declared, paid or made by the Company on any class of
its capital stock, and (iii) the Company shall not have incurred any liabilities
or obligations, direct or contingent, that are material, individually or in the
aggregate, to the Company and that are required to be disclosed on a balance
sheet or notes thereto in accordance with generally accepted accounting
principles and are not disclosed on the latest balance sheet or notes thereto
included in the Offering Memorandum. Since the date hereof and since the dates
as of which information is given in the Offering Memorandum, there shall not
have occurred any material adverse change.
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<PAGE>
(f) Weil Gotshal & Manges LLP shall have furnished to the
Initial Purchaser, its written opinion, as counsel to the Company, addressed to
the Initial Purchaser and dated as of the Closing Date, in form and substance
reasonably satisfactory to the Initial Purchaser and its counsel, substantially
in the form set forth on Exhibit C attached hereto.
(g) Troutman Sanders LLP shall have furnished to the Initial
Purchaser, its written opinion, as special Georgia counsel to the Company,
addressed to the Initial Purchaser and dated as of the Closing Date, in form and
substance reasonably satisfactory to the Initial Purchaser and its counsel,
substantially in the form set forth on Exhibit D attached hereto.
(h) The Initial Purchaser shall have received from Latham &
Watkins, counsel for the Initial Purchaser, such opinion or opinions, dated such
Closing Date, with respect to the issuance and sale of the Series A Notes, the
Offering Memorandum and other related matters as the Initial Purchaser may
reasonably require, and the Company shall have furnished to such counsel such
documents as they reasonably request for the purpose of enabling them to pass
upon such matters.
(i) The Initial Purchaser shall have received letters
addressed to the Initial Purchaser, and dated the date hereof and the Closing
Date from Ernst & Young, LLP, independent certified public accountants,
substantially in the forms heretofore approved by the Initial Purchaser.
(j) The Company shall have furnished to the Initial Purchaser
a certificate, dated such Closing Date, of its President and its Chief Financial
Officer or Treasurer or Assistant Treasurer stating that:
(i) The representations, warranties and agreements of
the Company in Section 1 are true and correct as of such Closing Date and giving
effect to the consummation of the transactions contemplated by the Credit
Documents and this Agreement; the Company has complied with all its agreements
contained herein; and the conditions set forth in Sections 7(a), (b), (c), (d),
(e) and (k) have been fulfilled; and
(ii) They have carefully examined the Preliminary
Offering Memorandum and the Offering Memorandum and, in their opinion
(i) as of their respective dates and as of the Closing Date, the
Preliminary Offering Memorandum and the Offering Memorandum did not
include any untrue statement of a material fact and did not omit to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading, and (ii) since the date of
the Offering Memorandum, no event has occurred which should have been
set forth in a supplement or amendment to the Offering Memorandum.
(k)(i) The Company shall not have sustained since the date of
the latest audited financial statements included in the Offering Memorandum 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 Memorandum or (ii) since such date there shall not
have been any change in the capital stock or long-term debt of the Company or
any change, or any development involving a prospective change, in or affecting
the general affairs, management, financial position, stockholders' equity or
results of operations of the Company, otherwise than as set forth or
contemplated in the Offering Memorandum, the effect of which, in any such case
described in clause (i) or (ii), is, in the judgment of the Initial Purchaser,
so material and adverse as to make it impracticable or inadvisable to proceed
with the public offering or the delivery of the Notes being delivered on such
Closing Date on the terms
17
<PAGE>
and in the manner contemplated in the Offering Memorandum.
(l) Prior to or simultaneously with the closing of the
transactions contemplated by the Operative Documents, the Company shall have
closed the transactions contemplated by the Credit Agreement.
(m) Latham & Watkins shall have been furnished with executed
copies of the Credit Documents and such other documents and opinions, 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
Agreement and in order to evidence the accuracy, completeness or satisfaction in
all material respects of any of the representations, warranties or conditions
herein contained.
(n) Each of the Company and the Trustee shall have entered
into the Indenture and the Company shall have entered into the Registration
Rights Agreement, and the Initial Purchaser shall have received counterparts,
conformed as executed, thereof.
(o) Subsequent to the execution and delivery of this Agreement
(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
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.
(p) Subsequent to the execution and delivery of this Agreement
there shall not have occurred any of the following: (i) trading in securities
generally on the New York Stock Exchange or the American Stock Exchange or in
the over-the-counter market shall have been suspended or minimum prices shall
have been established on any such exchange or such market by the Commission, by
such exchange or by any other regulatory body or governmental authority having
jurisdiction, (ii) a banking moratorium shall have been declared by Federal or
state authorities, (iii) the United States shall have become engaged in
hostilities, there shall have been an escalation in hostilities involving the
United States or there shall have been a declaration of a national emergency or
war by the United States or (iv) there shall have occurred such a material
adverse change in general economic, political or financial conditions (or the
effect of international conditions on the financial markets in the United States
shall be such) as to make it, in the judgment of a majority in interest of the
several Initial Purchaser, impracticable or inadvisable to proceed with the
public offering or delivery of the Notes being delivered on such Closing Date on
the terms and in the manner contemplated in the Offering Memorandum.
(q) The Notes shall have been designated for trading in
PORTAL.
(r) The Initial Purchaser shall have received copies of all
opinions rendered by each of Weil, Gotshal & Manges LLP and Troutman Sanders LLP
in connection with the execution of the Credit Agreement, and all such opinions
shall be addressed to the Initial Purchaser or the Initial Purchaser shall have
received letters with respect to each such opinion entitling the Initial
Purchaser to rely thereon.
(s) Time shall be of the essence, and delivery at the time and
place specified pursuant to this Agreement is a further condition of the
obligation of the Initial Purchaser hereunder.
All opinions, letters, evidence and certificates mentioned
above or elsewhere in this
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<PAGE>
Agreement shall be deemed to be in compliance with the provisions hereof only if
they are in form and substance reasonably satisfactory to counsel for the
Initial Purchaser.
8. Indemnification and Contribution.
(a) The Company shall indemnify and hold harmless the Initial
Purchaser, its officers and employees and each person, if any, who controls the
Initial Purchaser within the meaning of the Securities Act, from and against any
loss, claim, damage or liability, joint or several, or any action in respect
thereof (including, but not limited to, any loss, claim, damage, liability or
action relating to purchases and sales of Notes), to which that Initial
Purchaser, officer, employee or controlling person may become subject, under the
Securities Act or otherwise, insofar as such loss, claim, damage, liability or
action arises out of, or is based upon, (i) any untrue statement or alleged
untrue statement of a material fact contained (A) in any Preliminary Offering
Memorandum or the Offering Memorandum or in any amendment or supplement thereto
or (B) in any blue sky application or other document prepared or executed by the
Company (or based upon any written information furnished by the Company)
specifically for the purpose of qualifying any or all of the Series A Notes
under the securities laws of any state or other jurisdiction (any such
application, document or information being hereinafter called a "Blue Sky
Application"), (ii) the omission or alleged omission to state in any Preliminary
Offering Memorandum or the Offering Memorandum, or in any amendment or
supplement thereto, or in any Blue Sky Application any material fact required to
be stated therein or necessary to make the statements therein not misleading or
(iii) any act or failure to act or any alleged act or failure to act by the
Initial Purchaser in connection with, or relating in any manner to, the Notes or
the offering contemplated hereby, and which is included as part of or referred
to in any loss, claim, damage, liability or action arising out of or based upon
matters covered by clause (i) or (ii) above (provided that the Company shall not
be liable under this clause (iii) to the extent that it is determined in a final
judgment by a court of competent jurisdiction that such loss, claim, damage,
liability or action resulted directly from any such acts or failures to act
undertaken or omitted to be taken by the Initial Purchaser through its gross
negligence or willful misconduct), and shall reimburse the Initial Purchaser and
each such officer, employee or controlling person promptly upon demand for any
legal or other expenses reasonably incurred by that Initial Purchaser, officer,
employee or controlling person in connection with investigating or defending or
preparing to defend against any such loss, claim, damage, liability or action as
such expenses are incurred; provided, however, that the Company shall not be
liable in any such case to the extent that any such loss, claim, damage,
liability or action arises out of, or is based upon, any untrue statement or
alleged untrue statement or omission or alleged omission made in any Preliminary
Offering Memorandum or the Offering Memorandum, or in any such amendment or
supplement, or in any Blue Sky Application, in reliance upon and in conformity
with written information concerning the Initial Purchaser furnished to the
Company by or on behalf of the Initial Purchaser specifically for inclusion
therein; and provided further that with respect to any such untrue statement or
omission made in the Preliminary Offering Memorandum, the indemnity agreement
contained in this Section 8(a) shall not inure to the benefit of the Initial
Purchaser or controlling person of the Initial Purchaser which sold the Notes to
the person asserting any such loss, claim, damage, liability or action, to the
extent that such sale was an initial resale by the Initial Purchaser and any
such loss, claim, damage, liability or action of the Initial Purchaser is a
result of the fact that both (i) a copy of the Offering Memorandum was not sent
or given to such person prior to, concurrently with or promptly following the
sale of such Notes to such person, and (ii) the untrue statement or omission in
the Preliminary Offering Memorandum was corrected in the Offering Memorandum
unless, in either case, such failure to deliver the Offering Memorandum was a
result of non-compliance by the Company with Section 5(d) hereof. The foregoing
indemnity agreement is in addition to any liability which the Company may
otherwise have to the Initial Purchaser or to any officer, employee or
controlling person of the Initial Purchaser.
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(b) The Initial Purchaser shall indemnify and hold harmless
the Company, its officers and employees, each of its directors, and each person,
if any, who controls the Company within the meaning of the Securities Act, from
and against any loss, claim, damage or liability, joint or several, or any
action in respect thereof, to which the Company or any such director, officer or
controlling person may become subject, under the Securities Act or otherwise,
insofar as such loss, claim, damage, liability or action arises out of, or is
based upon, (i) any untrue statement or alleged untrue statement of a material
fact contained (A) in any Preliminary Offering Memorandum or the Offering
Memorandum or in any amendment or supplement thereto, or (B) in any Blue Sky
Application or (ii) the omission or alleged omission to state in any Preliminary
Offering Memorandum or the Offering Memorandum, or in any amendment or
supplement thereto, or in any Blue Sky Application any material fact required to
be stated therein or necessary to make the statements therein not misleading,
but in each case only to the extent that the untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information concerning the Initial Purchaser furnished
to the Company by or on behalf of the Initial Purchaser specifically for
inclusion therein, and shall reimburse the Company and any such director,
officer or controlling person for any legal or other expenses reasonably
incurred by the Company or any such director, officer or controlling person in
connection with investigating or defending or preparing to defend against any
such loss, claim, damage, liability or action as such expenses are incurred. The
foregoing indemnity agreement is in addition to any liability which the Initial
Purchaser may otherwise have to the Company or any such director, officer,
employee or controlling person.
(c) Promptly after receipt by an indemnified party under this
Section 8 of notice of any claim or the commencement of any action, the
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party under this Section 8, notify the indemnifying party in
writing of the claim or the commencement of that action; provided, however, that
the failure to notify the indemnifying party shall not relieve it from any
liability which it may have under this Section 8 except to the extent it has
been materially prejudiced by such failure and, provided further, that the
failure to notify the indemnifying party shall not relieve it from any liability
which it may have to an indemnified party otherwise than under this Section 8.
If any such claim or action shall be brought against an indemnified party, and
it shall notify the indemnifying party thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it wishes, jointly with
any other similarly notified indemnifying party, to assume the defense thereof
with counsel reasonably satisfactory to the indemnified party. After notice from
the indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under this Section 8 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation; provided, however, that
the Initial Purchaser shall have the right to employ counsel to represent
jointly the Initial Purchaser and its officers, employees and controlling
persons who may be subject to liability arising out of any claim in respect of
which indemnity may be sought by the Initial Purchaser against the Company under
this Section 8 if, in the reasonable judgment of the Initial Purchaser, it is
advisable for the Initial Purchaser, officers, employees and controlling persons
to be jointly represented by separate counsel, however, the fees and expenses of
such separate counsel shall not be paid by the Company unless (1) the employment
of counsel by the Initial Purchaser has been authorized in writing by the
Company, (2) a conflict or potential conflict exists (based upon advice of
counsel to the Initial Purchaser) between the Initial Purchaser and the Company
(in which case the Company will not have the right to direct the defense of such
action on behalf of the Initial Purchaser) or (3) the Company has not in fact
employed counsel reasonably satisfactory to the Initial Purchaser to assume the
defense of such action within a reasonable time after receiving notice of the
commencement of the action, in each of which cases the reasonable fees,
disbursements and other charges of counsel will be at the expense
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<PAGE>
of the Company. No indemnifying party shall (i) without the prior written
consent of the indemnified parties (which consent shall not be unreasonably
withheld), settle or compromise or consent to the entry of any judgment with
respect to any pending or threatened claim, action, suit or proceeding in
respect of which indemnification or contribution may be sought hereunder
(whether or not the indemnified parties are actual or potential parties to such
claim or action) unless such settlement, compromise or consent includes an
unconditional release of each indemnified party from all liability arising out
of such claim, action, suit or proceeding, or (ii) be liable for any settlement
of any such action effected without its written consent (which consent shall not
be unreasonably withheld), but if settled with the consent of the indemnifying
party or if there be a final judgment of the plaintiff in any such action, the
indemnifying party agrees to indemnify and hold harmless any indemnified party
from and against any loss or liability by reason of such settlement or judgment.
(d) If the indemnification provided for in this Section 8
shall for any reason be unavailable to or insufficient to hold harmless an
indemnified party under Section 8(a) or 8(b) in respect of any loss, claim,
damage or liability, or any action in respect thereof, referred to therein, then
each indemnifying party shall, in lieu of indemnifying such indemnified party,
contribute to the amount paid or payable by such indemnified party as a result
of such loss, claim, damage or liability, or action in respect thereof, (i) in
such proportion as shall be appropriate to reflect the relative benefits
received by the Company on the one hand and the Initial Purchaser on the other
from the offering of the Series A Notes or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Company on the one hand and the Initial
Purchaser on the other with respect to the statements or omissions which
resulted in such loss, claim, damage or liability, or action in respect thereof,
as well as any other relevant equitable considerations. The relative benefits
received by the Company on the one hand and the Initial Purchaser on the other
with respect to such offering shall be deemed to be in the same proportion as
the total net proceeds from the offering of the Series A Notes purchased under
this Agreement (before deducting expenses) received by the Company, on the one
hand, and the total discounts and commissions received by the Initial Purchaser
with respect to the Series A Notes purchased under this Agreement, on the other
hand, bear to the total gross proceeds from the offering of the Series A Notes
under this Agreement, in each case as set forth in the table on the cover page
of the Offering Memorandum. The relative fault shall be determined by reference
to whether the untrue or alleged untrue statement of a material fact or omission
or alleged omission to state a material fact relates to information supplied by
the Company or the Initial Purchaser, the intent of the parties and their
relative knowledge, access to information and opportunity to correct or prevent
such statement or omission. The Company and the Initial Purchaser agree that it
would not be just and equitable if contributions pursuant to this Section 8(d)
were to be determined by pro rata allocation or by any other method of
allocation which does not take into account the equitable considerations
referred to herein. The amount paid or payable by an indemnified party as a
result of the loss, claim, damage or liability, or action in respect thereof,
referred to above in this Section 8 shall be deemed to include, for purposes of
this Section 8(d), 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 Section 8(d), the Initial
Purchaser shall not be required to contribute any amount in excess of the amount
by which the total price at which the Series A Notes purchased by it was resold
to Eligible Purchasers exceeds the amount of any damages which the Initial
Purchaser has otherwise paid or become liable to pay by reason of any untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
(e) The Initial Purchaser confirms and the Company
acknowledges that the last paragraph on the cover page and the stabilization
legend on the inside front cover page and the tenth
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paragraph under the caption "Plan of Distribution" constitute the only
information concerning the Initial Purchaser furnished in writing to the Company
by or on behalf of the Initial Purchaser specifically for inclusion in the
Offering Memorandum.
9. Termination. The obligations of the Initial Purchaser
hereunder may be terminated by the Initial Purchaser by notice given to the
Company prior to delivery of and payment for the Series A Notes if, prior to
that time, any of the events described in Sections 7(k), 7(o) or 7(p), shall
have occurred or if the Initial Purchaser shall decline to purchase the Series A
Notes for any reason permitted under this Agreement.
10. Reimbursement of Initial Purchaser's Expenses. If the
Company shall fail to tender the Series A Notes for delivery to the Initial
Purchaser by reason of any failure, refusal or inability on the part of the
Company to perform any agreement on its part to be performed, or because any
other condition of the Initial Purchaser's obligations hereunder required to be
fulfilled by the Company is not fulfilled, the Company will reimburse the
Initial Purchaser for all reasonable out-of-pocket expenses (including the fees
and disbursements of its counsel) incurred by the Initial Purchaser in
connection with this Agreement and the proposed purchase of the Series A Notes,
and upon demand the Company shall pay the full amount thereof to Lehman Brothers
Inc.
11. Notices, etc. All statements, requests, notices and
agreements hereunder shall be in writing, and:
(a) if to the Initial Purchaser, shall be delivered
or sent by mail, telex or facsimile transmission to Lehman
Brothers Inc., Three World Financial Center, New York, New
York 10285, Attention: Syndicate Department (Fax: 212-526-
6588), with a copy to Latham & Watkins, 885 Third Avenue,
Suite 1000, New York, New York 10022, Attention: Kirk A.
Davenport, Esq. (Fax: 212-751-4864) and, in the case of any
notice pursuant to Section 8, to the Director of Litigation,
Office of the General Counsel, Lehman Brothers Inc., Three
World Financial Center, 10th Floor, New York, NY 10285; and
(b) if to the Company, shall be delivered or sent by
mail, telex or facsimile transmission to Nationwide Credit,
Inc., 6190 Powers Ferry Road, 4th Floor, Atlanta, GA 30339,
Attention: General Counsel (Fax:770-644-7420), with copies to
Weiss, Peck & Greer, One New York Plaza, 30th Floor, New York,
NY 10004, Attention: Craig S. Whiting (Fax: 212-908-0112);
Centre Partners Management LLC, 30 Rockefeller Plaza, 50th
Floor, New York, NY 10020, Attention: Paul Zepf (Fax: 212-332-
5801); and Weil, Gotshal & Manges LLP, 767 Fifth Avenue, New
York, NY 10153, Attention: Stephen M. Besen, Esq. (Fax: 212-
310-8007).
Any such statements, requests, notices or agreements shall
take effect at the time of receipt thereof.
12. Persons Entitled to Benefit of Agreement. This Agreement
shall inure to the benefit of and be binding upon the Initial Purchaser, the
Company, and their respective personal representatives and successors. This
Agreement and the terms and provisions hereof are for the sole benefit of only
those persons, except that (i) the representations, warranties, indemnities and
agreements of the Company contained in this Agreement shall also be deemed to be
for the benefit of the person or persons, if any, who control the Initial
Purchaser within the meaning of Section 15 of the Securities Act and (ii) the
representations, warranties, indemnities and agreements of the Initial
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Purchaser contained in this Agreement shall also be deemed to be for the benefit
of the directors, officers and any other person or persons, if any, who control
the Company within the meaning of Section 15 of the Securities Act.
13. Survival. The respective indemnities, representations,
warranties and agreements of the Company and the Initial Purchaser contained in
this Agreement or made by or on behalf on them, respectively, pursuant to this
Agreement, shall survive the delivery of and payment for the Notes and shall
remain in full force and effect, regardless of any investigation made by or on
behalf of any of them or any person controlling any of them.
14. Definition of the Terms "Business Day" and "Subsidiary."
For purposes of this Agreement, (a) "business day" means any day on which the
New York Stock Exchange, Inc. is open for trading and (b) "subsidiary" has the
meaning set forth in Rule 405 of the Rules and Regulations.
15. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF NEW YORK.
16. Counterparts. This Agreement may be executed in one
or more counterparts and, if executed in more than one counterpart, the executed
counterparts shall each be deemed to be an original but all such counterparts
shall together constitute one and the same instrument.
17. Headings. The headings herein are inserted for
convenience of reference only and are not intended to be part of, or to affect
the meaning or interpretation of, this Agreement.
[Signature Page Follows]
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<PAGE>
If the foregoing correctly sets forth the agreement between
the Company and the Initial Purchaser, please indicate your acceptance in the
space provided for that purpose below.
Very truly yours,
NATIONWIDE CREDIT, INC.
By: Jerrold Kaufman
--------------------------
Name: Jerrold Kaufman
Title: President and chief Executive
Officer
Accepted:
LEHMAN BROTHERS INC.
By: /s/ Theodore Davies
----------------------------
Authorized Representative
<PAGE>
EXHIBIT A
Registration Rights Agreement
-----------------------------
[Filed as Exhibit 4.3]
<PAGE>
EXHIBIT 10.3
NCI ACQUISITION CORPORATION
1997 MANAGEMENT PERFORMANCE OPTION PLAN
1. Purpose. The purpose of the NCI Acquisition Corporation 1997
Management Performance Option Plan (the "Plan") is to further the best interests
of NCI Acquisition Corporation, a Delaware corporation (the "Company"), and its
subsidiary Nationwide Credit, Inc. ("NCI"), by encouraging key employees of NCI
to continue association with NCI and by providing additional incentive for
unusual industry and efficiency through offering them an opportunity to acquire
on reasonable terms a proprietary stake in the Company and both NCI's and the
Company's future growth. The Company believes that this goal may best be
achieved by granting three classes of options, the Class A Options, Class B
Options and Class C Options (collectively, the "Options") to acquire shares (the
"Shares") of common stock ($0.01 par value) of the Company (the "Common Stock"),
to certain employees of NCI (the "Optionees").
The Options to be granted pursuant to the Plan shall not be Incentive Stock
Options (as defined in Section 422(b) of the Internal Revenue Code of 1986, as
amended (the "Code")).
2. Option Shares. The maximum number of Shares which may be made subject
to Options granted pursuant to the Plan shall be 57,665, of which 36,040 shall
be divided equally between the Class A Options and the Class B Options, 9,610 of
which shall be allocated to the Class C Options and 12,015 of which may be
allocated to Class A Options, Class B Options or Class C Options as determined
by the Board (as defined below). If the Option Period (as defined in Section 8
hereof) with respect to any Options expires or terminates for any reason without
having been exercised in full, the unpurchased Shares subject thereto shall
again be available for the grant of Options under the Plan.
3. Effective Date of Plan. The Plan shall take effect upon the
consummation of the transactions contemplated under the Agreement and Plan of
Merger, dated as of December 31, 1997 (the "Merger Agreement") between the
Company, NCI, NCI Merger Corporation, First Financial Management Corporation and
First Data Corporation (such date of the closing, the "Closing Date").
4. Administration of the Plan. The Plan shall be administered by the
Board of Directors of the Company (the "Board"). The interpretation and
construction by the Board of any provisions of the Plan or of any Options
granted hereunder shall be final, binding and
<PAGE>
conclusive. The Board shall not be liable for any action or determination made
in good faith with respect to the Plan or any Options granted hereunder.
5. Eligibility. The persons eligible to participate in the Plan as
recipients of Options shall include only the employees of NCI and its
subsidiaries as determined from time to time by the Board.
6. Grant of Options. On the Closing Date, simultaneously with the
consummation of the transactions occurring pursuant to the Merger Agreement on
the Closing Date, by action of the Board and subject to the provisions of the
Plan, the Company shall grant Options to purchase the number of Shares equal to
the number of Shares set forth opposite the names of the persons listed on
Schedule I hereto and, from time to time may grant Options to such other
eligible persons as may be selected from time to time by the Board. In the
event the Option Period (as defined in Section 8 below) for any of such Options
shall expire or terminate prior to the termination of the Plan for any reason
without having been exercised in full, the Board may, but shall not be obligated
to, grant new Options with respect to the Shares covered by such expired or
terminated Options to such eligible persons as may be selected by the Board and
subject to the provisions of the Plan. Each grant of an Option pursuant to the
Plan shall be made in writing and upon such terms and conditions as may be
determined by the Board at the time of grant, subject to the provisions and
limitations set forth in the Plan. The grant of such Option shall be evidenced
by a written agreement or certificate executed by the Company.
7. Option Price. The purchase price (the "Option Exercise Price")
for each Share placed under Option pursuant to the Plan shall be (a) $100.00 per
Share, with respect to Options granted on the Closing Date, and (b) the fair
market value per Share as determined by the Board in its sole discretion, with
respect to Options granted after the Closing Date, if any, in each case
exercisable by payment in cash.
8. Duration of Options. The period (the "Option Period") for which
each Option granted hereunder shall be effective shall commence upon the date of
the grant of such Option and shall continue until (a) with regard to the Class A
Options granted on the Closing Date, the eighth (8th) anniversary of the Closing
Date, (b) with regard to the Class B Options and Class C Options granted on the
Closing Date, the tenth (10th) anniversary of the Closing Date, or (c) with
regard to any class of Options granted after the Closing Date, the date fixed by
the Board at the time of the grant of such Options, which date cannot be longer
than ten (10) years after the date of grant (for clauses (a), (b) and (c), the
"Expiration Date") or as hereinafter provided. In addition to and in limitation
of the above, unless otherwise approved by the Board, the Option Period of any
Option, other than the Vested Percentage
2
<PAGE>
(as described below) of such Option, shall terminate on the date (the
"Termination Date") upon which the Optionee ceases to be a full-time employee of
NCI (or of one of its subsidiaries) for any reason whatsoever and such Option
shall no longer be exercisable and shall terminate, provided, however, the
Option Period with respect to the Vested Percentage of such Option, if any, as
determined pursuant to Section 9 hereof, shall terminate on the earlier of (i)
the Expiration Date of such Option or (ii) the sixtieth (60th) day after the
Termination Date. In no event shall an Option be exercisable until it has
vested in accordance with Section 9 hereof.
Neither the existence of the Plan nor the grant of any Option shall limit
whatever right the Company or NCI might otherwise have to terminate the
employment of any Optionee.
9. Vesting.
(a) Class A Options. Each Class A Option held by any Optionee shall
have a "Vested Percentage" equal to 100% if such Optionee shall be employed
full-time by NCI on the third (3rd) anniversary of the date of grant of such
Class A Option (the "Date of Grant"); provided however, that with respect to any
Class A Options granted after the Closing Date, the Board may alter the vesting
period and vesting schedule from that set forth herein. The "Vested Percentage"
of each Class A Option held by any Optionee whose full-time employment by NCI
shall terminate prior to such date for any reason whatsoever (other than for
"Cause" (as defined in Section 9(d) hereof)) shall be as follows:
(i) zero percent, if such termination of employment shall occur on
or prior to the date that is six (6) months following the Date of Grant.
(ii) sixteen and two-thirds percent (16 2/3%), if such termination
of employment shall occur on or subsequent to the date that is six (6)
months following the Date of Grant and prior to the first (1st) anniversary
of the Date of Grant.
(iii) thirty-three and one-third percent (33 1/3%), if such
termination of employment shall occur on or subsequent to the first (1st)
anniversary of the Date of Grant and prior to the date that is eighteen
(18) months following the Date of Grant.
(iv) fifty percent (50%), if such termination of employment shall
occur on or subsequent to the date that is eighteen (18) months following
the Date of Grant and prior to the second (2nd) anniversary of the Date of
Grant.
3
<PAGE>
(v) sixty-six and two-thirds percent (66 2/3%), if such termination
of employment shall occur on or subsequent to the second (2nd) anniversary
to the Date of Grant and prior to the date that is thirty (30) months
following the Date of Grant.
(vi) eighty-three and one-third percent (83 1/3%), if such
termination of employment shall occur on or subsequent to the date that is
thirty (30) months following the Date of Grant and prior to the date that
is thirty-six (36) months following the Date of Grant.
(vii) one hundred percent (100%), if such termination of employment
shall occur on or subsequent to the date that is thirty-six (36) months
following the Date of Grant.
(b) Class B Options. Each Class B Option held by any Optionee shall have a
"Vested Percentage" equal to 100% under the following conditions: (i) if (A)
such Optionee shall be employed full-time by NCI on the third (3rd) anniversary
of the Closing Date and (B) the Major Stockholders under the Stockholders'
Agreement, dated as of December 31, 1997, among the Company and certain
stockholders thereof (the "Stockholders' Agreement") shall have achieved an IRR
(as defined below) in excess of thirty-four (34%) percent; or (ii) Optionee
shall be employed full-time by NCI on the ninth (9th) anniversary of the Closing
Date. Notwithstanding the foregoing, with respect to any Class B Options granted
after the Closing Date, the Board may alter the vesting period and vesting
schedule from that set forth herein. The "Vested Percentage" of each Class B
Option held by any Optionee who is a full-time employee on the third (3rd)
anniversary of the Closing Date (or if such Optionee's full-time employment is
terminated by NCI prior to such date for any reason (other than for "Cause"),
the Major Stockholders shall have realized an IRR within the range of
percentages set forth in this Section 9(b) within one-hundred and eighty (180)
days of the date of such termination) with respect to the percentage of the IRR
set forth below shall be as follows:
Percentage of
IRR Vested Class B Options
--- ----------------------
equal to or greater than 25% but less than 26% 10%
equal to or greater than 26% but less than 27% 20%
equal to or greater than 27% but less than 28% 30%
equal to or greater than 28% but less than 29% 40%
equal to or greater than 29% but less than 30% 50%
equal to or greater than 30% but less than 31% 60%
equal to or greater than 31% but less than 32% 70%
equal to or greater than 32% but less than 33% 80%
4
<PAGE>
equal to or greater than 33% but less than 34% 90%
equal to or greater than 34% 100%
For purposes hereof, "IRR" means the internal rate of return per annum realized
in cash by the Major Stockholders on their investment in the Shares acquired
pursuant to the Stockholders' Agreement, taking into account all payments made
to the Company by the Major Stockholders in consideration of the issuance of the
Shares under the Stockholders' Agreement and all payment received by the Major
Stockholders from the Company in respect of such Shares or received by the Major
Stockholders upon any sale, transfer or other disposition thereof. The IRR
shall be computed following the disposition by each of the Major Stockholders of
not less than one-half ( 1/2) of the Shares acquired by the Major Stockholders
pursuant to the Stockholders' Agreement based on the amounts paid for and
received in respect of the Shares so disposed of. Upon subsequent dispositions
of Shares, the IRR shall be computed on a cumulative basis for the aggregate
Shares disposed of, and in the event the cumulative IRR exceeds the rate
previously computed in accordance with this Section 9(b), the Vesting Percentage
of the Class B Options shall be adjusted as appropriate. Notwithstanding the
foregoing, for purposes of determining the Vested Percentage of the Class C
Options, the IRR shall be computed in all cases based on the total investment of
the Major Stockholders in all of the Shares without regard to the percentage
disposed of by such Major Stockholders.
(c) Each Class C Option held by any Optionee shall have a "Vested
Percentage" equal to 100% under the following conditions: (i) if (A) such
Optionee shall be employed full-time by NCI on the third (3rd) anniversary of
the Closing Date (or if such Optionee's full-time employment is terminated by
NCI prior to such date for any reason whatsoever (other than for "Cause"), the
Major Stockholders shall have realized the IRR set forth in this Section 9(c)
within one-hundred and eighty (180) days of the date of such termination) and
(B) the Major Stockholders shall have achieved an IRR equal to or greater than
40%; or (ii) Optionee shall be employed full-time by NCI on the ninth (9th)
anniversary of the Closing Date.
(d) The Vested Percentage of each unexercised Option held by any Optionee
whose full-time employment by NCI shall be terminated for "Cause" shall be zero
percent (0%). Except as otherwise provided in any employment agreement between
such Optionee and NCI or the Company (in which case the term "Cause" as used
herein with respect to such Optionee shall have the meaning ascribed to it
therein), "Cause" as used in this Agreement shall mean (i) the gross negligence
or wilful misconduct of Optionee in carrying out his obligations and duties,
(ii) any other breach by Optionee of the terms of Optionee's employment which
has not been cured within five (5) days after delivery of notice by NCI to
5
<PAGE>
Optionee of such breach (or such shorter period if such breach adversely affects
NCI's ability to conduct debt collection activities in any jurisdiction),
including, without limitation, Optionee's insubordination, chronic absences from
work or alcoholism or drug dependency, (iii) Optionee shall have committed an
act of fraud, theft or dishonesty against the Company or NCI or any of their
subsidiary or affiliated companies, or (iv) Optionee shall be indicted for or
convicted of (or plead nolo contendre to) any felony or be convicted of (or
plead nolo contendre to) any misdemeanor involving fraud, dishonesty or moral
turpitude or any other misdemeanor that might, in the reasonable opinion of the
Board of Directors, adversely affect Optionee's ability to perform Optionee's
obligations or duties to the Company or NCI in any material respect or adversely
affects NCI's ability to conduct its debt collection activities in any
jurisdiction.
(e) In the event of the occurrence of a Transfer Event (as defined below),
all Class A Options shall be deemed to have a Vested Percentage of one hundred
(100%) percent and the conditions set forth in Section 9(b)(i)(A) with respect
to the Class B Options and the conditions set forth in Section 9(c)(i)(A) with
respect to the Class C Options shall be deemed to be satisfied. For purposes
hereof, "Transfer Event" shall mean (i) assets constituting all or substantially
all of the assets of the Company are sold, in one or more related transactions,
to any "person" or "group" (as such terms are defined in the United States
Securities Exchange Act of 1934, as amended) and as a result, less than fifty
(50%) of the outstanding voting securities or other capital interest of which
are owned in the aggregate by the stockholders of the Company, directly or
indirectly, immediately prior to or after such sale, (ii) an event or series of
events (whether a share purchase, merger, consolidation or other business
combination or otherwise) by which any person or group (other than a stockholder
of the Company on the Closing Date) is or becomes the "beneficial owner" (as
defined in the United States Securities Exchange Act of 1934 (the "Securities
Act"), as amended) directly or indirectly of more than fifty percent (50%) of
the combined voting power of the then outstanding securities of the Company, or
(iii) a report filed on Schedule 13D or Schedule 14D-1 (or any successor
schedule, form or report) each as promulgated pursuant to the Securities
disclosing that any person (as the term "person" is used in Section 13(d)3 or
Section 14(d)2 of the Securities Act), other than a stockholder or group of
stockholders of the Company on the Closing Date, has become the beneficial owner
(as the term "beneficial owner" is defined under Rule 13d-3 or any successor
rule or regulation promulgated under the Securities Act) of fifty (50%) percent
or more of the issued and outstanding shares of voting securities of the
Company, excluding in the case of each of clauses (i), (ii) and (iii) any
reincorporation, reorganization or recapitalization transaction in which the
stockholders of the Company continue to possess all of the outstanding voting
securities of the successor or surviving entity in the same relative
proportions.
6
<PAGE>
10. Non-Transferability. Options granted pursuant to the Plan shall not,
without the prior written consent of the Board, which may be granted or withheld
in its sole discretion, be transferred by the Optionee except to a living trust
for the benefit of any or all of the Optionee's spouse or descendants or to a
deceased Optionee's executors, legal heirs, devisees, administrators or
testamentary trustees and beneficiaries, provided, that the Optionee may pledge
the Options to the Company. During the lifetime of the Optionee, the Options
may be exercised only by him or her.
11. Termination of the Plan. The Plan shall terminate with respect to
additional option grants upon the close of business on the date following the
delivery of the audited financial statements for the Company for the year ending
December 31, 2000 unless it shall have sooner terminated by there having been
granted and fully exercised Options covering all of the Shares subject to the
Plan. Any Option outstanding under the Plan at the time of the termination of
the Plan shall remain in effect until such Option shall have been exercised or
shall have expired in accordance with its terms.
12. Exercisability of Options. Each of the Options shall become
exercisable with respect to the Vested Percentage upon the vesting thereof in
accordance with Section 9.
13. Procedure for Exercise and Payment for Shares. (a) Exercise of an
Option shall be made by the giving of written notice to the Company by the
Optionee. Such written notice shall be deemed sufficient for this purpose only
if delivered to the Company at its principal offices and only if such written
notice states the number of Shares with respect to which the Option is being
exercised and, further, states the date, not more than ninety (90) days after
the date of such notice, upon which the Shares shall be purchased and payment
therefor shall be made. The payments for Shares purchased pursuant to exercise
of an Option shall be made at the principal offices of the Company. Upon the
exercise of any Option, in compliance with the provisions of this paragraph and
promptly thereafter upon receipt by the Company of the payment for the Shares so
purchased together with the payment of the amount of any taxes (the "Withholding
Taxes") required to be collected or withheld as a result of the exercise of such
Option, the Company shall deliver or cause to be delivered to the Optionee so
exercising an Option certificate or certificates representing the number of
validly authorized, duly issued, fully paid and non-assessable Shares with
respect to which the Option is so exercised and payment is so made. The Shares
shall be registered in the name of the exercising Optionee, provided that, in no
event shall any Shares be issued pursuant to exercise of an Option until full
payment therefor shall have been made by cash or certified or bank cashier's
check, at which time the exercising Optionee shall have the rights of a
stockholder of the Company with respect to such Shares. For purposes of this
paragraph, the date of issuance shall be the date upon which payment in full has
been
7
<PAGE>
received by the Company as provided herein. In the event of the death of an
Optionee, a condition of exercising any Option shall be the delivery to the
Company of such tax waivers and other documents as the Company shall reasonably
request, provided that such request is made by the Company in writing and
delivered or mailed by certified mail or overnight courier service and addressed
to the heirs of such Optionee reasonably in advance of the Termination Date with
respect to such Option.
(b) Notwithstanding any other provision of the Plan, if an Optionee
determines to exercise an Option, the Company may notify an Optionee, after the
Company's receipt of the notice by the Optionee pursuant to Section 13(a), that
the Company will settle such Option in cash by paying the Optionee on a date
(the "Settlement Date") to occur as soon as practicable after such notification,
and in all events within ninety (90) days after the date of such notice, an
amount equal to (A) the difference between (i) the aggregate fair market value
as determined by the Board of Directors in its reasonable discretion on the
Settlement Date of the Shares with respect to which the Optionee requested the
exercise of the Option and (ii) the aggregate Option Exercise Price for such
Shares, less (B) any Withholding Taxes with respect to such payment.
14. Requirements of Law. If any law or any regulation of any commission
or agency of competent jurisdiction shall require the Company or the exercising
Optionee to take any action with respect to the Shares acquired by the exercise
of an Option, then the date upon which the Company shall issue the Shares shall
be postponed until full compliance has been made with all such requirements of
law or regulation; provided, that the Company shall use its best efforts to
promptly take all necessary action to comply with such requirements of law or
regulation. Further, if requested by the Company, at or before the time of the
issuance of the Shares with respect to which exercise of an Option has been
made, the exercising Optionee shall deliver to the Company his written
statements satisfactory in form and content to the Company, that he intends to
hold the Shares so acquired by him on exercise of his Option for investment and
not with a view to resale or other distribution thereof to the public in
violation of the Securities Act of 1933. Moreover, in the event that the
Company shall determine that, in compliance with the Securities Act of 1933 or
other applicable statutes or regulations, it is necessary to register any of the
Shares with respect to which an exercise of an Option has been made, or to
qualify any such Shares for exemption from any of the requirements of the
Securities Act of 1933 or any other applicable statute or regulation, no Options
may be exercised (and (i) any resulting delay will not otherwise derogate from
the rights of the Optionee to exercise the Option thereafter and (ii) the
Expiration Date or the Termination Date with respect to such Option shall not
occur during such time or a period ending not less than sixty (60) days after
such time) and no Shares shall be issued to the exercising Optionee until the
required action has been
8
<PAGE>
completed; provided, that the Company shall use its best efforts promptly to
take all necessary action to comply with such requirements of law or regulation.
15. Amendment or Discontinuance of the Plan. The Board may, insofar as
permitted by law, amend, suspend, or discontinue the Plan at any time without
restriction; provided, however, that (i) the Board may not alter, amend, suspend
or discontinue or revoke or otherwise impair the rights of any holder of any
outstanding Options which have been granted pursuant to the Plan and which
remain unexercised, except in the event that there is secured the written
consent of such holder, (ii) the Board may not alter or amend the IRR targets
set forth herein, except in the event that there is secured the written consent
of each of the holders of the then outstanding Options, and (iii) the Board may
not amend, alter or revise the Plan to change the number of Shares subject to
the Plan or change the description of the class of employees eligible to receive
Options. Nothing contained in this Section, however, shall in any way condition
or limit the termination of an Option as hereinabove provided where reference is
made to termination of employment of an Optionee. The Option Period of any
outstanding Option shall not be extended by any permitted amendment or
suspension or discontinuance of the Plan.
16. Governing Law. The Plan and such Options as may be granted thereunder
and all related matters shall be governed by, and construed and enforced in
accordance with the internal laws (and not the laws of conflicts) of the State
of New York from time to time obtaining.
17. Partial Invalidity. The invalidity or illegibility of any provision
hereof shall not be deemed to affect the validity of any other provision.
18. Party to Stockholders' Agreement. By accepting an Option, an Optionee
agrees that as a condition to the issuance of any Shares upon the exercise of
any Option by the holder thereof, such holder shall become a party to, bound by,
and subject to the provisions of, the Stockholders' Agreement. Prior to the
exercise of any Option hereunder, no Optionee shall have any rights as a
stockholder of the Company.
19. Adjustment Upon Changes in Capitalization. In the event that the
outstanding Shares are hereafter changed by reason of reorganization, merger,
consolidation, recapitalization, reclassification, stock split, combination or
exchange of Shares and the like, or dividends payable in Shares, an appropriate
adjustment shall be made by the Board in the aggregate number of Shares
available under the Plan and in the number of Shares and the Option Exercise
Price subject to outstanding Options. If the Company shall be reorganized,
consolidated, or merged with another corporation, or if all or substantially all
of the assets of
9
<PAGE>
the Company shall be sold or exchanged, an Optionee shall at the time of
issuance of the stock under such a corporate event, be entitled to receive upon
the exercise of an Option the same number and kind of shares of stock or the
same amount of property, cash or securities as he would have been entitled to
receive upon the occurrence of any such corporate event as if he had been,
immediately prior to such event, the holder of the number of Shares covered by
such Option. Any adjustment under this Section 19 in the number of Shares
subject to Options shall apply proportionately to only the unexercised portion
of any Option granted hereunder. If fractions of a share would result from any
such adjustment, the adjustment shall be revised to the next lower whole number
of shares.
10
<PAGE>
SCHEDULE I
----------
Initial Grants
--------------
=================================================================
Shares Subject
--------------
Name Class A Class B Class C to Plan
---- ------- ------- ------- -------
- -----------------------------------------------------------------
Jerry Kaufman 8,409 8,409 4,805 21,623
- -----------------------------------------------------------------
Loren Kranz 7,208 7,208 4,805 19,221
- -----------------------------------------------------------------
Greg Shubert 1,802 1,802 3,604
- -----------------------------------------------------------------
Kevin Henry 601 601 1,202
- -----------------------------------------------------------------
Other 12,015
- -----------------------------------------------------------------
TOTAL 57,665
=================================================================
11
<PAGE>
EXHIBIT 10.4
================================================================================
OPTION AGREEMENT
================================================================================
This OPTION AGREEMENT (the "Agreement") dated effective as of December
31, 1997 provides for the granting of an option by NCI Acquisition Corporation,
a Delaware corporation (the "Company") and the parent of Nationwide Credit, Inc.
("NCI"), to Jerry Kaufman, an employee of NCI (the "Optionee").
The Company has duly adopted the NCI Acquisition Corporation 1997
Management Performance Option Plan (the "Plan"), a copy of which is attached
hereto as Exhibit A and which is incorporated herein by reference. In
accordance with Section 6 of the Plan, the Board of Directors of the Company has
determined that the Optionee is to be granted options under the Plan to buy
shares of the Company's common stock, $0.01 par value (the "Shares"), on the
terms and subject to the conditions hereinafter provided.
1. Number of Shares, Option Prices. (a) The Company hereby grants
to the Optionee an option (the "Class A Option") to purchase up to 8,409 Shares
(the "Class A Option Shares") at a price of $100.00 per Share, exercisable by
the payment of the exercise price in cash.
(b) In addition to the Class A Options, the Company hereby grants to
the Optionee an option (the "Class B Option") to purchase up to 8,409 Shares
(the "Class B Option Shares") at a price of $100.00 per Share, exercisable by
the payment of the exercise price in cash.
(c) The Company also hereby grants to the Optionee an option (the
"Class C Option") to purchase up to 4,805 Shares (the "Class C Option Shares")
at a price of $100.00 per Share, exercisable by the payment of the exercise
price in cash. The Class C Options, together with the Class B Options and the
Class A Options are collectively referred to herein as the "Options". The Class
C Option Shares, together with the Class B Option Shares and the Class A Option
Shares are collectively referred to herein as the "Option Shares".
2. Period of Options and Conditions of Exercise. The period of the
Options and the conditions to exercise the Options are set forth in the Plan.
<PAGE>
3. Termination Upon Termination of Employment. Except as otherwise
provided in Section 8 of the Plan, the Options shall terminate immediately upon
the Optionee's ceasing to be a full-time employee of the Company.
4. Non-Transferability of Performance Options; Death of Optionee.
The Options and this Option Agreement shall not be transferred by the Optionee
except to a living trust for the benefit of any or all of the Optionee's spouse
or descendants or to a deceased Optionee's executors, legal heirs, devisees,
administrators or testamentary trustees and beneficiaries, and the Option may be
exercised during the lifetime of the Optionee only by the Optionee. Except to
the extent provided above, the Options and this Option Agreement may not be
assigned, transferred, pledged, hypothecated or disposed of in any way (whether
by operation of law or otherwise) and shall not be subject to execution,
attachment or similar process.
5. Exercise of Options. The Options shall be exercised in the
manner set forth in the Plan.
6. Specific Restrictions Upon Option Shares. The Optionee hereby
agrees with the Company as follows:
(a) The Optionee is acquiring the Options and shall acquire the
Option Shares for investment purposes only and not with a view to resale or
other distribution thereof to the public in violation of the Securities Act of
1933, as amended (the "Securities Act"), and shall not dispose of any Option or
Option Shares in transactions which, in the opinion of counsel to the Company,
violate the Securities Act, or the rules and regulations thereunder, or any
applicable state securities or "blue sky" laws; and further
(b) If any Option Shares shall be registered under the Securities
Act, no public offering (otherwise than on a national securities exchange, as
defined in the Securities Exchange Act of 1934, as amended) of any Option Shares
shall be made by the Optionee (or any other persons) under such circumstances
that he or she (or such person) may be deemed an underwriter, as defined in the
Securities Act; and further
(c) The Company shall have the authority to endorse upon the
certificate or certificates representing the Option Shares such legends
referring to the foregoing restrictions, any restrictions resulting from the
fact that the Optionee is a party to the Stockholders' Agreement (as defined in
the Plan) and any other applicable restrictions as it may deem appropriate.
2
<PAGE>
(d) The Optionee is, by reason of his, her or its business or
financial experience described below, capable of evaluating the merits and risks
of this investment and of protecting the Optionee's own interests in connection
with the purchase of the Options and the Option Shares.
List any information the Optionee believes is relevant in showing that
he, she or it is able to evaluate adequately the risks and merits of
this investment or has knowledge and experience in financial or
business matters:
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
7. Notices. Any notice required or permitted under this Option
Agreement shall be deemed given when delivered (i) personally or by recognized
overnight courier, or (ii) when deposited in a United States Post Office as
registered mail, postage prepaid, addressed, as appropriate, either to the
Optionee at his or her address set forth below or such other address as he or
she may designate in writing to the Company, and to the Company at 6190 Powers
Ferry Road, 4th Floor, Atlanta, Georgia 30339, Attention: President, or such
other address as the Company may designate in writing to the Optionee.
8. Failure to Enforce Not a Waiver. The failure of the Company to
enforce at any time any provision of this Option Agreement shall in no way be
construed to be a waiver of such provision or of any other provision hereof.
9. Governing Law. This Option Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without giving
effect to the conflict of laws principles thereof.
10. Provisions of Plan. The Options provided for herein are granted
pursuant to the Plan, and said Options and this Option Agreement are in all
respects governed by the Plan and subject to all of the terms and provisions
thereof, whether such terms and provisions are incorporated in this Option
Agreement solely by reference or are expressly cited herein. A copy of the Plan
has been furnished to the Optionee, and the Optionee hereby acknowledges receipt
thereof.
3
<PAGE>
IN WITNESS WHEREOF, the Company has executed this Option Agreement on
the day and year first above written.
NCI ACQUISITION CORPORATION
By: /s/ Paul J. Zepf
--------------------------------------
Name: Paul J. Zepf
Title: Director
The undersigned hereby accepts, and agrees to, all terms and provisions of the
foregoing Option Agreement.
/s/ Jerry Kaufman
--------------------------------------
Signature
Printed Name and Address:
Jerry Kaufman
3071 Lenox Road, NE
Unit 18
Atlanta, GA 30324
4
<PAGE>
EXHIBIT A
---------
NCI Acquisition Corporation
1997 Management Performance Option Plan
[Filed As Exhibit 10.3]
<PAGE>
EXHIBIT 10.5
================================================================================
OPTION AGREEMENT
================================================================================
This OPTION AGREEMENT (the "Agreement") dated effective as of December
31, 1997 provides for the granting of an option by NCI Acquisition Corporation,
a Delaware corporation (the "Company") and the parent of Nationwide Credit, Inc.
("NCI"), to Loren Kranz, an employee of NCI (the "Optionee").
The Company has duly adopted the NCI Acquisition Corporation 1997
Management Performance Option Plan (the "Plan"), a copy of which is attached
hereto as Exhibit A and which is incorporated herein by reference. In
accordance with Section 6 of the Plan, the Board of Directors of the Company has
determined that the Optionee is to be granted options under the Plan to buy
shares of the Company's common stock, $0.01 par value (the "Shares"), on the
terms and subject to the conditions hereinafter provided.
1. Number of Shares, Option Prices. (a) The Company hereby grants
to the Optionee an option (the "Class A Option") to purchase up to 7,208 Shares
(the "Class A Option Shares") at a price of $100.00 per Share, exercisable by
the payment of the exercise price in cash.
(b) In addition to the Class A Options, the Company hereby grants to
the Optionee an option (the "Class B Option") to purchase up to 7,208 Shares
(the "Class B Option Shares") at a price of $100.00 per Share, exercisable by
the payment of the exercise price in cash.
(c) The Company also hereby grants to the Optionee an option (the
"Class C Option") to purchase up to 4,805 Shares (the "Class C Option Shares")
at a price of $100.00 per Share, exercisable by the payment of the exercise
price in cash. The Class C Options, together with the Class B Options and the
Class A Options are collectively referred to herein as the "Options". The Class
C Option Shares, together with the Class B Option Shares and the Class A Option
Shares are collectively referred to herein as the "Option Shares".
2. Period of Options and Conditions of Exercise. The period of the
Options and the conditions to exercise the Options are set forth in the Plan.
<PAGE>
3. Termination Upon Termination of Employment. Except as otherwise
provided in Section 8 of the Plan, the Options shall terminate immediately upon
the Optionee's ceasing to be a full-time employee of the Company.
4. Non-Transferability of Performance Options; Death of Optionee.
The Options and this Option Agreement shall not be transferred by the Optionee
except to a living trust for the benefit of any or all of the Optionee's spouse
or descendants or to a deceased Optionee's executors, legal heirs, devisees,
administrators or testamentary trustees and beneficiaries, and the Option may be
exercised during the lifetime of the Optionee only by the Optionee. Except to
the extent provided above, the Options and this Option Agreement may not be
assigned, transferred, pledged, hypothecated or disposed of in any way (whether
by operation of law or otherwise) and shall not be subject to execution,
attachment or similar process.
5. Exercise of Options. The Options shall be exercised in the
manner set forth in the Plan.
6. Specific Restrictions Upon Option Shares. The Optionee hereby
agrees with the Company as follows:
(a) The Optionee is acquiring the Options and shall acquire the
Option Shares for investment purposes only and not with a view to resale or
other distribution thereof to the public in violation of the Securities Act of
1933, as amended (the "Securities Act"), and shall not dispose of any Option or
Option Shares in transactions which, in the opinion of counsel to the Company,
violate the Securities Act, or the rules and regulations thereunder, or any
applicable state securities or "blue sky" laws; and further
(b) If any Option Shares shall be registered under the Securities
Act, no public offering (otherwise than on a national securities exchange, as
defined in the Securities Exchange Act of 1934, as amended) of any Option Shares
shall be made by the Optionee (or any other persons) under such circumstances
that he or she (or such person) may be deemed an underwriter, as defined in the
Securities Act; and further
(c) The Company shall have the authority to endorse upon the
certificate or certificates representing the Option Shares such legends
referring to the foregoing restrictions, any restrictions resulting from the
fact that the Optionee is a party to the Stockholders' Agreement (as defined in
the Plan) and any other applicable restrictions as it may deem appropriate.
2
<PAGE>
(d) The Optionee is, by reason of his, her or its business or
financial experience described below, capable of evaluating the merits and risks
of this investment and of protecting the Optionee's own interests in connection
with the purchase of the Options and the Option Shares.
List any information the Optionee believes is relevant in showing that
he, she or it is able to evaluate adequately the risks and merits of
this investment or has knowledge and experience in financial or
business matters:
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
7. Notices. Any notice required or permitted under this Option
Agreement shall be deemed given when delivered (i) personally or by recognized
overnight courier, or (ii) when deposited in a United States Post Office as
registered mail, postage prepaid, addressed, as appropriate, either to the
Optionee at his or her address set forth below or such other address as he or
she may designate in writing to the Company, and to the Company at 6190 Powers
Ferry Road, 4th Floor, Atlanta, Georgia 30339, Attention: President, or such
other address as the Company may designate in writing to the Optionee.
8. Failure to Enforce Not a Waiver. The failure of the Company to
enforce at any time any provision of this Option Agreement shall in no way be
construed to be a waiver of such provision or of any other provision hereof.
9. Governing Law. This Option Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without giving
effect to the conflict of laws principles thereof.
10. Provisions of Plan. The Options provided for herein are granted
pursuant to the Plan, and said Options and this Option Agreement are in all
respects governed by the Plan and subject to all of the terms and provisions
thereof, whether such terms and provisions are incorporated in this Option
Agreement solely by reference or are expressly cited herein. A copy of the Plan
has been furnished to the Optionee, and the Optionee hereby acknowledges receipt
thereof.
3
<PAGE>
IN WITNESS WHEREOF, the Company has executed this Option Agreement on
the day and year first above written.
NCI ACQUISITION CORPORATION
By: /s/ Jerry Kaufman
-----------------------------------------------
Name: Jerry Kaufman
Title: President and Chief Executive Officer
The undersigned hereby accepts, and agrees to, all terms and provisions of the
foregoing Option Agreement.
/s/ Loren Kranz
--------------------------------------------------
Signature
Printed Name and Address:
Loren Kranz
3124 Denton Place
Roswell, GA 30075
4
<PAGE>
EXHIBIT A
---------
NCI Acquisition Corporation
1997 Management Performance Option Plan
[Filed as Exhibit 10.3]
<PAGE>
EXHIBIT 10.6
================================================================================
OPTION AGREEMENT
================================================================================
This OPTION AGREEMENT (this "Agreement"), dated effective as of May
18, 1998, provides for the granting of an option by NCI Acquisition Corporation,
a Delaware corporation (the "Company") and the parent of Nationwide Credit, Inc.
("NCI"), to Michael Lord, an employee of NCI (the "Optionee").
The Company has duly adopted the NCI Acquisition Corporation 1997
Management Performance Option Plan (the "Plan"), a copy of which is attached
hereto as Exhibit A and which is incorporated herein by reference. In
accordance with Section 6 of the Plan, the Board of Directors of the Company has
determined that the Optionee is to be granted options under the Plan to buy
shares of the Company's common stock, $0.01 par value (the "Shares"), on the
terms and subject to the conditions hereinafter provided.
1. Number of Shares, Option Prices. (a) The Company hereby grants
to the Optionee an option (the "Class A Option") to purchase up to 2,403 Shares
(the "Class A Option Shares") at a price of $100.00 per Share, exercisable by
the payment of the exercise price in cash.
(b) In addition to the Class A Options, the Company hereby grants to
the Optionee an option (the "Class B Option") to purchase up to 2,403 Shares
(the "Class B Option Shares") at a price of $100.00 per Share, exercisable by
the payment of the exercise price in cash. The Class B Options, together with
the Class A Options are collectively referred to herein as the "Options". The
Class B Option Shares, together with the Class A Option Shares are collectively
referred to herein as the "Option Shares".
2. Period of Options and Conditions of Exercise. The period of the
Options and the conditions to exercise the Options are set forth in the Plan,
except, (a) that solely with respect to the termination of the Option Period
applicable to the Vested Percentage of the Options, the proviso to the second
sentence of Section 8 of the Plan shall be modified by deleting the phrase "or
(ii) the sixtieth (60th) day after the Termination Date" and (b) that solely for
purposes of the vesting of the Class B Option granted pursuant to this
Agreement, Section 9(b) of the Plan shall be modified by deleting the phrase
"within one-hundred and eighty (180) days of the date of such termination" from
the definition of "Vested Percentage" in the last sentence of the first
paragraph thereof.
<PAGE>
3. Termination Upon Termination of Employment. Except as otherwise
provided in Section 8 of the Plan and paragraph 2 of this Agreement, the Options
shall terminate immediately upon the Optionee's ceasing to be a full-time
employee of the Company.
4. Non-Transferability of Performance Options; Death of Optionee.
The Options and this Option Agreement shall not be transferred by the Optionee
except to a living trust for the benefit of any or all of the Optionee's spouse
or descendants or to a deceased Optionee's executors, legal heirs, devisees,
administrators or testamentary trustees and beneficiaries, and the Option may be
exercised during the lifetime of the Optionee only by the Optionee. Except to
the extent provided above, the Options and this Option Agreement may not be
assigned, transferred, pledged, hypothecated or disposed of in any way (whether
by operation of law or otherwise) and shall not be subject to execution,
attachment or similar process.
5. Exercise of Options. The Options shall be exercised in the
manner set forth in the Plan.
6. Specific Restrictions Upon Option Shares. The Optionee hereby
agrees with the Company as follows:
(a) The Optionee is acquiring the Options and shall acquire the Option
Shares for investment purposes only and not with a view to resale or other
distribution thereof to the public in violation of the Securities Act of 1933,
as amended (the "Securities Act"), and shall not dispose of any Option or Option
Shares in transactions which, in the opinion of counsel to the Company, violate
the Securities Act, or the rules and regulations thereunder, or any applicable
state securities or "blue sky" laws; and further
(b) If any Option Shares shall be registered under the Securities Act,
no public offering (otherwise than on a national securities exchange, as defined
in the Securities Exchange Act of 1934, as amended) of any Option Shares shall
be made by the Optionee (or any other persons) under such circumstances that he
or she (or such person) may be deemed an underwriter, as defined in the
Securities Act; and further
(c) The Company shall have the authority to endorse upon the
certificate or certificates representing the Option Shares such legends
referring to the foregoing restrictions, any restrictions resulting from the
fact that the Optionee is a party to the Stockholders' Agreement (as defined in
the Plan) and any other applicable restrictions as it may deem appropriate.
2
<PAGE>
(d) The Optionee is, by reason of his, her or its business or
financial experience described below, capable of evaluating the merits and risks
of this investment and of protecting the Optionee's own interests in connection
with the purchase of the Options and the Option Shares.
List any information the Optionee believes is relevant in showing that
he, she or it is able to evaluate adequately the risks and merits of
this investment or has knowledge and experience in financial or
business matters:
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
7. Notices. Any notice required or permitted under this Option
Agreement shall be deemed given when delivered (i) personally or by recognized
overnight courier, or (ii) when deposited in a United States Post Office as
registered mail, postage prepaid, addressed, as appropriate, either to the
Optionee at his or her address set forth below or such other address as he or
she may designate in writing to the Company, and to the Company at 6190 Powers
Ferry Road, 4th Floor, Atlanta, Georgia 30339, Attention: President, or such
other address as the Company may designate in writing to the Optionee.
8. Failure to Enforce Not a Waiver. The failure of the Company to
enforce at any time any provision of this Option Agreement shall in no way be
construed to be a waiver of such provision or of any other provision hereof.
9. Governing Law. This Option Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without giving
effect to the conflict of laws principles thereof.
10. Provisions of Plan. Except as otherwise specifically set forth
herein, the Options provided for herein are granted pursuant to the Plan, and
said Options and this Option Agreement are in all respects governed by the Plan
and subject to all of the terms and provisions thereof, whether such terms and
provisions are incorporated in this Option Agreement solely by reference or are
expressly cited herein. A copy of the Plan has been furnished to the Optionee,
and the Optionee hereby acknowledges receipt thereof.
3
<PAGE>
IN WITNESS WHEREOF, the Company has executed this Option Agreement on
the day and year first above written.
NCI ACQUISITION CORPORATION
By: /s/ Jerry Kaufman
-----------------------------------------------
Name: Jerry Kaufman
Title: President and Chief Executive Officer
The undersigned hereby accepts, and agrees to, all terms and provisions of the
foregoing Option Agreement.
/s/ MICHAEL LORD
--------------------------------------------------
Signature
Printed Name and Address:
Michael Lord
RRI Box 20
Under the Mountain Road
South Londonderry, Vermont 05155
4
<PAGE>
EXHIBIT A
NCI Acquisition Corporation
1997 Management Performance Option Plan
[Filed as Exhibit 10.3]
<PAGE>
EXHIBIT 10.7
================================================================================
OPTION AGREEMENT
================================================================================
This OPTION AGREEMENT (the "Agreement") dated effective as of December
---------
31, 1997 provides for the granting of an option by NCI Acquisition Corporation,
a Delaware corporation (the "Company") and the parent of Nationwide Credit, Inc.
-------
("NCI"), to Greg Schubert, an employee of NCI (the "Optionee").
--- --------
The Company has duly adopted the NCI Acquisition Corporation 1997
Management Performance Option Plan (the "Plan"), a copy of which is attached
----
hereto as Exhibit A and which is incorporated herein by reference. In
---------
accordance with Section 6 of the Plan, the Board of Directors of the Company has
determined that the Optionee is to be granted options under the Plan to buy
shares of the Company's common stock, $0.01 par value (the "Shares"), on the
------
terms and subject to the conditions hereinafter provided.
1. Number of Shares, Option Prices. (a) The Company hereby grants
-------------------------------
to the Optionee an option (the "Class A Option") to purchase up to 1,802 Shares
--------------
(the "Class A Option Shares") at a price of $100.00 per Share, exercisable by
---------------------
the payment of the exercise price in cash.
(b) In addition to the Class A Options, the Company hereby grants to
the Optionee an option (the "Class B Option") to purchase up to 1,802 Shares
--------------
(the "Class B Option Shares") at a price of $100.00 per Share, exercisable by
---------------------
the payment of the exercise price in cash. The Class B Options, together with
the Class A Options are collectively referred to herein as the "Options". The
-------
Class B Option Shares, together with the Class A Option Shares are collectively
referred to herein as the "Option Shares".
-------------
2. Period of Options and Conditions of Exercise. The period of the
--------------------------------------------
Options and the conditions to exercise the Options are set forth in the Plan.
3. Termination Upon Termination of Employment. Except as otherwise
------------------------------------------
provided in Section 8 of the Plan, the Options shall terminate immediately upon
the Optionee's ceasing to be a full-time employee of the Company.
<PAGE>
4. Non-Transferability of Performance Options; Death of Optionee.
-------------------------------------------------------------
The Options and this Option Agreement shall not be transferred by the Optionee
except to a living trust for the benefit of any or all of the Optionee's spouse
or descendants or to a deceased Optionee's executors, legal heirs, devisees,
administrators or testamentary trustees and beneficiaries, and the Option may be
exercised during the lifetime of the Optionee only by the Optionee. Except to
the extent provided above, the Options and this Option Agreement may not be
assigned, transferred, pledged, hypothecated or disposed of in any way (whether
by operation of law or otherwise) and shall not be subject to execution,
attachment or similar process.
5. Exercise of Options. The Options shall be exercised in the
-------------------
manner set forth in the Plan.
6. Specific Restrictions Upon Option Shares. The Optionee hereby
----------------------------------------
agrees with the Company as follows:
(a) The Optionee is acquiring the Options and shall acquire the Option
Shares for investment purposes only and not with a view to resale or other
distribution thereof to the public in violation of the Securities Act of 1933,
as amended (the "Securities Act"), and shall not dispose of any Option or Option
--------------
Shares in transactions which, in the opinion of counsel to the Company, violate
the Securities Act, or the rules and regulations thereunder, or any applicable
state securities or "blue sky" laws; and further
(b) If any Option Shares shall be registered under the Securities Act,
no public offering (otherwise than on a national securities exchange, as defined
in the Securities Exchange Act of 1934, as amended) of any Option Shares shall
be made by the Optionee (or any other persons) under such circumstances that he
or she (or such person) may be deemed an underwriter, as defined in the
Securities Act; and further
(c) The Company shall have the authority to endorse upon the
certificate or certificates representing the Option Shares such legends
referring to the foregoing restrictions, any restrictions resulting from the
fact that the Optionee is a party to the Stockholders' Agreement (as defined in
the Plan) and any other applicable restrictions as it may deem appropriate.
(d) The Optionee is, by reason of his, her or its business or
financial experience described below, capable of evaluating the merits and risks
of this investment and of protecting the Optionee's own interests in connection
with the purchase of the Options and the Option Shares.
2
<PAGE>
List any information the Optionee believes is relevant in showing that
he, she or it is able to evaluate adequately the risks and merits of
this investment or has knowledge and experience in financial or
business matters:
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
7. Notices. Any notice required or permitted under this Option
-------
Agreement shall be deemed given when delivered (i) personally or by recognized
overnight courier, or (ii) when deposited in a United States Post Office as
registered mail, postage prepaid, addressed, as appropriate, either to the
Optionee at his or her address set forth below or such other address as he or
she may designate in writing to the Company, and to the Company at 6190 Powers
Ferry Road, 4th Floor, Atlanta, Georgia 30339, Attention: President, or such
other address as the Company may designate in writing to the Optionee.
8. Failure to Enforce Not a Waiver. The failure of the Company to
-------------------------------
enforce at any time any provision of this Option Agreement shall in no way be
construed to be a waiver of such provision or of any other provision hereof.
9. Governing Law. This Option Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of New York, without giving
effect to the conflict of laws principles thereof.
10. Provisions of Plan. The Options provided for herein are granted
------------------
pursuant to the Plan, and said Options and this Option Agreement are in all
respects governed by the Plan and subject to all of the terms and provisions
thereof, whether such terms and provisions are incorporated in this Option
Agreement solely by reference or are expressly cited herein. A copy of the Plan
has been furnished to the Optionee, and the Optionee hereby acknowledges receipt
thereof.
3
<PAGE>
IN WITNESS WHEREOF, the Company has executed this Option Agreement on
the day and year first above written.
NCI ACQUISITION CORPORATION
By: /s/ Jerry Kaufman
--------------------------------------
Name: Jerry Kaufman
Title: President and Chief Executive Officer
The undersigned hereby accepts, and agrees to, all terms and provisions of the
foregoing Option Agreement.
/s/ Greg Schubert
--------------------------------------
Signature
Printed Name and Address:
Greg Schubert
1051 Woodcroft Chase
Marietta, GA 30064
4
<PAGE>
EXHIBIT A
---------
NCI Acquisition Corporation
1997 Management Performance Option Plan
5
[Filed as Exhibit 10.3]
<PAGE>
EXHIBIT 10.8
AVALON OPTION AGREEMENT
This OPTION AGREEMENT (this "Agreement") dated as of December 31, 1997
---------
provides for the granting of options by NCI ACQUISITION CORPORATION, a Delaware
corporation (the "Company"), to AVALON INVESTMENT PARTNERS, LLC (the
-------
"Optionee"), a Delaware limited liability company.
--------
1. Grant of Options. In connection with the consummation of the
----------------
transactions contemplated under the Agreement and Plan of Merger, dated as of
December 31, 1997 (the "Merger Agreement") between the Company, NCI, NCI Merger
----------------
Corporation, First Financial Management and First Data Corporation (such date of
the closing, the "Closing Date"), the Board of Directors of the Company (the
------------
"Board") hereby grants to the Optionee pursuant to this Agreement two classes of
- ------
options, (i) the Class I Options to acquire 14,416 shares (the "Shares") of
------
common stock, $0.01 par value, of the Company (the "Common Stock") and (ii) the
------------
Class II Options to acquire 4,805 Shares of Common Stock (the Class I Options
and the Class II Options collectively, the "Options"), for a purchase price (the
-------
"Option Exercise Price") of $100.00 per Share, on the terms and subject to the
---------------------
conditions hereinafter provided.
2. Duration of Options. The period (the "Option Period") for which the
------------------- -------------
Options shall be effective shall commence upon the execution and delivery of
this Agreement and shall continue (i) with respect to the Class I Options, until
the eighth (8th) anniversary of the date hereof, and (ii) with respect to the
Class II Options, until the tenth (10th) anniversary of the date hereof (each
respectively, the "Expiration Date").
---------------
3. Vesting. Each Option held by the Optionee shall be fully vested on
-------
the Closing Date.
4. Non-Transferability. Options granted pursuant to this Agreement shall
-------------------
not be transferred by the Optionee (whether or not by operation of law) and may
be exercised only by the Optionee, provided that the Optionee may pledge the
--------
Options to the Company.
5. Exercisability of Options.
-------------------------
(a) Class I Options. Each Class I Option held by the Optionee shall become
---------------
exercisable on the Closing Date.
(b) Class II Options. Each Class II Option held by the Optionee shall
----------------
become exercisable if the Major Stockholders under the Stockholders' Agreement,
dated as of December 31, 1997, among the Company and certain stockholders
thereof (the
<PAGE>
"Stockholders' Agreement") shall have achieved an IRR (as defined below) equal
-----------------------
to or greater than twenty-five (25%) percent during the Option Period.
For purposes hereof, "IRR" means the internal rate of return per annum realized
---
in cash by the Major Stockholders on their entire investment in the Shares
acquired pursuant to the Stockholders' Agreement, taking into account all
payments made to the Company by the Major Stockholders in consideration of the
issuance of the Shares under the Stockholders' Agreement and all payment
received by the Major Stockholders from the Company in respect of such Shares or
received by the Major Stockholders upon any sale, transfer or other disposition
thereof.
6. Procedure for Exercise and Payment for Shares. (a) Exercise of an
---------------------------------------------
Option shall be made by the giving of written notice to the Company by the
Optionee. Such written notice shall be deemed sufficient for this purpose only
if delivered to the Company at its principal offices and only if such written
notice states the number of Shares with respect to which the Option is being
exercised and, further, states the date, not more than ninety (90) days after
the date of such notice, upon which the Shares shall be purchased and payment
therefor shall be made. The payments for Shares purchased pursuant to exercise
of an Option shall be made at the principal offices of the Company. Upon the
exercise of any Option, in compliance with the provisions of this paragraph and
promptly thereafter upon receipt by the Company of the payment for the Shares so
purchased together with the payment of the amount of any taxes (the "Withholding
-----------
Taxes") required to be collected or withheld as a result of the exercise of such
- -----
Option, the Company shall deliver or cause to be delivered to the Optionee so
exercising an Option certificate or certificates representing the number of
validly authorized, duly issued, fully paid and non-assessable Shares with
respect to which the Option is so exercised and payment is so made. The Shares
shall be registered in the name of the exercising Optionee, provided that, in no
event shall any Shares be issued pursuant to exercise of an Option until full
payment therefor shall have been made by cash or certified or bank cashier's
check, at which time the exercising Optionee shall have the rights of a
stockholder of the Company with respect to such Shares. For purposes of this
paragraph, the date of issuance shall be the date upon which payment in full has
been received by the Company as provided herein.
(b) Notwithstanding any other provision of this Agreement, if the Optionee
determines to exercise an Option, the Company may notify the Optionee, after the
Company's receipt of the notice by the Optionee pursuant to Section 6(a) above,
that the Company will settle such Option in cash by paying the Optionee on a
date (the "Settlement Date") to occur as soon as practicable after such
---------------
notification, and in all events within ninety (90) days after the date of such
notice, an amount equal to (A) the difference between (i) the
2
<PAGE>
aggregate fair market value as determined by the Board of Directors in its
reasonable discretion on the Settlement Date of the Shares with respect to which
the Optionee requested the exercise of the Option and (ii) the aggregate Option
Exercise Price for such Shares, less (B) any Withholding Taxes with respect to
such payment; provided, however, that in no event may the Company settle such
-------- -------
Option in cash without the consent of the Optionee.
7. Requirements of Law. If any law or any regulation of any commission
-------------------
or agency of competent jurisdiction shall require the Company or the Optionee to
take any action with respect to the Shares acquired by the exercise of the
Options, then the date upon which the Company shall issue the Shares shall be
postponed until full compliance has been made with all such requirements of law
or regulation; provided, that the Company shall use its best efforts to take
--------
promptly all necessary action to comply with such requirements of law or
regulation. Further, if requested by the Company, at or before the time of the
issuance of the Shares with respect to which exercise of the Options has been
made, the Optionee shall deliver to the Company its written statement
satisfactory in form and content to the Company, that it intends to hold the
Shares so acquired by it on exercise of the Options for investment only and not
with a view to resale or other distribution thereof to the public in violation
of the Securities Act of 1933. Moreover, in the event that the Company shall
determine that, in compliance with the Securities Act of 1933 or other
applicable statutes or regulations, it is necessary to register any of the
Shares with respect to which an exercise of the Options has been made, or to
qualify any such Shares for exemption from any of the requirements of the
Securities Act of 1933 or any other applicable statute or regulation, no Options
may be exercised (and (i) any resulting delay will not otherwise derogate from
the rights of the Optionee to exercise the Options thereafter and (ii) the
Expiration Date or the Termination Date with respect to the Options shall not
occur during such time or a period ending not less than sixty (60) days after
such time) and no Shares shall be issued to the Optionee until the required
action has been completed, provided that the Company shall use its best efforts
--------
promptly to take all necessary action to comply with such requirements of law or
regulation.
8. Adjustment Upon Changes in Capitalization. In the event that the
-----------------------------------------
outstanding Shares are hereafter changed by reason of reorganization, merger,
consolidation, recapitalization, reclassification, stock split, combination or
exchange of Shares and the like, or dividends payable in Shares, an appropriate
adjustment shall be made by the Board in the aggregate number of Shares
available under the Plan and in the number of Shares and the Option Exercise
Price subject to outstanding Options. If the Company shall be reorganized,
consolidated, or merged with another corporation, or if all or substantially all
of the assets of the Company shall be sold or exchanged, the Optionee shall at
the time of issuance of the stock under such a corporate event, be entitled to
receive upon the exercise of an Option the
3
<PAGE>
same number and kind of shares of stock or the same amount of property, cash or
securities as he would have been entitled to receive upon the occurrence of any
such corporate event as if he had been, immediately prior to such event, the
holder of the number of Shares covered by such Option. Any adjustment under
this Section 8 in the number of Shares subject to Options shall apply
proportionately to only the unexercised portion of any Option granted hereunder.
If fractions of a share would result from any such adjustment, the adjustment
shall be revised to the next lower whole number of shares.
9. Governing Law. This Agreement and the Options granted hereby and all
-------------
related matters shall be governed by, and construed and enforced in accordance
with, the internal laws (and not the laws of conflict) of the State of New York
from time to time obtaining.
10. Partial Invalidity. The invalidity or illegibility of any provision
------------------
hereof shall not be deemed to affect the validity of any other provision.
11. Party to Stockholders' Agreement. By accepting an Option, Optionee
--------------------------------
agrees that as a condition to the issuance of any Shares upon the exercise of
any Option by the holder thereof, such holder shall become a party to, bound by,
and subject to the provisions of, the Stockholders' Agreement. Prior to the
exercise of any Option hereunder, Optionee shall have no rights as a stockholder
of the Company.
4
<PAGE>
IN WITNESS WHEREOF, the Company has executed this Option Agreement on
the day and year first above written.
NCI ACQUISITION CORPORATION
By: /s/ Paul J. Zepf
-----------------------------------
Name: Paul J. Zepf
Title: Director
The undersigned hereby accepts, and agrees to, all terms and provisions of the
foregoing Option Agreement.
AVALON INVESTMENT PARTNERS, LLC
By: /s/ Donald F. Gayhardt
-----------------------------------
Name: Donald F. Gayhardt
Title: Member
5
<PAGE>
EXHIBIT 10.9
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement") made and entered into as of
the 31st day of December, 1997, by and among NATIONWIDE CREDIT, INC.
("Employer") and Jerry Kaufman who resides at 3071 Lenox Road, NE, Unit 18,
Atlanta, GA 30324 ("Executive").
W I T N E S S E T H:
WHEREAS, Employer desires to employ Executive and Executive desires to
accept employment with Employer upon the terms and conditions hereinafter set
forth;
NOW THEREFORE, in consideration of the premises and the mutual
covenants hereinafter set forth, and intending to be legally bound hereby, it is
hereby agreed as follows:
1. Employment Term. Employer agrees to employ Executive, and
Executive agrees to be so employed, in the capacity of President of Employer,
for a term commencing on the date hereof and ending on the third anniversary of
the date hereof (the "Initial Term"); provided, however, that, notwithstanding
anything to the contrary set forth in this Agreement, this Agreement may be
earlier terminated pursuant to Section 7 hereof. The term of this Agreement
will automatically extend past the Initial Term for succeeding periods of one
year each unless either party in its discretion shall terminate this Agreement
as of the end of the Initial Term, or as of the end of any subsequent one-year
period (in either case, the "Termination Date") by delivering notice to the
other party specifying the applicable Termination Date not later than one
hundred and twenty (120) days prior to the date so specified.
2. Time and Efforts; Place of Performance. Executive shall
diligently and conscientiously devote his full business time, attention, energy,
skill and best efforts to the business of Employer and the discharge of his
duties hereunder. Executive's duties under this Agreement shall be to serve as
President of Employer, with the responsibilities, rights, authority and duties
customarily pertaining to such office as may be established from time to time by
or under the direction of the Board of Directors of Employer (the "Board") and
Executive shall report to the Chairman of the Board. In the event Executive is
elected to the Board, Executive shall serve as a director without further
compensation, other than as provided in this Agreement. Executive shall also
act as an officer and/or director of such subsidiaries of Employer as may be
designated by the Board, commensurate with Executive's office, all without
further compensation other than as provided in this Agreement.
<PAGE>
3. Base Salary. In partial consideration of the services of
Executive during the term of this Agreement, Employer shall pay to Executive a
base salary compensation at an annual rate of $260,000 (the "Base Salary"), in
equal installments in accordance with the Employer's payroll practices in effect
from time to time for executive officers, but in no event less frequently than
monthly. The Base Salary may be adjusted upward annually in the discretion of
the Board, or an authorized committee thereof.
4. Bonus. (a) After the Company has received its audited financial
statements for each year end during the term of this Agreement, Executive will
have the potential to receive an annual bonus for such year, with the payment of
such bonus and the amount thereof to be determined based upon qualitative
criteria and the attainment of quantitative financial goals established annually
by the Board of Directors. For the calendar year 1998 Employee will have the
potential to receive a bonus which would range from $0 to $150,000. In the
event annual EBITDA (as hereinafter defined) based upon the Company's audited
financial statements for such year is $26 million or less, $0 will be earned.
In the event annual EBITDA for such year equals or exceeds $28 million, $105,000
will be earned. For annual EBITDA levels for the calendar year 1998 between $26
million and $28 million, the amount of bonus will be apportioned between $0 and
$105,000 by linear interpolation. Payment of $45,000 of the 1998 bonus shall be
based on the attainment of certain qualitative criteria established by the Board
of Directors. For years after 1998, the amount of the potential bonus and the
criteria therefore will be set by the Board of Directors in good faith and
provided to Employee prior to commencement of the year, provided that the
potential bonus amount for each subsequent year will be not less than the
potential bonus amount for the immediately preceding year, so long as the
budgeted EBITDA levels for the upcoming year are greater than the EBITDA levels
for the immediately preceding year. Executive's bonus, to the extent earned,
shall be payable no later than thirty (30) days after the Bond has received the
Company's audited financial statements for the applicable year.
(b) For purposes hereof, "EBITDA" has the meaning ascribed to such
term in the Agreement and Plan of Merger, dated as of December 31, 1997, between
NCI Acquisition Corporation, Employer, NCI Merger Corporation, First Financial
Management Corporation and First Data Corporation. EBITDA shall be determined
based on the audited financial statements of the Company. Notwithstanding the
provisions of Section 4(a), the EBITDA targets for any bonus period shall be
subject to modification in the reasonable discretion of the Board in the event
of any material acquisitions or dispositions during the applicable period.
(c) In the event Executive's employment is terminated by reason of
Cause (as herein defined) or the Executive's resignation, no bonus for the
calendar year in
2
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which such termination or resignation occurs shall be payable to Executive. If
Executive's employment terminates for any other reason (including expiration of
this Agreement), Executive's bonus for the year in which termination occurs
shall be payable to the extent earned as determined in the reasonable discretion
of the Board, but shall be prorated based upon the number of days in such year
that Executive was employed by Employer.
5. Benefits. Executive shall be eligible to participate in all
employee benefit programs of Employer offered from time to time during the term
of Executive's employment hereunder by Employer to employees or executives of
Executive's rank, to the extent that Executive qualifies under the eligibility
provisions of such plan or plans, in each case consistent with Employer's
current practice as approved by the Board prior to the date hereof, and provided
that Employer shall not be required to incur expenses in connection with any
such benefits in excess of the expenses for such benefits incurred in accordance
with such current practice.
6. Expenses. To the extent that Executive's reasonable and
necessary expenditures for travel, entertainment and similar items made in
furtherance of Executive's duties under this Agreement comply with Employer's
expense reimbursement policy, are deductible by Employer for federal income tax
purposes pursuant to the Internal Revenue Code of 1986, as amended and are
documented and substantiated by Executive as required by the Internal Revenue
Service and the policies of Employer, Employer shall reimburse the Executive for
such expenditures.
7. Termination.
(a) Executive's employment under this Agreement may be terminated
by Employer at any time for Cause. Upon termination of Executive's employment
for Cause, upon payment by Employer of any Base Salary that has accrued and is
unpaid to the date of such termination, Employer shall have no further liability
to Executive for any additional amounts including, without limitation, any Base
Salary or bonus. "Cause" as used in this Agreement shall mean (i) the gross
negligence or wilful misconduct of Executive in carrying out his obligations and
duties, (ii) any other breach by Executive of any other provision of this
Agreement which has not been cured within five (5) days after delivery of notice
by Employer to Executive of such breach (or such shorter period if such breach
adversely affects Employer's ability to conduct debt collection activities in
any jurisdiction), including, without limitation, Executive's insubordination,
chronic absences from work or alcoholism or drug dependency, (iii) Executive
shall have committed an act of fraud, theft or dishonesty against NCI or any of
its subsidiary or affiliated companies, or (iv) Executive shall be indicted for
or convicted of (or plead nolo contendre to) any felony or be convicted of (or
plead nolo
3
<PAGE>
contendre to) any misdemeanor involving fraud, dishonesty or moral turpitude or
any other misdemeanor that might, in the reasonable opinion of the Board of
Directors, adversely affect such Executive's ability to perform Executive's
obligations or duties to Employer in any material respect or adversely affect
the Employer's ability to conduct debt collection activities in any
jurisdiction.
(b) Subject to the terms of subsection (c) hereof, Employer may
terminate Executive's employment hereunder at any time other than for Cause (as
defined in Section 7(a) above) upon notice to Executive. In the event of any
such termination, in consideration for the obligations of Executive under
Section 8 hereof, the Employer shall pay to Executive a severance benefit (the
"Severance Benefit"), payable over a period of 12 months consistent with
Employer's past payroll practices, in an amount equal to 12 months of Base
Salary at the then current rate less the amount of any compensation, income or
benefits earned or paid to Executive as an employee or consultant from an
employer or company other than Employer during the last six (6) months of the
period during which the Severance Benefit shall be payable as provided above.
In the event that there is (i) a material change in Executive's duties or
responsibilities, or a material change in Executive's reporting relationships,
either of which results in or reflects a material diminution of the scope or
importance of Executive's duties or responsibilities, or (ii) a material
reduction in the level of benefits offered under the Employer's employee benefit
plans (other than any company-wide reduction in the level of benefits that is
applicable to all employees or executives of Executive's rank), which are made
available to Executive during the term of Executive's employment, including but
not limited to, annual and long-term incentive and stock-based plans and
programs, which is not cured within a period of ten (10) days following notice
to Employer by Executive, then Executive may by notice to the Board, deem a
constructive termination to have occurred, whereupon Executive shall be entitled
to the compensation set forth herein as if Executive had been terminated without
Cause as of the date of such notice to the Board. Upon termination of Executive
under this Section 7(b) for any reason (other than as a result of death),
Executive shall in good faith seek to obtain alternative employment and to
otherwise mitigate the amount of Severance Benefit payable by Employer.
(c) If Executive dies, this Agreement shall automatically terminate.
If Executive becomes permanently disabled during the term of this Agreement,
then at Employer's option, this Agreement will immediately terminate. In each
such case, upon payment by Employer of any Base Salary that has accrued and is
unpaid to the date of such termination, Employer shall have no further
obligations to Executive, his spouse or estate. Executive shall be deemed to be
permanently disabled if, during the term of this Agreement, he shall have been
unable or unwilling or shall have failed to perform his duties under this
Agreement (whether due to ill health, physical or mental incapacity or
disability, or for causes
4
<PAGE>
beyond his control) for a period of one-hundred and eighty (180) days, whether
consecutive or not. Any refusal by Executive to submit to a medical examination
for the purpose of certifying disability under this Section 7(c) shall be deemed
to constitute conclusive evidence of Executive's permanent disability. Upon
receipt of certifications from two physicians that the Executive's disability is
more likely than not to continue for a continuous period of one-hundred and
eighty (180) days or for shorter periods aggregating one-hundred and eighty
(180) days, Employer may immediately terminate this Agreement without waiting
for accrual of such one-hundred and eighty (180) day period. In the event of
Executive's death during the term of this Agreement, any accrued and unpaid
compensation due to Executive shall be paid to his estate.
(d) Subject to the terms of subsections (a) and (c) hereof,
payment of the Severance Benefit shall be Executive's sole remedy in the event
of the Employer's termination of this Agreement for any reason. Executive will
cooperate in order to allow Employer to purchase disability insurance regarding
Executive in order to fund its obligation hereunder.
(e) The terms of Sections 8 and 9 of this Agreement shall survive
and be binding upon Executive upon the termination of this Agreement.
(f) If Executive unilaterally terminates his employment with
Employer, other than under the conditions set forth in Section 7(b) hereof,
during the term of this Agreement, Employer shall have no further obligation to
make any payments under this Agreement and Executive shall forfeit any right to
such payments.
8. Restrictive Covenants. (a) In consideration of Employer's grant
of options to purchase shares of common stock of NCI Acquisition Corporation
pursuant to the NCI Acquisition Corporation's 1997 Management Performance Option
Plan to Executive and its covenant to pay, pursuant to the terms of Section 7, a
Severance Benefit, without prior written consent of the Board, Executive agrees
that he will not for a period of twelve (12) months (except in the case of
clause (iii) below, which will continue for a period of eighteen (18) months)
following the termination of Executive's employment with Employer for any reason
whatsoever (or to such lesser extent and for such lesser period as may be deemed
enforceable by a court of competent jurisdiction, it being the intention of the
parties that this Section 8 shall be so enforced): (i) directly or indirectly
engage, participate or make any financial investment in or become employed by or
render any services to or for any person or company in competition with the
credit reporting, collection or accounts receivable management business
conducted by Employer or any of its subsidiaries, or any similar business (the
"Business"), within any area in which Employer is doing business at such time
(whether
5
<PAGE>
as an employee, independent contractor, five (5%) percent or greater owner,
partner, lender, stockholder or otherwise); (ii) directly or indirectly raid,
entice, induce, solicit, canvass, or accept any business (of the type conducted
by Employer) for any other person or company from any past, present or future
(as defined below) customer of Employer; (iii) directly or indirectly raid,
entice, induce or attempt to cause any current or future (as defined below)
employee or other advisor of Employer to terminate his employment by or
engagement with Employer; (iv) directly or indirectly request any present or
future ("future", as used herein, shall mean at or prior to the time of
termination of Executive's employment) entities with whom Employer has business
relationships to curtail or cancel their business with Employer or (v) directly
or indirectly authorize or assist any other person or company in taking any of
the foregoing actions.
(b) Executive acknowledges and agrees that during the course of his
performance of services for the Employer he will acquire knowledge with respect
to information, technology or other matters which the Employer maintains and
preserves on a confidential basis concerning the Employer's business operations,
including, by way of illustration, such information concerning the Employer's
trade secrets, business and financial methods or practices, plans, pricing,
customer, vendor and sales information and other confidential or proprietary
information and any other information, documents or materials owned, developed
or possessed by the Employer, the confidentiality of which the Employer takes
reasonable steps to protect (any and all of which being hereinafter referred to
as "Confidential Information").
(c) Executive agrees that he will not, while he is employed by the
Employer or at any time thereafter, divulge to any person, directly or
indirectly, except to the Employer or its directors, officers and agents as
reasonably required in connection with his duties on behalf of the Employer
during his employment, or use the Confidential Information in any manner or for
any purpose in contravention of the Employer's policies or procedures,
inconsistent with the Employer's measures to protect its interest therein or
otherwise to the detriment of the Employer. Executive further agrees that he
will not, at any time after his employment with the Employer has ended, divulge
to any person or utilize for commercial or any other purpose not authorized in
writing by the Employer, directly or indirectly, any Confidential Information.
Executive further agrees that, if Executive's relationship with the Employer is
terminated (for whatever reason) he shall not take with him but will leave with
the Employer all records, papers and computer data and any copies thereof
relating to the Confidential Information (or if such papers, records, computer
data or copies are not on the premises of the Employer, Executive agrees to
return such papers, records and computer data as soon as practicable after his
termination). Executive acknowledges that all such papers, records, computer
data or copies thereof, are and remain the property of Employer.
6
<PAGE>
(d) Executive acknowledges that (i) the Confidential Information
is commercially and competitively valuable to the Employer; (ii) the
unauthorized use or disclosure of the Confidential Information would cause
irreparable harm to Employer; (iii) the Employer has taken and is taking all
reasonable measures to protect its legitimate interest in its Confidential
Information, including, without limitation, affirmative action to safeguard the
confidentiality of such Confidential Information; (iv) the restrictions on the
activities in which Executive may engage set forth in this Agreement, and the
periods of time for which such restrictions apply, are reasonably necessary in
order to protect the Employer's legitimate interests in its Confidential
Information; and (v) nothing herein shall prohibit the Employer from pursuing
any remedies, whether in law or equity, available to the Employer for breach or
threatened breach of this Agreement, including the recovery of damages from
Executive.
(e) For the purposes of this Section 8, the term "Employer" shall
be deemed to include Employer and all of its subsidiaries engaged in the
Business.
9. Inventions. All inventions, discoveries, improvements,
processes, formulae and data relating to Employer's business that Executive may
make, conceive or learn during the term of his employment by the Employer
(whether before, during or after the term of this Agreement, whether during
working hours or otherwise) shall be the exclusive property of Employer.
Executive agrees to make prompt disclosure to the Board of all such inventions,
etc., and to do all things necessary or useful to assist Employer in securing
their full enjoyment and protection.
10. No Conflicts. Executive represents and warrants that the
execution, delivery and performance of this Agreement by Executive will not
violate and agreement, undertaking or covenant to which Executive is party or is
otherwise bound.
11. Notices. Any notice given hereunder shall be in writing and
delivered or mailed by certified mail or overnight courier service (with proof
of delivery) and addressed to the appropriate party at the address set forth
below or at such other address as the party shall designate from time to time in
a notice:
If to Employer:
Nationwide Credit, Inc.
6190 Powers Ferry Road, 4th Floor
Atlanta, Georgia 30339
Attention: Chief Executive Officer
7
<PAGE>
If to Executive:
Jerry Kaufman
3071 Lenox Road, NE
Unit 18
Atlanta, GA 30324
12. Binding Effect. This Agreement shall inure to the benefit of and
be binding upon Employer, its successors and assigns. Executive acknowledges
that these services are unique and personal. Accordingly, Executive may not
assign any of his rights or delegate any of his duties or obligations under this
Agreement.
13. Waiver. Failure to insist in any one or more instances on strict
compliance with the terms of this Agreement shall not be deemed a waiver.
Waiver of a breach of any provision of this Agreement shall not be construed as
a waiver of any subsequent breach.
14. Governing Law; Injunctive Relief. This Agreement is made and
delivered in, and shall be construed in accordance with the substantive laws of,
the State of New York and the United States of America without regard to
conflict of law principles. Executive acknowledges that the services to be
rendered by him are of a special, unique and extraordinary character and, in
connection with such services, Executive will have access to confidential
information vital to Employer's and its subsidiary and affiliated companies'
businesses. By reason of this, Executive consents and agrees that if he
violates any of the provisions of this Agreement, Employer and its subsidiary
and affiliated companies would sustain irreparable harm and, therefore, in
addition to any other remedies which Employer may have under this Agreement or
otherwise, Employer shall be entitled to an injunction from any court of
competent jurisdiction restraining Employer from committing or continuing any
such violation of this Agreement.
15. Severability. In the event that any provision of this Agreement
shall be determined to be invalid by a court of competent jurisdiction, such
determination shall in no way affect the validity or enforceability of any other
provisions hereof.
16. Entire Agreement; Miscellaneous. The parties acknowledge and
agree that they are not relying on any representations, oral or written, other
than those expressly contained herein. This Agreement supersedes all proposals,
oral or written, all negotiations, conversations or discussions between the
parties and all course of dealing. All prior
8
<PAGE>
understandings and agreements between the parties regarding employment matters
are hereby merged in this Agreement, which alone is the complete and exclusive
statement of their understanding as to employment. No waiver or modification of
this Agreement shall be valid unless the same shall be in writing and signed by
the party sought to be charged therewith. Time is of the essence in this
Agreement and each and every provision hereof. This is a personal services
agreement; no agency, partnership, joint venture or other joint relationship is
created hereby. The parties acknowledge that they each participated in drafting
this Agreement, and there shall be not presumption against any party on the
ground that such party was responsible for preparing this Agreement or any part
hereof. Paragraph headings are for convenience of reference only and are not
intended to create substantive rights or obligations.
17. Attorney's Fees and Costs. Employer agrees to pay the reasonable
costs and expenses of Ungaretti & Harris with respect to its representation of
Executive and certain other management employees of the Employee, up to a
maximum of $10,000 (including costs and disbursements) in the aggregate for
Executive and all such other management employees of Employer.
9
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by the
undersigned as of the day and year first above written.
NATIONWIDE CREDIT, INC.
By: /s/ Paul J. Zepf
--------------------------------------------
Name: Paul J. Zepf
Title: Director
EXECUTIVE
By: /s/ Jerry Kaufman
--------------------------------------------
Name: Jerry Kaufman
Title: President
10
<PAGE>
EXHIBIT 10.10
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement") made and entered into as of
the 31st day of December, 1997, by and among NATIONWIDE CREDIT, INC.
("Employer") and Loren Kranz who resides at 3124 Denton Place, Roswell, GA 30075
("Executive").
W I T N E S S E T H:
-------------------
WHEREAS, Employer desires to employ Executive and Executive desires to
accept employment with Employer upon the terms and conditions hereinafter set
forth;
NOW THEREFORE, in consideration of the premises and the mutual
covenants hereinafter set forth, and intending to be legally bound hereby, it is
hereby agreed as follows:
1. Employment Term. Employer agrees to employ Executive, and
---------------
Executive agrees to be so employed, in the capacity of Chief Operating Officer
of Employer, for a term commencing on the date hereof and ending on the third
anniversary of the date hereof (the "Initial Term"); provided, however, that,
notwithstanding anything to the contrary set forth in this Agreement, this
Agreement may be earlier terminated pursuant to Section 7 hereof. The term of
this Agreement will automatically extend past the Initial Term for succeeding
periods of one year each unless either party in its discretion shall terminate
this Agreement as of the end of the Initial Term, or as of the end of any
subsequent one-year period (in either case, the "Termination Date") by
delivering notice to the other party specifying the applicable Termination Date
not later than one hundred and twenty (120) days prior to the date so specified.
2. Time and Efforts; Place of Performance. Executive shall
--------------------------------------
diligently and conscientiously devote his full business time, attention, energy,
skill and best efforts to the business of Employer and the discharge of his
duties hereunder. Executive's duties under this Agreement shall be to serve as
Chief Operating Officer of Employer, with the responsibilities, rights,
authority and duties customarily pertaining to such office as may be established
from time to time by or under the direction of the Board of Directors of
Employer (the "Board") and Executive shall report to the Chief Executive
Officer. In the event Executive is elected to the Board, Executive shall serve
as a director without further compensation, other than as provided in this
Agreement. Executive shall also act as an officer and/or director of such
subsidiaries of Employer as may be designated by the Board, commensurate with
Executive's office, all without further compensation other than as provided in
this Agreement.
<PAGE>
3. Base Salary. In partial consideration of the services of
-----------
Executive during the term of this Agreement, Employer shall pay to Executive a
base salary compensation at an annual rate of $220,000 (the "Base Salary"), in
equal installments in accordance with the Employer's payroll practices in effect
from time to time for executive officers, but in no event less frequently than
monthly. The Base Salary may be adjusted upward annually in the discretion of
the Board, or an authorized committee thereof.
4. Bonus. (a) After the Company has received its audited financial
-----
statements for each year end during the term of this Agreement, Executive will
have the potential to receive an annual bonus for such year, with the payment of
such bonus and the amount thereof to be determined based upon qualitative
criteria and the attainment of quantitative financial goals established annually
by the Board of Directors. For the calendar year 1998 Employee will have the
potential to receive a bonus which would range from $0 to $150,000. In the
event annual EBITDA (as hereinafter defined) based upon the Company's audited
financial statements for such year is $26 million or less, $0 will be earned.
In the event annual EBITDA for such year equals or exceeds $28 million, $105,000
will be earned. For annual EBITDA levels for the calendar year 1998 between $26
million and $28 million, the amount of bonus will be apportioned between $0 and
$105,000 by linear interpolation. Payment of $45,000 of the 1998 bonus shall be
based on the attainment of certain qualitative criteria established by the Board
of Directors. For years after 1998, the amount of the potential bonus and the
criteria therefore will be set by the Board of Directors in good faith and
provided to Employee prior to commencement of the year, provided that the
potential bonus amount for each subsequent year will be not less than the
potential bonus amount for the immediately preceding year, so long as the
budgeted EBITDA levels for the upcoming year are greater than the EBITDA levels
for the immediately preceding year. Executive's bonus, to the extent earned,
shall be payable no later than thirty (30) days after the Bond has received the
Company's audited financial statements for the applicable year.
(b) For purposes hereof, "EBITDA" has the meaning ascribed to such
term in the Agreement and Plan of Merger, dated as of December 31, 1997, between
NCI Acquisition Corporation, Employer, NCI Merger Corporation, First Financial
Management Corporation and First Data Corporation. EBITDA shall be determined
based on the audited financial statements of the Company. Notwithstanding the
provisions of Section 4(a), the EBITDA targets for any bonus period shall be
subject to modification in the reasonable discretion of the Board in the event
of any material acquisitions or dispositions during the applicable period.
(c) In the event Executive's employment is terminated by reason of
Cause (as herein defined) or the Executive's resignation, no bonus for the
calendar year in
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<PAGE>
which such termination or resignation occurs shall be payable to Executive. If
Executive's employment terminates for any other reason (including expiration of
this Agreement), Executive's bonus for the year in which termination occurs
shall be payable to the extent earned as determined in the reasonable discretion
of the Board, but shall be prorated based upon the number of days in such year
that Executive was employed by Employer.
5. Benefits. Executive shall be eligible to participate in all
--------
employee benefit programs of Employer offered from time to time during the term
of Executive's employment hereunder by Employer to employees or executives of
Executive's rank, to the extent that Executive qualifies under the eligibility
provisions of such plan or plans, in each case consistent with Employer's
current practice as approved by the Board prior to the date hereof, and provided
that Employer shall not be required to incur expenses in connection with any
such benefits in excess of the expenses for such benefits incurred in accordance
with such current practice.
6. Expenses. To the extent that Executive's reasonable and
--------
necessary expenditures for travel, entertainment and similar items made in
furtherance of Executive's duties under this Agreement comply with Employer's
expense reimbursement policy, are deductible by Employer for federal income tax
purposes pursuant to the Internal Revenue Code of 1986, as amended and are
documented and substantiated by Executive as required by the Internal Revenue
Service and the policies of Employer, Employer shall reimburse the Executive for
such expenditures.
7. Termination.
-----------
(a) Executive's employment under this Agreement may be terminated by
Employer at any time for Cause. Upon termination of Executive's employment for
Cause, upon payment by Employer of any Base Salary that has accrued and is
unpaid to the date of such termination, Employer shall have no further liability
to Executive for any additional amounts including, without limitation, any Base
Salary or bonus. "Cause" as used in this Agreement shall mean (i) the gross
negligence or wilful misconduct of Executive in carrying out his obligations and
duties, (ii) any other breach by Executive of any other provision of this
Agreement which has not been cured within five (5) days after delivery of notice
by Employer to Executive of such breach (or such shorter period if such breach
adversely affects Employer's ability to conduct debt collection activities in
any jurisdiction), including, without limitation, Executive's insubordination,
chronic absences from work or alcoholism or drug dependency, (iii) Executive
shall have committed an act of fraud, theft or dishonesty against NCI or any of
its subsidiary or affiliated companies, or (iv) Executive shall be indicted for
or convicted of (or plead nolo contendre to) any felony or be convicted of (or
plead nolo
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contendre to) any misdemeanor involving fraud, dishonesty or moral turpitude or
any other misdemeanor that might, in the reasonable opinion of the Board of
Directors, adversely affect such Executive's ability to perform Executive's
obligations or duties to Employer in any material respect or adversely affect
the Employer's ability to conduct debt collection activities in any
jurisdiction.
(b) Subject to the terms of subsection (c) hereof, Employer may
terminate Executive's employment hereunder at any time other than for Cause (as
defined in Section 7(a) above) upon notice to Executive. In the event of any
such termination, in consideration for the obligations of Executive under
Section 8 hereof, the Employer shall pay to Executive a severance benefit (the
"Severance Benefit"), payable over a period of 12 months consistent with
Employer's past payroll practices, in an amount equal to 12 months of Base
Salary at the then current rate less the amount of any compensation, income or
benefits earned or paid to Executive as an employee or consultant from an
employer or company other than Employer during the last six (6) months of the
period during which the Severance Benefit shall be payable as provided above. In
the event that there is (i) a material change in Executive's duties or
responsibilities, or a material change in Executive's reporting relationships,
either of which results in or reflects a material diminution of the scope or
importance of Executive's duties or responsibilities, or (ii) a material
reduction in the level of benefits offered under the Employer's employee benefit
plans (other than any company-wide reduction in the level of benefits that is
applicable to all employees or executives of Executive's rank), which are made
available to Executive during the term of Executive's employment, including but
not limited to, annual and long-term incentive and stock-based plans and
programs, which is not cured within a period of ten (10) days following notice
to Employer by Executive, then Executive may by notice to the Board, deem a
constructive termination to have occurred, whereupon Executive shall be entitled
to the compensation set forth herein as if Executive had been terminated without
Cause as of the date of such notice to the Board. Upon termination of Executive
under this Section 7(b) for any reason (other than as a result of death),
Executive shall in good faith seek to obtain alternative employment and to
otherwise mitigate the amount of Severance Benefit payable by Employer.
(c) If Executive dies, this Agreement shall automatically terminate.
If Executive becomes permanently disabled during the term of this Agreement,
then at Employer's option, this Agreement will immediately terminate. In each
such case, upon payment by Employer of any Base Salary that has accrued and is
unpaid to the date of such termination, Employer shall have no further
obligations to Executive, his spouse or estate. Executive shall be deemed to be
permanently disabled if, during the term of this Agreement, he shall have been
unable or unwilling or shall have failed to perform his duties under this
Agreement (whether due to ill health, physical or mental incapacity or
disability, or for causes
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beyond his control) for a period of one-hundred and eighty (180) days, whether
consecutive or not. Any refusal by Executive to submit to a medical examination
for the purpose of certifying disability under this Section 7(c) shall be deemed
to constitute conclusive evidence of Executive's permanent disability. Upon
receipt of certifications from two physicians that the Executive's disability is
more likely than not to continue for a continuous period of one-hundred and
eighty (180) days or for shorter periods aggregating one-hundred and eighty
(180) days, Employer may immediately terminate this Agreement without waiting
for accrual of such one-hundred and eighty (180) day period. In the event of
Executive's death during the term of this Agreement, any accrued and unpaid
compensation due to Executive shall be paid to his estate.
(d) Subject to the terms of subsections (a) and (c) hereof, payment of
the Severance Benefit shall be Executive's sole remedy in the event of the
Employer's termination of this Agreement for any reason. Executive will
cooperate in order to allow Employer to purchase disability insurance regarding
Executive in order to fund its obligation hereunder.
(e) The terms of Sections 8 and 9 of this Agreement shall survive and
be binding upon Executive upon the termination of this Agreement.
(f) If Executive unilaterally terminates his employment with Employer,
other than under the conditions set forth in Section 7(b) hereof, during the
term of this Agreement, Employer shall have no further obligation to make any
payments under this Agreement and Executive shall forfeit any right to such
payments.
8. Restrictive Covenants. (a) In consideration of Employer's grant
---------------------
of options to purchase shares of common stock of NCI Acquisition Corporation
pursuant to the NCI Acquisition Corporation's 1997 Management Performance Option
Plan to Executive and its covenant to pay, pursuant to the terms of Section 7, a
Severance Benefit, without prior written consent of the Board, Executive agrees
that he will not for a period of twelve (12) months (except in the case of
clause (iii) below, which will continue for a period of eighteen (18) months)
following the termination of Executive's employment with Employer for any reason
whatsoever (or to such lesser extent and for such lesser period as may be deemed
enforceable by a court of competent jurisdiction, it being the intention of the
parties that this Section 8 shall be so enforced): (i) directly or indirectly
engage, participate or make any financial investment in or become employed by or
render any services to or for any person or company in competition with the
credit reporting, collection or accounts receivable management business
conducted by Employer or any of its subsidiaries, or any similar business (the
"Business"), within any area in which Employer is doing business at such time
(whether
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as an employee, independent contractor, five (5%) percent or greater owner,
partner, lender, stockholder or otherwise); (ii) directly or indirectly raid,
entice, induce, solicit, canvass, or accept any business (of the type conducted
by Employer) for any other person or company from any past, present or future
(as defined below) customer of Employer; (iii) directly or indirectly raid,
entice, induce or attempt to cause any current or future (as defined below)
employee or other advisor of Employer to terminate his employment by or
engagement with Employer; (iv) directly or indirectly request any present or
future ("future", as used herein, shall mean at or prior to the time of
termination of Executive's employment) entities with whom Employer has business
relationships to curtail or cancel their business with Employer or (v) directly
or indirectly authorize or assist any other person or company in taking any of
the foregoing actions.
(b) Executive acknowledges and agrees that during the course of his
performance of services for the Employer he will acquire knowledge with respect
to information, technology or other matters which the Employer maintains and
preserves on a confidential basis concerning the Employer's business operations,
including, by way of illustration, such information concerning the Employer's
trade secrets, business and financial methods or practices, plans, pricing,
customer, vendor and sales information and other confidential or proprietary
information and any other information, documents or materials owned, developed
or possessed by the Employer, the confidentiality of which the Employer takes
reasonable steps to protect (any and all of which being hereinafter referred to
as "Confidential Information").
(c) Executive agrees that he will not, while he is employed by the
Employer or at any time thereafter, divulge to any person, directly or
indirectly, except to the Employer or its directors, officers and agents as
reasonably required in connection with his duties on behalf of the Employer
during his employment, or use the Confidential Information in any manner or for
any purpose in contravention of the Employer's policies or procedures,
inconsistent with the Employer's measures to protect its interest therein or
otherwise to the detriment of the Employer. Executive further agrees that he
will not, at any time after his employment with the Employer has ended, divulge
to any person or utilize for commercial or any other purpose not authorized in
writing by the Employer, directly or indirectly, any Confidential Information.
Executive further agrees that, if Executive's relationship with the Employer is
terminated (for whatever reason) he shall not take with him but will leave with
the Employer all records, papers and computer data and any copies thereof
relating to the Confidential Information (or if such papers, records, computer
data or copies are not on the premises of the Employer, Executive agrees to
return such papers, records and computer data as soon as practicable after his
termination). Executive acknowledges that all such papers, records, computer
data or copies thereof, are and remain the property of Employer.
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(d) Executive acknowledges that (i) the Confidential Information is
commercially and competitively valuable to the Employer; (ii) the unauthorized
use or disclosure of the Confidential Information would cause irreparable harm
to Employer; (iii) the Employer has taken and is taking all reasonable measures
to protect its legitimate interest in its Confidential Information, including,
without limitation, affirmative action to safeguard the confidentiality of such
Confidential Information; (iv) the restrictions on the activities in which
Executive may engage set forth in this Agreement, and the periods of time for
which such restrictions apply, are reasonably necessary in order to protect the
Employer's legitimate interests in its Confidential Information; and (v) nothing
herein shall prohibit the Employer from pursuing any remedies, whether in law or
equity, available to the Employer for breach or threatened breach of this
Agreement, including the recovery of damages from Executive.
(e) For the purposes of this Section 8, the term "Employer" shall be
deemed to include Employer and all of its subsidiaries engaged in the Business.
9. Inventions. All inventions, discoveries, improvements,
----------
processes, formulae and data relating to Employer's business that Executive may
make, conceive or learn during the term of his employment by the Employer
(whether before, during or after the term of this Agreement, whether during
working hours or otherwise) shall be the exclusive property of Employer.
Executive agrees to make prompt disclosure to the Board of all such inventions,
etc., and to do all things necessary or useful to assist Employer in securing
their full enjoyment and protection.
10. No Conflicts. Executive represents and warrants that the
------------
execution, delivery and performance of this Agreement by Executive will not
violate and agreement, undertaking or covenant to which Executive is party or is
otherwise bound.
11. Notices. Any notice given hereunder shall be in writing and
-------
delivered or mailed by certified mail or overnight courier service (with proof
of delivery) and addressed to the appropriate party at the address set forth
below or at such other address as the party shall designate from time to time in
a notice:
If to Employer:
Nationwide Credit, Inc.
6190 Powers Ferry Road, 4th Floor
Atlanta, Georgia 30339
Attention: Chief Executive Officer
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If to Executive:
Loren Kranz
3124 Denton Place
Roswell, GA 30339
12. Binding Effect. This Agreement shall inure to the benefit of and
--------------
be binding upon Employer, its successors and assigns. Executive acknowledges
that these services are unique and personal. Accordingly, Executive may not
assign any of his rights or delegate any of his duties or obligations under this
Agreement.
13. Waiver. Failure to insist in any one or more instances on strict
------
compliance with the terms of this Agreement shall not be deemed a waiver.
Waiver of a breach of any provision of this Agreement shall not be construed as
a waiver of any subsequent breach.
14. Governing Law; Injunctive Relief. This Agreement is made and
--------------------------------
delivered in, and shall be construed in accordance with the substantive laws of,
the State of New York and the United States of America without regard to
conflict of law principles. Executive acknowledges that the services to be
rendered by him are of a special, unique and extraordinary character and, in
connection with such services, Executive will have access to confidential
information vital to Employer's and its subsidiary and affiliated companies'
businesses. By reason of this, Executive consents and agrees that if he
violates any of the provisions of this Agreement, Employer and its subsidiary
and affiliated companies would sustain irreparable harm and, therefore, in
addition to any other remedies which Employer may have under this Agreement or
otherwise, Employer shall be entitled to an injunction from any court of
competent jurisdiction restraining Employer from committing or continuing any
such violation of this Agreement.
15. Severability. In the event that any provision of this Agreement
------------
shall be determined to be invalid by a court of competent jurisdiction, such
determination shall in no way affect the validity or enforceability of any other
provisions hereof.
16. Entire Agreement; Miscellaneous. The parties acknowledge and
-------------------------------
agree that they are not relying on any representations, oral or written, other
than those expressly contained herein. This Agreement supersedes all proposals,
oral or written, all negotiations, conversations or discussions between the
parties and all course of dealing. All prior understandings and agreements
between the parties regarding employment matters are hereby
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merged in this Agreement, which alone is the complete and exclusive statement of
their understanding as to employment. No waiver or modification of this
Agreement shall be valid unless the same shall be in writing and signed by the
party sought to be charged therewith. Time is of the essence in this Agreement
and each and every provision hereof. This is a personal services agreement; no
agency, partnership, joint venture or other joint relationship is created
hereby. The parties acknowledge that they each participated in drafting this
Agreement, and there shall be not presumption against any party on the ground
that such party was responsible for preparing this Agreement or any part hereof.
Paragraph headings are for convenience of reference only and are not intended to
create substantive rights or obligations.
17. Attorney's Fees and Costs. Employer agrees to pay the reasonable
-------------------------
costs and expenses of Ungaretti & Harris with respect to its representation of
Executive and certain other management employees of the Employee, up to a
maximum of $10,000 (including costs and disbursements) in the aggregate for
Executive and all such other management employees of Employer.
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IN WITNESS WHEREOF, this Agreement has been duly executed by the
undersigned as of the day and year first above written.
NATIONWIDE CREDIT, INC.
By: /s/ Jerry Kaufman
-------------------------------------
Name: Jerry Kaufman
Title: President and Chief Executive Officer
EXECUTIVE
By: /s/ Loren Kranx
-------------------------------------
Name: Loren Kranz
Title: Chief Operating Officer
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EXHIBIT 10.11
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement") made and entered into as of
the 18th day of May, 1998, by and among NATIONWIDE CREDIT, INC. ("Employer") and
Michael Lord who resides at RRI Box 20, Under the Mountain Road, South
Londonderry, Vermont 05155 ("Executive").
W I T N E S S E T H:
-------------------
WHEREAS, Employer desires to employ Executive and Executive desires to
accept employment with Employer upon the terms and conditions hereinafter set
forth;
NOW THEREFORE, in consideration of the premises and the mutual
covenants hereinafter set forth, and intending to be legally bound hereby, it is
hereby agreed as follows:
I. Employment Term. Employer agrees to employ Executive, and
Executive agrees to be so employed, in the capacity of Chief Financial Officer
of Employer, for a term commencing on the date hereof and ending on the third
anniversary of the date hereof (the "Initial Term"); provided, however, that,
notwithstanding anything to the contrary set forth in this Agreement, this
Agreement may be earlier terminated pursuant to Section 7 hereof. The term of
this Agreement will automatically extend past the Initial Term for succeeding
periods of one year each unless either party in its discretion shall terminate
this Agreement as of the end of the Initial Term, or as of the end of any
subsequent one-year period (in either case, the "Termination Date") by
delivering notice to the other party specifying the applicable Termination Date
not later than one hundred and twenty (120) days prior to the date so specified.
II. Time and Efforts; Place of Performance. Executive shall
diligently and conscientiously devote his full business time, attention, energy,
skill and best efforts to the business of Employer and the discharge of his
duties hereunder. Executive's duties under this Agreement shall be to serve as
Chief Financial Officer of Employer, with the responsibilities, rights,
authority and duties customarily pertaining to such office as may be established
from time to time by or under the direction of the Board of Directors of
Employer (the "Board") and Executive shall report to the Chief Executive
Officer. In the event Executive is elected to the Board, Executive shall serve
as a director without further compensation, other than as provided in this
Agreement. Executive shall also act as an officer and/or director of such
<PAGE>
subsidiaries of Employer as may be designated by the Board, commensurate with
Executive's office, all without further compensation other than as provided in
this Agreement.
III. Base Salary; Signing Bonus; Options. In partial consideration of
the services of Executive during the term of this Agreement, Employer shall pay
to Executive a base salary compensation at an annual rate of $200,000 (the "Base
Salary"), in equal installments in accordance with the Employer's payroll
practices in effect from time to time for executive officers, but in no event
less frequently than monthly. The Base Salary may be adjusted upward annually
in the discretion of the Board, or an authorized committee thereof. In
addition, Employer shall pay Executive a one-time signing bonus in the amount of
$25,000, payable in a single installment within thirty (30) days of the date
hereof. Furthermore, in connection with the execution of this Agreement,
Executive has entered into an Option Agreement, dated as of May 18, 1998, with
NCI Acquisition Corporation (the "Option Agreement") with respect to the grant
of certain options to purchase common stock of NCI Acquisition Corporation.
IV. Annual Bonus. After the Company has received its audited
financial statements for each year end during the term of this Agreement,
Executive will have the potential to receive an annual bonus for such year,
comprised of (i) an amount (for calendar year 1998 and 1999) that is not subject
to any criteria (such amount, the "Guaranteed Bonus") and (ii) an amount to be
determined based upon qualitative criteria and the attainment of certain
quantitative financial goals established annually by the Board (such amount, the
"Performance Bonus"), as set forth in greater detail below:
A. For the calendar year 1998, (i) Executive shall receive a
Guaranteed Bonus of $50,000 and (ii) Executive will have the potential to
receive a Performance Bonus which would range from $0 to $70,000. In the event
annual EBITDA (as hereinafter defined) based upon the Company's audited
financial statements for such year is $26 million or less, $0 of the Performance
Bonus will be earned. In the event annual EBITDA for such year equals or
exceeds $28 million, $49,000 of the Performance Bonus will be earned. For
annual EBITDA levels for the calendar year 1998 between $26 million and $28
million, the amount of the Performance Bonus will be apportioned between $0 and
$49,000 by linear interpolation. Payment of $21,000 of the 1998 Performance
Bonus shall be based on the attainment of certain qualitative criteria
established by the Board.
B. For the calendar year 1999, (i) Executive shall receive a
Guaranteed Bonus of $25,000 and (ii) Executive will have the potential to
receive a Performance Bonus which would range from $0 to $95,000. Executive
will have the potential to earn up to $66,500 of the 1999 Performance Bonus in
the event annual EBITDA (as hereinafter defined)
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based upon the Company's audited financial statements for fiscal 1999 reach the
levels to be established by the Board in connection with the Company's budget
for fiscal 1999. Payment of $28,500 of the 1999 Performance Bonus shall be
based on the attainment of certain qualitative criteria established by the
Board.
C. For calendar years after 1998 and 1999, the amount of the
Guaranteed Bonus (if any) and the potential Performance Bonus and the criteria
therefore will be set by the Board in good faith and provided to Executive prior
to commencement of the year, provided, that the potential Performance Bonus
amount for each subsequent year will be not less than the potential Performance
Bonus amount for the immediately preceding year, so long as the budgeted EBITDA
levels for the upcoming year are greater than the EBITDA levels for the
immediately preceding year. Executive's bonus, to the extent earned, shall be
payable no later than thirty (30) days after the Board has received the
Company's audited financial statements for the applicable year.
D. For purposes hereof, "EBITDA" has the meaning ascribed to such
term in the Agreement and Plan of Merger, dated as of December 31, 1997, between
NCI Acquisition Corporation, Employer, NCI Merger Corporation, First Financial
Management Corporation and First Data Corporation. EBITDA shall be determined
based on the audited financial statements of the Company. Notwithstanding the
provisions of Sections 4(b) and 4(c) hereof, the EBITDA targets for any
Performance Bonus period shall be subject to modification in the reasonable
discretion of the Board in the event of any material acquisitions or
dispositions during the applicable period.
E. In the event Executive's employment is terminated by reason of
Cause (as herein defined) or the Executive's resignation, no bonus (Guaranteed
Bonus or Performance Bonus) for the calendar year in which such termination or
resignation occurs shall be payable to Executive. If Executive's employment
terminates for any other reason (including expiration of this Agreement),
Executive's bonus for the year in which termination occurs shall be payable to
the extent earned in accordance with the criteria set forth in this Section 4 as
determined in the reasonable discretion of the Board, but shall be prorated
based upon the number of days in such year that Executive was employed by
Employer. Executive's prorated bonus, to the extent earned, shall be payable no
later than thirty (30) days after the Board has received the Company's audited
financial statements for the applicable year.
V. Benefits. Executive shall be eligible to participate in all
employee benefit programs of Employer offered from time to time during the term
of Executive's employment hereunder by Employer to employees or executives of
Executive's rank, to the extent that Executive qualifies under the eligibility
provisions of such plan or plans, in each case
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consistent with Employer's current practice as approved by the Board prior to
the date hereof, and provided that Employer shall not be required to incur
expenses in connection with any such benefits in excess of the expenses for such
benefits incurred in accordance with such current practice. In addition,
Executive shall be eligible to receive relocation expenses in accordance with
the terms of the Company's relocation policy attached hereto as Exhibit A.
VI. Expenses. To the extent that Executive's reasonable and
necessary expenditures for travel, entertainment and similar items made in
furtherance of Executive's duties under this Agreement comply with Employer's
expense reimbursement policy, are deductible by Employer for federal income tax
purposes pursuant to the Internal Revenue Code of 1986, as amended and are
documented and substantiated by Executive as required by the Internal Revenue
Service and the policies of Employer, Employer shall reimburse the Executive for
such expenditures.
VII. Termination.
A. Executive's employment under this Agreement may be
terminated by Employer at any time for Cause. Upon termination of Executive's
employment for Cause, upon payment by Employer of any Base Salary, amounts
payable under any employee benefit program of Employer in which Employee
participated, or reimbursement for expenses, in each case, for amounts that have
accrued and are unpaid to the date of such termination, Employer shall have no
further liability to Executive for any additional amounts including, without
limitation, any Base Salary or bonus. "Cause" as used in this Agreement shall
mean (i) the gross negligence or wilful misconduct of Executive in carrying out
his obligations and duties, (ii) any other breach by Executive of any other
provision of this Agreement which has not been cured within five (5) days after
delivery of notice by Employer to Executive of such breach (or such shorter
period if such breach adversely affects Employer's ability to conduct debt
collection activities in any jurisdiction), including, without limitation,
Executive's insubordination, chronic absences from work or alcoholism or drug
dependency, (iii) Executive shall have committed an act of fraud, theft or
dishonesty against NCI or any of its subsidiary or affiliated companies, or (iv)
Executive shall be indicted for or convicted of (or plead nolo contendre to) any
felony or be convicted of (or plead nolo contendre to) any misdemeanor involving
fraud, dishonesty or moral turpitude or any other misdemeanor that might, in the
reasonable opinion of the Board of Directors, adversely affect such Executive's
ability to perform Executive's obligations or duties to Employer in any material
respect or adversely affect the Employer's ability to conduct debt collection
activities in any jurisdiction.
B. Subject to the terms of subsection (c) hereof, Employer may
terminate Executive's employment hereunder at any time other than for Cause (as
defined in
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Section 7(a) above) upon notice to Executive. In the event of any such
termination, in consideration for the obligations of Executive under Section 8
hereof, the Employer shall pay to Executive a severance benefit (the "Severance
Benefit"), payable over a period of 12 months consistent with Employer's past
payroll practices, in an amount equal to 12 months of Base Salary at the then
current rate less the amount of any compensation, income or benefits earned or
paid to Executive as an employee or consultant from an employer or company other
than Employer during the last six (6) months of the period during which the
Severance Benefit shall be payable as provided above. In the event that there
is (i) a material change in Executive's duties or responsibilities, or a
material change in Executive's reporting relationships, either of which results
in or reflects a material diminution of the scope or importance of Executive's
duties or responsibilities, or (ii) a material reduction in the level of
benefits offered under the Employer's employee benefit plans (other than any
company-wide reduction in the level of benefits that is applicable to all
employees or executives of Executive's rank), which are made available to
Executive during the term of Executive's employment, including but not limited
to, annual and long-term incentive and stock-based plans and programs, which is
not cured within a period of ten (10) days following notice to Employer by
Executive, then Executive may by notice to the Board, deem a constructive
termination to have occurred, whereupon Executive shall be entitled to the
compensation set forth herein as if Executive had been terminated without Cause
as of the date of such notice to the Board. Upon termination of Executive under
this Section 7(b) for any reason (other than as a result of death), Executive
shall in good faith seek to obtain alternative employment and to otherwise
mitigate the amount of Severance Benefit payable by Employer.
C. If Executive dies, this Agreement shall automatically
terminate. If Executive becomes permanently disabled during the term of this
Agreement, then at Employer's option, this Agreement will immediately terminate.
In each such case, upon payment by Employer of any Base Salary that has accrued
and is unpaid to the date of such termination, Employer shall have no further
obligations to Executive, his spouse or estate. Executive shall be deemed to be
permanently disabled if, during the term of this Agreement, he shall have been
unable or unwilling or shall have failed to perform his duties under this
Agreement (whether due to ill health, physical or mental incapacity or
disability, or for causes beyond his control) for a period of one-hundred and
eighty (180) days, whether consecutive or not. Any refusal by Executive to
submit to a medical examination for the purpose of certifying disability under
this Section 7(c) shall be deemed to constitute conclusive evidence of
Executive's permanent disability. Upon receipt of certifications from two
physicians that the Executive's disability is more likely than not to continue
for a continuous period of one-hundred and eighty (180) days or for shorter
periods aggregating one-hundred and eighty (180) days, Employer may immediately
terminate this Agreement without waiting for accrual of such one-hundred and
eighty (180) day period. In the event of Executive's death during the term of
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this Agreement, any accrued and unpaid compensation due to Executive shall be
paid to his estate.
D. Subject to the terms of subsections (a) and (c) hereof,
payment of the Severance Benefit shall be Executive's sole remedy in the event
of the Employer's termination of this Agreement for any reason. Executive will
cooperate in order to allow Employer to purchase disability insurance regarding
Executive in order to fund its obligation hereunder.
E. The terms of Sections 8 and 9 of this Agreement shall
survive and be binding upon Executive upon the termination of this Agreement.
F. If Executive unilaterally terminates his employment with
Employer, other than under the conditions set forth in Section 7(b) hereof,
during the term of this Agreement, Employer shall have no further obligation to
make any payments under this Agreement and Executive shall forfeit any right to
such payments.
VIII. Restrictive Covenants. A. In consideration of Employer's
grant under the Option Agreement of options to purchase shares of common stock
of NCI Acquisition Corporation pursuant to NCI Acquisition Corporation's 1997
Management Performance Option Plan to Executive and its covenant to pay,
pursuant to the terms of Section 7, a Severance Benefit, without prior written
consent of the Board, Executive agrees that he will not for a period of twelve
(12) months (except in the case of clause (iii) below, which will continue for a
period of eighteen (18) months) following the termination of Executive's
employment with Employer for any reason whatsoever (or to such lesser extent and
for such lesser period as may be deemed enforceable by a court of competent
jurisdiction, it being the intention of the parties that this Section 8 shall be
so enforced): (i) directly or indirectly engage, participate or make any
financial investment in or become employed by or render any services (whether as
an employee, independent contractor, five (5%) percent or greater owner,
partner, lender, stockholder or otherwise) to or for any person or company in
competition with the credit reporting, collection or accounts receivable
management business conducted by Employer or any of its subsidiaries, or any
similar business (the "Business"), within any area in which Employer is doing
business at such time; (ii) directly or indirectly raid, entice, induce,
solicit, canvass, or accept any business (of the type conducted by Employer) for
any other person or company from any past, present or future (as defined below)
customer of Employer; (iii) directly or indirectly raid, entice, induce or
attempt to cause any current or future (as defined below) employee or other
advisor of Employer to terminate his employment by or engagement with Employer;
(iv) directly or indirectly request any present or future ("future", as used
herein, shall mean at or prior to the time of termination of Executive's
employment)
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entities with whom Employer has business relationships to curtail or cancel
their business with Employer or (v) directly or indirectly authorize or assist
any other person or company in taking any of the foregoing actions.
B. Executive acknowledges and agrees that during the course of his
performance of services for the Employer he will acquire knowledge with respect
to information, technology or other matters which the Employer maintains and
preserves on a confidential basis concerning the Employer's business operations,
including, by way of illustration, such information concerning the Employer's
trade secrets, business and financial methods or practices, plans, pricing,
customer, vendor and sales information and other confidential or proprietary
information and any other information, documents or materials owned, developed
or possessed by the Employer, the confidentiality of which the Employer takes
reasonable steps to protect (any and all of which being hereinafter referred to
as "Confidential Information").
C. Executive agrees that he will not, while he is employed by the
Employer or at any time thereafter, divulge to any person, directly or
indirectly, except to the Employer or its directors, officers and agents as
reasonably required in connection with his duties on behalf of the Employer
during his employment, or use the Confidential Information in any manner or for
any purpose in contravention of the Employer's policies or procedures,
inconsistent with the Employer's measures to protect its interest therein or
otherwise to the detriment of the Employer. Executive further agrees that he
will not, at any time after his employment with the Employer has ended, divulge
to any person or utilize for commercial or any other purpose not authorized in
writing by the Employer, directly or indirectly, any Confidential Information.
Executive further agrees that, if Executive's relationship with the Employer is
terminated (for whatever reason) he shall not take with him but will leave with
the Employer all records, papers and computer data and any copies thereof
relating to the Confidential Information (or if such papers, records, computer
data or copies are not on the premises of the Employer, Executive agrees to
return such papers, records and computer data as soon as practicable after his
termination). Executive acknowledges that all such papers, records, computer
data or copies thereof, are and remain the property of Employer.
D. Executive acknowledges that (i) the Confidential Information is
commercially and competitively valuable to the Employer; (ii) the unauthorized
use or disclosure of the Confidential Information would cause irreparable harm
to Employer; (iii) the Employer has taken and is taking all reasonable measures
to protect its legitimate interest in its Confidential Information, including,
without limitation, affirmative action to safeguard the confidentiality of such
Confidential Information; (iv) the restrictions on the activities in which
Executive may engage set forth in this Agreement, and the periods of time for
which such
7
<PAGE>
restrictions apply, are reasonably necessary in order to protect the Employer's
legitimate interests in its Confidential Information; and (v) nothing herein
shall prohibit the Employer from pursuing any remedies, whether in law or
equity, available to the Employer for breach or threatened breach of this
Agreement, including the recovery of damages from Executive.
E. For the purposes of this Section 8, the term "Employer" shall be
deemed to include Employer and all of its subsidiaries engaged in the Business.
IX. Inventions. All inventions, discoveries, improvements,
processes, formulae and data relating to Employer's business that Executive may
make, conceive or learn during the term of his employment by the Employer
(whether before, during or after the term of this Agreement, whether during
working hours or otherwise) shall be the exclusive property of Employer.
Executive agrees to make prompt disclosure to the Board of all such inventions,
etc., and to do all things necessary or useful to assist Employer in securing
their full enjoyment and protection.
X. No Conflicts. Executive represents and warrants that the
execution, delivery and performance of this Agreement by Executive will not
violate and agreement, undertaking or covenant to which Executive is party or is
otherwise bound.
XI. Notices. Any notice given hereunder shall be in writing and
delivered or mailed by certified mail or overnight courier service (with proof
of delivery) and addressed to the appropriate party at the address set forth
below or at such other address as the party shall designate from time to time in
a notice:
If to Employer:
Nationwide Credit, Inc.
6190 Powers Ferry Road, 4th Floor
Atlanta, Georgia 30339
Attention: Chief Executive Officer
If to Executive:
Michael Lord
RRI Box 20
Under the Mountain Road
South Londonderry, Vermont 05155
8
<PAGE>
XII. Binding Effect. This Agreement shall inure to the benefit of
and be binding upon Employer, its successors and assigns. Executive
acknowledges that these services are unique and personal. Accordingly,
Executive may not assign any of his rights or delegate any of his duties or
obligations under this Agreement.
XIII. Waiver. Failure to insist in any one or more instances on
strict compliance with the terms of this Agreement shall not be deemed a waiver.
Waiver of a breach of any provision of this Agreement shall not be construed as
a waiver of any subsequent breach.
XIV. Governing Law; Injunctive Relief. This Agreement is made and
delivered in, and shall be construed in accordance with the substantive laws of,
the State of New York and the United States of America without regard to
conflict of law principles. Executive acknowledges that the services to be
rendered by him are of a special, unique and extraordinary character and, in
connection with such services, Executive will have access to confidential
information vital to Employer's and its subsidiary and affiliated companies'
businesses. By reason of this, Executive consents and agrees that if he
violates any of the provisions set forth in Section 8 of this Agreement,
Employer and its subsidiary and affiliated companies would sustain irreparable
harm and, therefore, in addition to any other remedies which Employer may have
under this Agreement or otherwise, Employer shall be entitled to an injunction
from any court of competent jurisdiction restraining Employer from committing or
continuing any such violation of this Agreement.
XV. Severability. In the event that any provision of this Agreement
shall be determined to be invalid by a court of competent jurisdiction, such
determination shall in no way affect the validity or enforceability of any other
provisions hereof.
XVI. Entire Agreement; Miscellaneous. The parties acknowledge and
agree that they are not relying on any representations, oral or written, other
than those expressly contained herein. This Agreement supersedes all proposals,
oral or written, all negotiations, conversations or discussions between the
parties and all course of dealing. All prior understandings and agreements
between the parties regarding employment matters are hereby merged in this
Agreement, which alone is the complete and exclusive statement of their
understanding as to employment. No waiver or modification of this Agreement
shall be valid unless the same shall be in writing and signed by the party
sought to be charged therewith. Time is of the essence in this Agreement and
each and every provision hereof. This is a personal services agreement; no
agency, partnership, joint venture or other joint relationship is created
hereby. The parties acknowledge that they each participated in drafting this
Agreement, and there shall be not presumption against any party on the ground
that such party
9
<PAGE>
was responsible for preparing this Agreement or any part hereof. Paragraph
headings are for convenience of reference only and are not intended to create
substantive rights or obligations.
XVII. Attorney's Fees and Costs. Employer agrees to pay the
reasonable costs and expenses of Sharfman, Siviglia, Poret, Kook, Ross &
Shanman, P.C. with respect to its representation of Executive, up to a maximum
of $5,000 (including costs and disbursements) in the aggregate for Executive.
XVIII. D&O Insurance. During the term of this Agreement, Employer
shall maintain in effect a valid directors and officers insurance policy
covering Executive, which policy will have a coverage amount as determined in
the reasonable discretion of the Board from time to time.
IN WITNESS WHEREOF, this Agreement has been duly executed by the
undersigned as of the day and year first above written.
NATIONWIDE CREDIT, INC.
By: /s/ Jerry Kaufman
------------------------------------
Name: Jerry Kaufman
Title: President and Chief Executive Officer
EXECUTIVE
By: /s/ Michael Lord
------------------------------------
Name: Michael Lord
Title: Chief Financial Officer
10
<PAGE>
EXHIBIT 10.12
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement") made and entered into as of
---------
the 31st day of December, 1997, by and among NATIONWIDE CREDIT, INC.
("Employer") and Gregory Schubert who resides at 1051 Woodcroft Chase, Marietta,
--------
GA 30064 ("Executive").
---------
W I T N E S S E T H:
-------------------
WHEREAS, Employer desires to employ Executive and Executive desires to
accept employment with Employer upon the terms and conditions hereinafter set
forth;
NOW THEREFORE, in consideration of the premises and the mutual
covenants hereinafter set forth, and intending to be legally bound hereby, it is
hereby agreed as follows:
1. Employment Term. Employer agrees to employ Executive, and
---------------
Executive agrees to be so employed, in the capacity of Sr. Vice President,
Operations of Employer, for a term commencing on the date hereof and ending on
the third anniversary of the date hereof (the "Initial Term"); provided,
------------ --------
however, that, notwithstanding anything to the contrary set forth in this
- -------
Agreement, this Agreement may be earlier terminated pursuant to Section 7
hereof. The term of this Agreement will automatically extend past the Initial
Term for succeeding periods of one year each unless either party in its
discretion shall terminate this Agreement as of the end of the Initial Term, or
as of the end of any subsequent one-year period (in either case, the
"Termination Date") by delivering notice to the other party specifying the
- -----------------
applicable Termination Date not later than one hundred and twenty (120) days
prior to the date so specified.
2. Time and Efforts; Place of Performance. Executive shall
--------------------------------------
diligently and conscientiously devote his full business time, attention, energy,
skill and best efforts to the business of Employer and the discharge of his
duties hereunder. Executive's duties under this Agreement shall be to serve as
Sr. Vice President, Operations of Employer, with the responsibilities, rights,
authority and duties customarily pertaining to such office as may be established
from time to time by or under the direction of the Board of Directors of
Employer (the "Board") and Executive shall report to the Chief Executive
-----
Officer. In the event Executive is elected to the Board, Executive shall serve
as a director without further compensation, other than as provided in this
Agreement. Executive shall also act as an officer and/or director of such
subsidiaries of Employer as may be designated by the Board,
<PAGE>
commensurate with Executive's office, all without further compensation other
than as provided in this Agreement.
3. Base Salary. In partial consideration of the services of
-----------
Executive during the term of this Agreement, Employer shall pay to Executive a
base salary compensation at an annual rate of $137,000 (the "Base Salary"), in
-----------
equal installments in accordance with the Employer's payroll practices in effect
from time to time for executive officers, but in no event less frequently than
monthly. The Base Salary may be adjusted upward annually in the discretion of
the Board, or an authorized committee thereof.
4. Bonus. (a) After the Company has received its audited financial
-----
statements for each year end during the term of this Agreement, Executive will
have the potential to receive an annual bonus for such year, with the payment of
such bonus and the amount thereof to be determined based upon qualitative
criteria and the attainment of quantitative financial goals established annually
by the Board of Directors. For the calendar year 1998 Employee will have the
potential to receive a bonus which would range from $0 to $90,000. In the event
annual EBITDA (as hereinafter defined) based upon the Company's audited
financial statements for such year is $26 million or less, $0 will be earned.
In the event annual EBITDA for such year equals or exceeds $28 million, $63,000
will be earned. For annual EBITDA levels for the calendar year 1998 between $26
million and $28 million, the amount of bonus will be apportioned between $0 and
$63,000 by linear interpolation. Payment of $27,000 of the 1998 bonus shall be
based on the attainment of certain qualitative criteria established by the Board
of Directors. For years after 1998, the amount of the potential bonus and the
criteria therefore will be set by the Board of Directors in good faith and
provided to Employee prior to commencement of the year, provided that the
potential bonus amount for each subsequent year will be not less than the
potential bonus amount for the immediately preceding year, so long as the
budgeted EBITDA levels for the upcoming year are greater than the EBITDA levels
for the immediately preceding year. Executive's bonus, to the extent earned,
shall be payable no later than thirty (30) days after the Bond has received the
Company's audited financial statements for the applicable year.
(b) For purposes hereof, "EBITDA" has the meaning ascribed to such
------
term in the Agreement and Plan of Merger, dated as of December 31, 1997, between
NCI Acquisition Corporation, Employer, NCI Merger Corporation, First Financial
Management Corporation and First Data Corporation. EBITDA shall be determined
based on the audited financial statements of the Company. Notwithstanding the
provisions of Section 4(a), the EBITDA targets for any bonus period shall be
subject to modification in the reasonable discretion of the Board in the event
of any material acquisitions or dispositions during the applicable period.
2
<PAGE>
(c) In the event Executive's employment is terminated by reason of
Cause (as herein defined) or the Executive's resignation, no bonus for the
calendar year in which such termination or resignation occurs shall be payable
to Executive. If Executive's employment terminates for any other reason
(including expiration of this Agreement), Executive's bonus for the year in
which termination occurs shall be payable to the extent earned as determined in
the reasonable discretion of the Board, but shall be prorated based upon the
number of days in such year that Executive was employed by Employer.
5. Benefits. Executive shall be eligible to participate in all
--------
employee benefit programs of Employer offered from time to time during the term
of Executive's employment hereunder by Employer to employees or executives of
Executive's rank, to the extent that Executive qualifies under the eligibility
provisions of such plan or plans, in each case consistent with Employer's
current practice as approved by the Board prior to the date hereof, and provided
that Employer shall not be required to incur expenses in connection with any
such benefits in excess of the expenses for such benefits incurred in accordance
with such current practice.
6. Expenses. To the extent that Executive's reasonable and
--------
necessary expenditures for travel, entertainment and similar items made in
furtherance of Executive's duties under this Agreement comply with Employer's
expense reimbursement policy, are deductible by Employer for federal income tax
purposes pursuant to the Internal Revenue Code of 1986, as amended and are
documented and substantiated by Executive as required by the Internal Revenue
Service and the policies of Employer, Employer shall reimburse the Executive for
such expenditures.
7. Termination.
-----------
(a) Executive's employment under this Agreement may be terminated by
Employer at any time for Cause. Upon termination of Executive's employment for
Cause, upon payment by Employer of any Base Salary that has accrued and is
unpaid to the date of such termination, Employer shall have no further liability
to Executive for any additional amounts including, without limitation, any Base
Salary or bonus. "Cause" as used in this Agreement shall mean (i) the gross
-----
negligence or wilful misconduct of Executive in carrying out his obligations and
duties, (ii) any other breach by Executive of any other provision of this
Agreement which has not been cured within five (5) days after delivery of notice
by Employer to Executive of such breach (or such shorter period if such breach
adversely affects Employer's ability to conduct debt collection activities in
any jurisdiction), including, without limitation, Executive's insubordination,
chronic absences from work or alcoholism or drug dependency, (iii) Executive
shall have committed an act of fraud, theft or dishonesty against
3
<PAGE>
NCI or any of its subsidiary or affiliated companies, or (iv) Executive shall be
indicted for or convicted of (or plead nolo contendre to) any felony or be
---- ---------
convicted of (or plead nolo contendre to) any misdemeanor involving fraud,
---- ---------
dishonesty or moral turpitude or any other misdemeanor that might, in the
reasonable opinion of the Board of Directors, adversely affect such Executive's
ability to perform Executive's obligations or duties to Employer in any material
respect or adversely affect the Employer's ability to conduct debt collection
activities in any jurisdiction.
(b) Subject to the terms of subsection (c) hereof, Employer may
terminate Executive's employment hereunder at any time other than for Cause (as
defined in Section 7(a) above) upon notice to Executive. In the event of any
such termination, in consideration for the obligations of Executive under
Section 8 hereof, the Employer shall pay to Executive a severance benefit (the
"Severance Benefit"), payable over a period of 12 months consistent with
- ------------------
Employer's past payroll practices, in an amount equal to 12 months of Base
Salary at the then current rate less the amount of any compensation, income or
----
benefits earned or paid to Executive as an employee or consultant from an
employer or company other than Employer during the last six (6) months of the
period during which the Severance Benefit shall be payable as provided above.
In the event that there is (i) a material change in Executive's duties or
responsibilities, or a material change in Executive's reporting relationships,
either of which results in or reflects a material diminution of the scope or
importance of Executive's duties or responsibilities, or (ii) a material
reduction in the level of benefits offered under the Employer's employee benefit
plans (other than any company-wide reduction in the level of benefits that is
applicable to all employees or executives of Executive's rank), which are made
available to Executive during the term of Executive's employment, including but
not limited to, annual and long-term incentive and stock-based plans and
programs, which is not cured within a period of ten (10) days following notice
to Employer by Executive, then Executive may by notice to the Board, deem a
constructive termination to have occurred, whereupon Executive shall be entitled
to the compensation set forth herein as if Executive had been terminated without
Cause as of the date of such notice to the Board. Upon termination of Executive
under this Section 7(b) for any reason (other than as a result of death),
Executive shall in good faith seek to obtain alternative employment and to
otherwise mitigate the amount of Severance Benefit payable by Employer.
(c) If Executive dies, this Agreement shall automatically terminate.
If Executive becomes permanently disabled during the term of this Agreement,
then at Employer's option, this Agreement will immediately terminate. In each
such case, upon payment by Employer of any Base Salary that has accrued and is
unpaid to the date of such termination, Employer shall have no further
obligations to Executive, his spouse or estate. Executive shall be deemed to be
permanently disabled if, during the term of this Agreement,
4
<PAGE>
he shall have been unable or unwilling or shall have failed to perform his
duties under this Agreement (whether due to ill health, physical or mental
incapacity or disability, or for causes beyond his control) for a period of one-
hundred and eighty (180) days, whether consecutive or not. Any refusal by
Executive to submit to a medical examination for the purpose of certifying
disability under this Section 7(c) shall be deemed to constitute conclusive
evidence of Executive's permanent disability. Upon receipt of certifications
from two physicians that the Executive's disability is more likely than not to
continue for a continuous period of one-hundred and eighty (180) days or for
shorter periods aggregating one-hundred and eighty (180) days, Employer may
immediately terminate this Agreement without waiting for accrual of such one-
hundred and eighty (180) day period. In the event of Executive's death during
the term of this Agreement, any accrued and unpaid compensation due to Executive
shall be paid to his estate.
(d) Subject to the terms of subsections (a) and (c) hereof, payment of
the Severance Benefit shall be Executive's sole remedy in the event of the
Employer's termination of this Agreement for any reason. Executive will
cooperate in order to allow Employer to purchase disability insurance regarding
Executive in order to fund its obligation hereunder.
(e) The terms of Sections 8 and 9 of this Agreement shall survive and
be binding upon Executive upon the termination of this Agreement.
(f) If Executive unilaterally terminates his employment with Employer,
other than under the conditions set forth in Section 7(b) hereof, during the
term of this Agreement, Employer shall have no further obligation to make any
payments under this Agreement and Executive shall forfeit any right to such
payments.
8. Restrictive Covenants. (a) In consideration of Employer's grant
---------------------
of options to purchase shares of common stock of NCI Acquisition Corporation
pursuant to the NCI Acquisition Corporation's 1997 Management Performance Option
Plan to Executive and its covenant to pay, pursuant to the terms of Section 7, a
Severance Benefit, without prior written consent of the Board, Executive agrees
that he will not for a period of twelve (12) months (except in the case of
clause (iii) below, which will continue for a period of eighteen (18) months)
following the termination of Executive's employment with Employer for any reason
whatsoever (or to such lesser extent and for such lesser period as may be deemed
enforceable by a court of competent jurisdiction, it being the intention of the
parties that this Section 8 shall be so enforced): (i) directly or indirectly
engage, participate or make any financial investment in or become employed by or
render any services to or for any person or company in competition with the
credit reporting, collection or accounts receivable
5
<PAGE>
management business conducted by Employer or any of its subsidiaries, or any
similar business (the "Business"), within any area in which Employer is doing
--------
business at such time (whether as an employee, independent contractor, five (5%)
percent or greater owner, partner, lender, stockholder or otherwise); (ii)
directly or indirectly raid, entice, induce, solicit, canvass, or accept any
business (of the type conducted by Employer) for any other person or company
from any past, present or future (as defined below) customer of Employer; (iii)
directly or indirectly raid, entice, induce or attempt to cause any current or
future (as defined below) employee or other advisor of Employer to terminate his
employment by or engagement with Employer; (iv) directly or indirectly request
any present or future ("future", as used herein, shall mean at or prior to the
------
time of termination of Executive's employment) entities with whom Employer has
business relationships to curtail or cancel their business with Employer or (v)
directly or indirectly authorize or assist any other person or company in taking
any of the foregoing actions.
(b) Executive acknowledges and agrees that during the course of his
performance of services for the Employer he will acquire knowledge with respect
to information, technology or other matters which the Employer maintains and
preserves on a confidential basis concerning the Employer's business operations,
including, by way of illustration, such information concerning the Employer's
trade secrets, business and financial methods or practices, plans, pricing,
customer, vendor and sales information and other confidential or proprietary
information and any other information, documents or materials owned, developed
or possessed by the Employer, the confidentiality of which the Employer takes
reasonable steps to protect (any and all of which being hereinafter referred to
as "Confidential Information").
------------------------
(c) Executive agrees that he will not, while he is employed by the
Employer or at any time thereafter, divulge to any person, directly or
indirectly, except to the Employer or its directors, officers and agents as
reasonably required in connection with his duties on behalf of the Employer
during his employment, or use the Confidential Information in any manner or for
any purpose in contravention of the Employer's policies or procedures,
inconsistent with the Employer's measures to protect its interest therein or
otherwise to the detriment of the Employer. Executive further agrees that he
will not, at any time after his employment with the Employer has ended, divulge
to any person or utilize for commercial or any other purpose not authorized in
writing by the Employer, directly or indirectly, any Confidential Information.
Executive further agrees that, if Executive's relationship with the Employer is
terminated (for whatever reason) he shall not take with him but will leave with
the Employer all records, papers and computer data and any copies thereof
relating to the Confidential Information (or if such papers, records, computer
data or copies are not on the premises of the Employer, Executive agrees to
return such papers, records and computer data as soon as practicable after
6
<PAGE>
his termination). Executive acknowledges that all such papers, records,
computer data or copies thereof, are and remain the property of Employer.
(d) Executive acknowledges that (i) the Confidential Information is
commercially and competitively valuable to the Employer; (ii) the unauthorized
use or disclosure of the Confidential Information would cause irreparable harm
to Employer; (iii) the Employer has taken and is taking all reasonable measures
to protect its legitimate interest in its Confidential Information, including,
without limitation, affirmative action to safeguard the confidentiality of such
Confidential Information; (iv) the restrictions on the activities in which
Executive may engage set forth in this Agreement, and the periods of time for
which such restrictions apply, are reasonably necessary in order to protect the
Employer's legitimate interests in its Confidential Information; and (v) nothing
herein shall prohibit the Employer from pursuing any remedies, whether in law or
equity, available to the Employer for breach or threatened breach of this
Agreement, including the recovery of damages from Executive.
(e) For the purposes of this Section 8, the term "Employer" shall be
deemed to include Employer and all of its subsidiaries engaged in the Business.
9. Inventions. All inventions, discoveries, improvements,
----------
processes, formulae and data relating to Employer's business that Executive may
make, conceive or learn during the term of his employment by the Employer
(whether before, during or after the term of this Agreement, whether during
working hours or otherwise) shall be the exclusive property of Employer.
Executive agrees to make prompt disclosure to the Board of all such inventions,
etc., and to do all things necessary or useful to assist Employer in securing
their full enjoyment and protection.
10. No Conflicts. Executive represents and warrants that the
------------
execution, delivery and performance of this Agreement by Executive will not
violate and agreement, undertaking or covenant to which Executive is party or is
otherwise bound.
11. Notices. Any notice given hereunder shall be in writing and
-------
delivered or mailed by certified mail or overnight courier service (with proof
of delivery) and addressed to the appropriate party at the address set forth
below or at such other address as the party shall designate from time to time in
a notice:
7
<PAGE>
If to Employer:
Nationwide Credit, Inc.
6190 Powers Ferry Road, 4th Floor
Atlanta, Georgia 30339
Attention: Chief Executive Officer
If to Executive:
Gregory Schubert
1051 Woodcroft Chase
Marietta, GA 30064
12. Binding Effect. This Agreement shall inure to the benefit of and
--------------
be binding upon Employer, its successors and assigns. Executive acknowledges
that these services are unique and personal. Accordingly, Executive may not
assign any of his rights or delegate any of his duties or obligations under this
Agreement.
13. Waiver. Failure to insist in any one or more instances on strict
------
compliance with the terms of this Agreement shall not be deemed a waiver.
Waiver of a breach of any provision of this Agreement shall not be construed as
a waiver of any subsequent breach.
14. Governing Law; Injunctive Relief. This Agreement is made and
--------------------------------
delivered in, and shall be construed in accordance with the substantive laws of,
the State of New York and the United States of America without regard to
conflict of law principles. Executive acknowledges that the services to be
rendered by him are of a special, unique and extraordinary character and, in
connection with such services, Executive will have access to confidential
information vital to Employer's and its subsidiary and affiliated companies'
businesses. By reason of this, Executive consents and agrees that if he
violates any of the provisions of this Agreement, Employer and its subsidiary
and affiliated companies would sustain irreparable harm and, therefore, in
addition to any other remedies which Employer may have under this Agreement or
otherwise, Employer shall be entitled to an injunction from any court of
competent jurisdiction restraining Employer from committing or continuing any
such violation of this Agreement.
8
<PAGE>
15. Severability. In the event that any provision of this Agreement
------------
shall be determined to be invalid by a court of competent jurisdiction, such
determination shall in no way affect the validity or enforceability of any other
provisions hereof.
16. Entire Agreement; Miscellaneous. The parties acknowledge and
-------------------------------
agree that they are not relying on any representations, oral or written, other
than those expressly contained herein. This Agreement supersedes all proposals,
oral or written, all negotiations, conversations or discussions between the
parties and all course of dealing. All prior understandings and agreements
between the parties regarding employment matters are hereby merged in this
Agreement, which alone is the complete and exclusive statement of their
understanding as to employment. No waiver or modification of this Agreement
shall be valid unless the same shall be in writing and signed by the party
sought to be charged therewith. Time is of the essence in this Agreement and
each and every provision hereof. This is a personal services agreement; no
agency, partnership, joint venture or other joint relationship is created
hereby. The parties acknowledge that they each participated in drafting this
Agreement, and there shall be not presumption against any party on the ground
that such party was responsible for preparing this Agreement or any part hereof.
Paragraph headings are for convenience of reference only and are not intended to
create substantive rights or obligations.
17. Attorney's Fees and Costs. Employer agrees to pay the reasonable
-------------------------
costs and expenses of Ungaretti & Harris with respect to its representation of
Executive and certain other management employees of the Employee, up to a
maximum of $10,000 (including costs and disbursements) in the aggregate for
Executive and all such other management employees of Employer.
9
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by the
undersigned as of the day and year first above written.
NATIONWIDE CREDIT, INC.
By: /s/ Jerry Kaufman
-----------------------------------------
Name: Jerry Kaufman
Title: President and Chief Executive Officer
EXECUTIVE
By: /s/ Gregory Schubert
-----------------------------------------
Name: Gregory Schubert
Title: Sr. Vice President, Operations
10
<PAGE>
EXHBIT 10.13
================================================================================
STOCKHOLDERS' AGREEMENT
for
NCI ACQUISITION CORPORATION
================================================================================
<PAGE>
Table of Contents
-----------------
Page
----
ARTICLE I DEFINED TERMS
Section 1.1 Definitions.............................. 2
Section 1.2 Rules of Construction.................... 8
ARTICLE II PURCHASE OF SECURITIES
Section 2.1 The Securities........................... 9
Section 2.2 Purchase and Sale of Securities.......... 9
Section 2.3 Representations and Warranties
of the Company........................... 10
Section 2.4 Representations and Warranties
of Stockholders.......................... 11
Section 2.5 Reimbursement of Expenses................ 12
ARTICLE III MANAGEMENT OF THE
COMPANY; ACTIVITIES OF THE STOCKHOLDERS
Section 3.1 Board of Directors....................... 13
Section 3.2 Board Approval Matters................... 16
Section 3.3 Noncompetition........................... 19
Section 3.4 Bylaws................................... 21
Section 3.5 Termination of Employment Agreements..... 21
Section 3.6 Initiation of Sale Process............... 21
ARTICLE IV TRANSFER RESTRICTIONS;
TRANSFER OF STOCK
Section 4.1 Transfer of Common Stock................. 22
Section 4.2 Legends.................................. 26
Section 4.3 Transferees to be Bound.................. 27
Section 4.4 Termination of Restrictions.............. 28
Section 4.5 Repurchase Rights........................ 28
Section 4.6 Closing.................................. 33
Section 4.7 Failure to Deliver Shares................ 34
ARTICLE V BUDGETS
Section 5.1 Annual Budget Process.................... 34
ARTICLE VI COVENANTS OF THE COMPANY
Section 6.1 Financial Statements and
Other Information........................ 35
Section 6.2 Inspection............................... 36
Section 6.3 Records.................................. 37
1
<PAGE>
Section 6.4 Fiscal Year.............................. 37
ARTICLE VII CONFIDENTIALITY
Section 7.1 Confidentiality.......................... 37
ARTICLE VIII MISCELLANEOUS
Section 8.1 Termination of Agreement................. 40
Section 8.2 Notices.................................. 40
Section 8.3 Waivers.................................. 42
Section 8.4 Amendment................................ 43
Section 8.5 Applicable Law........................... 43
Section 8.6 Assignment............................... 43
Section 8.7 Binding Effect; Benefits................. 43
Section 8.8 Counterparts............................. 43
Section 8.9 Invalidity............................... 44
Section 8.10 Entire Agreement and Construction....... 44
Section 8.11 Expenses................................ 44
Section 8.12 After-Acquired Shares of Common Stock... 44
Section 8.13 Joinder of Spouses...................... 45
Section 8.14 Future Actions.......................... 45
Section 8.15 Dispute Resolution...................... 45
2
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STOCKHOLDERS' AGREEMENT
-----------------------
THIS STOCKHOLDERS' AGREEMENT, is entered into and effective as of
December 31, 1997 (the "Effective Date"), by and among NCI Acquisition
Corporation, a Delaware corporation (the "Company"), the State Board of
Administration of Florida, a body corporate organized under the constitution of
the State of Florida (the "State Board"), solely in its capacity as a managed
account under the Investment Management Agreement (as defined herein) and not in
its individual capacity, Centre Capital Investors II, L.P., a Delaware limited
partnership ("CCI"), Centre Capital Tax-Exempt Investors II, L.P., a Delaware
limited partnership ("CCTI"), Centre Capital Offshore Investors II, L.P., a
Bermuda limited partnership ("CCOI"), Centre Parallel Management Partners, L.P.,
a Delaware limited partnership ("CPMP"), Centre Partners Coinvestment, L.P., a
Delaware limited partnership ("CPC"), WPG Corporate Development Associates V,
L.P., a Delaware limited partnership ("WPG"), WPG Corporate Development
Associates V (Overseas), L.P., a Delaware limited partnership ("WPG Overseas"),
Weber Family Trust dated 1/6/89, a California trust ("Weber"), Lion Investments
Limited, a limited company organized under the laws of England and Wales
("Lion"), Westpool Investment Trust plc, a limited company organized under the
laws of England and Wales ("Westpool"), Avalon Investment Partners, LLC, a
Delaware limited liability company ("Avalon"), and Jerrold Kaufman, Loren Kranz,
Gregory Schubert and Kevin Henry (each a "Management Stockholder" and
collectively, the "Management Stockholders"). The State Board, CCI, CCTI, CCOI,
CPMP, CPC, WPG, WPG Overseas, Weber, Lion, Westpool, Avalon, each Management
Stockholder and each other person that may become a party hereto as contemplated
hereby are hereinafter referred to individually as a "Stockholder" and
collectively as the "Stockholders".
W I T N E S S E T H:
-------------------
WHEREAS, the Company's authorized capital stock consists of 500,000
shares of common stock, par value $0.01 per share (the "Common Stock"), with
each share of Common Stock having the rights and preferences set forth in the
Company's Certificate of Incorporation and Bylaws; and
<PAGE>
WHEREAS, the Stockholders wish to acquire certain of such shares of
Common Stock, subject to the terms and conditions set forth in this Agreement;
and
WHEREAS, the Company and each of the Stockholders have agreed, inter
alia, to make certain provisions for the management of the Company and its
Subsidiaries and to restrict the transfer of the Common Stock held by the
Stockholders.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, and intending to be legally bound hereby, the
parties hereto covenant and agree as follows:
ARTICLE I
DEFINED TERMS
Section I.1 Definitions. When used in this Agreement, the following
-----------
terms shall have the respective meanings set forth below:
"Affiliate" means, with respect a specified 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, "controlling", "controlled by",
and "under common control with") means the power to direct or cause the
direction of the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise.
"Appraiser" has the meaning set forth in Section 4.5(f).
---------
"Available Repurchase Shares" has the meaning set forth in Section
---------------------------
4.5(b).
"Avalon" has the meaning set forth in the introduction hereto.
------
"Bylaws" means the Company's Bylaws in the form attached hereto as
------
Exhibit B, as such Bylaws may be hereafter amended in accordance with the
provisions thereof and the provisions of Section 3.4 hereof.
2
<PAGE>
"CCI" has the meaning set forth in the introduction hereto.
---
"CCOI" has the meaning set forth in the introduction hereto.
----
"CCTI" has the meaning set forth in the introduction hereto.
----
"Centre" means Centre Partners Management LLC, a Delaware limited
------
liability company, which is the designated representative of each member of the
Centre Group for purposes of this Agreement.
"Centre Designee" has the meaning set forth in Section 3.1(a).
---------------
"Centre Fund" means any of the State Board, CCI, CCTI, CCOI, CPMP or
-----------
CPC, any Affiliates of any of the foregoing, and any other investment fund
sponsored or managed by Centre or any Affiliate thereof.
"Centre Group" means Centre, each of its Affiliates, each Centre Fund
------------
and each Permitted Centre Distributee.
"Centre Ownership Percentage" means, as of a particular time, the
---------------------------
amount, expressed as a percentage, obtained by dividing (i) the sum of (x) the
aggregate number of shares of Common Stock beneficially owned by Centre and/or
each of its Affiliates and/or any Centre Fund at such time and (y) the aggregate
number of shares of Common Stock owned by each of the Permitted Centre
Distributees at such time, which shares were distributed by Centre or one of its
Affiliates through an in-kind distribution (or, in the case of the State Board,
through a release under the Investment Management Agreement), in each case as
permitted under Section 4.1(a), by (ii) the total number of shares of Common
Stock outstanding at such time (such total number of shares outstanding to be
determined without regard to options, warrants or other convertible securities,
regardless of whether any such instrument or security is "in the money").
"Certificate of Incorporation" means the Company's Amended and
----------------------------
Restated Certificate of Incorporation as originally filed with the Secretary of
State of the State
3
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of Delaware on December 30, 1997, a copy of which is attached hereto as Exhibit
A, and as such Certificate of Incorporation may be hereafter amended in
accordance with applicable law and the terms of this Agreement.
"Class A Director" means any Centre Designee; provided, however, that
---------------- -------- -------
no such director shall be a "Class A Director" from and after (i) the occurrence
of an Initial Public Offering or (ii) such time as the Centre Ownership
Percentage shall be less than 20%.
"Class B Directors" means any WPG Designee; provided, however, that no
----------------- -------- -------
such director shall be a "Class B Director" from and after (i) the occurrence of
an Initial Public Offering or (ii) such time as the WPG Ownership Percentage
shall be less than 20%.
"Code" means the Internal Revenue Code of 1986, as amended.
----
"Company" has the meaning set forth in the introduction hereto.
-------
"Controlled Affiliate" means any Person in which, at the time of the
--------------------
applicable determination, a Stockholder has, directly or indirectly, a 50% or
greater ownership interest or any Person with respect to which a Stockholder
possesses (through one or more intermediaries), the power to direct or cause the
direction of the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise.
"CPC" has the meaning set forth in the introduction hereto.
---
"CPMP" has the meaning set forth in the introduction hereto.
----
"DGCL" means the Delaware General Corporate Law, as amended from time
----
to time.
"Effective Date" has the meaning set forth in the introduction hereto.
--------------
"Employment Agreements" means each of the Employment Agreements, dated
---------------------
December 31, 1997, between
4
<PAGE>
the Company and each Management Stockholder, substantially in the form of
Exhibit C hereto.
"Fair Market Value" has the meaning set forth in Section 4.5(f).
-----------------
"Financing Agreement" has the meaning set forth in Section 4.5(g).
-------------------
"First Option" has the meaning set forth in Section 4.1(c).
------------
"HSR Act" has the meaning set forth in Section 4.1(c).
-------
"Initial Public Offering" means the completion of the sale of shares
-----------------------
of Common Stock by the Company and/or one or more stockholders of the Company
pursuant to one or more effective registration statements under the Securities
Act, which, when taken together with all shares of Common Stock which have been
publicly sold pursuant to Rule 144 under the Securities Act (or any
substantially similar rule then in effect) or under previous registration
statements, but without double-counting shares previously sold, represent in the
aggregate more than 50% of the then-outstanding shares of Common Stock (without
regard to options, warrants or other convertible securities, regardless of
whether any such instrument or security is "in the money").
"Insurance Proceeds" has the meaning set forth in Section 4.5(g).
------------------
"Investment Management Agreement" means the agreement, dated December
-------------------------------
21, 1995, between the State Board and Centre Parallel Management Partners, L.P.
"Lion" has the meaning set forth in the introduction hereto.
----
"Major Stockholder" means each of Centre and WPG; provided, however,
----------------- -------- -------
that (i) neither Centre nor WPG shall be deemed a Major Stockholder from and
after the occurrence of an Initial Public Offering, (ii) Centre shall no longer
be deemed to be a Major Stockholder from and after such time as the Centre
Ownership Percentage shall be less than 20% and (iii) WPG shall no longer be
5
<PAGE>
deemed to be a Major Stockholder from and after such time as the WPG Ownership
Percentage shall be less than 20%.
"Management Stockholder" has the meaning set forth in the introduction
----------------------
hereto.
"Other Stockholder" has the meaning set forth in Section 4.1(c).
-----------------
"Participation Offer" has the meaning set forth in Section 4.1(c).
-------------------
"Participating Stockholder" has the meaning set forth in Section
-------------------------
4.1(c).
"Permitted Centre Distributee" means (i) any general or limited
----------------------------
partner in any Centre Fund (or any Affiliate of any such general or limited
partner) and any liquidating trust for the benefit of such partners and (ii) the
State Board.
"Permitted WPG Distributee" means any general or limited partner in
-------------------------
any WPG Fund (or any Affiliate of any such general or limited partner) and any
liquidating trust for the benefit of such partners.
"Person" means an individual, partnership, limited partnership,
------
limited liability partnership, limited liability company, foreign limited
liability company, trust, estate, corporation, custodian, trustee, executor,
administrator, nominee or any other entity.
"Purchase Money Note" has the meaning set forth in Section 4.5(g).
-------------------
"Purchase Price" has the meaning set forth in Section 4.5(e).
--------------
"Purchasing Stockholder" has the meaning set forth in Section 4.5(e).
----------------------
"Registration Rights Agreement" means the Registration Rights
-----------------------------
Agreement, of even date herewith, among the Company and each of the initial
Stockholders, as such agreement may be supplemented or amended from time to
time.
6
<PAGE>
"Repurchase Event" means the occurrence of any of the following
----------------
events: (i) the termination of employment of a Management Stockholder for any
reason; or (ii) the insolvency of a Stockholder.
"Repurchase Option Notice" has the meaning set forth in Section 4.5(b)
------------------------
"Repurchase Right" has the meaning set forth in Section 4.5(a).
----------------
"Repurchase Right Pro-Rata Share" has the meaning set forth in Section
-------------------------------
4.5(d).
"Sale Transaction" has the meaning set forth in Section 3.6.
----------------
"Second Option" has the meaning set forth in Section 4.1(c).
-------------
"Securities Act" means the Securities Act of 1933, as amended from
--------------
time to time and any successor statute thereto, and the rules and regulations
promulgated thereunder, as amended from time to time.
"Selling Stockholder" has the meaning set forth in Section 4.5(a).
-------------------
"Specified Company" means any of the following: Equifax Inc.,
-----------------
National Revenue Corp., Outsourcing Solutions, Inc., The Union Corp., NCO Group,
Inc., GC Services L.P. and Great Lakes Collection Bureau Inc.
"Stockholders" has the meaning set forth in the introduction hereto.
------------
"Subsidiary" means, with respect to a specified Person, any Person in
----------
which, at the time of the applicable determination, such specified Person has,
directly or indirectly, a 50% or greater ownership interest or any Person with
respect to which such specified Person possesses (through one or more
intermediaries) the power to direct or cause the direction of the management and
policies of such Person, directly or indirectly, whether through the ownership
of voting securities, by contract or otherwise.
7
<PAGE>
"Transferor" has the meaning set forth in Section 4.1(c).
----------
"Transferor's Notice" has the meaning set forth in Section 4.1(c).
-------------------
"Weber" has the meaning set forth in the introduction hereto.
-----
"Westpool" has the meaning set forth in the introduction hereto.
--------
"WPG" has the meaning set forth in the introduction hereto.
---
"WPG Designee" has the meaning set forth in Section 3.1(a).
------------
"WPG Fund" means each of WPG, WPG (Overseas), Weiss, Peck & Greer,
--------
L.L.C., any Affiliates of any of the foregoing, and any other fund sponsored or
managed by Weiss, Peck & Greer, L.L.C. or any Affiliate thereof.
"WPG Group" means WPG, each of its Affiliates, each WPG Fund, Weber,
---------
Lion, Westpool and each Permitted WPG Distributee.
"WPG Ownership Percentage" means, as of a particular time, the amount,
------------------------
expressed as a percentage, obtained by dividing (i) the sum of (x) the aggregate
number of shares of Common Stock beneficially owned by WPG, each of its
Affiliates, each of Weber, Lion and Westpool and/or any WPG Fund at such time
and (y) the aggregate number of shares of Common Stock owned by each of the
Permitted WPG Distributees at such time, which shares were distributed by WPG or
one of its Affiliates through an in-kind distribution as permitted under Section
4.1(a), by (ii) the total number of shares of Common Stock outstanding at such
time (such total number of shares outstanding to be determined without regard to
options, warrants or other convertible securities, regardless of whether any
such instrument or security is "in the money").
Section I.2 Rules of Construction. For purposes of this Agreement:
---------------------
8
<PAGE>
(a) Unless the context otherwise requires; (i) words in the singular
include the plural and words in the plural include the singular; (ii) words in
the masculine include the feminine and words in the feminine include the
masculine; (iii) a reference to any person or entity includes its successors and
assigns and (iv) the words "include" or "including" shall be deemed to be
followed by the phrase "without limitation".
(b) References to Articles or Sections are, unless otherwise
specified, to Articles or Sections of this Agreement. The captions in this
Agreement and the Table of Contents to this Agreement are for convenience of
reference only and shall not be deemed to alter or affect any provision hereof
or interpretation or construction hereof.
(c) References herein to any agreement or other instrument shall,
unless the context otherwise requires (or the definition thereof otherwise
specifies), be deemed references to the same as it may from time to time be
changed, amended or extended.
ARTICLE II
PURCHASE OF SECURITIES
Section II.1 The Securities. The Company has authorized and reserved
--------------
up to 403,650 shares of Common Stock for issuance and sale pursuant to the terms
and conditions of this Agreement, each having such rights, restrictions and
privileges as are contained in or accorded by the Certificate of Incorporation
or Bylaws of the Company, subject to the provisions of this Agreement.
Section II.2 Purchase and Sale of Securities.
-------------------------------
(a) Subject to the terms of this Agreement, the Company hereby
sells to each of the Stockholders, and each of the Stockholders hereby
irrevocably subscribes for and purchases from the Company the number of shares
of Common Stock set forth opposite each such Stockholder's name on Schedule I
hereto for the purchase price of $100.00 per share of Common Stock.
9
<PAGE>
(b) Simultaneously with the execution of this Agreement, the Company
is delivering to each of the Stockholders one or more certificates registered in
the name of each such Stockholder representing the aggregate number of shares of
Common Stock being purchased by such Stockholder against payment of such
Stockholder's purchase price by wire transfer of immediately available funds to
an account designated by the Company.
Section II.3 Representations and Warranties of the Company. The
---------------------------------------------
Company represents and warrants to each of the Stockholders as follows:
(a) The Company is a corporation duly organized and validly existing
under the laws of the State of Delaware. The Company has the corporate power
and authority to carry on its business as proposed to be conducted and is duly
licensed or qualified to do business and in good standing in each jurisdiction
in which its ownership or leasing of property or the conduct of its business
requires such licensing or qualification. The Company has full right, power and
authority to enter into this Agreement and to perform its obligations hereunder.
(b) This Agreement has been duly authorized, executed and delivered
by the Company and constitutes a valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms.
(c) The authorized capital stock of the Company consists of 500,000
shares of Common Stock, par value $.01 per share, of which not more than 403,650
shares will be issued and outstanding immediately following the Effective Date,
having the rights, preferences and privileges specified in the Certificate of
Incorporation or Bylaws. Other than as contemplated by this Agreement and
except for (i) the NCI Acquisition Corporation 1997 Management Performance
Option Plan which provides for this issuance of options to purchase up to 57,665
shares of Common Stock on the terms and conditions set forth therein and (ii)
the Option Agreement, dated as of December 31, 1997, between the Company and
Avalon, which provides for the issuance of up to 19,221 shares of Common Stock
on the terms and conditions set forth therein, there are no outstanding
securities of the
10
<PAGE>
Company evidencing the right to purchase or subscribe for any shares of capital
stock of the Company, there are no outstanding or authorized options, warrants,
calls, subscriptions, rights, commitments or any other agreements of any
character obligating the Company to issue any shares of its capital stock or any
securities convertible into or evidencing the right to purchase or subscribe for
any shares of such stock, and there are no agreements or understandings with
respect to the voting, sale or transfer of any shares of capital stock of the
Company.
(d) All the shares of Common Stock issued by the Company have been
duly authorized, validly issued, fully paid and nonassessable. All the shares
of Common Stock issuable by the Company pursuant to this Agreement will be, when
issued and paid for and delivered in accordance with the terms of this
Agreement, duly authorized, validly issued, fully paid and nonassessable.
(e) Neither the execution and delivery of this Agreement, nor the
consummation of the transactions contemplated hereby, nor compliance by the
Company with any of the provisions hereof will (i) conflict with or result in a
breach of any provision of the Certificate of Incorporation or Bylaws, (ii)
constitute or result in a breach of any term, condition or provision of, or
constitute a default under, or give rise to any right of termination,
cancellation or acceleration with respect to, or result in the creation of any
lien, charge or encumbrance upon any property or asset of the Company pursuant
to any note, bond, mortgage, indenture, license, agreement or other instrument
or obligation to which the Company is a party, or (iii) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to the Company,
except (in the case of clause (ii) above) for such violations, rights,
conflicts, breaches, creations or defaults which, either individually or in the
aggregate, will not have a material adverse effect on the business, results of
operations or financial condition of the Company and its Subsidiaries, taken as
a whole.
Section II.4 Representations and Warranties of Stockholders. Each
----------------------------------------------
Stockholder, severally and not jointly, represents and warrants to Company and
to the other Stockholders as follows:
11
<PAGE>
(a) If such Stockholder is not a natural person, such Stockholder
represents and warrants that it is a corporation, partnership, trust or other
entity duly organized, validly existing and in good standing under the laws of
such Stockholder's jurisdiction of organization.
(b) This Agreement has been duly authorized, executed and delivered
by such Stockholder and constitutes a valid and binding obligation of such
Stockholder enforceable against such Stockholder in accordance with its terms.
(c) Each Stockholder represents and warrants to, and covenants and
agrees with the Company that the shares of Common Stock to be acquired by it
under this Agreement are being acquired for its own account for investment and
with no intention of distributing or reselling such shares of Common Stock or
any part thereof or interest therein in any transaction which would be in
violation of the securities laws of the United States or any state, without
prejudice, however, to such Stockholder's right, subject to the provisions of
this Agreement and the Registration Rights Agreement, at all times to sell or
otherwise dispose of all or any part of the shares of Common Stock under an
effective registration statement under the Securities Act and other applicable
state securities laws or under Rule 144 promulgated under the Securities Act.
Each Stockholder, further represents and warrants to the Company that such
Stockholder has no present agreement, understanding, plan or intent to transfer
to any transferee the shares of Common Stock to be purchased by it pursuant to
this Agreement.
Section II.5 Reimbursement of Expenses. The Company shall reimburse
-------------------------
each of Centre and WPG for all reasonable, out-of-pocket expenses (including,
without limitation, legal fees and expenses) incurred by such party in
connection with (i) the negotiation of this Agreement, (ii) the transactions
contemplated by this Article II and/or (iii) the transactions contemplated by
the Agreement and Plan of Merger, dated as of December 31, 1997, between the
Company, Nationwide Credit, Inc., NCI Merger Corporation, First Financial
Management Corporation and First Data Corporation. The Company shall make such
reimbursement payments promptly, but in no
12
<PAGE>
event more than five business days following its receipt of any invoice with
respect thereto.
ARTICLE III
MANAGEMENT OF THE COMPANY;
ACTIVITIES OF THE STOCKHOLDERS
Section III.1 Board of Directors.
------------------
(a) The Stockholders and the Company shall take all action within
their respective power (including, but not limited to, having all of their
shares of Common Stock represented in person or by proxy at all meetings of
stockholders, voting their shares of Common Stock and causing any director
designated by such Stockholder not to take any action inconsistent with this
Agreement) required to cause the Board of Directors of the Company at all times
to consist of nine members, as follows: (i) three designees of Centre (each a
"Centre Designee"), subject to adjustment as provided in Section 3.2(b)(i), (ii)
three designees of WPG (each a "WPG Designee"), subject to adjustment as
provided in Section 3.2(b)(ii), and (iii) three individuals nominated by a
majority of the members of the Board of Directors then in office; provided,
--------
however, that with respect to the initial Board of Directors established under
- -------
this Agreement, such three individuals shall be nominated by a majority of the
Class A Directors and the Class B Directors and elected by a plurality of the
votes present (in person or by proxy) and entitled to vote in respect of the
election of directors. Such directors shall serve on the Board of Directors
until their respective successors are duly elected and qualified in accordance
with the provisions of this Agreement, the Certificate of Incorporation and the
By-laws.
(b) (i) The right of Centre to designate three directors under this
Section 3.1 shall be reduced to the right to designate two directors at such
time as the Centre Ownership Percentage shall be less than 20%, the right of
Centre to designate two directors under this Section 3.1 shall be reduced to the
right to designate one director at such time as the Centre Ownership Percentage
shall be less than 10%, and the right of Centre to designate any directors under
this Section 3.1 shall terminate at such time as the Centre Ownership Percentage
shall be less than 2%.
13
<PAGE>
(ii) The right of WPG to designate three directors under this Section
3.1 shall be reduced to the right to designate two directors at such time as the
WPG Ownership Percentage shall be less than 20%, the right of WPG to designate
two directors under this Section 3.1 shall be reduced to the right to designate
one director at such time as the WPG Ownership Percentage shall be less than
10%, and the right of WPG to designate any directors under this Section 3.1
shall terminate at such time as the WPG Ownership Percentage shall be less than
2%.
(c) In the event that any director (a "Withdrawing Director")
designated in the manner set forth in Section 3.1(a) above is unable to serve,
or once having commenced to serve, is removed or withdraws from the Board of
Directors of the Company, such Withdrawing Director's replacement (the
"Substitute Director") on the Board of Directors of the Company will be
designated by the party or parties who designated the Withdrawing Director,
subject to Section 3.1(d) hereof. The Company and each of the Stockholders
agree to take all action within their power, including, but not limited to, the
voting of capital stock of the Company, to cause the election of such Substitute
Director.
(d) In the event that any Stockholder entitled to designate a
director or directors pursuant to this Agreement ceases to be so entitled, the
vacancy or vacancies resulting therefrom shall be filled by the remaining
directors or by the stockholders in the manner provided by law. In the event
any Stockholder entitled to designate a director or directors pursuant to this
Agreement chooses not to designate any director or directors, such directorship
or directorships shall remain vacant.
(e) A majority of the Board of Directors, which majority shall
include at least one Class A Director, if any, and one Class B Director, if any,
must be present in order for a quorum of the Board of Directors to be present
for the transaction of the Company's business.
(f) The Board of Directors shall create the following permanent
committees: (i) an Audit Commit-
14
<PAGE>
tee; (ii) a Compensation Committee; and (iii) a Nominating Committee. Each
committee of the Board of Directors (including, without limitation, the
committees referred to in the preceding sentence) shall include at least one
Class A Director, if any, and one Class B Director, if any. Subject to the DGCL,
each committee shall have such rights and responsibilities as shall be granted
by the Board of Directors. Any action by any committee shall require the
unanimous vote of all Class A Directors and all Class B Directors who are on
such committee.
(g) The Board of Directors of the Company shall meet not less than
four times per annum.
(h) Special meetings of the Board of Directors of the Company may be
called by any Class A Director or Class B Director or upon written notification
to the Board of Directors by Stockholders holding at least 30% of the then-
outstanding shares of Common Stock.
(i) The Company shall (i) pay each Centre Designee and each WPG
Designee an annual retainer of $15,000, (ii) pay Jeffrey Weiss an annual
retainer of $30,000 for so long as Mr. Weiss is a member of the Board of
Directors of the Company and (iii) reimburse the reasonable out-of-pocket
expenses incurred by each such designee in the performance of such designee's
obligations as a director (including, without limitation, expenses incurred
traveling to and attending meetings of the Board of Directors of the Company).
(j) The Chairman of the Board of Directors of the Company shall be
selected by the Major Stockholders for twelve month periods beginning on the
Effective Date as follows: (x) during the first twelve months following the
Effective Date, the Chairman be shall an individual selected by Centre from
among the Centre Designees, (y) during the immediately succeeding twelve months,
the Chairman shall be an individual selected by WPG from among the WPG Designees
and (z) during each succeeding twelve-month period thereafter, the Major
Stockholders shall alternate selecting the Chairman from among their respective
designees to the Board of Directors; provided, however, that if at any time
-------- -------
there shall be only one Major Stockholder, then such Major Stockholder shall be
entitled to select the Chairman.
15
<PAGE>
(k) The Vice Chairman of the Board of Directors of the Company shall
be selected for twelve month periods beginning on the Effective Date by the
Major Stockholder who does not select the Chairman for such period pursuant to
Section 3.1(j) above; provided, however, that if at any time there shall be only
-------- -------
one Major Stockholder, then such Major Stockholder shall be entitled to select
the Vice Chairman.
(l) Notwithstanding anything in the Certificate of Incorporation, the
Bylaws or this Agreement to the contrary, Centre shall have the sole and
exclusive power to remove any Centre Designee from the Board of Directors of the
Company and WPG shall have the sole and exclusive power to remove any WPG
Designee from the Board of Directors of the Company.
Section III.2 Board Approval Matters. Except as otherwise expressly
----------------------
provided in this Agreement (including, without limitation, Section 3.6), without
the prior approval of a majority of the entire Board of Directors, which
majority shall include at least one Class A Director, if any, and one Class B
Director, if any, the Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, take or permit to be taken any of the
following actions:
(a) Take any action that, under applicable law, may be taken
only with the approval of the Board of Directors of the Company or such
Subsidiary.
(b) Approve the annual operating budget of the Company and its
Subsidiaries (which shall include, without limitation, a financing plan and
an annual capital expenditure budget), or its equivalent, including any
material revisions thereto.
(c) Make or commit to make any individual capital expenditure or
acquisition of assets which exceeds $500,000 or aggregate capital
expenditures or acquisitions which exceed $1,000,000 in any calendar year
(other than, in all cases, capital expenditures or acquisitions of assets
provided for in the approved annual operating budget).
16
<PAGE>
(d) Incur, create, refinance, assume or guarantee any
indebtedness, absolute or contingent of any nature whatsoever, in excess of
$1,000,000 in any calendar year (other than indebtedness provided for in
the approved annual operating budget).
(e) Create any mortgage, lien, security interest or encumbrance
on any asset of the Company or any of its Subsidiaries, other than in the
ordinary course of business.
(f) Settle any claim or litigation involving a settlement amount
in excess of $500,000.
(g) Increase or decrease the number of members of the Board of
Directors of the Company.
(h) Sell or otherwise dispose of any assets, the value of which
exceeds $500,000 on an individual basis or $1,000,000 in the aggregate in
any calendar year (other than, in all cases, asset sales in the ordinary
course of business or as provided in the approved annual operating budget).
(i) Amend or propose, approve, authorize or adopt any amendment
to, the Certificate of Incorporation or Bylaws.
(j) Issue or sell, or agree to issue or sell, to any person (i)
any shares of capital stock of the Company or any of its Subsidiaries, any
rights, options or warrants to acquire any such shares, or any securities
convertible into or exchangeable or exercisable for such shares, (ii) any
securities, the provisions of which, by their terms, set or provide a
mandatory formula for determining, directly or indirectly, the
participation in earnings and profits of the Company or any of its
Subsidiaries or (iii) any securities which are convertible into or
exchangeable or exercisable for securities described in clause (ii) above.
(k) Redeem, repurchase, retire or otherwise acquire for value
any of the capital stock of the Company or any of its Subsidiaries.
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<PAGE>
(l) With respect to the Company only, declare or pay, directly
or indirectly, any dividend or make any other distribution, whether in
cash, property or securities or a combination thereof, with respect to
(whether by reduction of capital or otherwise) any share of capital stock
of the Company.
(m) Except agreements entered into on the Effective Date in
connection with the consummation of the transactions contemplated under
Article II, enter into any agreement or transaction involving more than
$15,000 with (x) a director or any officer of the Company or any of its
Subsidiaries or (y) any Stockholder(s) or any of their respective
subsidiaries, Affiliates or associates.
(n) Subject to Section 3.6, take any action to effect the
dissolution, liquidation, merger, consolidation, other business combination
or sale of all or substantially all the assets of the Company or any of its
Subsidiaries, or the enter into any agreement contemplating any of the
foregoing.
(o) File a petition under the Federal Bankruptcy Act or any
other insolvency law, or admit in writing its bankruptcy, insolvency or
general inability to pay its debts.
(p) Appoint a liquidator of the Company in the event of the
dissolution of the Company.
(q) Change or modify its accounting methods, practices or
policies or tax policies.
(r) Select or remove the Company's independent certified public
accountants.
(s) Engage any financial advisor.
(t) Employ or terminate any employee of the Company or any of
its Subsidiaries (except as provided in Section 3.5 hereof) whose title is
that of Vice President or higher.
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(u) Organize any new subsidiaries or enter into any business
which is not conducted by the Company as of the Effective Date.
(v) Adopt or amend any employee benefit plan or any stock option
plan.
(w) Approve or agree to file a registration statement in respect
of, or take any other action to register, any securities of the Company or
any of its Subsidiaries under any federal or state law, except as required
pursuant to the Registration Rights Agreement.
(x) Acquire a business (whether by means of a purchase of assets
or any security, a merger or any other business combination) involving a
purchase price (including indebtedness assumed or to which the business is
subject) in excess of $1,000,000.
(y) Take any action other than in the ordinary course of
business.
Section III.3 Noncompetition.
--------------
(a) Each Stockholder (other than the Management Stockholders,
whose non-competition agreements are set forth in their respective Employment
Agreements) agrees that it will not, and will cause each of its Subsidiaries and
Controlled Affiliates not to, directly or indirectly, acquire beneficial
ownership of 5% or more of the outstanding voting stock of (i) any Specified
Company or (ii) any Person with total consolidated revenues from collection
activities and/or accounts receivable management activities, in each case of the
type engaged in by the Company on the date hereof, in excess of $10 million
during the most recent fiscal year for which information is available, provided
that such revenues from collection and accounts receivable management activities
constituted 25% or more of such Person's total consolidated revenues for such
fiscal year. Notwithstanding anything in this Agreement to the contrary
(including, without limitation, Section 8.3), this Section 3.3 may be waived,
and shall be inapplicable to, any acquisition of such voting securities (i) in
the case of an acquisition by a Stockholder who is not a Major Stockholder, if
such acquisition is consented to by each Major
19
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Stockholder (if any), or if there shall be no Major Stockholders, by a majority
of the Board of Directors of the Company, or (ii) in the case of an acquisition
by a Major Stockholder, if such acquisition is consented to by the other Major
Stockholder or, if there shall be no other Major Stockholder, by a majority of
the Board of Directors of the Company. The restri ction set forth in this
Section 3.3 shall terminate with respect to a particular Stockholder upon the
earlier to occur of (i) the termination of this Agreement or (ii) six months
after (x) for Stockholders other than those described in clause (y) or clause
(z) below, such time as such Stockholder and its Affiliates no longer own any
shares of Common Stock or any options or warrants to acquire any shares of
Common Stock, (y) for the members of the Centre Group, such time as the Centre
Ownership Percentage shall be less than 2% and (z) for the members of the WPG
Group, such time as the WPG Ownership Percentage shall be less than 2%.
(b) Each Stockholder regards the restrictions set forth in this
Section 3.3 as reasonable and as designed to provide the other Stockholders and
the Company with limited, legitimate and reasonable protection against
diminution of the value of the Company attributable to any actions of any
Stockholder or its Controlled Affiliates contrary to such restrictions. Each
Stockholder acknowledges that irreparable damage would occur in the event any of
the provisions of this Section 3.3 were breached and accordingly agrees that the
Company and the other Stockholders shall be entitled to an injunction or
injunctions to prevent breaches of the provisions of this Section 3.3, and shall
be entitled to enforce specifically the provisions of this Section 3.3, in any
court of the United States or any state thereof having jurisdiction, in addition
to any other remedy to which the Company or such Stockholder may be entitled
under this Agreement or at law or in equity. It is the intent and understanding
of the Stockholders that if, in any action before any court or other
governmental entity legally empowered to enforce the provisions of this Section
3.3, any term, restriction, covenant or promise in this Section 3.3 is found to
be unreasonable and for that reason unenforceable, then such term, restriction,
covenant or promise shall be deemed modified to the extent necessary to make it
enforceable by such court or other governmental entity.
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Section III.4 Bylaws. Notwithstanding anything in the Certificate of
------
Incorporation, the Bylaws or this Agreement to the contrary, each of the
Stockholders acknowledges and agrees that it shall not take or cause to be taken
any action to amend, restate, repeal or adopt new bylaws for the Company, unless
such action is taken with the approval of a majority of the entire Board of
Directors of the Company, which majority shall include at least one Class A
Director, if any, and one Class B Director, if any. Any purported action by any
Stockholder to amend, restate, repeal or adopt new bylaws for the Company that
does not comply with the immediately preceding sentence shall be null and void
ab initio and of no force or effect, and the Company shall not recognize or be
- -- ------
bound by any such purported action.
Section III.5 Termination of Employment Agreements. Notwithstanding
------------------------------------
anything in this Agreement or the Bylaws to the contrary, and in addition to any
other rights or powers that may be provided in the Bylaws, each of the
Employment Agreements may be terminated by the Company for "Cause" (as such term
is defined in the respective Employment Agreement) if such termination is
authorized by a resolution duly adopted and approved by a majority of the then-
existing Class A Directors and Class B Directors, without the necessity for any
vote, consent or approval from any of the other members of the Board of
Directors of the Company, which resolution shall contain a certification and
finding by the adopting directors that the factual basis or bases supporting
termination for "Cause" do in fact exist; provided, however, that in the event
-------- -------
no majority consensus is obtained in a vote of the Class A Directors and Class B
Directors, such termination may be authorized by a majority vote of the Board of
Directors of the Company.
Section III.6 Initiation of Sale Process. (a) At any time following
--------------------------
the fourth anniversary of the Effective Date, any Major Stockholder shall be
entitled to require the Board of Directors of the Company to direct the
Company's management to solicit offers from third parties to engage in a Sale
Transaction (as defined below); provided, however, that this Section 3.6 shall
-------- -------
be of no force or effect from and after the consummation of an Initial Public
Offering. In such event the Company shall take all actions reasonably necessary
to solicit
21
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such offers, including, but not limited to, engaging the services of an
investment banker selected by a majority of the Board of Directors of the
Company (without regard to Section 3.2) with the consent of all then-existing
Major Stockholders, which consent shall not be unreasonably withheld or delayed,
with a view toward obtaining the highest aggregate price per share of Common
Stock. Upon receipt of such offers, the Company shall enter into such agreements
as shall be necessary to effectuate the acquisition (whether by the sale of
stock or assets or by merger or consolidation or similar transaction) of the
Company (a "Sale Transaction") at the highest aggregate price per share of
Common Stock and the Board of Directors shall approve such actions (including
the execution and delivery of any definitive acquisition agreement); provided,
--------
however, that neither the Company nor the Board of Directors shall be required
- -------
to take any such action unless the Board shall have received an opinion from the
Company's financial advisor to the effect that the consideration to be paid in
respect of the shares of Common Stock in such transaction is fair to the
Company's stockholders from a financial point of view.
(b) If the Board of Directors of the Company adopts a resolution
approving a Sale Transaction pursuant to Section 3.6(a), each Stockholder shall
vote all shares of Common Stock held by it in favor of such Sale Transaction and
shall otherwise cooperate with the Company in connection with the effectuation
of such Sale Transaction.
ARTICLE IV
TRANSFER RESTRICTIONS; TRANSFER OF STOCK
Section IV.1 Transfer of Common Stock. No Stockholder shall sell,
------------------------
transfer, assign or otherwise in any manner dispose of (such a sale, transfer,
assignment or disposition is sometimes referred to herein as a "transfer"), or
pledge, hypothecate, encumber or otherwise grant a security interest in
(voluntarily or involuntarily), any shares of Common Stock except (x) as
expressly permitted in any subsection of this Section 4.1, (y) as provided in
Section 4.5 or (z) with the prior written consent of a majority of the Board of
Directors of the Company and each of the Major Stockholders:
(a) Subject to Section 4.1(d) and to compliance with Section
4.3, a Stockholder may transfer
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<PAGE>
shares of Common Stock to an Affiliate thereof. In the event any such Affiliate
is a corporation, partnership, trust, association or other entity and ceases to
be an Affiliate of the transferring Stockholder due to such Stockholder's
disposition of its direct or indirect interest in such Affiliate, such
transferring Stockholder shall cause such Affiliate to transfer to such
Stockholder or another Affiliate of such Stockholder all Common Stock owned by
such Affiliate immediately prior to the time such Affiliate ceases to be an
Affiliate of such Stockholder, provided that if such transfer of Common Stock
-------- ----
does not occur prior to such disposition of such interest in such Affiliate,
such disposition shall be deemed a transfer which is subject to all of the
restrictions set forth in this Article IV. In addition, subject to compliance
with Section 4.3, (i) Centre may transfer or cause to be transferred shares of
Common Stock to any Permitted Centre Distributee pursuant to an in-kind
distribution (or, in the case of the State Board, through a release under the
Investment Management Agreement) of such shares, (ii) WPG may transfer or cause
to be transferred shares of Common Stock to any Permitted WPG Distributee
pursuant to an in-kind distribution of such shares and (iii) each Management
Stockholder may transfer shares of Common Stock to a living trust for the
benefit of any or all of such Management Stockholder's spouse or descendants.
For the avoidance of doubt, any distribution by such trust shall be deemed to be
a transfer for purposes of this Agreement.
(b) A Stockholder may transfer shares of Common Stock in a
registered public offering pursuant to the Registration Rights Agreement or,
thereafter, pursuant to Rule 144 promulgated under the Securities Act.
(c) Subject to Section 4.1(d) and to compliance with Section
4.3, and except with respect to a transfer pursuant to Section 4.1(a), 4.1(b) or
4.5, a Stockholder other than a Management Stockholder or a transferee of a
Management Stockholder under Section 4.1(a) (the "Transferor") may at any time
give written notice (the "Transferor's Notice") to the Company that it has
received a bona fide third-party offer to purchase all or a portion of the
shares of such Stockholder's Common Stock and that such Stockholder desires to
transfer any or all of such shares. The Transferor's Notice shall specify the
proposed transferee thereof, the number
23
<PAGE>
of shares of Common Stock to be transferred and the amount and type of
consideration to be received therefor, shall contain an undertaking by the
proposed transferee to honor any Participation Offer which is made in accordance
with the terms hereof and shall contain the following offers:
(i) The Transferor shall offer to sell (the "First Option") all
such shares to the Company for cash at the same price per share as to be
paid by the proposed transferee. Regardless of whether the Company
exercises the First Option, to the extent the consideration to be paid by
the proposed transferee consists of assets other than cash, the cash
equivalent of such consideration shall be determined by a qualified,
independent appraiser selected by the Board of Directors. The decision
whether or not the Company will accept the First Option in any particular
instance shall be made by the Board of Directors of the Company, excluding
any directors designated by the Transferor or proposed transferee (or any
Affiliate thereof) pursuant to Section 3.1 hereof. If the Company (x)
fails to notify the Transferor in writing within 20 days (35 days in the
event that an appraiser is selected to determine the cash equivalent value
of any non-cash consideration) after receipt of the Transferor's Notice
that it elects to accept the First Option or (y) by written notice rejects
the First Option in whole or in part, the Transferor shall offer to sell
(the "Second Option") the shares not to be so purchased to any other
stockholder who is a Major Stockholder (each, an "Other Stockholder") for
cash at the same price as the Company is entitled to purchase such shares
pursuant to the First Option, such offer to be accepted ratably based on
the number of shares of Common Stock owned by each Other Stockholder
exercising the Second Option. If such Second Option is not accepted by any
of such Other Stockholders by written notice delivered to the Transferor
within 20 days after the date such offer is received, the Transferor may
transfer all shares subject to the Transferor's Notice to the proposed
transferee in accordance with the terms of such transfer set forth in the
Transferor's Notice, and, if the Participation Offer described in clause
(ii) below has been accepted, the Participation Offer; provided, howev-
-------- ------
24
<PAGE>
er, that such transfer shall occur no later than 60 days after the
--
expiration of such 20-day period or five days after the expiration or
waiver of any waiting period (such period not to exceed 60 days) applicable
to such transfer pursuant to the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), whichever is later. The Transferor
shall not be required to sell any shares covered by the Transferor's Notice
to the Company or to any Other Stockholder unless all such shares are to be
purchased pursuant to either the First Option, the Second Option, or both.
If the First Option and/or the Second Option, as the case may be, is
accepted, the Transferor shall transfer such shares (free of all liens and
encumbrances except this Agreement) to the respective purchasers thereof no
earlier than 60 days nor more than 90 days after the date such offer is
accepted by the Company and/or Other Stockholders, whichever is later,
against delivery by the purchaser of immediately available funds payable to
the Transferor; provided that, if the HSR Act is applicable to the First
Option or the Second Option, such date shall be extended to the date which
is five days after the date the applicable waiting period expires or is
waived.
(ii) The Transferor shall offer (the "Participation Offer") to
include in the proposed transfer a number of shares designated by any of
the other Stockholders (each, a "Participating Stockholder"), not to
exceed, in respect of any such Participating Stockholder, the number of
shares equal to the product of (x) the aggregate number of shares to be
transferred by the Transferor to the proposed transferee and (y) a fraction
with a numerator equal to the number of shares of Common Stock that such
Participating Stockholder owns and a denominator equal to the number of
shares of Common Stock that all the Stockholders own; provided that a
--------
Transferor shall not be required to make a Participation Offer in respect
of a proposed transfer, or series of related proposed transfers, by the
Transferor of a number of shares of Common Stock representing less than 2-
1/2% of the then-outstanding shares of Common Stock. The Participation
Offer shall be conditioned upon the Transferor transferring shares pursuant
to the First Option and/or the
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<PAGE>
Second Option or consummating (which it shall not be obligated to do) the
transactions contemplated in the Transferor's Notice with the transferee
named therein. If any Participating Stockholder or Participating
Stockholders have accepted the Participation Offer, the Transferor and such
Participating Stockholder or Participating Stockholders shall transfer the
number of shares specified in the Participation Offer as follows: (i) to
the Company, if it exercised the First Option in whole, or (ii) if the
Company exercised the First Option in part and the Other Stockholder or
Other Stockholders who exercised the Second Option did so with respect to
the remaining shares, to the Company and the Other Stockholder or Other
Stockholders, or (iii) if the Company did not exercise the First Option, to
the Other Stockholder or Other Stockholders who exercised the Second Option
in full, if any, or (iv) in all other events, to the proposed transferee in
accordance with the terms of such transfer set forth in the Transferor's
Notice.
(d) Any purported transfer of Common Stock by a Stockholder which is
not permitted by the foregoing provisions of this Section, or which is in
violation of such provisions, shall be void and of no force and effect
whatsoever.
(e) In no event shall a merger or consolidation of the Company with
any person or entity effected in accordance with the provisions of Sections 3.2
or 3.6 above constitute a transfer for purposes of this Section 4.1.
Section IV.2 Legends. (a) Each certificate for Common Stock shall
-------
contain a legend substantially in the form of the following:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND
CONDITIONS OF, AND RESTRICTIONS ON TRANSFER SET FORTH IN, A STOCKHOLDERS'
AGREEMENT ENTERED INTO BY AND AMONG NCI ACQUISITION CORPORATION (THE
"COMPANY") AND CERTAIN OTHER PERSONS NAMED THEREIN, DATED AS OF DECEMBER
31, 1997, COPIES OF WHICH ARE ON FILE WITH THE SECRETARY OF THE COMPANY,
AND SUCH SHARES ARE HELD AND MAY NOT BE SOLD, AS-
26
<PAGE>
SIGNED, TRANSFERRED, PLEDGED, HYPOTHECATED, ENCUMBERED, OTHERWISE GRANTED
AS SECURITY, OR OTHERWISE DISPOSED OF EXCEPT IN ACCORDANCE THEREWITH. SUCH
STOCKHOLDERS' AGREEMENT CONTAINS, AMONG OTHER THINGS, A "RIGHT OF FIRST
REFUSAL" RESTRICTION WITH RESPECT TO SUCH SHARES.
(b) In addition to the legend required under Section 4.2(a), each
Stockholder agrees that, if legal counsel to the Company deems appropriate, each
certificate representing shares of Common Stock also shall bear a legend in
substantially the following form:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD, PLEDGED, TRANSFERRED
OR OTHERWISE DISPOSED OF UNTIL THE HOLDER HEREOF PROVIDES EVIDENCE
REASONABLY SATISFACTORY TO THE COMPANY (WHICH, IN THE DISCRETION OF THE
COMPANY, MAY INCLUDE AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
COMPANY) THAT SUCH OFFER, SALE, PLEDGE, TRANSFER OR OTHER DISPOSITION WILL
NOT VIOLATE APPLICABLE FEDERAL OR STATE SECURITIES LAWS.
Section IV.3 Transferees to be Bound. In the event of any transfer
-----------------------
of shares of Common Stock of the Company pursuant to Section 4.1(a) or (c)
hereof, the transferee shall agree in writing with the remaining Stockholder(s)
to be bound by the terms of this Agreement prior to such transfer, and from and
after such transfer, such transferee shall be deemed to be a "Stockholder" for
all purposes hereunder; provided, however, that notwithstanding anything in this
-------- -------
Agreement to the contrary, no transferee of any shares of Common Stock shall be
(i) entitled to exercise any rights of Centre or WPG under this Agreement with
respect to the designation of Centre Designees or WPG Designees or (ii) deemed
to be a Major Stockholder. In the event of a transfer of shares of Common Stock
by a Management Stockholder to a living trust for the benefit of any or all of
such Management Stockholder's spouse or descendants, such trust and, in the
event of any distribution of such shares of Common Stock by such trust, the
distributees thereof, together
27
<PAGE>
with such Management Stockholder, shall be deemed to be such Management
Stockholder for all purposes under this Agreement, and shall comply with all
obligations of such Management Stockholder hereunder, in each case including,
without limitation, Section 4.5 hereof.
Section IV.4 Termination of Restrictions. Notwithstanding anything
---------------------------
in this Agreement to the contrary, from and after the consummation of an Initial
Public Offering, the provisions of Sections 4.1, 4.2(a) and 4.3 shall be
inapplicable.
Section IV.5 Repurchase Rights.
-----------------
(a) Within 60 days following the occurrence of a Repurchase Event
with respect to a Stockholder, the Company shall have the right and option to
purchase (a "Repurchase Right") all or any part of the shares of Common Stock
owned by such Stockholder and each Affiliate of such Stockholder (or his
personal representative, as the case may be) (collectively, the "Selling
Stockholder") in the manner, for the price and on the terms and conditions
contained in this Section 4.5. The Company shall exercise such option by giving
written notice of such exercise to the Selling Stockholder specifying the number
of shares to be repurchased.
(b) In the event that the Company does not exercise the foregoing
Repurchase Right with respect to all of the shares of Common Stock that may be
purchased under this Section 4.5, then the Company shall notify (the "Repurchase
Option Notice") each of the Other Stockholders of (i) the event giving rise to
the Repurchase Right, and (ii) the number of shares of Common Stock owned by
such Selling Stockholder as to which the Company did not exercise its Repurchase
Right (the "Available Repurchase Shares").
(c) Following the delivery of the Repurchase Option Notice, each
of the Other Stockholders shall have a Repurchase Right (exercisable within 30
days of receipt of the Repurchase Option Notice by giving written notice to such
Selling Stockholder) to purchase all or any part of the Available Repurchase
Shares, in the manner, for the price and on the terms and conditions contained
in this Section 4.5.
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<PAGE>
(d) If the Company exercises its Repurchase Right, then it shall
purchase all of the shares of Common Stock for which it has exercised such
right, and each Other Stockholder who shall have exercised its Repurchase Right
(collectively, the "Purchasing Stockholders") shall purchase all of the shares
of Common Stock for which it has exercised such right. In the event that the
Purchasing Stockholders shall have exercised their Repurchase Rights with
respect to a number of shares of Common Stock representing, in the aggregate,
more than the number of Available Repurchase Shares, then each Purchasing
Stockholder shall purchase from the Selling Stockholder a number of shares equal
to the lesser of (i) the number of shares of Common Stock for which such
Purchasing Stockholder purported to exercise its Repurchase Right and (ii) such
Purchasing Stockholder's Repurchase Right Pro-Rata Share (as defined below) of
the Available Repurchase Shares. If following such allocation, any of such
Available Repurchase Shares remains unallocated, such unallocated shares will be
reallocated (one or more times as necessary) on the same principle among those
Purchasing Stockholders who shall have been allocated less than the number of
shares of Common Stock for which such Purchasing Stockholder purported to
exercise its Repurchase Right, until all Available Repurchase Shares shall have
been allocated; provided, however, that no Stockholder shall, by reason of the
-------- -------
foregoing, be required to purchase more than the number of Available Repurchase
Shares with respect to which it has exercised a Repurchase Right. "Repurchase
Right Pro-Rata Share" means, with respect to a particular Purchasing
Stockholder, a fraction, the numerator of which is the number of shares of
Common Stock owned by such Purchasing Stockholder and the denominator of which
is the number of shares of Common Stock owned by all Purchasing Stockholders who
are subject to such allocation.
(e) The purchase price ("Purchase Price") of any shares of Common
Stock pursuant to the exercise of a Repurchase Right shall be the Fair Market
Value of such shares; provided, however, that if a Repurchase Right arises upon
-------- -------
the termination of a Management Stockholder for Cause (as such term is defined
in the Management Stockholder's Employment Agreement), then the Purchase Price
of each share of Common Stock shall be the lower of the cost (determined on an
average cost basis) of such
29
<PAGE>
share of Common Stock or the Fair Market Value of such share of Common Stock.
(f) For purposes of this Section 4.5, the "Fair Market Value" of
a share of Common Stock subject to a Repurchase Right shall be determined as
follows:
(i) if, at the time of such Repurchase Event, such shares of
Common Stock are listed on any national securities exchange or quoted on
any inter-dealer system, the Fair Market Value of a share of Common Stock
shall be equal to the average closing sales price per share of Common Stock
on such exchange or system during the ten trading days prior to the date on
which such Repurchase Event occurred;
(ii) if such shares are not so listed or quoted at such time,
then during the ten-day period following the date on which a Repurchase
Right is exercised the Selling Stockholder (or his personal representative)
and the Board of Directors of the Company (following consultation with the
Purchasing Stockholders, if any) shall each submit to the other such
party's respective proposal as to the Fair Market Value. If neither
proposal is more than 10% higher than the other proposal, then the Fair
Market Value shall be equal to the average of such proposals; or
(iii) in the event that one of the proposals contemplated under
clause (ii) above is more than 10% higher than the other proposal, then
within ten business days after the submission of such proposals, the Board
of Directors shall select and retain a qualified independent appraiser of
closely held businesses (the "Appraiser"). The Selling Stockholder (or his
personal representative), on the one hand, and the Board of Directors, on
the other hand, shall each submit to the Appraiser such parties' respective
proposal as to the Fair Market Value (which proposal shall be the same
proposal submitted under clause (ii) above), together with such supporting
data as such party deems relevant. The Appraiser shall then conduct its
own evaluation of such opinions and such data, and shall conduct such
independent procedures and investigation as the Appraiser shall deem
necessary in order
30
<PAGE>
to form an opinion as to the Fair Market Value. The Appraiser shall then
determine the Fair Market Value, which shall be within the range proposed
by the Selling Stockholder and the Board of Directors. The Appraiser shall
give written notice of its determination to the Selling Stockholder (or his
personal representative) and the Company. The fees and expenses of the
Appraiser shall be paid equally by the Selling Stockholder (or his personal
representative) and the Company.
(g) The Purchase Price with respect to any shares of Common Stock
purchased by the Company pursuant to its Repurchase Right shall be paid in the
following manner:
(i) to the extent permitted by any loan agreement, indenture or
other agreement to which the Company or any Subsidiary is a party or by
which any of them or their property is bound (a "Financing Agreement"), an
amount equal to 33-1/3% of the Purchase Price shall be paid on the Closing
Date; provided, however, that (A) if (x) the Company or any Subsidiary
-------- -------
shall have obtained insurance on the life of a Selling Stockholder for the
purpose of providing funds with which to purchase such shares of Common
Stock, (y) the proceeds of such insurance (the "Insurance Proceeds") exceed
the portion of the Purchase Price which is payable on the Closing Date in
cash but for the operation of this clause (i), and (z) the Insurance
Proceeds have been collected on the Closing Date, then the Company shall
pay toward the Purchase Price on the Closing Date an amount equal to such
Insurance Proceeds (but not in excess of the Purchase Price) (it being
understood that if the Insurance Proceeds are collected by the Company or
any Subsidiary after the Closing Date, the Company shall make a mandatory
prepayment under the note(s) delivered by the Company pursuant to this
Section 4.5(g) of the amount by which the Insurance Proceeds exceed the
amount which was paid on the Closing Date (but not in excess of the
remaining principal balance of such note(s)), immediately following
collection thereof, with all installments coming due under said note(s)
thereafter to be reduced ratably) and (B) if any Financing Agreement
prohibits or restricts the ability of the
31
<PAGE>
Company to make any payment required hereunder, then the Company shall pay
at the Closing such amount as is permissible under such Financing
Agreement;
(ii) the balance of the Purchase Price shall be paid in two (2)
equal annual installments on the first and second anniversaries,
respectively, of the Closing Date; provided, however, that such number of
-------- -------
installments shall be increased (but shall not exceed five) if necessary to
reduce the amount of the required payments to a level which is permissible
under any Financing Agreement. The principal amount of the balance of the
Purchase Price remaining from time to time unpaid shall bear interest,
payable on the same dates as each installment of principal, at a rate per
annum equal to the lowest rate per annum which will not result in any
portion of the purchase price of the shares of Common Stock being treated
as interest (whether unstated interest, original issue discount or
otherwise) under the provisions of the Code; and
(iii) In the event a Management Stockholder is indebted to the
Company under a Promissory Note evidencing a portion of the subscription
price or option exercise price of his Shares (a "Purchase Money Note"), the
aggregate principal balance, and all accrued interest, outstanding under
said Purchase Money Note as of the Article VI Closing Date shall be offset
(x) against the Purchase Price payable by the Company and (y) ratably under
the installment payments due and to become due with respect thereto, except
that all payments shall be applied first to accrued interest owed under the
Purchase Money Note and the remainder to the principal thereof in inverse
order of maturity. The portion of the Purchase Price which is not paid on
the Closing Date shall be evidenced by a non-negotiable promissory
installment note or notes made by the Company, such note or notes to be in
a commercially reasonable form (including, without limitation, rights of
acceleration thereunder), providing for payment of the unpaid balance of
the Purchase Price and interest thereon, all as herein provided. Each such
promissory installment note shall provide that it may be prepaid at any
time or from time to time, in whole or in part, without premium, penalty
32
<PAGE>
or notice. If there is more than one seller of such shares of Common Stock,
a separate note shall be issued to each such seller. Each note shall
provide that a default under any other note made by the maker thereof to a
Management Stockholder or his Affiliates shall be a default under all notes
made by the maker thereof to such Management Stockholder or his Affiliates
pursuant to this Section 4.5. Each such note shall be subordinated and
subject in right of payment to the prior payment of all indebtedness of the
Company and any successor thereto, including, without limitation, any debt
outstanding under any Financing Agreement and any modifications, renewals,
extensions, replacements and refundings of all such indebtedness. Any
Purchasing Stockholder shall be entitled to pay the Purchase Price with a
note to the same extent as the Company. Any notes which are made by the
Company or any Purchasing Stockholder shall be secured by a pledge of the
shares of Common Stock so purchased and shall be with full recourse to the
maker, provided, however, that where the maker is a direct or indirect
-------- -------
Affiliate of a Management Stockholder, then, at the option of the payee,
the note shall be issued with full recourse to the last Management
Stockholder who had owned such shares of Common Stock.
Section IV.6 Closing. Any purchase of shares of Common Stock
-------
pursuant to Section 4.1(c) or 4.5 shall be consummated (the "Closing") at the
Company's principal office at 10:00 a.m., prevailing business time, on the date
(the "Closing Date") which is (x) specified in Section 4.1(c)(i) in the case of
a purchase under Section 4.1(c) or (y) the 90th day after the date of occurrence
of the event giving rise to the Repurchase Right or obligation to purchase
shares of Common Stock pursuant to this Section 4.5, unless an appraisal demand
is exercised or (z) in the event an appraisal demand is exercised pursuant to
Section 4.5(f), the 30th day after the date on which the Company receives the
written report of the Appraiser pursuant to Section 4.5(f). If such date is a
Saturday, Sunday or legal holiday, the Closing shall occur at the same time and
place on, and the Closing Date shall be, the next succeeding business day. At
the Closing, each Person selling shares of Common Stock shall deliver
certificates representing the shares being purchased, duly endorsed, and each
shall furnish such other
33
<PAGE>
evidence, including applicable inheritance and estate tax waivers and releases,
as may reasonably be necessary to effect the transfers of such shares.
Section IV.7 Failure to Deliver Shares. In the event the Company or
-------------------------
any Stockholder exercises one or more options to purchase shares of Common Stock
pursuant to this Article IV and in the event a Stockholder or an Affiliate whose
shares are to be purchased pursuant to this Article IV fails to deliver such
shares, in proper form for transfer, on the Closing Date, the Company and/or
such Stockholders purchasing Shares pursuant to this Article IV may elect to
deposit the cash and promissory note, if any, representing the Purchase Price
with an escrow agent. From and after the deposit of such Purchase Price, such
shares shall be deemed for all purposes (including the right to vote, receive
payment of dividends and exercise rights under this Agreement) to have been
transferred to the purchasers thereof, the Company shall issue new certificates
representing such shares to the purchasers thereof, and the certificates
registered in the name of the Stockholders obligated to sell such shares shall
be deemed to have been canceled and to represent solely a right to receive
payment of the Purchase Price, without interest, from the escrow account. If
the proceeds of sale have not been claimed by the Stockholder and each Affiliate
thereof whose shares were purchased pursuant to this Article IV prior to the
third anniversary of the Closing Date, the escrow deposits, and all interest
earned thereon, shall be returned to the respective depositors, and the
Stockholder and each such Affiliate thereof whose shares of Common Stock were
purchased shall look solely to the purchasers for payment of the Purchase Price.
The escrow agent shall not be liable for any action or inaction taken by him in
good faith.
ARTICLE V
BUDGETS
Section V.1 Annual Budget Process. The parties hereto agree that the
---------------------
annual operating budget of the Company (which shall include a financing plan and
an annual capital expenditure budget) for a particular year will be prepared and
available for review by the directors within the normal budget cycle of the
Company but in
34
<PAGE>
no event later than November 15th of the year preceding each such particular
year, provided that actual approval of such budget shall occur in accordance
-------- ----
with the terms of Section 3.2 hereof.
ARTICLE VI
COVENANTS OF THE COMPANY
Section VI.1 Financial Statements and Other Information. The Company
------------------------------------------
shall deliver to each Stockholder, or its transferee, as long as it holds any
shares of Common Stock, the following:
(a) As soon as available but in any event not later than sixty
(60) days after the end of each of the quarterly accounting periods (other than
the fourth fiscal quarter of the Company in each fiscal year which is governed
by Section 6.1(b) below), the unaudited consolidated balance sheet of the
Company and its Subsidiaries, if any, as of the end of each such period, the
related unaudited consolidated statements of income and retained earnings of the
Company and its Subsidiaries, if any, for such quarterly period and for the
period from the beginning of such fiscal year to the end of such quarterly
period, and the related unaudited statements of cash flows of the Company and
its Subsidiaries, if any, for the period from the beginning of such fiscal year
to the end of such quarterly period. All such financial statements shall be
prepared in accordance with generally accepted accounting principles (except
that such financial statements need not contain footnotes) applied on a
consistent basis.
(b) As soon as available, but in any event no later than ninety
(90) days after the end of each fiscal year of the Company, a copy of the
audited consolidated balance sheets of the Company and its Subsidiaries, if any,
as of the end of such fiscal year and the related consolidated statements of
income, retained earnings and cash flows of the Company and its Subsidiaries
stating in comparative form the figures as of the end of and for the previous
fiscal year certified by a firm of independent certified public accountants of
recognized national standing selected by the Company and approved by the Board
of Directors in accordance with Section 3.2 hereof. All such financial
statements shall be prepared
35
<PAGE>
in accordance with generally accepted accounting principles applied on a
consistent basis.
(c) As soon as available but in any event not later than
forty-five (45) days after the end of each month, beginning after the first
month after the Effective Date, on a monthly basis, (i) an unaudited
consolidated statement of income and explanation of income and expenses of the
Company and its Subsidiaries, if any, for such month, (ii) an unaudited
consolidated balance sheet of the Company and its Subsidiaries, if any, as of
the end of such month and (iii) an unaudited consolidated statement of funds
from operations of the Company and its Subsidiaries, if any, as of the end of
such month.
(d) For any period in which the Company is required to file
reports under Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended, the Company shall deliver such reports to all Stockholders.
(e) With reasonable promptness, such other information and data
with respect to the Company or any of its Subsidiaries as from time to time may
be reasonably requested by any Stockholder.
Section VI.2 Inspection. Employees and agents of the Major
----------
Stockholders and, for so long as WPG is a Major Stockholder, employees and
agents of each of Lion, Weber and Westpool, shall have access to the properties
of the Company and its Subsidiaries, if any, for the purpose of inspecting such
properties and the operations thereon (except as restricted by secrecy or
similar agreements with third parties), during reasonable business hours,
provided (i) reasonable advance notice is given and (ii) it will not, in the
reasonable discretion of the Company, interfere with the ongoing operation of
the Company or its Subsidiaries, as the case may be. The books and records of
the Company and each of its Subsidiaries shall be available for inspection and
review by employees and agents of the Stockholders during reasonable business
hours, provided reasonable advance notice is given and provided it will not, in
the reasonable discretion of the Company, interfere with the ongoing operation
of the Company or its Subsidiaries, as the case may be. The costs and expenses
incurred in connection with any such inspections or reviews shall be borne by
the Stockholder making such inspection or review. Notwith-
36
<PAGE>
standing anything in this Agreement to the contrary, and without limiting any
Management Stockholder's obligations under Article VII, no Management
Stockholder shall be entitled to review or receive any Confidential Information
from and after such time as such Management Stockholder directly or indirectly
engages in, participates in or makes a financial investment in or becomes
employed by or renders any services to or for any Person (including such
Management Stockholder) in competition with the credit reporting, collection or
accounts receivable management activities of the Company or any of its
Subsidiaries, regardless of whether such activities are otherwise permitted
under such Management Stockholder's Employment Agreement.
Section VI.3 Records. The Company shall, and shall cause each of its
-------
Subsidiaries to, maintain reasonably complete and accurate records and accounts
of all income and expenditures, working capital, investments, acquisitions and
disposition of properties, financial arrangements and all other Company
activities. Such records and accounts shall be maintained in accordance with
generally accepted accounting principles.
Section VI.4 Fiscal Year. The Company's fiscal year shall commence
-----------
on January 1 and end on December 31 of each year.
ARTICLE VII
CONFIDENTIALITY
Section VII.1 Confidentiality. Each of the Stockholders and the
---------------
Company acknowledges that it, its Affiliates and its and its Affiliates'
employees, agents, advisors or representatives (collectively, "representatives")
possess and may hereafter obtain, confidential business, commercial, technical,
financial and operational information from the other parties to this Agreement,
their respective Affiliates and their respective businesses and which relates to
the past, ongoing or future operations of the Company (collectively, such
information, whether obtained in written form, visually (such as by inspection)
or orally, is hereinafter referred to as "Confidential Information"). For
purposes of this Section 7.1, the "Confidential Information of a party" shall
include the Confidential Information of such Party's
37
<PAGE>
Affiliates. With respect to Confidential Information, each of the Company and
each Stockholder covenants to the others as follows:
(a) Each party agrees to exercise the same degree of care as it
uses in protecting its own Confidential Information from disclosure (but not
less than reasonable care) to make no disclosure of any Confidential Information
received from any other party, and further agrees to make no use of any
Confidential Information received from any other party except, in each case, in
connection with the execution and delivery of this Agreement, the Registration
Rights Agreement, the agreements and transactions contemplated hereby and
thereby and any future agreements, arrangements and transactions involving the
operations of the Company.
(b) The obligations of non-disclosure and restricted use
contained in this Section 7.1 shall not apply to any of the disclosing party's
Confidential Information that the receiving party can show by reasonable proof:
(i) was available to the public prior to the date such
Confidential Information was disclosed to the receiving party;
(ii) becomes available to the public through no fault of the
receiving party subsequent to the date such Confidential Information was
disclosed to the receiving party;
(iii) was in the possession of the receiving party prior to the
date such Confidential Information was disclosed to the receiving party,
and was not obtained by the receiving party from a third party having an
obligation of confidentiality to the disclosing party regarding such
Confidential Information;
(iv) is hereafter rightfully obtained by the receiving party
from a third party not under an obligation of confidentiality to the
disclosing party regarding such Confidential Information; or
(v) is independently developed by employees of the receiving
party without using
38
<PAGE>
the Confidential Information of the disclosing party.
It shall not be a breach of the obligation of non-disclosure contained in this
Section 7.1 if a receiving party discloses any Confidential Information as
required by law or judicial proceeding; provided, however, that such disclosure
-------- -------
shall be excused only to the extent such disclosure is required by law or such
proceeding and only if the receiving party provides prior written notice to the
disclosing party sufficient to allow the disclosing party an opportunity to
oppose or attempt to limit the required disclosure, and only if the receiving
party itself uses all reasonable efforts to ensure that the confidentiality of
the Confidential Information is protected by court or administrative order.
(c) The obligations provided herein with respect to
non-disclosure and restricted use of Confidential Information shall not apply to
particular Confidential Information upon the occurrence of ten years from the
date of first receipt of such Information by the receiving party from the
disclosing party.
(d) Each party shall have the right to disclose to its
Affiliates and representatives (and (x) in the case of Centre, to the members of
the Centre Group and (y) in the case of WPG, to the members of the WPG Group)
(collectively, its "Permitted Receiving Persons") all Confidential Information
received under this Agreement; however each receiving party warrants that its
Permitted Receiving Persons will comply with all of the obligations set out in
this Section 7.1, and further agrees to be responsible for all harm caused by
any non-compliance by any Permitted Receiving Person of the receiving party with
any of the obligations set out in this Section 7.1, to the same extent the
receiving party would have been responsible under applicable law for its own
breach of the same obligations.
(e) Each party agrees that it will use reasonable efforts to
inform all of its Permitted Receiving Persons to whom Confidential Information
of any other party is disclosed, of the existence of this Agreement and of the
confidential nature of such Confidential Information.
39
<PAGE>
ARTICLE VIII
MISCELLANEOUS
Section VIII.1 Termination of Agreement. This Agreement shall
------------------------
terminate only (a) with the mutual consent of the Stockholders, (b) upon the
dissolution or liquidation of the Company, (c) upon the consummation of any
merger or consolidation to which the Company is a party (except any merger or
consolidation immediately following which a majority of the capital stock
entitled to vote generally in the election of directors of the surviving or
resulting entity or any Person controlling such surviving or resulting entity
shall be held by the Stockholders) or (d) upon the consummation of a Sale
Transaction.
Section VIII.2 Notices. All notices, consents, requests, demands and
-------
other communications which are required or may be given pursuant to the terms of
this Agreement shall be in writing and shall be deemed duly given or delivered
if (i) delivered by hand, (ii) delivered by a recognized overnight commercial
courier (receipt requested), or (iii) sent by telecopier (with receipt
confirmed), provided that with respect to clause (iii) a copy is either promptly
-------- ----
thereafter mailed in the United States by first-class postage pre-paid mail or
sent by a recognized overnight commercial courier (receipt requested), to the
party as follows:
If to the
Centre Group: Centre Partners Management LLC
30 Rockefeller Plaza, 50th Floor
Suite 5050
New York, New York 10020
Fax: (212) 332-5801
Attention: Paul J. Zepf
Copy to: Skadden, Arps, Slate,
Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Fax: (212) 735-2001
Attention: William S. Rubenstein,
Esq.
If to the
40
<PAGE>
WPG Group (other
than Weber, Lion
and Westpool): WPG Corporate Development
Associates V, L.P.
One New York Plaza
New York, New York 10004
Fax: (212) 908-0112
Attention: Craig S. Whiting
Copy to: Finn, Dixon & Herling, LLP
One Landmark Square, Suite 1400
Stamford, Connecticut 06901
Fax: (203) 325-5015
Attention: Michael J. Herling, Esq.
If to Weber, Lion
or Westpool: __ Bluewater Capital Management, Inc.
50 California Street
Suite 3200
San Francisco, California 94111
Fax: (415) 788-6763
Attention: Morris Cheston III
Copy to: London Merchant Securities Group of
Companies
Carlton House
33 Robert Adam Street
London W1M 5AH
Fax: 011-44-171-935-3737
Attention: Iain MacPhail MA, FCA
If to Avalon: Avalon Investment Partners, LLC
Daylesford Plaza
Suite 210
1436 Lancaster Avenue
Berwyn, Pennsylvania 19312
Fax: (610) 296-7844
Attention: Jeffrey Weiss
If to the
Company: NCI Acquisition Corporation
6190 Powers Ferry Road
4th Floor
Atlanta, Georgia 30339
Fax: (770) 644-7420
Attention: President
41
<PAGE>
Copy to: Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Fax: (212) 310-8007
Attention: Jane McDonald, Esq.
If to any
Management
Stockholder: __ NCI Acquisition Corporation
6190 Powers Ferry Road
4th Floor
Atlanta, Georgia 30339
Fax: (770) 644-7420
Attention: President
Copy to: Ungaretti & Harris
70 West Madison Street
Suite 3500
Chicago, Illinois 60602
Fax: (312) 977-4405
Attention: Gary I. Levenstein, Esq.
or to such other address and/or telecopy number as any party (or the acquiror of
such party's shares of Common Stock) shall have designated by fifteen (15) days'
notice in writing to the other parties.
Section VIII.3 Waivers. The parties hereto may by written instrument
-------
(i) extend the time for the performance of any of the obligations or other acts
of the other parties hereto, and (ii) waive compliance or performance by any
other party with or of any of the covenants or agreements made to it by any
other party contained in this Agreement; provided, however, that the Major
-------- -------
Stockholders, by mutual written agreement, shall be entitled to waive, on behalf
of all parties to this Agreement, without the consent of the Company or the
other Stockholders, any provision of this Agreement, provided that such waiver
does not materially adversely affect the rights of the Company or such other
Stockholders hereunder. The delay or failure on the part of any party hereto to
insist, in any one instance or more, upon strict performance of any of the terms
or conditions of this Agreement, or to exercise any right or privilege herein
conferred shall not be construed as a waiver of any such terms conditions,
rights or privileges but the
42
<PAGE>
same shall continue and remain in full force and effect. All rights and remedies
are cumulative.
Section VIII.4 Amendment. This Agreement shall be modified,
---------
supplemented or amended only by a written instrument executed by all of the
Stockholders; provided, however, that the Major Stockholders, by mutual written
-------- -------
agreement, shall be entitled to amend this Agreement without the consent of the
Company or the other Stockholders provided that such amendment does not
materially adversely affect the rights of the Company or such other Stockholders
hereunder.
Section VIII.5 Applicable Law. This Agreement shall be governed by
--------------
and construed in accordance with the laws of the State of Delaware without
giving effect to any of the conflict of law rules thereof.
Section VIII.6 Assignment. Except as expressly contemplated hereby,
----------
this Agreement may not be assigned by any party to it without the prior written
consent of the other parties.
Section VIII.7 Binding Effect; Benefits. This Agreement shall inure
------------------------
to the benefit of, and be binding upon, the parties to it and their respective
successors, permitted assigns and other permitted transferees. Nothing
contained in this Agreement, express or implied, is intended to confer upon any
person or entity other than the parties to it and their respective successors,
permitted assigns and other permitted transferees, any rights or remedies under
or by reason of this Agreement.
Section VIII.8 Counterparts. This Agreement may be executed in one
------------
or more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
Section VIII.9 Invalidity. If any of the provisions of the Agreement
----------
is held invalid or unenforceable, such invalidity or unenforceability shall not
affect in any way the validity or enforceability of any other provision of the
Agreement. In the event any provision of this Agreement (other than Section
3.3, which shall be governed by its terms) is held invalid or unenforceable, the
parties shall attempt to agree on a valid or enforceable provision which shall
be a reason-
43
<PAGE>
able substitute for such invalid or unenforceable provision in light of the
tenor of the Agreement and, on so agreeing, shall incorporate such substitute
provision in the Agreement.
Section VIII.10 Entire Agreement and Construction. This Agreement,
---------------------------------
together with the Registration Rights Agreement and any exhibits, annexes and
other documents contemplated hereby and thereby, contains the entire agreement
between the parties hereto with respect to the subject matter hereof and all
prior understandings and agreements shall merge herein. There are no additional
terms, whether consistent or inconsistent, oral or written, which are intended
to be part of the parties' understandings which have not been incorporated into
this Agreement, the Registration Rights Agreement and any exhibits, annexes and
other agreements and documents contemplated hereby or thereby.
Section VIII.11 Expenses. Except as otherwise expressly provided
--------
herein and except for expenses to be reimbursed in connection with the
consummation of the transactions contemplated by Article II, each party shall
bear its own fees, costs and expenses in connection with the transactions
contemplated herein.
Section VIII.12 After-Acquired Shares of Common Stock. All of the
-------------------------------------
provisions of this Agreement shall apply to, and the term "Common Stock" shall
mean and include (a) all of the shares of Common Stock now owned or which may be
transferred hereafter to, or owned by, a Stockholder, (b) all shares of Common
Stock issued to a Stockholder and (c) all shares of Common Stock (i) received by
a Stockholder as a dividend on or other payment made to holders of shares of
Common Stock, or (ii) issued in connection with a split of shares of Common
Stock or a reorganization, recapitalization, consolidation or merger.
Section VIII.13 Joinder of Spouses. The spouses of certain
------------------
Stockholders have joined in the execution of this Agreement in order to evidence
their agreement and consent to be bound by the terms and conditions hereof as to
their interest, whether as community property or otherwise, if any, in the
shares of Common Stock owned by their respective spouses.
44
<PAGE>
Section VIII.14 Future Actions. The Company and each Stockholder
--------------
shall execute and deliver all such future instruments and take such other and
further action as may be reasonably necessary or appropriate to carry out the
provisions of this Agreement and the intention of the parties expressed herein.
Section VIII.15 Dispute Resolution.
------------------
(a) Except as otherwise provided in Section 4.5(f), any dispute
between or among the parties hereto arising out of or relating to this Agreement
shall be resolved in accordance with the procedures specified in this Section
8.15.
(b) Except as otherwise provided in Section 4.5(f), the
Stockholders shall attempt in good faith to resolve any dispute arising out of
or relating to this Agreement promptly by negotiation between executives or
other persons who have authority to settle the dispute. Any Stockholder may give
any other Stockholder or Stockholders written notice of any dispute not resolved
in the normal course of business (a "Dispute Notice"). Within 15 days after
delivery of the Dispute Notice, the receiving Stockholder or Stockholders shall
submit a written response to the Stockholder that gave the Dispute Notice. The
Dispute Notice and the response shall each include (i) a summary of the position
taken with respect to such dispute by the Stockholder delivering such document,
and (ii) the name and title of the executive or other representative who will
represent such Stockholder at the meeting or meetings hereinafter contemplated.
Within 30 days after delivery of the Dispute Notice, the executives or other
representatives of the Stockholders involved in the related dispute shall meet
at a mutually acceptable time and place, and thereafter as often as they
mutually deem necessary, to attempt to resolve the dispute. All reasonable
requests for information with respect to a dispute made by one Stockholder to
any other Stockholder involved in such dispute shall be honored in a timely
manner.
(c) Except as otherwise provided in Section 4.5(f), if a dispute
has not been resolved within 45 days after delivery of the related Dispute
Notice, or if the Stockholders involved in such dispute fail to meet within 30
days after delivery of the Dispute Notice, any
45
<PAGE>
of such Stockholders may initiate arbitration of the dispute in the manner
hereinafter provided.
(d) Except as otherwise provided in Section 4.5(f), any dispute
between or among Stockholders arising out of or relating to this Agreement or
the breach, termination or validity of any provision hereof, which has not been
resolved by the nonbinding procedure set forth in Section 8.15(b) within 45 days
after delivery of the related Dispute Notice, shall be settled by binding
arbitration in accordance with the then-current rules of the American
Arbitration Association or any successor thereto (the "AAA") by a sole
independent and impartial arbitrator, which arbitrator shall be appointed by
mutual agreement of the Stockholders that are involved in the dispute or, if
such Stockholders fail to appoint such arbitrator within 90 days after delivery
of the Dispute Notice as provided herein, the AAA, shall be asked to select and
appoint such an arbitrator. The arbitration shall be governed by the United
States Arbitration Act, 9 U.S.C. (S) 1-16, and judgment upon any award rendered
by the arbitrator may be entered by any count having jurisdiction thereof. The
place of arbitration shall be New York, New York. The arbitrator is not
empowered to award damages in excess of compensatory damages and each
Stockholder hereby irrevocably waives any right to recover such excess damages
with respect to any dispute resolved by arbitration.
(e) Except as otherwise provided in Section 4.5(f), the
procedures specified in this Section 8.15 shall be the sole and exclusive
procedures for the resolution of disputes between or among Stockholders arising
out of or relating to this Agreement; provided, however, that a Stockholder,
without prejudice to the above procedures, may seek a preliminary injunction or
other provisional judicial relief, if in its sole judgement such action is
necessary to avoid irreparable damage or to preserve the status quo.
(f) All applicable statutes of limitation and defenses based
upon the passage of time shall be tolled while the procedures specified in this
Section 8.15 are pending. The Stockholders will take such action, if any,
required to effectuate such tolling.
(g) Each Stockholder is required to continue to perform its
obligations under this Agreement
46
<PAGE>
pending final resolution of any dispute arising out of or relating to this
Agreement.
(h) All negotiations pursuant to this Section 8.15 shall be
confidential and treated as compromise and settlement negotiations for purposes
of the Federal Rules of Evidence and applicable state rules of evidence.
47
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed by their officers thereunto duly authorized, all as of the day and year
first above written.
COMPANY: NCI ACQUISITION CORPORATION
By /s/ Paul J. Zepf
------------------------------
Name: Paul J. Zepf
Title: Director
STOCKHOLDERS: CENTRE CAPITAL INVESTORS II, L.P.
CENTRE CAPITAL TAX-EXEMPT INVESTORS II, L.P.
CENTRE CAPITAL OFFSHORE INVESTORS
II, L.P.
By: Centre Partners II, L.P.
General Partner
By: Centre Partners Management LLC
Attorney-in-fact
By /s/ Paul J. Zepf
------------------------------
Name: Paul J. Zepf
Title:
STATE BOARD OF ADMINISTRATION OF
FLORIDA
By: Centre Parallel Management
Partners, L.P.
Manager
By: Centre Partners Management
LLC
Attorney-in-fact
By /s/ Paul J. Zepf
------------------------------
Name: Paul J. Zepf
Title:
48
<PAGE>
CENTRE PARALLEL MANAGEMENT
PARTNERS, L.P.
CENTRE PARTNERS COINVESTMENT, L.P.
By: Centre Partners II LLC
General Partner
By /s/ Paul J. Zepf
------------------------------
Name: Paul J. Zepf
Title:
AVALON INVESTMENT PARTNERS, LLC
By /s/ D. F. Gayhardt
------------------------------
Name: D. F. Gayhardt
Title: Member
49
<PAGE>
WPG CORPORATE DEVELOPMENT
ASSOCIATES V, L.P.
By: WPG Private Equity
Partners II, L.L.C.
General Partner
By /s/ Craig S. Whiting
------------------------------
Name:
Title: Managing Member
WPG CORPORATE DEVELOPMENT
ASSOCIATES V (OVERSEAS), L.P.
By: WPG Private Equity Partners II
(Overseas), L.L.C.
General Partner
By /s/ Patrick Keating
------------------------------
Name: Patrick Keating
Title: Director
50
<PAGE>
WEBER FAMILY TRUST dated 1/6/89
By /s/ E. M. Weber
------------------------------
Name: E. M. Weber
Title: Trustee
LION INVESTMENTS LIMITED
By /s/ Michael Waldron
------------------------------
Name: Michael Waldron
Title: Director
WESTPOOL INVESTMENT TRUST PLC
By /s/ Michael Waldron
------------------------------
Name: Michael Waldron
Title: Director
51
<PAGE>
/s/ Jerrold Kaufman
--------------------------------
JERROLD KAUFMAN
/s/ Loren Kranz
--------------------------------
LOREN KRANZ
/s/ Gregory Schubert
--------------------------------
GREGORY SCHUBERT
/s/ Kevin Henry
--------------------------------
KEVIN HENRY
/s/ Rebeca Kaufman
SPOUSES OF MANAGEMENT --------------------------------
STOCKHOLDERS: REBECA KAUFMAN
/s/ Laurie Kranz
--------------------------------
LAURIE KRANZ
/s/ Julie Schubert
--------------------------------
JULIE SCHUBERT
/s/ Tina Henry
--------------------------------
TINA HENRY
52
<PAGE>
SCHEDULE I
----------
Name Number of Shares
- ---- ----------------
Centre Capital Investors II, L.P. 61,213
Centre Capital Tax-Exempt Investors II, L.P. 19,919
Centre Capital Offshore Investors II, L.P. 12,280
Centre Parallel Management Partners, L.P. 939
Centre Partners Coinvestment, L.P. 12,691
State Board of Administration of Florida 92,958
WPG Corporate Development Associates V, L.P. 164,464
WPG Corporate Development Associates V
(Overseas), L.P. 25,536
Weber Family Trust 37
Lion Investments Limited 2,463
Westpool Investment Trust PLC 7,500
Avalon Investment Partners, LLC 1,000
Jerry Kaufman 1,000
Loren Kranz 1,000
Gregory Schubert 500
Kevin Henry 150
-------
TOTAL 403,650
=======
1
<PAGE>
Exhibit 12
Nationwide Credit, Inc.
Statement Regarding Computation of
Earnings to Fixed Charges
<TABLE>
<CAPTION>
THREE
MONTHS
ENDED
MARCH 31,
PRO FORMA ------------
1993 1994 1995 1996 1997 1997 1997 1998
----- ------ ----- ------ ----- --------- ---- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fixed charges:
Interest expense*..... 526 680 501 241 122 12,798 31 4,088
Portion of rent
expense
representative of
interest (1/3)....... 943 1,371 1,498 1,437 1,575 1,590 391 360
----- ------ ----- ------ ----- ------- --- ------
1,469 2,051 1,999 1,678 1,697 14,388 422 4,448
Earnings:
Income (loss) from
continuing operations
before income taxes
and extraordinary
item................. 5,503 18,910 4,102 8,766 2,316 (19,312) (92) (3,561)
Fixed charges per
above................ 1,469 2,051 1,999 1,678 1,697 14,388 422 4,448
----- ------ ----- ------ ----- ------- --- ------
6,972 20,961 6,101 10,444 4,013 (4,924) 330 887
Ratio of earnings to
fixed charges.......... 4.8 10.2 3.1 6.2 2.4 -- -- --
Deficit in fixed charges
coverage............... N/A N/A N/A N/A N/A $19,312 $92 $3,561
</TABLE>
- --------
* Includes amortization of deferred debt issuance costs.
<PAGE>
EXHIBIT 21
SUBSIDIARIES
------------
Name Jurisdiction
- -------------------------------- ------------
Master Collectors of Dallas, Inc. Texas
NCI Recoveries Limited United Kingdom
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Summary Historical
and Pro Forma Financial and Other Data," "Selected Historical Financial
Information and Other Data" and "Experts" and to the use of our report dated
March 31, 1998 (except for Note 13, as to which the date is May 18, 1998), in
the Registration Statement (Form S-4) and related Prospectus of Nationwide
Credit, Inc. for the registration of $100,000,000 of its 10 1/4% Senior Notes
due 2008.
/s/ Ernst & Young LLP
Atlanta, Georgia
June 18, 1998
<PAGE>
EXHIBIT 25
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)
STATE STREET BANK AND TRUST COMPANY
(Exact name of trustee as specified in its charter)
Massachusetts 04-1867445
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national bank) Identification No.)
225 Franklin Street, Boston, Massachusetts 02110
(Address of principal executive offices) (Zip Code)
Maureen Scannell Bateman, Esq. Executive Vice President and General Counsel
225 Franklin Street, Boston, Massachusetts 02110
(617) 654-3253
(Name, address and telephone number of agent for service)
NATIONWIDE CREDIT, INC.
(Exact name of obligor as specified in its charter)
GEORGIA 58-1900192
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6190 POWERS FERRY ROAD, 4TH FLOOR
ATLANTA, GA 30339
(Address of principal executive offices) (Zip Code)
10-1/4% SENIOR NOTES DUE 2008
(Title of indenture securities)
<PAGE>
GENERAL
ITEM 1. GENERAL INFORMATION.
FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISORY AUTHORITY TO WHICH
IT IS SUBJECT.
Department of Banking and Insurance of The Commonwealth of
Massachusetts, 100 Cambridge Street, Boston, Massachusetts.
Board of Governors of the Federal Reserve System, Washington, D.C.,
Federal Deposit Insurance Corporation, Washington, D.C.
(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
The obligor is not an affiliate of the trustee or of its parent, State
Street Corporation.
(See note on page 2.)
ITEM 3. THROUGH ITEM 15. NOT APPLICABLE.
ITEM 16. LIST OF EXHIBITS.
LIST BELOW ALL EXHIBITS FILED AS PART OF THIS STATEMENT OF ELIGIBILITY.
1. A COPY OF THE ARTICLES OF ASSOCIATION OF THE TRUSTEE AS NOW IN EFFECT.
A copy of the Articles of Association of the trustee, as now in
effect, is on file with the Securities and Exchange Commission as
Exhibit 1 to Amendment No. 1 to the Statement of Eligibility and
Qualification of Trustee (Form T-1) filed with the Registration
Statement of Morse Shoe, Inc. (File No. 22-17940) and is incorporated
herein by reference thereto.
2. A COPY OF THE CERTIFICATE OF AUTHORITY OF THE TRUSTEE TO COMMENCE
BUSINESS, IF NOT CONTAINED IN THE ARTICLES OF ASSOCIATION.
A copy of a Statement from the Commissioner of Banks of Massachusetts
that no certificate of authority for the trustee to commence business
was necessary or issued is on file with the Securities and Exchange
Commission as Exhibit 2 to Amendment No. 1 to the Statement of
Eligibility and Qualification of Trustee (Form T-1) filed with the
Registration Statement of Morse Shoe, Inc. (File No. 22-17940) and is
incorporated herein by reference thereto.
3. A COPY OF THE AUTHORIZATION OF THE TRUSTEE TO EXERCISE CORPORATE TRUST
POWERS, IF SUCH AUTHORIZATION IS NOT CONTAINED IN THE DOCUMENTS SPECIFIED
IN PARAGRAPH (1) OR (2), ABOVE.
A copy of the authorization of the trustee to exercise corporate trust
powers is on file with the Securities and Exchange Commission as
Exhibit 3 to Amendment No. 1 to the Statement of Eligibility and
Qualification of Trustee (Form T-1) filed with the Registration
Statement of Morse Shoe, Inc. (File No. 22-17940) and is incorporated
herein by reference thereto.
4. A COPY OF THE EXISTING BY-LAWS OF THE TRUSTEE, OR INSTRUMENTS
CORRESPONDING THERETO.
A copy of the by-laws of the trustee, as now in effect, is on file
with the Securities and Exchange Commission as Exhibit 4 to the
Statement of Eligibility and Qualification of Trustee (Form T-1) filed
with the Registration Statement of Eastern Edison Company (File No.
33-37823) and is incorporated herein by reference thereto.
1
<PAGE>
5. A COPY OF EACH INDENTURE REFERRED TO IN ITEM 4. IF THE OBLIGOR IS IN
DEFAULT.
Not applicable.
6. THE CONSENTS OF UNITED STATES INSTITUTIONAL TRUSTEES REQUIRED BY
SECTION 321(b) OF THE ACT.
The consent of the trustee required by Section 321(b) of the Act is
annexed hereto as Exhibit 6 and made a part hereof.
7. A COPY OF THE LATEST REPORT OF CONDITION OF THE TRUSTEE PUBLISHED
PURSUANT TO LAW OR THE REQUIREMENTS OF ITS SUPERVISING OR EXAMINING
AUTHORITY.
A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or examining
authority is annexed hereto as Exhibit 7 and made a part hereof.
NOTES
In answering any item of this Statement of Eligibility which relates to
matters peculiarly within the knowledge of the obligor or any underwriter for
the obligor, the trustee has relied upon information furnished to it by the
obligor and the underwriters, and the trustee disclaims responsibility for the
accuracy or completeness of such information.
The answer furnished to Item 2. of this statement will be amended, if
necessary, to reflect any facts which differ from those stated and which would
have been required to be stated if known at the date hereof.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as amended,
the trustee, State Street Bank and Trust Company, a corporation organized and
existing under the laws of The Commonwealth of Massachusetts, has duly caused
this statement of eligibility to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the City of Boston and The Commonwealth of
Massachusetts, on the 16TH DAY OF JUNE, 1998
STATE STREET BANK AND TRUST COMPANY
By: /s/ Kathy A. Larimore
--------------------------------
NAME: KATHY A. LARIMORE
TITLE: ASSISTANT VICE PRESIDENT
2
<PAGE>
EXHIBIT 6
CONSENT OF THE TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture Act
of 1939, as amended, in connection with the proposed issuance by NATIONWIDE
CREDIT, INC. of its 10-1/4% SENIOR NOTES DUE 2008, we hereby consent that
reports of examination by Federal, State, Territorial or District authorities
may be furnished by such authorities to the Securities and Exchange Commission
upon request therefor.
STATE STREET BANK AND TRUST COMPANY
By: /s/ Kathy A. Larimore
--------------------------------
NAME: KATHY A. LARIMORE
TITLE: ASSISTANT VICE PRESIDENT
Dated: June 16, 1998
3
<PAGE>
EXHIBIT 7
Consolidated Report of Condition of State Street Bank and Trust Company,
Massachusetts and foreign and domestic subsidiaries, a state banking institution
organized and operating under the banking laws of this commonwealth and a member
of the Federal Reserve System, at the close of business March 31, 1998,
--------------
published in accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act and in accordance
with a call made by the Commissioner of Banks under General Laws, Chapter 172,
Section 22(a).
<TABLE>
<CAPTION>
Thousands of
ASSETS Dollars
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin...................................................... 1,144,309
Interest-bearing balances............................................................................... 9,914,704
Securities................................................................................................... 10,062,052
Federal funds sold and securities purchased
under agreements to resell in domestic offices
of the bank and its Edge subsidiary..................................................................... 8,073,970
Loans and lease financing receivables:
Loans and leases, net of unearned income ............ 6,433,627
Allowance for loan and lease losses.................. 88,820
Allocated transfer risk reserve...................... 0
Loans and leases, net of unearned income and allowances................................................. 6,344,807
Assets held in trading accounts.............................................................................. 1, 117,547
Premises and fixed assets.................................................................................... 453,576
Other real estate owned...................................................................................... 100
Investments in unconsolidated subsidiaries................................................................... 44,985
Customers' liability to this bank on acceptances outstanding................................................. 66,149
Intangible assets............................................................................................ 263,249
Other assets................................................................................................. 1,066,572
----------
Total assets................................................................................................. 38,552,020
==========
LIABILITIES
Deposits:
In domestic offices..................................................................................... 9,266,492
Noninterest-bearing................................. 6,824,432
Interest-bearing.................................... 2,442,060
In foreign offices and Edge subsidiary.................................................................. 14,385,048
Noninterest-bearing................................. 75,909
Interest-bearing.................................... 14,309,139
Federal funds purchased and securities sold under
agreements to repurchase in domestic offices of
the bank and of its Edge subsidiary..................................................................... 9,949,994
Demand notes issued to the U.S. Treasury and Trading Liabilities............................................. 171,783
Trading liabilities........................................................................................ 1,078,189
Other borrowed money......................................................................................... 406,583
Subordinated notes and debentures............................................................................ 0
Bank's liability on acceptances executed and outstanding..................................................... 66,149
Other liabilities............................................................................................ 878,947
Total liabilities............................................................................................ 36,203,185
----------
EQUITY CAPITAL
Perpetual preferred stock and related
surplus...................................................................................................... 0
Common stock................................................................................................. 29,931
Surplus...................................................................................................... 450,003
Undivided profits and capital reserves/Net unrealized holding gains (losses)................................. 1,857,021
Net unrealized holding gains (losses) on available-for-sale securities....................................... 18,136
Cumulative foreign currency translation adjustments.......................................................... (6,256)
Total equity capital......................................................................................... 2,348,835
----------
Total liabilities and equity capital......................................................................... 38,552,020
----------
</TABLE>
4
<PAGE>
I, Rex S. Schuette, Senior Vice President and Comptroller of the above named
bank do hereby declare that this Report of Condition has been prepared in
conformance with the instructions issued by the Board of Governors of the
Federal Reserve System and is true to the best of my knowledge and belief.
Rex S. Schuette
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
David A. Spina
Marshall N. Carter
Truman S. Casner
5
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR 3-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1998
<PERIOD-START> JAN-01-1997 JAN-01-1998
<PERIOD-END> DEC-31-1997 MAR-31-1998
<CASH> 1982 7186
<SECURITIES> 0 0
<RECEIVABLES> 12871 15941
<ALLOWANCES> 4449 2791
<INVENTORY> 0 0
<CURRENT-ASSETS> 19001 23771
<PP&E> 27607 12708
<DEPRECIATION> 16017 1131
<TOTAL-ASSETS> 190865 176136
<CURRENT-LIABILITIES> 13148 14503
<BONDS> 0 0
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 63879 34545
<TOTAL-LIABILITY-AND-EQUITY> 190865 176136
<SALES> 119013 29925
<TOTAL-REVENUES> 119013 29925
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 116375 29398
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 122 4088
<INCOME-PRETAX> 2516 (3561)
<INCOME-TAX> 2423 0
<INCOME-CONTINUING> 93 (3561)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 (869)
<CHANGES> 0 0
<NET-INCOME> 93 (4430)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
<PAGE>
EXHIBIT 99.1
LETTER OF TRANSMITTAL
TO EXCHANGE
10 1/4% SENIOR NOTES DUE 2008
FOR 10 1/4% SERIES A SENIOR NOTES DUE 2008
OF
NATIONWIDE CREDIT, INC.
PURSUANT TO THE EXCHANGE OFFER AND PROSPECTUS DATED , 1998
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME, ON , 1998 (THE "EXPIRATION DATE"), UNLESS THE EXCHANGE
OFFER IS EXTENDED BY THE COMPANY.
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
STATE STREET BANK AND TRUST COMPANY
By Registered or Certified Mail by Hand or Overnight Delivery
Attn: Kellie Mullen
Corporate Trust Department, 4th Floor
Two International Place
Boston, MA 02110
Facsimile Transmissions:
(Eligible Institutions Only)
(617) 664-5290
For Information or
Confirmation by Telephone:
(617) 664-5587
(ORIGINALS OF ALL DOCUMENTS SENT BY FACSIMILE SHOULD BE SENT PROMPTLY BY
REGISTERED
OR CERTIFIED MAIL, BY HAND, OR BY OVERNIGHT DELIVERY SERVICE).
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OR TRANSMISSION OF
INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A
VALID DELIVERY.
The undersigned acknowledges that it has received the Prospectus, dated
, 1998 (the "Prospectus"), of Nationwide Credit, Inc., a Georgia corporation
(the "Company"), and this Letter of Transmittal, which together constitute the
Company's offer (the "Exchange Offer") to exchange an aggregate principal
amount of up to $100.0 million of its 10 1/4% Series A Senior Notes due 2008,
which have been registered under the Securities Act of 1933, as amended (the
"Securities Act") (the "New Notes") of the Company for a like principal amount
of the issued and outstanding 10 1/4% Senior Notes due 2008 (the "Old Notes")
of the Company.
IF YOU WISH TO EXCHANGE 10 1/4% SENIOR NOTES DUE 2008 FOR AN EQUAL AGGREGATE
PRINCIPAL AMOUNT OF 10 1/4% SERIES A SENIOR NOTES DUE 2008, PURSUANT TO THE
EXCHANGE OFFER, YOU MUST VALIDLY TENDER (AND NOT WITHDRAW) OLD NOTES TO THE
EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE.
SIGNATURES MUST BE PROVIDED
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY BEFORE COMPLETING THIS
LETTER OF TRANSMITTAL.
1
<PAGE>
Capitalized terms used but not defined herein shall have the same meaning
given them in the Prospectus.
This Letter of Transmittal is to be completed by holders of Old Notes (as
defined) either if Old Notes are to be forwarded herewith or if tenders of Old
Notes are to be made by book-entry transfer to an account maintained by State
Street Bank and Trust Company (the "Exchange Agent") at the Depository Trust
Company (the "Book-Entry Transfer Facility" or "DTC") pursuant to the
procedures set forth in "The Exchange Offer--Procedures for Tendering Old
Notes" in the Prospectus.
Holders of Old Notes whose certificates (the "Certificates") for such Old
Notes are not immediately available or who cannot deliver their Certificates
and all other required documents to the Exchange Agent on or prior to the
Expiration Date (as defined in the Prospectus) or who cannot complete the
procedures for book-entry transfer on a timely basis, must tender their Old
Notes according to the guaranteed delivery procedures set forth in "The
Exchange Offer--Guaranteed Delivery Procedures" in the Prospectus.
DESCRIPTION OF OLD NOTES
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NAME(S) AND
ADDRESS(ES)
OF
REGISTERED
OWNER(S)
AS IT
APPEARS ON
THE OLD
NOTES AGGREGATE
(PLEASE CERTIFICATE PRINCIPAL AMOUNT
FILL IN, IF NUMBER(S) OF OLD NOTES
BLANK) OF OLD NOTES TENDERED
- -------------------------------------------------------
--------------
--------------
--------------
--------------
--------------
<S> <C> <C>
TOTAL PRINCIPAL
AMOUNT
OF NOTES TENDERED
</TABLE>
2
<PAGE>
(BOXES BELOW TO BE CHECKED BY ELIGIBLE INSTITUTIONS ONLY)
[_] 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:
Name of Tendering Institution _______________________________________________
Account Number ______________________________________________________________
Transaction Code Number _____________________________________________________
[_] CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF GUARANTEED DELIVERY IF
TENDERED NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING:
Name of Registered Holder(s) ________________________________________________
Window Ticket Number (if any) _______________________________________________
Date of Execution of Notice of Guaranteed Delivery __________________________
Name of Institution which Guaranteed Delivery _______________________________
If Guaranteed Delivery is to be made By Book-Entry Transfer:
Name of Tendering Institution _______________________________________________
Account Number ______________________________________________________________
Transaction Code Number _____________________________________________________
[_] CHECK HERE IF TENDERED BY BOOK-ENTRY TRANSFER AND NON-EXCHANGED OLD NOTES
ARE TO BE RETURNED BY CREDITING THE BOOK-ENTRY TRANSFER FACILITY ACCOUNT
NUMBER SET FORTH ABOVE.
[_] CHECK HERE IF YOU ARE A BROKER-DEALER WHO ACQUIRED THE OLD NOTES FOR ITS OWN
ACCOUNT AS A RESULT OF MARKET MAKING OR OTHER TRADING ACTIVITIES (A
"PARTICIPATING BROKER-DEALER") AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF
THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO.
Name: _________________________________________________________________________
Address: ______________________________________________________________________
3
<PAGE>
Ladies and Gentlemen:
1. The undersigned hereby tenders to Nationwide Credit, Inc., a Georgia
corporation (the "Company"), the 10 1/4% Senior Notes due 2008 (the "Old
Notes"), described above pursuant to the Company's offer of $1,000 principal
amount of 10 1/4% Series A Senior Notes due 2008 (the "New Notes"), in
exchange for each $1,000 principal amount of the Old Notes, upon the terms and
subject to the conditions contained in the Prospectus dated , 1998 (the
"Prospectus"), receipt of which is hereby acknowledged, and in this Letter of
Transmittal (which together with the Prospectus constitute the "Exchange
Offer").
2. THE UNDERSIGNED HEREBY REPRESENTS AND WARRANTS THAT THE UNDERSIGNED HAS
FULL POWER AND AUTHORITY TO TENDER, EXCHANGE, SELL, ASSIGN AND TRANSFER THE
OLD NOTES TENDERED HEREBY AND THAT, WHEN THE SAME ARE ACCEPTED FOR EXCHANGE,
THE COMPANY WILL ACQUIRE GOOD, MARKETABLE AND UNENCUMBERED TITLE THERETO, FREE
AND CLEAR OF ALL LIENS, RESTRICTIONS, CHARGES AND ENCUMBRANCES, AND THAT THE
OLD NOTES TENDERED HEREBY ARE NOT SUBJECT TO ANY ADVERSE CLAIMS OR PROXIES.
THE UNDERSIGNED WILL, UPON REQUEST, EXECUTE AND DELIVER ANY ADDITIONAL
DOCUMENTS DEEMED BY THE COMPANY OR THE EXCHANGE AGENT TO BE NECESSARY OR
DESIRABLE TO COMPLETE THE EXCHANGE, ASSIGNMENT AND TRANSFER OF THE OLD NOTES
TENDERED HEREBY, AND THE UNDERSIGNED WILL COMPLY WITH ITS OBLIGATIONS UNDER
THE REGISTRATION RIGHTS AGREEMENT. THE UNDERSIGNED HAS READ AND AGREES TO ALL
OF THE TERMS OF THE EXCHANGE OFFER.
3. The undersigned understands that the tender of the Old Notes pursuant to
any one of the procedures set forth in the Prospectus and in the instructions,
attached hereto, will, upon the Company's acceptance for exchange of such
tendered Old Notes, constitute a binding agreement between the undersigned and
the Company as to the terms and conditions set forth in the Prospectus.
4. Unless the box under the heading "Special Registration Instructions" is
checked, the undersigned hereby represents and warrants that:
(i) the New Notes acquired pursuant to the Exchange Offer are being
obtained in the ordinary course of business of the undersigned, whether or
not the undersigned is the holder;
(ii) neither the undersigned nor any such other person is engaging in or
intends to engage in a distribution of such New Notes;
(iii) neither the undersigned nor any such other person has an
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
such term is defined under Rule 405 promulgated under the Securities Act of
1933, as amended (the "Securities Act"), of the Company.
5. The undersigned may, if, and only if, unable to make all of the
representations and warranties contained in Item 4 above, elect to have its
Old Notes registered in the shelf registration described in the Exchange and
Registration Rights Agreement, dated as of January 28, 1998, between the
Company and Lehman Brothers Inc. in the form filed as an exhibit to the
Registration Statement (the "Registration Agreement") (all terms used in this
Item 5 with their initial letters capitalized, unless otherwise defined
herein, shall have the meanings given them in the Registration Agreement).
Such election may be made by checking the box under "Special Registration
Instructions" below. By making such election, the undersigned agrees, as a
Holder participating in a Shelf Registration, to indemnify and hold harmless
the Company, its officers and employees, each of its directors, and each
person, if any who controls (within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act) the Company, from and
against any and all losses, claims, damages, liabilities and actions
(including without limitation, any legal or other expenses incurred in
connection with investigating or defending any matter, including any action
that could give rise to any such losses, claims, damages, liabilities or
actions), insofar as such loss, claim, damage, liability or action arises out
of, or is based upon, (i) any untrue statement or alleged untrue statement of
a material fact contained in any preliminary prospectus or Prospectus,
4
<PAGE>
or any amendment or supplement thereto, provided by such Holder to the
Company, or (ii) the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, except insofar as such losses, claims, damages, liabilities or
actions are caused by an untrue statement or omission or alleged untrue
statement or omission that is based upon information relating to the Company
furnished in writing to such Holder expressly for use in any preliminary
prospectus or Prospectus. In no event shall any Holder be liable or
responsible for any amount in excess of the amount by which the total amount
received by such Holder with respect to its sale of Transfer Restricted
Securities pursuant to the Prospectus exceeds (i) the amount paid by such
Holder for such Transfer Restricted Securities and (ii) the amount of any
damages that such Holder has otherwise been required to pay by reason of such
untrue statement or alleged untrue statement or omission or alleged omission.
Any such indemnification shall be governed by the terms and subject to the
conditions set forth in the Registration Agreement, including, without
limitation, the provisions regarding notice, retention of counsel,
contribution and payment of expenses set forth therein. The above summary of
the indemnification provision of the Registration Agreement is not intended to
be exhaustive and is qualified in its entirety by the Registration Agreement.
6. 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 that were acquired as a result
of market-making activities or other trading activities. It acknowledges that
it will deliver a prospectus in connection with any resale of such New Notes;
however, by so acknowledging and delivering a prospectus, the undersigned will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. If the undersigned is a broker-dealer and Old Notes held for
its own account were not acquired as a result of market-making or other
trading activities, such Old Notes cannot be exchanged pursuant to the
Exchange Offer.
7. Any obligation of the undersigned hereunder shall be binding upon the
successors, assigns, executors, administrators, trustees in bankruptcy and
legal and personal representatives of the undersigned.
8. Unless otherwise indicated herein under "Special Delivery Instructions,"
please issue the certificates for the New Notes in the name of the
undersigned.
9. Holders of Old Notes whose Old Notes are accepted for exchange will not
receive accrued interest on such Old Notes for any period from and after the
last Interest Payment Date to which interest has been paid or duly provided
for on such Old Notes prior to the original issue date of the New Notes or, if
no such interest has been paid or duly provided for, will not receive any
accrued interest on such Old Notes, and the undersigned waives the right to
receive any interest on such Old Notes accrued from and after such Interest
Payment Date or, if no such interest has been paid or duly provided for, from
and after January 28, 1998.
10. The undersigned will, upon request, execute and deliver any additional
documents deemed by the Company or the Exchange Agent to be necessary or
desirable to complete the sale, assignment and transfer of the Old Notes
tendered hereby. All authority herein conferred or agreed to be conferred in
this Letter of Transmittal shall survive the death or incapacity of the
undersigned and any obligation of the undersigned hereunder shall be binding
upon the heirs, executors, administrators, personal representatives, trustees
in bankruptcy, legal representatives, successors and assigns of the
undersigned. Except as stated in the Prospectus, this tender is irrevocable.
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF OLD NOTES"
ABOVE AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE TENDERED THE OLD NOTES
AS SET FORTH IN SUCH BOX.
5
<PAGE>
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTION 1)
To be completed ONLY IF the New Notes are to be issued or sent to
someone other than the undersigned or to the undersigned at an address
other than that provided above.
Mail [_] Issue [_] (check appropriate boxes) certificates to:
Name: _____________________________________________________________________
(PLEASE PRINT)
Address: __________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
(INCLUDING ZIP CODE)
SPECIAL REGISTRATION INSTRUCTIONS
(SEE ITEM 5)
To be completed ONLY IF (i) the undersigned satisfies the conditions set
forth in Item 5 above, (ii) the undersigned elects to register its Old
Notes in the shelf registration described in the Registration Agreement,
and (iii) the undersigned agrees to indemnify certain entities and
individuals as set forth in Item 5 above.
[_] By checking this box the undersigned hereby (i) represents that it
is unable to make all of the representations and warranties set forth in
Item 4 above, (ii) elects to have its Old Notes registered pursuant to the
shelf registration described in the Registration Agreement, and (iii)
agrees to indemnify certain entities and individuals identified in, and to
the extent provided in, Item 5 above.
6
<PAGE>
SIGNATURE
To be completed by all exchanging noteholders. Must be signed by
registered holder exactly as name appears on Old Notes. If signature is by
trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative
capacity, please set forth full title. See Instruction 3.
X _________________________________________________________________________
X _________________________________________________________________________
SIGNATURE(S) OF REGISTERED HOLDER(S) OR AUTHORIZED SIGNATURE
Dated: ____________________________________________________________________
Name(s):___________________________________________________________________
___________________________________________________________________________
(PLEASE TYPE OR PRINT)
Capacity: _________________________________________________________________
Address: __________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
(INCLUDING ZIP CODE)
Area Code and Telephone No.: ______________________________________________
SIGNATURE GUARANTEE (IF REQUIRED BY INSTRUCTION 1 BELOW)
Certain Signatures Must be Guaranteed by an Eligible Institution
___________________________________________________________________________
(NAME OF ELIGIBLE INSTITUTION GUARANTEEING SIGNATURES)
___________________________________________________________________________
(ADDRESS (INCLUDING ZIP CODE) AND TELEPHONE NUMBER (INCLUDING AREA CODE) OF
FIRM)
___________________________________________________________________________
(AUTHORIZED SIGNATURE)
___________________________________________________________________________
(PRINTED NAME)
___________________________________________________________________________
(TITLE)
Dated: ____________________________________________________________________
PLEASE READ THE INSTRUCTIONS ON THE REVERSE SIDE HEREOF, WHICH FORM A PART OF
THIS LETTER OF TRANSMITTAL.
7
<PAGE>
INSTRUCTIONS
1. GUARANTEE OF SIGNATURES. Signatures on this Letter of Transmittal must be
guaranteed by an eligible guarantor institution that is a member or
participant in the Securities Transfer Agents Medallion Program, the New York
Stock Exchange Medallion Signature Program, the Stock Exchange Medallion
Program, or by an "eligible guarantor institution" within the meaning of Rule
17Ad-15 promulgated under the Exchange Act (an "Eligible Institution") unless
the box entitled "Special Delivery Instructions" has not been completed or the
Old Notes described above are tendered for the account of an Eligible
Institution.
2. DELIVERY OF LETTER OF TRANSMITTAL AND OLD NOTES; GUARANTEED DELIVERY
PROCEDURES. The Old Notes, together with a properly completed and duly
executed Letter of Transmittal (or copy thereof), should be mailed or
delivered to the Exchange Agent at the address set forth above.
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, this Letter
of Transmittal and all other required documents to the Exchange Agent on or
prior to the Expiration Date or (iii) who cannot complete the procedures for
delivery by book-entry transfer on a timely basis, may tender their Old Notes
by properly completing and duly executing a Notice of Guaranteed Delivery
pursuant to the guaranteed delivery procedures set forth in "The Exchange
Offer--Guaranteed Delivery Procedures" in the Prospectus. Pursuant to such
procedures: (i) such tender must be made by or through an Eligible Institution
(as defined below); (ii) a properly completed and duly executed Notice of
Guaranteed Delivery, substantially in the form made available by the Company,
must be received by the Exchange Agent on or prior to the Expiration Date; and
(iii) the Certificates (or a Book-Entry Confirmation (as defined in the
Prospectus)) representing all tendered Old Notes, in proper form for transfer,
together with a Letter of Transmittal (or facsimile thereof), properly
completed and duly executed, with any required signature guarantees and any
other documents required by this Letter of Transmittal, must be received by
the Exchange Agent within three New York Stock Exchange, Inc. trading days
after the date of execution of such Notice of Guaranteed Delivery, all as
provided in "The Exchange Offer--Guaranteed Delivery Procedures" in the
Prospectus.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted by
facsimile or mail to the Exchange Agent, and must include a guarantee by an
Eligible Institution in the form set forth in such Notice. For Old Notes to be
properly tendered pursuant to the guaranteed delivery procedure, the Exchange
Agent must receive a Notice of Guaranteed Delivery on or prior to the
Expiration Date. As used herein and in the Prospectus, "Eligible Institution"
means a member of or participant in the Securities Transfer Agents Medallion
Program, the New York Stock Exchange Medallion Signature Program, the Stock
Exchange Medallion Program or an "eligible guarantor institution" within the
meaning of Rule 17Ad-15 under the Exchange Act.
THE METHOD OF DELIVERY OF OLD NOTES AND THE LETTER OF TRANSMITTAL OR THE
NOTICE OF GUARANTEED DELIVERY, 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 NOMINEES TO EFFECT THE
ABOVE TRANSACTIONS FOR SUCH HOLDERS.
3. SIGNATURE ON LETTER OF TRANSMITTAL, BOND POWERS AND ENDORSEMENTS. If this
Letter of Transmittal is signed by a person other than a registered holder of
any Old Notes, such Old Notes must be endorsed or accompanied by appropriate
bond powers, signed by such registered holder exactly as such registered
holder's name appears on such Old Notes.
8
<PAGE>
If this 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,
proper evidence satisfactory to the Company of their authority to so act must
be submitted with this Letter of Transmittal.
4. INADEQUATE SPACE. If the space provided in the box captioned "Description
of Old Notes" is inadequate, the Certificate number(s) and/or the principal
amount of Old Notes and any other required information should be listed on a
separate signed schedule which is attached to this Letter of Transmittal.
5. QUESTIONS, REQUESTS FOR ASSISTANCE AND ADDITIONAL COPIES. Questions and
requests for assistance may be directed to the Exchange Agent at its address
and telephone number set forth on the front of this Letter of Transmittal.
Additional copies of the Prospectus, the Notice of Guaranteed Delivery and the
Letter of Transmittal may be obtained from the Exchange Agent or from your
broker, dealer, commercial bank, trust company or other nominee.
6. MISCELLANEOUS. All questions as to the validity, form, eligibility
(including time of receipt), acceptance, and withdrawal of tendered Old Notes
will be resolved by the Company in its sole discretion, which determination
will be final and binding. The Company reserves the absolute right to reject
any or 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 this Letter of Transmittal) will be final and
binding. Unless waived, any defects or irregularities in connection with
tenders of Old Notes must be cured within such time as the Company shall
determine. Neither the Company, the Exchange Agent, nor any other person shall
be under any duty to give notification of defects in such tenders or 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 thereof as soon as practicable following the
Expiration Date.
9
<PAGE>
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
FOR EXCHANGE OF
ANY AND ALL OUTSTANDING
10 1/4% SENIOR NOTES DUE 2008
FOR 10 1/4% SERIES A SENIOR NOTES DUE 2008
OF
NATIONWIDE CREDIT, INC.
PURSUANT TO THE EXCHANGE OFFER AND PROSPECTUS DATED , 1998
This Notice of Guaranteed Delivery, or one substantially equivalent to this
form, must be used to accept the Exchange Offer (as defined below) if (i)
certificates for the 10 1/4% Senior Notes due 2008 (the "Old Notes"), of
NATIONWIDE CREDIT, INC. (the "Company") are not immediately available, (ii)
Old Notes, the Letter of Transmittal and all other required documents cannot
be delivered to State Street Bank and Trust Company (the "Exchange Agent") on
or prior to 5:00 P.M. New York City time, on the Expiration Date (as defined
in the Prospectus referred to below) or (iii) the procedures for delivery by
book-entry transfer cannot be completed on a timely basis. This Notice of
Guaranteed Delivery may be delivered by hand, overnight courier or mail, or
transmitted by facsimile transmission, to the Exchange Agent. See "The
Exchange Offer--Guaranteed Delivery Procedures" in the Prospectus. In
addition, in order to utilize the guaranteed delivery procedure to tender Old
Notes pursuant to the Exchange Offer, a completed, signed and dated Letter of
Transmittal relating to The Old Notes (or facsimile thereof) must also be
received by the Exchange Agent within three New York Stock Exchange, Inc.
trading days after the date of execution of this Notice of Guaranteed
Delivery. Capitalized terms not defined herein have the meanings assigned to
them in the Prospectus.
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
STATE STREET BANK AND TRUST COMPANY
By Registered or Certified Mail, by Hand or by Overnight Delivery
Attn: Kellie Mullen
Corporate Trust Department, 4th Floor
Two International Place
Boston, MA 02110
Facsimile Transmissions:
(Eligible Institutions Only)
(617) 664-5290
For information or
Confirmation by Telephone:
(617) 664-5587
Delivery of this Notice of Guaranteed Delivery to an address other than as
set forth above or transmission of this Notice of Guaranteed Delivery via
facsimile to a number 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 IN THE
SIGNATURE BOX ON THE LETTER OF TRANSMITTAL.
1
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to Nationwide Credit, Inc., a Georgia
Corporation (the "Corporation"), upon the terms and subject to the conditions
set forth in the Prospectus dated , 1998 (as the same may be amended or
supplemented from time to time, the "Prospectus"), and the related Letter of
Transmittal (which together constitute the "Exchange Offer"), receipt of which
is hereby acknowledged, the aggregate principal amount of Old Notes set forth
below pursuant to the guaranteed delivery procedures set forth in the
Prospectus under the caption "The Exchange Offer--Guaranteed Delivery
Procedures."
Name(s) of Registered Holder(s): __________________________________________
Aggregate Principal Amount Amount Tendered: $ _____________________________
Certificate No.(s) (if available): ________________________________________
(Total Principal Amount Represented by Old Notes Certificate(s)) __________
$ _________________________________________________________________________
If Old Notes will be tendered by book-entry transfer, provide the
following information:
DTC Account Number: _______________________________________________________
Date: _____________________________________________________________________
--------
* Must be in denominations of a Liquidation Amount of $1,000 and any
integral multiple thereof, and not less than $100,000 aggregate
Principal amount.
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned and every obligation of the undersigned
hereunder shall be binding upon the heirs personal representatives, successors
and assigns of the undersigned.
2
<PAGE>
PLEASE SIGN HERE
X
------------------------------------- -------------------------------
X
------------------------------------- -------------------------------
Signature(s) of Owner(s) or Authorized
Signatory Date
Area Code and Telephone Number: ___________________________________________
Must be signed by the holder(s) of the Old Notes as their name(s)
appear(s) on certificates for Old Notes or on a security position listing,
or by person(s) authorized to become registered holder(s) by endorsement
and documents transmitted with this Notice of Guaranteed Delivery. If
signature is by a trustee, executor, administrator, guardian, attorney-in-
fact, officer or other person acting in a fiduciary or representative
capacity, such person must set forth his or her full title below.
PLEASE PRINT NAME(S) AND ADDRESS(ES)
Name(s):
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Capacity:
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Address(es):
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3
